Q4 2021 Exela Technologies Inc Earnings Call
[music].
Good day and welcome to the Excel with technologies incorporated fourth quarter and full year 2021 financial results call.
All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded I would now like to turn the conference over to Mark Griffin of Investor Relations. Please go ahead.
Thank you good afternoon, everyone and welcome to Excel at technologies fourth quarter 2021 conference call.
I'm joined today by October .
So as Chief Executive Officer, Mr. Todd <unk>, our Chief Financial Officer.
Following prepared remarks by Ron and she thought 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.
Our securities insurance.
This conference call is being broadcast live via webcast, which is available on the Investor Relations page of <unk> website at <unk> Dot Com a replay of this call will also be available through March 17th 2022.
Information to access this replay is listen on today's press release, which is also available on the Investor Relations page of it sounds website.
During today's call <unk> will make certain statements regarding future events and financial performance that may be characterized as forward looking statements under the private securities.
So quick data.
Excuse me Litigation Reform Act of 95.
These statements reflect management's current beliefs assumptions and expectations as of today March 10 2022.
Subject to a number of factors that may cause actual results to differ materially from.
From those statements.
We undertake no obligation to update any statements to reflect these events that occur. After this call actual results could differ materially from any forward looking statements more information. Please refer to the risk factors discussed in <unk>. Most recently filed periodically court on Form 10-K , along with today's press release and the company's other filings with the SEC.
Copies are available from the FCC on the Investor Relations page at <unk> website.
During today's call, we'll refer to certain non-GAAP financial measures.
These non-GAAP financial measures.
Measures provide additional information on how management views the operating performance of our business reconciliations between GAAP and non-GAAP results. We discussed on today's call can be found on the Investor Relations page of our lifestyle.
Please note the presentation that accompanies this conference call is also available on the Investor Relations page of the website.
With all of the mandatory regulation FD disclosure out of the way I am pleased to turn the call over to our CEO Brian content.
Hey.
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.
During the year, we executed a sizeable debt reduction strategy improve the efficiency of our business, while stabilizing revenue and positioning our business for a return to growth.
<unk> minerals of our business are solid and we are particularly pleased with the strong growth of our digital solutions for the SMB market.
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 its excel excel a success.
So with that let's begin with slide number three.
An overview of <unk> fourth quarter and full year highlights.
Yeah.
Total revenue for the year was 1.1 dollars 67 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 five 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 significant we earn more gross profit dollars on lower revenue.
Additionally, we generated adjusted EBITDA of $173 $7 three.
$3 million or 14, 8% of revenue and expansion of 135 basis points more.
More importantly, we generated adjusted EBITDA of $39.5 million 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 it through a series of transactions, we were able to reduce our long term debt by 30% or $454 million with these improvements seller is on track for it.
$50 million cash flow improvement in 2022.
We're also increase our market capitalization of the seller by almost 300% to $238 million.
Now, let's turn to slide number four 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 activity.
Our renewal rates continue to improve and one 9% increase year over year in terms of customer attraction, we closed 45% more deals sequentially.
Our strategy continues to evolve scaling up our cloud usage, many of our platforms, including intelligent data processing, our IBP and our work from anywhere initiatives or that'd be assay are driving fast adoption of the cloud cloud.
Cloud uses usage is expected to rise substantially from 30% in Q4 cloud.
Cloud you should 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 number five.
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 tailwind here and we will expand upon them in the subsequent slides.
First the work from anywhere adoption continues to rise providing a hedge against rising cost.
Bridging our global footprint.
Second anticipating COVID-19 is subsiding or stabilizing.
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're also experiencing notable demand in our products and services.
Now, let's turn to slide number six and let's talk about the work from anywhere solutions or WSI.
That address the rising cost 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 cost in all locales.
The hiring market at large is challenging 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 I D. P F.
Our WSI initiatives are driving margin expansion through more efficient delivery. During 2021, we made great strides in right sizing our cost by reducing our real estate footprint and optimizing our headcount.
We haven't increased our W. S E agents by more than 8000, this past year, and we plan to accelerate that in 2022 to more than 25000 agents over the year, we enhanced our WSI platform, but changing our model to a cost per click so their customers.
We're paying for output rather than time.
Our work from anywhere solution is secure scalable and global.
As competition for talent is growing globally <unk> solution gives our customers access to labor pools on a global basis.
Now, let's look at slide number seven and let's talk about the renewal.
