Q1 2021 Exela Technologies Inc Earnings Call
[music].
Good morning, and welcome to the XLR technologies first quarter 2021 financial results conference call.
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Now I'd like to turn the conference over to William Maina Investor Relations. Please go ahead.
Thank you and good morning, everyone and welcome to the <unk> technologies first quarter 2021 conference call I'm joined today by Ron Cogburn, <unk>, Chief Executive Officer, and Sri <unk>, Our Chief Financial Officer. Following prepared remarks made by Ron <unk> will take your questions. Today's conference is being broadcast live via web.
Cash, which is available on the Investor Relations page at Mcdonald's website, and external tech Dot Com a replay of this call will be available through May 11, 2021 information to access. The replay is listed in today's press release, which is also available on the Investor Relations page of Exxon's website.
During today's call it'll will make certain statements regarding future events and financial performance that may be categorized as far as looking statements under the private Securities Litigation Reform Act change pod.
These statements reflect management's current beliefs assumptions and expectations as of today may four 2021 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 that reflect the events that occur after this call and.
And actual results could differ materially from any forward looking statements for more information. Please refer to the risk factors discussed in <unk>. Most recent periodic report on form 10-K.
And with today's press release, and the company's other filings with the SEC copies are available from the SEC or the Investor Relations page of Exxon's much right there.
During today's call we refer to certain non-GAAP financial measures. We believe these non-GAAP 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 in 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 Reg FD disclosures out of the way I'm pleased to turn the call over to our CEO Ron Cogburn Ron. Please go ahead.
Hi, good morning, and thanks, everyone for joining us on our first quarter 2021 conference call.
Today, I would like to highlight a few key topics, which I hope everyone takes away from this call.
To begin with excel is improving key performance metrics, especially our profitability, which grew considerably in Q1.
Second I will address a drastic settle its participation in the digital transformation of our customers by building digital road simple broken processes, which drives growth and the b to b and B to C low.
The existing networks behind.
Next we'll talk about new products and markets, which represent exciting growth opportunities for each seller.
This include our digital asset group or Dag Eric.
Eric Selle of bills and payments or X V P.
And the intelligent data processing or IV solutions, along with the adoption of these solutions in the small and medium business market.
Next we will talk about our ongoing efforts driving operational leverage and margin improvement strengthening our balance sheet and financial flexibility.
And then we will also highlight the stability of our revenue base growing pipeline improving customer sentiment all of which gives us increased confidence in our 2021 outlook.
So lets begin the day on slide number four with an overview of our Q1 results and some recent business highlights.
Revenue for the first quarter was in line with our expectations at $300 million.
Variations from Q1 of last year were primarily due to the exit of non strategic transition revenue.
Volume impacts from COVID-19.
And our non core asset sales.
Our revenue base is stable and diversified from a customer industry and geography standpoint.
Our backlog is substantial and our pipeline growth remains strong, particularly for our tech solutions, where we're seeing increased demand with new and existing customers.
Through Q1 of 2021 our Dag business represented about 8% of our total revenue, including our SMB business.
From a profitability perspective.
We delivered strong margin improvement in the first quarter as well.
Our Q1 gross margin was 22 and a half per cent and increase of approximately 370 basis points sequentially.
250 basis points year over year.
Q1, adjusted EBITDA margin was 15 and a half per center.
The increase of 365 basis points from the last quarter and.
And 334 basis points year over year.
This is noteworthy in this environment.
Yeah, we delivered multiple key new business wins and solution solution launches are in the first quarter as well.
With respect to the new business wins, our recent expansion into the small and medium business market showed strong growth in Q1, 2021.
SMB customers for our digital mailroom solution grew 117% sequentially in Q1.
And our S. M b dry sign users increased to almost 170 per cent.
This is the kind of adoption we were looking for our pipeline continues to grow.
In this segment and we have plans for further global expansion of this business.
As we previously announced in early March we also delivered our first cloud hosted deployment of P. C H global.
With a major U S insurer.
Under this $90 million 10 year licensing agreement <unk> has deployed its P. C. H global digital exchange platform to execute the end to end processing of complex health care claims for this large customer.
Now regarding the new products and solution launches I was happy to announce the global expansion of our exchange for bills and payments or X V. P.
