Good day and welcome to the Exela Technologies, Inc. Fourth Quarter and Full Year 2021 Financial Results Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Marc Griffin of Investor Relations. Please go ahead..

Thank you. Good afternoon, everyone, and welcome to Exela Technologies’ Fourth Quarter 2021 Conference Call. I'm joined today by Ron Cogburn, Exela's Chief Executive Officer; and Shrikant Sortur, our Chief Financial Officer. Following prepared remarks by Ron and Shrikant, we will take your questions.

As a reminder during the Q&A session of today's call, we will not be able to take questions on the pending acquisition offer due to legal restrictions on commenting on our securities issuance. Today's conference call is being broadcast live via webcast, which is available on the Investor Relations page of Exela's website at exelatech.com.

A replay of this call will also be available through March 17, 2022. Information to access this replay is listed on today's press release, which is also available on the Investor Relations page of Exela's website.

During today's call, Exela will make certain statements regarding future events and financial performance that may be characterized as forward-looking statements under the Private Securities Litigation Reform Act of 1995.

These statements reflect management's current beliefs, assumptions and expectations as of today, March 10, 2022, and are subject to a number of factors that may cause actual results to differ materially from those statements.

We undertake no obligation to update any statements to reflect these events that occur after this call, and actual results could differ materially from any forward-looking statements.

For more information, please refer to the risk factors discussed in Exela's most recently filed periodic report on Form 10-K, along with today's press release and the company's other filings with the SEC. Copies are available from the SEC or on the Investor Relations page of Exela's website.

During today's call, we'll refer to certain non-GAAP financial measures. We believe these non-GAAP financial measures provide additional information on how management views the operating performance of our business. Reconciliations between GAAP and non-GAAP results we discuss on today's call can be found on the Investor Relations page of our website.

Please note the presentation that accompanies this conference call is also available on the Investor Relations page of our website. With all the mandatory Regulation FD disclosure out of the way, I'm pleased to turn the call over to our CEO, Ron Cogburn. Ron, please go ahead..

Good afternoon, and thanks, everyone, for joining us on our fourth quarter and our full year 2021 call. We are pleased with the solid execution and transformation of our business in 2021.

During the year, we executed a sizable debt reduction strategy, improved the efficiency of our business while stabilizing revenue and positioning our business for a return to growth.

The fundamentals of our business are solid, and we are particularly pleased with the strong growth of our digital solutions for the SMB market, but we see opportunity for further geographic expansion and new product launches.

Our enhanced capital structure and enhanced technology backbone will lead to additional improvements in margins and cash flow in 2022. Also, I want to thank our global team for their dedication to our customers and Exela's success. So with that, let's begin with Slide #3, an overview of Exela's fourth quarter and full year highlights.

Total revenue for the year was $1.167 billion, which was in line with our revised guidance for 2021. Revenue for the fourth quarter was $294 million. While both are down on a year-over-year basis, Q4 revenue was up $15 million sequentially by 5.4%.

During 2021, we focused on the efficient delivery of our services, which resulted in good margin improvements for the year. Gross profit for Q4 was $59 million at 19.9% of revenue, down slightly by 80 basis points. Full year gross profit was $278 million or 23.8% of revenue, an expansion of 300 basis points. And here's what's significant.

We are in more gross profit dollars on lower revenue. Additionally, we generated adjusted EBITDA of $173.3 million or 14.8% of revenue, an expansion of 135 basis points.

More importantly, we generated adjusted EBITDA of $39.5 in Q4, an increase of 6% or $1.3 million year-over-year that resulted in an adjusted EBITDA margin of 13.1%, which was up 124 basis points. Since the start of 2021, we've been laser-focused on reducing our long-term debt and enhancing our capital structure.

We are pleased that through a series of transactions, we were able to reduce our long-term debt by 30% or $454 million. With these improvements, Exela is on track for a $50 million cash flow improvement in 2022. We also increased our market capitalization of Exela by almost 300% to $238 million.

Now let's turn to Slide #4 and let's talk about our key performance metrics. The fundamental drivers of our business have inflected and are highlighted by the robust renewal rates, expansion activity and increasing pipeline of new activities. Our renewal rates continue to improve and were 9% increased year-over-year.

In terms of customer traction, we closed 45% more deals sequentially. Our strategy continues to evolve, scaling up our cloud usage. Many of our platforms, including the intelligent data processing, or IDP, and our work-from-anywhere initiatives, or WFA, are driving fast adoption of the cloud.

Cloud usage is expected to rise substantially from the 30% in Q4. Cloud usage continues to strengthen our margin profile and employee productivity. More than 50% of our employees are now on our work-from-anywhere platform, and that percentage should rise. Now let's turn to Slide #5.