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 onsite business as we return to pre 2020 levels.
COVID-19 had the hardest impact on our onsite businesses the world easiest restrictions and returns to a pre pandemic level of activity, we are well positioned to benefit from that.
In 'twenty 'twenty and 2021 we have expect we had approximately $90 million of annual revenues that have been delayed.
We estimate that if the renewal rates were to recover to pre pandemic levels that would include a 19 $90 million uptick in our onsite business.
Finally, let's turn to slide number eight for an update on our progress in the small to medium business sector or S. N V. As we call it which is part of our digital asset group a day.
Q4 was a very strong or very 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 dry sense solutions in the fourth quarter, our DMR SMB customers grew 44% sequentially.
And our dry sign users grew an impressive 135% from Q3 of 2021.
DMR and dry Sun 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 <unk> robotic process automation platform.
In health care and public sectors. Another notable launch in 2021 with <unk>.
Human resource outsourcing or <unk> business, which you call like seller HR solutions.
Finally, we launched our compact high speed enterprise scanning platform called until a scan raptor.
The Raptor provides comparable capability as our existing <unk> suite of products, but at a much lower cost and.
In December we also launched a remote online.
<unk> platform.
This platform will help us accelerate the conversion of smbs onto our DMR platform and expand our value proposition to a much broader audience.
We look forward to updating you.
Progress of the remote online <unk> platform in the coming quarters as the platform ramps.
Now, let's turn to slide number nine which is conceivably the most important slide in the deck and it highlights points number four and five which you saw on slide number five.
So, let's start with business growth and the steps excel or 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.
Enterprise level as well as the business unit level.
Additional talent investment and continued expansion of the SMB across new markets and solutions, that's the let's talk about positioning.
We've engaged with strategic partnerships and potential new M&A, which we hope to share some news with 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 I D P.
Let's talk about financials.
The lower cost of capital for better performance and stronger balance sheet.
Increased financial flexibility through preferred equity and extending debt maturities to 2026.
Of course, the awards and recognition wall Street to the industry analyst.
We continue.
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 <unk>.
So with that I'll now turn the call over to our CFO sure it kind of sort your to run through the numbers in more detail.
Got it.
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.
Opening Mark indicated that will not be talking about the pending exchange offer.
Some of you heard that or it was misquoted pending acquisition offer I just wanted 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 reconciliation or in our filings and the appendix of the presentation.
2021 was a year in which we executed on our commitment to improving <unk> fundamentals.
On the balance sheet front, we reduced our long term debt by almost half a billion dollars.
We extended the maturity by three years on substantially all of our long term debt.
We reached an agreement to settle the appraisal action dates 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, but most important metrics the lora revenue improving come back to 2020.
All of this was achieved ended generally unpredictable unfavorable environment, both inflationary pressure on wages and continuous COVID-19 impact.
We met our revenue the revised revenue guidance for the year. We had provided a revenue range of 1.16 to 1.1 dollars 75 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%.
No reason to be satisfied with these achievements and feel cautiously optimistic about 2022.
Let me begin on slide 11, and review, our fourth quarter and full year 2021 results.
First.
The fourth quarter results.
Our revenue for the fourth quarter totaled $294 3 million, an increase of $15 $1 million or five 4% sequentially and a decline of six 3% year over year.
Our <unk> segment continues to be impacted by lower volumes, primarily caused by the effects of COVID-19 as shown on slide seven that Ron touched upon.
Health care solutions, and legal and loss prevention segments, both posted solid year over year revenue growth health care growth was driven by our provider business and our LLP a segment continued to be driven by strong new project businessmen.
Our fourth quarter 'twenty to an even gross profit margin of 19, 9% 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 six 4% year over year and eight 7% sequentially. Our adjusted EBITDA margin for the fourth quarter of 2020 . One was 13, 4% up 160 basis points year over year and 40 <unk>.
At this point sequentially from Q3.
Capital expenditure in Q4 with $9 million or two 9% of revenue in line with our expectations.
Next I'll touch upon our full year 2021 panels with Bolton metrics.
For the annual year over year comparative.
2020 numbers are on a pro forma basis adjusted for the divestitures that we did that.
Revenue for the year 2021 was 1.17 billion a decline of nine 7% year over year on a reported basis and eight 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 the TPS segment with $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 return to office plan are affecting our onsite business. In addition containing transition zone.
We continue to believe that we are well positioned to see return of volumes and revenue improved in the segment once the headwinds subside.