And to the Americas, Continental Europe, and the Asia markets.
We discussed our X P. P platform at length during our recent caliber fireside chat.
Our legacy billing processes for both payers and receivers today is fraught with inefficient manual processes with are inherently expensive risky and they don't give companies the full transparency and other corporate bills and payment process.
X P. P enables builders to send bills to businesses and consumers electronically offering transparency and simple reconciliation.
It also allows payers to receive all their bills in one place with the analytics alerts and more payment options are.
Our X P. P solution is garnering accelerating interest across our existing and new customers and I look forward to providing you with updates on future calls.
And we're also excited about our recent rollout of our intelligent data processing your I D P platform.
I V. P was designed to provide customers with its easy to implement highly scalable secure cloud based environment to run their critical business processes.
Our IBP platform Leverages artificial intelligence deep learning architecture, and <unk> vast library of knowledge from customer and industry rules across existing and future processes to generate continuously improve results for our customers.
Next is our our P. A R robotic process automation. It's another digital solution. We're excited to talk about we invite you to join US for another fireside chat with D. A Davidson on May 20th well will go into further detail on the use cases and how these bots are working hard for our cash.
<unk>.
Now turning to our operational leverage improvement initiatives, we have a couple of important highlights to mention here.
In the first quarter, we completed 25% of our multi year plan to reduce our facilities footprint rationalizing our footprint.
Also our initiatives to increase automation in our organization enabled us to continue optimizing our workforce.
Our total employees as of March 31, 2021 were 18400 as compared to 19000.
December 30 <unk> of 2020.
Finally, with respect to our balance sheet, we remained focused on strengthening our financial flexibility and liquidity position.
As a reminder, in mid March we raised $26 $8 million in gross proceeds.
Net of equity offering.
Now, let's turn to slide number five.
Now many of you will be familiar with this slide from our last earnings call, but I think it's important and it gets to the heart of our strong market position and illustrates the significant addressable market opportunity that we have for our V. P M and digital solutions.
With over 30 years of experience, we serve 4000 plus customers globally, including 60 per cent there was a fortune 100.
<unk> customers across verticals, such as banking insurance commercial.
Health care and public sector rely on that fully deployed technology slash stack.
140, plus delivery centers.
Were 18000 employees to execute mission critical business processes.
Now our solutions are integral parts of our customers' day to day operations.
And they include liquidity solutions, paving and technology solutions.
My favorite human capital management, which.
Which we replaced work day.
Work from anywhere technologies and of course information management and communication.
We believe we've only just scratched the surface in terms of a significant market opportunity with our current customer base.
Now, let's turn to slide number six.
I'll note that we have deep valuable and long tenured relationship with our customers, including many of the world's largest enterprises.
Our largest customers have been with excel at an average of 15 years with low customer concentration and our focus on the industries that have the strongest projected CAGR like banking financial services insurance and health care, we're well positioned for growth. Furthermore.
With the most but most of our revenue in the U S and in Europe.
We're strategically positioned to benefit from the economic recovery post COVID-19.
<unk> Digital foundation, and our engineering heritage powers, our long tenured customer relationship.
And this is what enables us to continue to innovate and launch new disruptive solutions that further widen our competitive moat.
Now, let's turn to slide number seven.
So you heard me mentioned at the beginning of the call expect to excel as expansion into the SMB segment.
While we have significant white space opportunity available with our large enterprise customers, we see strong potential.
For our leading solutions for small and medium businesses.
That shouldn't be today is an untapped market for <unk> and we believe it represents a significant future opportunity.
Here are some stats on some recent stats that really give us confidence in our offerings.
As shown on the left side of the page we've seen very strong growth in the number of new SMB customers, which I mentioned earlier in the call.
For our digital mail room, as I mentioned, it's up 117 per cent quarter over quarter.
Dry side is up a 170 per cent quarter over quarter driven.
By an increase in demand for the work from anywhere solutions that we offer.
With the success, we've achieved within this space so far.
We plan to bring more subscription based business process as a service or B pass solutions.
Software as a service or SaaS.
S M D market across Americas, Europe and Asia.
Our software licenses and subscriptions for our digital platform as strength in our backlog and improve our profitability.