I'd like to focus on our strong positioning heading into 2022 based on the extensive accomplishments made in 2021. We have listed a number of tailwinds here, and we'll expand upon them in the subsequent slides. First, the work-from-anywhere adoption continues to rise, providing a hedge against rising costs while leveraging a global footprint.

Second, anticipating COVID-19 is subsiding or stabilized. Third, growing services, expanding products, solutions both in enterprise and rapidly growing SMB markets. Fourth, stronger balance sheet and improving fundamentals. And five, growing Wall Street and industry research analyst coverage.

Looking ahead, in addition to the increased efficiency and a stronger balance sheet, we are also experiencing notable demand in our products and services. Now let's turn to Slide #6 and let's talk about the work-from-anywhere solutions, or WFA, that address the rising costs and increasing productivity.

Our cloud-based system work-from-anywhere model increases the efficiency of our services now and continues to provide a hedge against rising labor costs in all locale. The hiring market at large is challenging, and we will all -- and we are well positioned to find lower-cost talent from the geographies that we serve.

More importantly, our cloud-based system, intelligent data processing, or IDP, and our WFA initiatives are driving margin expansion through more efficient delivery. During 2021, we made great strides in rightsizing our costs by reducing our real estate footprint and optimizing our headcount.

We have increased our WFA agents by more than 8,000 this past year, and we plan to accelerate that in 2022 to more than 25,000 agents. Over the year, we enhanced our WFA platform by changing our model to a cost per click so that our customers are paying for output rather than time. Our work-from-anywhere solution is secure, scalable and global.

As competition for talent is growing globally, Exela's solution gives our customers access to labor pool on a global basis. Now let's look at Slide #7 and let's talk about the renewal rates.

Given the improvements we've seen in the current COVID-19 environment, including lower case rates and decreasing restrictions, we are optimistic about the future and the growth of our on-site business as we return to pre-2020 levels. COVID-19 had the hardest impact on our on-site business.

As the world eases restrictions and returns to a prepandemic level of activity, we are well positioned to benefit from them. In 2020 and 2021, we had approximately $90 million of annual revenues that have been delayed.

We estimate that if the renewal rates were to recover to prepandemic levels, that would include a $90 million uptick in our on-site business. Finally, let's turn to Slide #8 for an update on our progress in the small to medium business sector, or SMB, as we call it, which is part of our digital asset group or DAG.

Q4 was a very strong -- we finished very strong to a solid year for the SMB offerings. Since our entrance into this segment in late 2020, we have seen a consistent strong growth in the number of SMB customers for our digital mailroom, or DMR, and new users of our DrySign solution.

In the fourth quarter, our DMR SMB customers grew 44% sequentially, and our DrySign users grew an impressive 135% in Q3 of 2021. DMR and DrySign also expanded across many new geographies, including Europe and Asia Pacific. The growth trajectory of our digital asset remained strong.

And most recently, we deployed Exela's robotic process automation platform, EON, in health care and public sectors. Another notable launch in 2021 with Exela's human resource outsourcing, or HRO, business, which we call Exela HR solutions. Finally, we launched our compact, high-speed enterprise scanning platform called IntelliScan Raptor.

The Raptor provides comparable capability as our existing IntelliScan suite of products but at a much lower cost. In December, we also launched our remote online notarization platform. This platform will help us accelerate the conversion of SMBs onto our DMR platform and expand our value proposition to a much broader launch.

We look forward to updating you on the progress of the remote online notarization platform in the coming quarters as the platform ramps up. Now let's turn to Slide #9, which is conceivably the most important slide in the deck, and it highlights points #4 and 5, which you saw on Slide #5.

So let's start with business growth and the steps Exela has taken to invest in the future business growth of our company. For example, expanding our footprint into the data science consulting arena with new outside leadership and a goal of several hundred FTEs by the end of the year.

Next, further expansion of our finance and accounting practice, followed by further alignment of our leadership compensation to the P&L goals at the enterprise level as well as the business unit level, additional talent investment and continued expansion of the SMB across new markets and solutions. Next, let's talk about positioning.

We've engaged with strategic partnerships and potential new M&A, which we hope to share some news with in the coming near term. Expansion of our digital offerings, which we plan to launch more platforms this year, 2022, than we did last year and then new geographies leveraging cloud and IDP. Let's talk about financials.

The lower cost of capital for better performance and stronger balance sheet, increased financial flexibility through preferred equity and extended debt maturities to 2026 and of course, the awards and recognition from Wall Street to the industry analysts. We continue -- excuse me.