Health care solutions segment revenue was $217 8 million, an increase of $6 8 million or three 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.
Air business experienced lower volumes as compared to prior year and was down by three 7% year over year.
<unk> 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, renewables were up year over year and our pipeline remains robust.
Our gross profit increased by approximately $12 3 million or four 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.
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 eight 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 one 4% year over year.
Our adjusted EBITDA margin for 'twenty or 'twenty, one was 14, 9% up 148 basis points year over year.
The optimization and restructuring charges or and or else 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 one 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 pre payments of interest on notes and exchange tumbled.
Part of the debt exchange <unk> 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 2020 when that payment in refinancing activity.
That 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 from our balance sheet initiatives.
As part of our capital structure initiatives, we raised a total of 407 billion in equity during the year and in line with our previously announced deleveraging strategy, we deployed the 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 through July 2026, except for the stub portion.
Finally in Q1 of 2020 to be agreed to exchange 100 million outstanding under the revolving facility for $50 million in cash and $50 million of 11, 5% senior secured notes due 2020.
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 20 to 23% to 24% of revenue.
Adjusted EBITDA margin greater than 15% of revenue Capex levels up approximately 1.5% of revenue and working capital in line with historical levels.
In closing I would like to emphasize these three key areas of our focus.
I've covered on all of the earlier slides.
Bust.
Solid fundamentals strengthening the balance sheet puts us in a good position a reduction of nearly half a billion dollars in debt and extension of maturities provides us with financial flexibility.
The agreement on 100 million under revolver as a positive development supplemental appraisal action is ananda.
This leads us for.
For a better on me for continued operating performance improvements, which is a second team in.
Improvement across all metrics continued to manage cost and capacity to offset rising inflation and other headwinds.
<unk> done already of services through proprietary technology, that's a long term bet against rising costs.
We will continue to focus on operating cash flow improvement toward 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 of geographies.
Thing in our business, including M&A and talent across X a lot.
Good morning, independence, and better execution across the segment.
Lastly continue to grow old wall Street interaction and expand our coverage.
Thank you all for joining us today.
I open the line for questions.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at.
At this time, we will pause momentarily to assemble our roster.
Okay.
Our first question comes from Josh Seigler from Cantor Fitzgerald.
Please go ahead.
Good afternoon, and thanks for taking my question can you start by breaking down some of your EBITDA adjustments. What was included in a 28 million of other charges bucket.
Are you there shriek huh.
Sorry, I was on mute.
That's what I thought.
[laughter].
Josh Thank you for the question.
Can you clarify.
Add backs for Q4 up 21 or are you indicated 20 Bucks correct.
Q4 'twenty one.
Well I guess the the main I'll cover the main items, probably the work has it 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 billion and then other than that that's that's the big one other than that.
There are a number of regular from from severance too dark cosmetic cost to.
Gain on sale of assets to noncash equity comp all of the regular noncash charges. So Josh.
Okay. Thank you that's helpful. And then you know as.
We head into claims going to how are you guys thinking about your cost saving initiatives how are those progressing.
One one good indicator Josh its again, the ONR that I touched upon going from 45 million plus 22. This year right 2020. It was 45.6 22 point to one way of looking at it as a cost savings are converting to <unk> and then into into a gap savings.
Sure.
Similarly, we have a lot of additional savings bucket.
<unk> talked about in the past and continue to execute on those Josh.
Okay understood and last one for me you guys mentioned you know the strategic partnerships M&A, a 'twenty two priorities I'd love some more color on that you know what exactly are you looking for in the market and how can it.
Bolt or.
The company moving forward.
But this is rod.
Yeah, Let me, let me help with that strategic partnerships with outside parties and I think we've talked about some of the large corporations that we partnered with last year.
Find those to be.
Exceptionally fruitful for us in terms of services and solutions.
Pull through that we pull through you.
As far as M&A I would just encourage you to stay tuned.
We will share more in the near term on that.
Okay. Thank you guys very much.
Thank you. Thank you.
The next question comes from Zach Cummins from B Riley Riley Securities. Please go ahead.
Yeah, Hi, Ron.
Thanks for taking my questions 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 it on the gross margin line.
Sure first of all thanks for the question Zack.
Q4.
If you recollect going into Q4 in Q3, we had kind of anticipated some of the headwinds.
<unk> headwinds is the wrong term to use some of the one timers that were expecting in Q4 from a cost perspective, it could be the yearend PTO accruals are one timers that come in in Q4.