Our enterprise customer contracts tend to be five to 10 years with renewals and annual maintenance and support services.
They also generally generate higher gross margins as well now our SMB customers are a little different there contract tend to be per user per month, and our cloud hosted solutions with features and flexibility.
Ideal for that market place.
So in closing accelerant mines, well positioned in today's environment, the global trend towards digital transformation to grow market share increase productivity and reduce costs through modernization and automation of our business process is generating strong tailwind for our sector.
Our extensive investment in technology enables us to build long standing trusted relationships with other customers.
Our multiple patents and process and new digital solutions deepens and widen our competitive moat as well.
As we execute against our strategy and benefit from the normalization of volumes and customer renewal weights toward pre COVID-19 levels.
We anticipate improving performance throughout 2021.
We will continue to execute on our cost efficiency and operational improvement plans.
A drive future Marchuk margin expansion, while continuing to focus on strengthening our balance sheet and financial flexibility.
Based on our Q1 results and the momentum we're seeing in our business. We are reiterating our prior 2021 guidance.
And with this I'll turn the call over to Sri accounts short sure our CFO.
To run through the numbers in more detail.
Colin.
Thank you Ron good morning, everybody.
In my prepared remarks, I will take you through our consolidated results and segment revenue and discuss guidance for the full year.
Happy to report sequential and year over year gross margin and adjusted EBITDA margin growth this quarter.
As we have done in the past we are reporting both GAAP and non-GAAP numbers.
Felicia sorry, not filings and in the appendix of the presentation.
Start on slide eight and review, our first quarter 2021 results.
Revenue for the first quarter totaled $300 1 million a decrease of 17, 9% year over year on a reported basis and 19, 3% in constant currency.
A look at our segment revenue revenue for our <unk> segment was $231 9 billion a decrease of 18, 4% from $284 1 million in the first quarter of 2020.
This decline is primarily driven by the transition revenue in COVID-19 related volumes.
Health care solutions segment revenue totaled $51 1 million a decrease of 22% from 64 million in the year ago period.
This decline was primarily driven by COVID-19 wanted us.
Our legal and loss prevention segment revenue was $17 1 million essentially flat year over year.
Despite the 65 million year over year decline in our Q1 revenue our gross profit only declined by approximately $5 million, reflecting our ongoing focus on operational improvement and efficiencies.
Our gross profit margin for the first quarter increased 370 basis points sequentially, and 250 basis points year over year to 22, 5%, primarily due to better cost and capacity management and the reduction of stranded costs attributable to the transition revenue.
Gross profits were lower by approximately 5 million due to a non cash restructuring charge reserved and plans for operational improvements.
The benefit of our ongoing actions to reduce our cost structure nearly offset the full impact from lower revenue.
Going down the income statement SG&A expenses for Q1 totaled 41, 9 million down 16, 9% year over year and down eight 7% sequentially, representing 14% of sales, we delivered lower year over year and sequential SG&A. Despite the higher professional piece on that.
Three cost in Q1 of 2021, which we expect will decline in subsequent quarters. This year.
Shifting to EBITDA and adjusted EBITDA in Q1, we delivered EBITDA of $23 5 million compared to $54 6 million in the prior year period.
A reminder, EBITDA per our prior ear quarter Q1 of 'twenty 'twenty included a gain of 35.3 million recognized from the sale of sausage Ob decks are lumpy.
Adjusted EBITDA for the fourth quarter. It was $46 5 million up four 7% from $44 4 million in the prior year period.
Our adjusted EBITDA margin for the first quarter was 15, 5% up 366 basis points from the prior quarter and 334 basis points from 12, 1% in the first.
Water up 2020.
Our Q1 margin expansion benefits from cost efficiencies, which I just mentioned, including our deployment of work from anywhere solutions, which which has helped reduce our real estate facility costs as part of our multiyear facilities plan and cloud deployments, which are benefiting our it infrastructure expenses.
Moving to slide nine and focusing on our profit and operating metric performance.
As I mentioned earlier, our gross profit and EBITDA margins were up substantially in Q1 versus Q4 of 2020, driven by business mix and effective cost management.