As you can see, we've been very busy preparing for 2022, and we're confident that our positions and efforts will lead to further revenue growth and expanded profitability. We continue to focus on the growing Wall Street research coverage and are pleased that B. Riley and Cantor Fitzgerald are making recommendations on Exela.

With that, I'll now turn the call over to our CFO, Shrikant Sortur, to run through the numbers in more detail.

Shrikant?.

Thank you, Ron, and thanks to everyone for joining us this afternoon. I will cover our consolidated results and segment revenue for the fourth quarter and full year 2021 performance and provide an update on our balance sheet improvement initiatives. Before I dive into it, a quick clarification.

In opening, Mark indicated that we'll not be talking about the pending exchange offer. If some of you heard that or it was misquoted as spending acquisition offer, I just want to clarify, what he said was pending exchange offer. There's no pending acquisition offers. Just to clarify. Jumping right into the presentation.

As we have done in the past, we are reporting both GAAP and non-GAAP numbers. The reconciliations are in our filings and in the appendix of the presentation. 2021 was a year in which we executed on our commitment to improve Exela's fundamental. On the balance sheet front, we reduced our long-term debt by almost $0.5 billion.

We extended the maturity by 3 years on substantially all of our long-term debt. We reached an agreement to settle the appraisal action case at the end of December. And recently, we entered into an exchange and prepayment agreement with our revolving credit lenders.

On the operations front, we adapted well to the new normal that most of our metrics below revenue improving compared to 2020. All of this was achieved in a generally unpredictable, unfavorable environment with both inflationary pressure on earnings and continuous COVID-19 impact. We met our revenue -- revised revenue guidance for the year.

We had provided a revenue range of $1.16 billion to $1.175 billion on our Q3 call, and we came in at the midpoint of the range. We ended the year at the midpoint of our original gross profit margin guidance for the year at approximately 24%. A reason to be satisfied with these achievements and feel cautiously optimistic about 2022.

That said, let me begin on Slide 11 and review our fourth quarter and full year 2021 results. First, a look at the fourth quarter results. Revenue for the fourth quarter totaled $294.3 million, an increase of $15.1 million or 5.4% sequentially and a decline of 6.3% year-over-year.

Our ITPS segment continues to be impacted by lower volumes, primarily caused by the effects of COVID-19, as shown on Slide 7 that Ron touched upon. Our Healthcare Solutions and Legal and Loss Prevention segment both posted solid year-over-year revenue growth.

Healthcare growth was driven by our provider business, and our LLPS segment continued to be driven by strong new project business mix. Our fourth quarter 2021 gross profit margin of 19.9% was an increase of 110 basis points year-over-year as a result of better cost and capacity management, offsetting the impact from lower revenue.

Turning to adjusted EBITDA. In Q4 of 2021, we generated adjusted EBITDA of $39.5 million, up 6.4% year-over-year and 8.7% sequentially. Our adjusted EBITDA margin for the fourth quarter of 2021 was 13.4%, up 160 basis points year-over-year and 40 basis points sequentially from Q3.

Capital expenditure in Q4 was $9 million or 2.9% of revenue, in line with our expectations. Next, I'll touch upon our full year 2021 P&L results and metrics. For the annual year-over-year comparative, 2020 numbers are on a pro forma basis adjusted for the divestitures that we did in that year.

Revenue for the year 2021 was $1.167 billion, a decline of 9.7% year-over-year on a reported basis and 8.7% on a pro forma basis after adjusting for the divestitures that I mentioned. As indicated earlier, we met our revised revenue guidance and came in at the midpoint of the range. A quick look at our segment revenue performance.

Revenue for our ITPS segment was $874.2 million, a decrease of $124.6 million or 12.5% year-over-year. The decline was primarily driven by continued COVID-19 impact as the delays in our customers to return-to-office plan are affecting our on-site business in addition to trailing transition revenue.

We continue to believe that we are well positioned to see a return of volumes and revenue improved in the segment once the headwinds subside. Healthcare Solutions segment revenue was $217.8 million, an increase of $6.8 million or 3.2% year-over-year.

Revenue from provider business was higher by $12.2 million or 18.7% year-over-year, primarily driven by higher volumes and expansion with existing clients. Payer business experienced lower volume as compared to prior year and was down by 3.7% year-over-year.

LLPS segment revenue was $74.6 million, up by $6.2 million or 9% year-over-year, primarily driven by multiple project wins. Overall, our current revenue base is stable and diversified from a customer, industry and geographic standpoint. Renewals are up year-over-year, and our pipeline remains robust.

Our gross profit increased by approximately $12.3 million or 4.6% year-over-year despite a revenue decline of $111.6 million, reflecting our ongoing focus on capacity and cost management. Our gross profit margin for the year 2021 was 23.8%, up 304 basis points year-over-year.