That's exactly what happened from a gross margin perspective, we had.
Profitable revenue from some of your higher margin businesses, but that was offset by one off.
Spend 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 in.
<unk> that number here in Q4 and kind of how you're thinking about improving that as we go into 2022.
Are you what Q4 was if you look at specific to Q4 from a cash flow perspective, there has been impact from the exchange offer that'd be completed right from an operating perspective, not only the additional interest charges that prepaid impacts the operational cash flows even in the financing section there's a number of one timers.
As a result of the exchange offer completion.
That's a general note and specifically.
The other regular working capital swings that you see between E. R. P M and timing of course is there a particular number what 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 <unk>. 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 and that's fair if you can connect the dots the prepayment of the interests for exchange offer resulted in additional cash outflow to entrust impacting the operating cash flows in Q4 traditionally Q4 has a positive cash.
Cash flow quarter. This time, because it's not because of that prepayment.
That's the key key change.
Understood.
And just looking at some of the key metrics that you provided with renewals and new business. It seems.
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 topline performance or should we assume that were relatively stable from a topline perspective or how should we be thinking about that.
Again, a great question. So if you don't mind.
Our presentation that even in my discussion right. There if you could think about it there are three common threads one until later together three focus areas. So to speak right they've done a lot of the work on the balance sheet strengthening the balance sheet.
Lot of which we accomplished in 2021.
Each in turn helped us with our operating performance, but you know 2022 is probably a breakout here we need to now leverage off of the strong balance sheet continue to improve on our operating income.
Between the two of US this is where the growth is going to come from you listed a number of things that you're focused on from expanding the market renewal sorry was beginning to pick up.
Robust pipeline all of that said.
You can't VEB gave a historical base I I don't want you to jump from a modeling perspective, you can use the historical.
Sure.
Number so to speak.
And if you think about it our revenues have been a bit to 80 to 90 range for every quarter in two.
2021 right so.
Feel free to use that modeling for for 'twenty two.
Understood and then 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 onsite business potentially coming back into play here in 2022.
Just kind of curious of how you are going to balance that those those different gross margin impacts.
I would you know.
The inflationary challenges and cost creep is something that we're going to watch out very carefully that said I think to mitigate that.
Have a pricing related adjustments so 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.
Sure.
On the macro perspective, as a potential headwind, but internally what we can control is continued focus on capacity and cost management, Josh sorry exactly.
Yeah, Yeah, no problem and and finally in terms of some of the actions that you've taken post quarter or two.
The address some of your near term liabilities, both with the summary judgment in exchange for your revolver.
Can you just speak to kind of the flexibility that you still have remaining.
Kind of the upcoming maturities from here I know you don't have any maturities as the rest of 2022, but but think about how you would manage.
Some of the other maturities on the horizon and some of the different aspects at your disposal.
Sure again going back to what <unk>, what I said you know the to use the analogy, it's really putting one foot in front of the other right. If you just see what you have done.
Yeah.
Raising equity paying down debt.
Tackling maturities from from Marci off to a pretty collection payment et cetera, extending maturities, we are going to be focused on shoring up our liquidity continued to do that to your point. There are no immediate obligations in 2022 as such so it is going to be a time for us to continue to build on liquidity.
Understood well, thanks for taking my questions and best of luck with the rest of the quarter.
Thanks, a lot.
The next question comes from Randall client from Ethanol Avenue Capital Group. Please go ahead.
Hey, guys. Thanks, Thanks for taking the call and the questions.
I think that kind of covered a couple of my questions, maybe I'll try it from a slightly different way I mean, 2021, again I would agree with us.
Focus on the fact that you guys were seem to be very focused on the balance sheet and as far as I can tell <unk> got everything done include even though the appraisal action, which was hanging over your head and Walgreens just announced as well.
And obviously the bonds and the term loans. So I mean, correct me if I'm wrong, if I'm missing anything it looks like 'twenty two is done on the balance sheet.
So if that's the case.
What is the key priorities for it for 'twenty two what are your real goals here I mean, obviously, you've kind of addressed them.
Somewhat high level, Ron in a couple of the block and tackling numbers.
Covered as well, but anything else, we should be thinking about as you move from your focus off the balance sheet in 'twenty one to 'twenty two.
Yeah again, thanks, Robert for the question, let me take that one first and then you can provide some additional business color. So that'll in sort 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 link load, adding talent pursuing stride 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-19 levels of used to.