Importantly, our ONR charges continued to decline in Q1, and we are currently at an approximately 20 million run rate for 2021 compared with 46 million for full year 2020.
The EBITDA less Capex for Q1, 2021, with $38 8 million, representing 12.9% of revenue and 590 basis points improvement from Q4 of 2020.
Let's touch briefly on our balance sheet and liquidity in March we raised approximately $26 8 million via an equity offering before deducting placement and other.
Operating expenses are.
Our global liquidity per our credit agreement was 62 million as of March 31st 2021.
<unk> of 22 billion of cash and an additional $20 million of availability under our global credit facilities.
And an additional $53 million undrawn on our committed securitization facilities in the U S.
Total net debt as of March 31st 2021, plus 1.48 billion.
We believe we are well positioned to forego strength the balance sheet has to be prepared for the return of COVID-19 volume and growth in the SMB space.
Last Monday, we filed an S. Three to provide the company extra financial flexibility our strategic objective remains.
One achieving higher gross margin, but strategically focusing on high quality revenue that includes return of COVID-19 volume and continued strong growth index SMB market share.
<unk> strengthened the balance sheet with the ultimate objective to reduce our cost of capital and enhance financial flexibility on a levered basis.
Turning to a review of our 2021 outlook as Ron mentioned, we are reaffirming our prior guidance ranges.
Full year 2021, we continue to expect total revenue to be in the range of $1. Two 5 billion to $1. Three 9 billion are current estimates assume the normalization of pre COVID-19 volumes renewal rates will return to historical levels pre COVID-19 COVID-19, and continued momentum in winning new business.
Gross margin in 2021 to be between 23, and 25% reflecting improved operating leverage.
Nothing from the normalization of volume to pre COVID-19 levels and increased productivity of existing employee base and higher utilization of production infrastructure.
Adjusted EBITDA margin to be in the 16% to 17% range, reflecting higher gross margin as well as improved operating leverage resulting from the scaling of revenue with minimal additions to production infrastructure and reduction in professional and legal expense.
The normalization of capital structure.
We expect GAAP fixed levels of approximately one per cent of revenue in line with historical levels and working capital in line with historical levels and recent trends.
Turning to slide 10, I believe you with three takeaways from today's presentation first are rising performers.
Reflected in the sequential growth in profit and operating metrics with improving operating leverage again recently launched SMB business showing robust growth in Q1 of 2021 with substantial backlog and growing pipeline and floor plans to continue to strengthen balance sheet as previously announced are in progress.
Like to thank you all very much for joining us on the call today.
Operator, please open the call for questions.
We will now begin the question and answer session.
I asked a question you May press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
With your question. Please press Star then two.
At this time, we will pause momentarily to assemble the roster.
And our first question will come from Gerry law.
Of Carlyle. Please go ahead.
Hey, guys. Thanks for the questions just had a few here.
She kind of I think you mentioned a few quarters ago that.
Yeah.
And the <unk> the low margin.
Revenue streams, there call it 150 million and most of that if not all of it will be exited at least on the revenue line.
By the first quarter of 'twenty one.
That's still the expectation.
Currently.
That is correct Gerry.
Q1 of 2021 March almost one full cycle of the trend should revenue we have trended.
Internally as we look at it would be a trend, but at $147 million of fix it. So it's in line with the 150 that we had expected.
Okay, Great and then if I look at the three line items in healthcare <unk> and rust.
If I were to just look at your your guidance for the year.
Even looking at the low end of guidance you should at least see some uptick or at least flattening on the <unk> line.
Is that something you you see kind of going forward in the next few quarters at least on an ITT S.
I would say so again as you saw in our guidance in our discussions today there are assumptions built into it COVID-19 volume is coming back up.
A couple of additional color if you would want.
Care solutions for example quarter over quarter remained flat with just which isn't a very good because traditionally Q4 tends to be a higher quarter for health care solutions. The fact that Q1 of this year was flat with Q4 bodes well for us.
We expect to see the volumes to continue to pick backup LLP as we have said that.
A few different times in the past project driven so.
So anything could happen so rest of the growth is going to be picked up from ibs and the the Dag and all of the Smbs that were focusing on we expect growth to come in that area as well as from payments in a few different business verticals within it.