We met our original gross profit margin guidance provided at the beginning of 2021. SG&A expenses for total 2021 was at $169.8 million, down by $15.7 million or 8.4% year-over-year despite higher professional and advisory fees, primarily driven by our balance sheet improvement initiatives.

For the year, we generated adjusted EBITDA of $173.3 million, an increase of $2.4 million or 1.4% year-over-year. Our adjusted EBITDA margin for 2021 was 14.9%, up 148 basis points year-over-year. The optimization and restructuring charges, O&R as we call it, for the year was $22.2 million, lower by $23.4 million as compared to 2020.

For the year, we invested $17 million in capital expenditure or 1.4% of revenue. Let us turn to Slide 12 and go over some of the cash flow highlights. During the year, our cash balance decreased $22 million to $48 million, mostly as a result of refinancing activity.

Our cash interest expense was $189 million for the year and included prepayments of interest on notes and exchange term loans. As part of the debt exchange, Exela purchased $192 million of the new 11.5% senior secured notes due 2026, which was paid for with the combination of cash and our $115 million debt facility.

As a result of our 2021 debt payment and refinancing activity, Exela is on track to improve our cash flow in 2022 by approximately $15 million. Moving on to Slide 13. I'd like to discuss updates through our balance sheet initiatives. As part of our capital structure initiative, we raised a total of $407 million in equity during the year.

And in line with our previously announced deleveraging strategy, we deployed this capital effectively to reduce our long-term debt by $454 million. Additionally, the debt exchange offer resulted in extending the maturities of our long-term debt to July 2026, except for the subportion.

Finally, in Q1 of 2022, we agreed to exchange $100 million outstanding under the revolving facility for $50 million in cash and $50 million of the 11.5% senior secured notes due 2026. We are not providing a formal outlook for 2022. For modeling purposes, we suggest that investors and other users use our historical 2021 metrics to forecast.

As macro conditions ease and inflationary pressures normalized, we'll look to provide more details on the outlook.

For reference, revenue greater than $1.16 billion, gross profit margin greater than 23% to 24% of revenue, adjusted EBITDA margin greater than 15% of revenue, CapEx levels of approximately 1.5% of revenue and working capital in line with historical levels.

In closing, we would like to emphasize these 3 key areas of our focus, which are covered on all of the earlier slides. First, solid fundamentals. Strengthening the balance sheet puts us in a good position. A reduction of nearly $0.5 billion in debt and extension of maturities provides us with financial flexibility.

The agreement on $100 million revolver is a positive development. Settlement of appraisal action is another. This leads us for a better and a continued operating performance improvement, which is the second theme. The improvement across all metrics. We continue to manage cost and capacity to offset rising inflation and other headwinds.

Numerising delivery of services through proprietary technology, that's our long-term bet against rising costs. And we'll continue to focus on operating cash flow improvement. Third, growth and being prepared for the future. We want to focus on profitable revenue. SMB growth is encouraging, and we are expanding our product range in geographies.

We're investing in our business, including M&A and talent across Exela to enable more independence and better execution across the segment. Lastly, continue to grow our Wall Street interaction and expand our coverage. Thank you all for joining us today. With that, I open the line for questions..

[Operator Instructions] Our first question comes from Josh Siegler from Cantor Fitzgerald..

Can you start by breaking down some of your EBITDA adjustments? What was included in that $28 million of other charges bucket?.

Are you there, Shrikant?.

Sorry, I was on mute. Josh, thank you for the question. Can you clarify the add-backs for Q4 of '21? Or are you indicating --.

Yes, that's correct. That's correct. Q4 '21..

I guess the main -- I'll cover the main items. You probably -- the vast asset at a more detailed level. The main items are, in Q4, we had a loss on modification of the debt as part of the exchange offer, that's approximately $11 million. And then other than -- that's the big one.

Other than that, there are a number of regular from severance to dark facility costs to gain on sale of assets to noncash equity comp, all of the regular noncash charges, Josh..

Okay. That's helpful.

And then as we head into 2022, how are you guys thinking about your cost saving initiatives? How are those progressing?.

One good indicator, Josh, is, again, the O&R that I touched upon, going from $45 million plus to $22 million this year, right? 2020, it was 45.6, 22.2. One way of looking at it is cost savings are converting to O&R and then into GAAP savings flow through. Similarly, we have a lot of additional savings success that we have talked about in the past.

We'll continue to execute on those, Josh..

Okay. Understood. And last one for me. You guys mentioned strategic partnerships, M&A as 2022 priorities. I'd love some more color on that.

What exactly are you looking for in the market? And how can you bolster the company moving forward?.