Average around 370 to 319 from you of course, the revenue makes some things have changed but we have.
Well more to go after in 2022 with a strong balance sheet that all becomes possible lastly.
The growth part in stabilizing and growing our topline and bottom line, that's going to be a focus for 'twenty to 'twenty, two and and lastly, and in one word unlocking shirts the shareholder value.
That's going to be the key focus.
And you wanted a good shake out no. That's good you know what are the things that I'd draw your attention to slide number nine and that's.
That's really sort of the roadmap if you will for the things that are in process things that were 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 and we've invested in new talent.
Create a day.
Better comp plan to drive growth and help with incentives.
And then you know most of all the SMB market is <unk>.
Turns out to be.
An incredible pleasing surprise to all of us.
With the adoption of the solutions and platforms. It was offered in and I think you heard me say it we're going to roll out more of these solutions and platforms in 'twenty two than we rolled out in 'twenty one.
So we have a queue and we have it lined up and we're ready to move on that and.
I think it's going to be a great year for us and.
The expansion of clouds using it allows us to.
B anywhere that we need to be to meet the customers' expectations.
Got it okay, well look.
The extra time, hopefully because we wont be dealing with the lawyers and the pension insurance that's good.
Hopefully hopefully get some incremental value from the time you spent on the business.
Detailed questions, which I'm, assuming will probably be the 10-K 10-K be out probably with like next Tuesday, or whatever whats the estimated time on that.
The deadline is march 16th of near shoring too.
To find and buy them.
Next week, Okay, and then lastly, I guess again I think people are trying to give you more color, but obviously you know 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 it doesn't feel like you need to sell businesses.
The M&A it sounds like acquisitions.
I don't know if you can probably more color and it sounds like it may not be that long before you can provide more color, but anything else just kind of curious on that.
You know from from a from a strategic insight.
Insight as I said the toward toward delivered the third leg of our strategy is grow it and grow it b, we are going to keep our options open identify investment targets.
So as long as something strategic tuck in or anything that is being be able to pursue that but then again, we don't have anything to share right now when the time is right I'm going to share more down up and stuff.
Okay. Thanks I'll drop.
Appreciate it guys. Thanks Randall. Thank you. Thank you Randall.
Our next question comes from Erik Stevens from Gates Capital. Please go ahead.
Yes, this is actually Jeff.
Well hi, how are you doing pretty good hey, how much an ATM proceeds.
Have you raised since the end of 'twenty one.
And you mean in this quarter.
Yeah Yeah.
Yeah cause cause the share count's up like 80 million shares from your.
Yeah.
I, probably shouldn't bother number Jeff I don't but you will find that in our subsequent footnotes when we filed the 10-K.
Okay, and then the $50 million of cash flow improvement Youre talking about whats the base number that you're using in 'twenty one.
How do you define cash flow.
It's up.
We have the social from the past, it's approximately cash interest savings and then Lisa facility savings.
The split is 30.
35, 37 million of interest savings and then the rest in.
Global footprint than other operational savings, mainly Nathan plus would be something.
And your lease expense what was your lease rent expense for 2021.
On a consolidated basis.
For all of us like solar.
Yes.
I can I can look up and let you know 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 facility.
I don't know if I want to zero in on any particular place where either the logic is going to be.
Simple lower cost of capital lower interest rates.
So any facility that weekend.
Views, our interest cost or cost of capital, we'll do that.
Right and you talked about asset sales at one time or are you contemplating any asset sale.
Given what we have done strategically over the last year in terms of raising cash and focusing on the balance sheet improvements I don't think the focus right now is on asset sales.
Some great valuation comes it comes through and it makes strategic sense, we'll definitely consider it but that's not our focus 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 you gave that number back in December of 'twenty, what would that number have been for 'twenty one.
That's something that would be an odd disclosed, but I'm happy to share that.
8% of our revenue in 2020 was from digital asset groups.
And now with the radio revenue in 'twenty, one that's eight 3%. So it's in a similar range of course.
Revenue changes that 2022 2021 and 126 million so that Superman and Kathy you can imagine in dollar terms, it's the last one.
In person days charms actually the revenue share from that group is could you do 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 <unk> with.
With the current footprint.
Yes.
It's been pretty elevated in the last three quarters.
That's again, great question, but elevated in the last three quarters compared to what would be voted in 'twenty 'twenty Jeff.