Mhm, great I appreciate all that color chaconne in the quarter. It looks like you are.
Moving onto cash flows and working capital sources and uses it looks like <unk> and ADP kind of moving a little bit outside of where you were.
In the last quarter or two and you know I think per your guidance youre expecting it to be you know call it one per cent or so.
Growth.
Right around that area do you expect that to really normalize over the next few quarters, yeah. So I'm I'm I'm sure maybe I'm getting.
I'm not getting the question right, but the one percentage obviously, our capex estimates right Jerry so from working capital perspective.
Thinking about it the right way in the sense.
B have swings on the audit even quarters, we continue to really continue to expect that obviously as we convert cash as you saw between Q4 and Q1, we had additional margins and cash generation.
That will help us either.
Either to get to a neutral or a cash cash position positive situation from an operational perspective eventually.
Okay.
Great. Thanks, and just last one for me.
I think you mentioned the F.
Vascular EBIT at the $500 million mixed.
Mix shelf that was filed can you provide any additional color there in terms of timing or quantum or use of.
Oh, Yeah, Yeah. That's really you should think about it would be already had the self registration in the past this was to give us extra flexibility.
No specific usage earmark right now, but we're going to be very strategic about it from a use of funds perspective, it's mainly for general corporate purposes.
Fortunately to invest to fuel growth and profitable revenue in the near term right.
Also you could we could look at it in and we have two or three other areas that you would like to focus on strengthening strengthening the balance sheet.
Where do you think our cost of capital and as I said.
To improve our liquidity.
And just on just on the liquidity piece of it can you say how much liquidity do you currently have.
Maybe at the end of April or early May.
Right, So what I would like to do with too.
Two point answer one be liquidity at the end of April is better than March and from a business perspective.
Every month of the quarter in particular March was definitely much better in terms of volumes and returns compared to Jonathan Fab, we have seen a good trend in April so our liquidity and up April is better than what it was in March number one number two I think.
Have you been disclosing our liquidity and our chosen case and presentations. So you have a good feel for.
At various points in time, what those were.
Lastly, you know as I said, we are looking at hitting all of the power meters profitable growth margin improvement.
Etc. So rather than give you a number at a point in time and lock get locked in I think we are we are happy to see the cashman version or the better margin improvements in the business.
Okay. Thank you.
Yeah.
Thanks Jerry.
Yeah.
As a reminder, in the interest of time, we ask that you. Please limit yourself to one question and one follow up.
And the next question will come from David.
Please go ahead.
Hey, Thanks for the call guys.
One question My primary one is there wasn't any mention in the release to the prepared remarks regarding asset sales like we've seen.
Over the last four or five quarters I just was curious if this was still on your plans has there been any change to our two.
Other divestitures. Thank you.
Hey, good morning, David Thanks for the question.
No change in plans as such but we most certainly wanted to be very strategic about it it's dependent on the valuations I think on the last earnings.
The earnings call I kind of mentioned the two asset sales that we did.
Oh there.
Relatively small honor the next one that we wanted to do was probably.
Which one will be it'll be much bigger in a potentially bigger and also make a strategic fit right. So depending on the valuation depending on where we land we are still looking at it.
So you are still in the process here and there's parameters I believe $125 million to $150 million of proceeds are still.
It's still in a in your side here.
That is correct yes.
Okay, Okay great.
Secondly.
The cash burn I know this is a cash burn quarter the cadence here in la.
Like and I think you cited earlier, you're a are and maybe some of those items.
We're a little bit you know, you're a little bit more cash on those but was there any one time, just usually used them burn this much cash on a quarter I'm wondering.
If I would you know.
To look at this and walk through exactly what would be the outliers this quarter that made it a little bit higher was it simply working capital issues with the E. R insights or were there some one timers I'm missing.
No actually I Wonder if you went outside it really to one timers the way I look at it.
You rightly pointed out its working capital swings what is probably a little bit more per ounce in Q4 versus Q1 is that.
Q1 revenue was sequentially down by 14 million, but our E. R went up by $10 million, which is an indicator.
The collections in Q4 were pretty robust pretty good and you.
Conversely in Q1 collections were later, so we have that labor pool, right, so not too little.
A little bit backend loaded Q1, if you if things got better as the quarter went on.