Yes. Let me help with that. Strategic partnerships are with outside parties. I think we've talked about some of the large corporations that we partnered with last year, and we found those to be exceptionally fruitful for us in terms of services and solutions that they pull through and that we pull through.

As far as M&A, I would just encourage you to stay tuned, and we'll share more in the near term on that..

The next question comes from Zach Cummins from B. Riley Securities..

Just starting off with the gross margin in Q4. I mean it was down pretty dramatically on a sequential basis just versus what you were running at over the past couple of quarters.

So can you speak to some of the quarterly impacts that we saw to the gross margin line?.

Sure. First of all, thanks for the question, Zach. Q4, if you recollect, going into Q4 and Q3, we had kind of anticipated some of the headwinds is the wrong term to use, some of the one-timers that we are expecting in Q4 from a cost perspective, it could be the year-end [P2] accruals, one-timers that come in, in Q4.

That's exactly what happened from a gross margin perspective. We had profitable revenue from some of our higher-margin businesses, but that was offset by one-off trend in Q4..

Understood. And in terms of the free cash flow in the quarter, I mean, obviously, you had additional interest expense that you were paying from the debt exchange.

But can you speak to any other items that were impacting that number here in Q4 and kind of how you're thinking about improving that as we go into 2022?.

Q4 was -- if you look at specific to Q4 from a cash flow perspective, there has been impact from the exchange offer that we completed, right? From an operating perspective, not only the additional interest charges that prepaid impact operational cash flows, even in the finance inflection, there's a number of onetimers as a result of the exchange offer completion.

That's a general note.

And specifically, with the other regular working capital things that you see between AR and AP and timing of those, is there a particular number you were zeroing on that I can help you with?.

No. I was just trying to get a handle on, I mean, the free cash flow generation in this quarter. I know Q4 is typically one of the stronger, especially operating cash flow type of quarters for Exela. So I was just kind of curious of what were some of the impacts that you guys saw in Q4. Obviously, the exchange offer being a big portion of that..

Right, right. And that's fair, if you can kind of the dot, the prepayment of the interest post exchange offer resulted in additional cash out quarter interest impacting the operating cash flows in Q4. Traditionally, Q4 is a positive cash flow quarter. This time, it was not because of that prepayment. That's the key change..

Understood. And just looking at some of the key metrics that you provided with renewals and new business, it seems like all of this is trending in the right direction.

I know you're not giving formal guidance in terms of the outlook here, but at least, how are you thinking about the near term for top line performance? Or should we assume that we're relatively stabilizing here from a top line perspective? Or how should we be thinking about that?.

Again, a great question.

So if you don't mind, our presentation and even in my discussion right there, if you think about it, there are 3 common threads, one interrelates with other, 3 focus areas, so to speak, right? We have done a lot of the work on the balance sheet, strengthening the balance sheet, a lot of which we accomplished in 2021, which, in turn, helped us with our operating performance.

But 2022 is probably a breakout year. We need to now leverage off of the strong balance sheet to continue to improve on our operating performance. Between the 2 of this, this is where growth is going to come from, right? We listed a number of things that we are focused on from expanding the market. Our renewals are beginning to pick up.

It's robust pipeline. All of that said, you can -- we gave a historical base -- I don't want you to term out like from a modeling perspective, you can use the historical number, so to speak. And if you think about it, our revenues have been in the 280, 290 range for every quarter in 2021, right? So feel free to use that modeling for '22..

Understood. And as I'm thinking about margins, especially on gross margins, obviously, some nice improvement here in 2021.

Is there any impact to gross margins as you start to see more of your on-site business potentially coming back into play here in 2022? So I'm just kind of curious of how you're going to balance those different gross margin impacts..

I would -- the inflationary challenges and cost creep is something that we're going to watch out for very carefully. That said, I think to mitigate that, we have pricing-related adjustments that we can see more so all of this -- work-from-anywhere model and going to cloud, all of these are catered towards offsetting cost inflation or cost pressures.

In other words, the cost creep is a potential -- from a macro perspective, is a potential headwind. But internally, what we can control is continue to focus on capacity and cost management, Josh -- sorry, Zach..

Yes. Yes. No problem.

And finally, in terms of some of the actions that you've taken post quarter to address some of your near-term liabilities, both with the summary judgment and the exchange for your revolver, can you speak to kind of the flexibility that you still have remaining with kind of the upcoming maturities from here? I know you don't have any maturities the rest of 2022, but think about how you would manage some of the other maturities on the horizon in some of the different aspects at your disposal..

Sure. Again, going back to what I said, to use an analogy, it's really putting one foot in front of the other, right? If you see what we've done raising it, paying down debt, tackling maturities from RCF to appraisal action payment, et cetera, extending maturities, we are going to be focused on shoring up our liquidity, continue to do that.

To your point, there are no immediate obligations in 2022 as such. So it's going to be a time for us to continue to build our liquidity..

The next question comes from Randal Klein from Avenue Capital Group..

Zach, kind of covered a couple of my questions. Maybe I'll try it in a slightly different way.

I mean 2021, again, I would agree with his focus on the fact that you guys were -- seem to be very focused on the balance sheet, and as far as I can tell, got everything done, including even that appraisal action, which was hanging over your head and the revolver you just announced as well and obviously, the bonds and the term loan.

So I mean correct me if I'm wrong, if I'm missing it, it looks like F '22 is done on the balance sheet.

So if that's the case, what is the key priorities for '22? What are your goals here? I mean, obviously, you've kind of addressed them both at a somewhat high level, Ron, and a couple of the block and tackling numbers, Shrikant, you've covered as well.

But anything else we should be thinking about as you move from your focus of the balance sheet in '21 to '22?.

Yes. Again, thanks, Randal, for the question. Let me take that one first and then you can provide some additional business color.

So Randal, instead of being repetitive about the balance sheet right now, building upon it, what's important for us is to focus on business operations in 2022, right? That will include adding talent, pursuing strategic tuck-ins, if any, leverage large happy customer base for growth.

We still have a lot that we can do if you think about pre-COVID levels that we used to average around 370 to 390 in revenue. Of course, the revenue mix and things have changed, but we have more to go after in 2022. With a strong balance sheet, that all becomes possible.

Lastly, the growth part in stabilizing and growing our top line and bottom line, that's going to be up for 2022. And lastly, in one word, unlocking shareholder value. That's going to be the key focus. And Ron, you want to --.

Good, Shrikant. No, that's good. One of the things that I draw your attention to is Slide #9, and that's really sort of the road map, if you will, for the things that are in process, things that we're going to do.

And we're investing in the business heavily, rolling out the data science, consulting practice, increasing our finance and accounting services. And then we've upgraded our talent. We've invested in new talent. We've created a better comp plan to drive the growth and help with the incentives.

And then most of all, the SMB market has turned out to be an incredible pleasing surprise to all of us with the adoption of the solutions and platforms that we've offered. And I think you heard me say it, we're going to roll out more of these solutions and platforms in '22 than we rolled out in '21.

So we have a queue, and we have a mindset, and we're ready to move on that. And I think it's going to be a great year for us. And with the expansion of cloud use, it allows us to be anywhere that we need to be to meet the customers' expectations..

Got it. Okay. Well, look, you'll have the extra time, hopefully, because you won't be dealing with the lawyers and the balance sheet issues. That's good. You can -- hopefully, will get some incremental value from the time you spend on the business. I guess have to detail questions, which I'm assuming will probably be the 10-K.

Will the 10-K be out by like next Tuesday or whatever, what's the estimated time on that?.

The deadline is March 16 that we are showing to file that. Yes..

Okay. Next week. Okay. And then lastly, I guess, again, I think people already tried in New York at giving more color, but obviously, I don't think we've heard much about M&A other than you were talking about selling some businesses a couple of years ago. Now doesn't sound like you need to sell businesses, the M&A sounds like acquisitions.

I don't know if you can provide more color. It sounds like it may not be that long before you can provide more color, but anything else, just kind of curious on that..

From a strategic insight, as I said, the third leg of our strategy is growth. In growth, we are going to keep our options open, identify investment targets. So as long as something is strategic, talking or anything that is, we will pursue that. But then again, we don't have anything to share right now.

When the time is right, we'll share more developments then..

Our next question comes from Eric Stephens from Gates Capital..

Yes. This is actually Jeff.

How much in ATM proceeds have you raised since the end of '21?.

Since the end -- you mean in this first quarter of this year, Jeff?.

Yes, because the share count is up like 80 million shares, right, from your end?.

Yes. I probably should know the number, Jeff. I don't. But you will find that in our subsequent footnote when we file the 10-K..

Okay.

And then the $50 million of cash flow improvement you're talking about, what's the base number that you're using in '21? How do you define cash flow?.

It's -- we have disclosures from the past. It's approximately cash interest savings and then lease and facility savings. The split is $35 million, $37 million of interest savings, and then the rest in global footprint and other operational savings, mainly lease and facility savings..

And your lease expense, what was your lease expense for 2021?.

On a consolidated basis, for all of Exela?.

Yes..

I can look up and let you know, Jeff, after one of the next questions maybe..

And then the -- would it be fair to assume that the next step in your financing would be a new AR facility?.