That makes sense okay. Okay.
And then that that secondly, you said the cadence of your health care volumes is improving.
So we would expect.
Better margin business, that's a that's a tailwind going into that I guess with more.
Discretionary procedures going on that's definitely a benefit for you guys.
Exactly but you know I want to be cautiously optimistic there right I think the good trend as you look at years past as Q4 health care tends to be better than Q1, because there are just this.
Quarter over quarter. It was flat that's very pleasing for us, but again I want to be cautiously optimistic given everything going on.
Hopefully.
Late Q2 and onwards, you'll start to see some pre COVID-19 volumes come back up.
Alright, thanks for the call.
No problem. Thank you David.
Our next question comes from Alan <unk>.
Each point capital. Please go ahead.
Alright, Thanks for taking my question.
So first on the $66 million year over year decline in revenue could you help bridge that between transition exited revenue and then just COVID-19 impacts.
On a dollars basis.
Yes high level again take this as a directional number but.
You know.
Transition impact that space at 150 run rate approximately 37, or so a quarter and I think for Q1 to Q1. That's in the same range 35, 36 from a transmission revenue impact perspective.
COVID-19 impact you know late sort of late March so two and a half months of COVID-19 impact when you compare year over year, approximately $20 million and then the other $10 million from the contribution from the asset sales that we did so in Q1 of last year, we had approximately $10 million from those two assets contributing to the revenue which.
Did not repeat in 2021, so that's the high level of breakup for the 65.
Got it.
And then I guess on the year over year decline still being around 20% going from <unk> to <unk> I guess like with some of the reopening going on I would have thought you'd see some minor sequential improvement so what areas I guess within <unk> and health care services are still kind of lagging and are still feeling a pretty severe COVID-19.
Impact.
Yeah.
One is as I said right already so you're specifically asking about I D. P. S, which are looking at it right health care and legal sequentially. Alan you asked me a sequential rate.
Yeah, just year over year decline rate going from <unk> to <unk> seems like it's pretty consistent but I thought it would have improved on a easier comp.
Yeah Okay.
Like I said healthcare and legal.
Q4 to Q1 sequentially led to relatively flat.
Drilling down into a T. P S. Our payments business was actually flat Q4 to Q1.
It doesn't be.
Digital assets group there in European region, we tend to have a one time Q4 benefits from higher software sales professional service gross sales and equipment sales that obviously doesn't repeat in Q1.
But what is good about this Alan is that.
Not just the.
Revenue decline is never good, but what I mean to say is in Q1 traditionally every year going from Q4 to Q1, while theres seasonality in Q4 that doesn't get repeated in Q1, we tend to see a lot of both season pass through in Q1 of every year. This year. It was not that pronounced what this means is while revenue was.
Lower sequentially it didn't really impact our margin I think thats the positive takeaway, but long story short.
Payments within a T. P S remained flat.
We had some compression in the.
Onsite and our United Communication services businesses.
Okay got it thank you.
Okay.
The next question comes from AMR to water of Imperial capital. Please go ahead.
Hi, guys.
I have two questions first one is around liquidity.
You mentioned that.
You have them.
A little over $50 million from.
Available from the Undrawn part of D. A R facility.
My question is that available to you today.
Hi, there good morning, and thanks for the question it is available to us today subject to conditions.
If you have a follow up it can address.
It's sort of jumping into a conclusion, so sharp short and sweet answer it's available to us subject to conditions.
Okay.
The other question I have is regarding the health care business.
Okay.
When you look at 2020.
Versus 2021.
How should we think about.
You've given the overall revenue guidance as the health care are going to perform in line, but those.
Sort of Europe of your ranges or should it perform better or just.
Just trying to get.
Out getting any specific numbers, maybe directionally, if you can help us.
You know I I think you know again, if you look at our beef those dumps.
As long as the pre COVID-19 or not as long as as long as the pre COVID-19 volume start to pick up as our renewal rates return back to normalcy.
And as we continue to win new business, we certainly see growth in the health care space.
What is the unknown right now and that's why we are cautiously optimistic about this is that.
Don't know how things will pan out in the next two to four months right.
Inoculation happens as things start to return back to normalcy.