I don't know if I want to zero in on any particular facility. The logic is going to be simple, lower cost of capital, lower interest rates. So any facility that we can reduce our interest cost or cost of capital, we'll do that..

Right. And you talked about asset sales at one time.

Are you contemplating any asset sales?.

Given what we have done strategically over the last year in terms of raising cash and focusing on the balance sheet improvement, I don't think the focus right now is on asset sales. Some great valuation comes through. And if it makes strategic sense, we'll definitely consider it, but that's not a focus area right now..

Okay. And then you've talked about this digital asset group being $100 million of revenues or so. And I'm just wondering, I think that you gave that number back in December of '20.

What would that number have been for '21?.

That's something that we have not disclosed, but I'm happy to share that 8% of our revenue in 2020 was from digital asset groups. And now with the reduced revenue in '21, that's 8.3%. So it's in a similar range. Of course, revenue changes to 2020 to 2021 of $126 million. So as you can imagine in dollar terms, it's larger.

But in percentage terms, we have actually the revenue share from that group has continued to improve..

And then what are you -- my last question, what do you think the ongoing SG&A run rate should be for the business with the current footprint? I mean it's been pretty elevated the last 3 quarters..

That's again a great question. But elevated the last 3 quarters, if you compare to what we were in 2020, Jeff, it was $15 million, $47 million, $43 million, $46 million. And in '21, actually, we improved, right, $42 million, $36 million, $43 million and $48 million. Some of those numbers you'll see in either the fact sheet or what we put out there.

That said, Q4 had onetime costs related to the exchange offer. Baseline, I guess, '21, we are right 40 to -- I would say, averaging $40 million. And that $40 million still includes elevated professional and legal fees.

So you can discount some of those to go away in future, but it'll all depend on when we wrap up all of the capital structure initiative..

Okay.

And then if your 11.5% bonds went up in value, I guess, is there -- is that a liquidity option at some point? If they went up in value, you could sell those and release equity from the SPD, corporate liquidity?.

Theoretically, yes. Whether we'll do that or not, that's something that I guess it'll be based on strategic intent..

[Operator Instructions] Our next question comes from Craig Carlozzi from Longfellow..

Just a couple on my end. Most were answered. I guess, first, would you be able to provide what your liquidity was both at year-end and more recently? I know throughout 2021, you provide periodic liquidity update at random times throughout the quarter, that would be great.

And then two, internally when you think about your business plan to get from here to where you need to be to have a sustainable capital structure, do you anticipate or require any more equity capital raising activity?.

Yes. For the first part of the question, there was a point in time when liquidity was being asked for quite extensively given whatever perception what's out there. But I think everyone needs to probably give us credit for what we have been able to accomplish in 2021. Liquidity sometimes is a point in time.

I think the fact that we raised over $400 million in liquidity paid down as we had paid down on debt, continue to improve our capital structure. I think we want to take the focus away from a point in time kind of liquidity, right? One, you've met a lot of our obligations. Having settled whatever else is out there, you'll start building up cash.

So the balance sheet liquidity is what, I guess, we all should eventually be focusing on. I'll leave it at that. The second one --.

What about year-end? Before you move on, what about year-end, at least the quarterly liquidity? Do you have year-end or will that be in your K? Or is that something you can provide on --.

Yes. No, at this point in time again, it's something we have not yet determined. But if you look at the balance sheet for -- on the press release today, the 3 statements was there, right, between restricted cash and cash and equivalents, it was $48 million.

Again, this is why I say it's important at this point in time that level of liquidity is after completing our exchange offer and meeting other obligations, including the prepayment of interest, is just part of the exchanges offer plus other interest and hallmarks..

Right. So if I were to look at your liquidity and look at the unrestricted cash, I think it's $21 million.

That's kind of the year-end number?.

Yes. Plus availability under the facility. Yes..

And what is the availability under the other facilities at year-end? Ballpark, Shrikant. I don't need precision..

If you can help me with what you're trying to solve, I'm more than happy to address specific questions because I do not want a point in time. If we need to talk about all of the other initiatives we are doing with the cost of the liquidity could be up or down, right? So let's talk contextually.

What is it that you're trying to zero in on?.

Well, I mean, I don't need to sound blunt. I'm not picking a random point in time. December 31 is fine. But when I look at the business and I look at the cash flow pressures and I look at the uses of cash, specifically to pay down part of your revolver, I'm not sure how much equity you've raised in Q1. I know a prior caller asked that question.

But I do know there are uses of cash, and the internal cash flow generation of the business has been challenged. And so what I'm trying to understand is, I understand that you've done a good job extending the maturities of your balance sheet. And I think that's terrific, and I applaud all the equity capital raises.

But I just don't know how much liquidity you have and then how much liquidity you need to run the business comfortably. So that's really the nature of the question..

Yes. No, understood. Understood. But I didn't take it that way either. But what I want to be very mindful of is on a public call when we talk about some -- a number without a context, right, that sometimes we send the wrong message.

When you say that, what we need to also consider to your point, how much did we raise post 12/31? What else did we pay out, right? You're talking about appraisal action settlement and other settlements -- so other prepayments. So there's a number of things involved.

So I prefer not to get into a walk rather wait for the 10-K to be filed or we'll put out formal numbers in a public forum at the right time..

Okay. And then I guess your internal business plan selling more equity? I cut you off on your attempt to answer that..

Internal business plan selling more equity, I guess the point is we have $570 million of unused registration statements, right, between debt and equity. And again, comes back to the point that we have put -- whatever equity we have raised, we'll put to good use. We have committed what we're going to do. That production, put it to good use.

So we'll continue to be strategic. Whether do we want to raise equity, what do we want to do with it, it's going to be all depending on strategic intent, and again, not being evasive to your question, but it's contextual..

Our next question comes from Alex Graf from Cowen..

I was just hoping to reconcile just the equity capital raises throughout 2021. I believe in the first quarter, you raised about 26.8 in a private placement. And then between ATM 1 and 2, about $250 million. And then ATM 3 in the third quarter Q, I think you disclosed in October, it was around $29.2 million. So roughly $306 million total.

Given your disclosure of $407 million, I think it's safe to assume that you raised another $101 million or so under ATM 3.

Does that sound about right?.

Yes. Correct. On a gross basis, yes..

On a gross basis, yes. And then so implying at the end of the year, you probably had around 120 left under that ATM 3.

In terms of plans for additional usage, how do you kind of anticipate using any additional proceeds? I mean given where the March 10 share count was and the share count was at the end of the year, you can kind of back into it based off the VWAP.

So it looks like you might have raised anywhere between $55 million to $60 million potentially so far in the first quarter. Not sure if that's in the ballpark or how you kind of anticipate those proceeds, I would imagine some of those went towards the revolver paydown.

But just curious how you guys kind of think about tapping into the balance of that ATM and what the use of proceeds would be from those..

Yes. I think I covered it on the earlier question, right, which kind of remains. And I just want to emphasize, not being dodgy, not being evasive of the question, it is dependent on our need.

And the only thing that I will say is the prepayment of the RCF, it's yet to happen, right? So we are going to figure out and match our uses and sources if that gives you a better answer for you. I would put it that way. Yes..

Got it. And just on renewal rates, great to see the 9% year-over-year number.

What I was just trying to get a better sense of is, how competitive is the market for renewals? Is there any type of discounting taking place to retain the business? Or are you able to grow contract values? And then secondly, on that point, what's the breakdown kind of between ITPS, Healthcare and LLPS for your renewals?.

This is Ron. Let me help you with the renewal, the pressure in the market. And Alex, we may have to make that our last question, if you don't mind..

Sure..

One of our slides that deals with….

Ron, sorry to interrupt. I think there is some static with your phone..

Sorry.

Can you hear me better now?.

Yes..

Sorry. Sorry. Sorry, Alex, microphone malfunction. One of the things that we like to point folks toward is the 15 -- top 15 customers. So if you look at the average tenure of those customers, it's about 15 years. Some go as high as 25 years, and we have gone through many, many renewal cycles. So our strategy, we called it land and expand.

You've heard me talk about that in the past. These are the things that we try to do with new statements of work, new master service agreements. And so as we come along and we come up to a renewal, typically, for the larger customers that have longer tenure, we've got multiple statements of work that we're dealing with.

So our combination of services and solutions makes it a little bit stickier. It makes it a little bit more expensive to disengage. So we have some of those things on our side when we come up against any pricing pressures.

And sure, in the market like we have today with some of the challenges out there, sometimes we do experience that, but we overcome it by adding additional services, and we call those bundled pricing.

So at the end of the day, that's kind of how we've hedged against that historically and how we would plan to work on that in '22 with renewals that come into place then.

Does that help?.

That's certainly very helpful, yes. Appreciate that..

This concludes our question-and-answer session. I'd like to turn the conference back over to Ronald Cogburn for any closing remarks..

Thanks. And we really want to thank everybody for participating in the call today, and we really appreciate all the questions. As always, if you would like to have further information or talk with us on a one-on-one basis, just reach out to our folks at the Investor Relations group, and we'll set a private call up with you and answer your questions.

And of course, when the 10-K is filed, some of those questions may be answered. Thanks again, and we look forward to speaking with you on the first quarter soon. Thank you. Bye..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..