There is additional revenue our business to be picked up but that's where we need to wait and watch in the near term to see how it will pan out.
Got it and just broadly.
EBITDA margins for the health care business, where where are they roughly.
Yeah.
From a segment perspective be only look at it at a gross margin levels because of the shared services and corporate costs that that has on ESG and other so gross margin we expect it to be.
In line with historical trends and as you saw in our guidance, we expect our gross margin pick up from prior years to land at 23% to 25% right. So we'll.
We will continue to be in the range.
Of growth that we had projected.
Got it. Thank you very much that's all I have.
Most of them right.
Yes.
Yeah.
The next question comes from Jeff Hutton of Jpmorgan. Please go ahead.
Hi, Thanks for taking the question.
One quick one on <unk> on slide eight just about one of the add backs that you have in your EBITDA line you have.
Noncash and other of $13 one could you just maybe detail what what.
Much of that is noncash and in or what exactly those charges were four.
Yes sure.
We usually have the details listed in our fact sheet.
For this quarter, we are still not put it out as we find the cube, we'll put it out but to address your question, Jeff typically these noncash charges.
If there are impairments to goodwill and other intangible assets, which is not there in Q1.
You know things like non cash expense.
A loss on sale of assets those are the non cash elements than the other charges includes potentially imply sovereigns dock facility.
And things like that customer exit costs and things like that.
I will preempt and kind of tell you you'll see a higher number there this quarter, mainly because I mentioned in the prepared remarks, we took a noncash charge for our restructuring in France restructuring a couple of facilities.
That is part of the noncash add backs, which is driving the higher number in Q1.
Great that's helpful and one follow up if I may.
How do we different question.
Some of the new the new segments and kind of the newer products that youre going after you list them. There on slide seven but can you tell us like what revenue like dry sign or the HCM stuff, where the ex BP products are generating can you give any color on the size that you you gave some growth rates, but it's hard to tell.
Yeah, Yeah, no no no problem, John I will provide you with that answer and then maybe Ron can add more color from a business perspective.
Jeff at this point in time, Yeah at this point in time, it's almost too early to talk about our revenue number.
Because it's not very meaningful right now.
We are excited about is the number of customers are getting onboard it into some of our products the day, the dmr's and dry signs.
Particularly for our digital are our products that we have that's exciting.
And at this point in time, you are more focused on building up these customers. If you followed us if you know us from the past.
We have always focused on our top customers are enterprise customers, which will continue to do that smbs provides us a new opportunity to broaden our revenue. There are a lot of these products easy to deploy regular revenue stream and then importantly, we have more products lined up right. So simple answer.
To your question would be it's not meaningful revenue right now, but it's something that in the pipeline that it will grow the hope to avoid in a bigger way.
That said, Ron if you want to give.
A little bit more color on the products or if you want to add some color feel free to do so.
Thanks sure upon.
So feeling left out there.
[laughter], Jeff what's interesting about these products is that we are always the users of our own solutions and services.
I've heard some people use the phrase you eat our own dog food, but you know at.
At the end of the day I hope that a user.
The DMR solution and dry sign for well over a year. So I think I can tell you with confidence that <unk>.
As we roll this out we did sort of a soft rollout we are thrilled with the adoption rate that we're seeing along that customer set so the if it's per user per click per instance, it's a much different approach and for us that's really exciting because we have not.
Opened up that that channel within our business. So when we look at that and we look at the other things that we can offer on a subscription basis.
We're very hopeful about where this is going to take us in future quarters, we can give more detail around the revenue but.
Right now we're off to a great start.
Thanks for that color. Thank you.
This concludes our question and answer session.
Now I'd like to turn the conference back over to Ron Cogburn for any closing remarks.
Thanks, operator.
Always we're very appreciative for everyone that joined the call today, and we really enjoy.
Addressing any questions you have and you know always you can reach out to us.
Secondly, if you have questions that we did not answer you didn't get a chance to ask.
But let me remind you as I did during the prepared remarks.
We have got another fireside chat coming up with D. A Davidson late 20th and it's around our RPI solution robotic process automation, which is part of the overall growth or approach with the digital assets. So please make plans to join us.
Thanks, everyone and we'll see you next quarter.
Conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Okay.
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