It was a 15.047 billion and 43 46 and in 'twenty, one actually be improved rate 42, 36, 43 and 48.
Some of those numbers you will see in either the factsheet or what we put out there that said.
Q4 had one time costs related to the X gene offer baseline I guess 21, we'll be alright 42.
I would say, averaging 40 million and that's 40 million still includes elevated professional and legal fees.
You can discount and some of those to go away in future but.
It will all depend on when we wrap up policy.
Capital structure initiatives.
Yeah.
Okay and then.
If you have 11, 5% bonds went up in value I guess is there.
Is that a liquidity at some point of if they went up in value you could sell those and release equity from the S. P D corporate liquidity.
Theoretically, yes, but there'll be able do that or not that's something that I guess it'll be based on strategic intent.
Okay. Thank you.
Thanks, Joe.
In the interest of time, please limit yourself to one question and one follow up our next question comes from Craig Carlyle see from Longfellow. Please go ahead.
Yeah, Hey, thanks for the time, just a couple of them I administer 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 would provide.
Periodically 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 are requiring more equity capital raising activities right.
Yeah.
First part of the question you know thereabouts appointed Diamond and liquidity was.
Being asked for quite extensively given.
Outerwear perception work out there, but I think you know everybody's probably give us credit for what we have being able to accomplish in 2021.
Liquidity, sometimes with the point in time.
The fact that we raised over 400 million, having paid down as asked we had played pay down on debt continue to improve our capital structure I think we want to take the focus off of you from a point in time kind of liquidity right one.
Not a lot of her obligations, having settled water what else is out there and start building up the cash so the balance sheet liquidity is what I guess.
We should all eventually be.
Focusing on I leave it at that.
The second what about year end well 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 could be right. Yeah. Yeah.
No I just wanted them again, if something <unk> been audit determined but you can look at the balance sheet for it.
On the press release today, the three statements booths, there right between restricted cash and cash equivalents was $48 million.
Again this is why I say, it's important at this point in time.
Level of liquidity after completing our exchange offer and meeting other obligations, including the prepay and a prepayment of interest. It's just part of the exchange offer plus other interest in AMR. So.
Right. So so if I were to look at your liquidity and look at the unrestricted cash and I think it's 21 million.
That's kind of the year end number.
But yes, plus availability under our other facilities.
And what is the availability under the other facilities at yearend ballpark is fine I don't need precision.
If you can help me there.
What you are trying to fall I'm more than happy to address specific questions because I do not want a point in time.
We need to talk about all of the other initiatives, we are doing that that causes the.
Liquidity could be up or down right.
Alright, so let's talk contextually what is it that you're trying to zero in on.
Well I mean, I don't mean to sound blunt I'm not picking a random point in time December 31st 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 and I know a prior caller asked that question, but I do know there are uses of cash and the <unk>.
Terminal cash flow generative generation of the business has been.
Hmm.
You know a challenge 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 of the equity capital raises but I just don't know how much liquidity you have.
And then how much liquidity, we need to run the business comfortably. So that's really the naturally yes no no.
No no understood understood, but I didn't take it that would be either but what I want to be very mindful lawful sits on a public call, but when we talk about some a number without a context right.
Sometimes we'll send the wrong message you when you when you say that.
What we need to also consider as to your point how much did we raised post 12 31, what else it would be payout right. We're talking about a pretty collection supplement the other supplements.
So other prepayments so theres number of things and also I'd prefer not to get into a walk rather wait for the 10-K to be filed or you know really.
We'll put out formal hormone numbers in a public forum at the right time.
Okay, and then I guess your internal business plan selling more equity.
No I cut you off on your attempted incident.
Internal business plan selling more equity.
I guess the point of risk, we have 517 million of unused registration statements right between.
Debt and liquidity.
And again it comes back to the point that we have put what are what equity. We have raised will put it to good use committed what are we going to do <unk> got production put it to good use. So we will continue to be strategic but do we want to raise equity what he would want what do we want to do with it.
It's going to be all depending on strategic intent.
Again, not being a vessel to your question, but it's got next to them.
Understood. Okay. Thank you. Thank you. Thank you. Thank you. Thank you.
Okay.
Our next question comes from Alex graph from Cowen. Please go ahead.
Good afternoon, and thank you for taking my question.
I was just hoping to reconcile just the equity capital raises.
Throughout 2021, I believe in the first quarter, you raised about $26 eight a M.
Private placement.
Between ATM wanted to about $260 million.
And then Tim three 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 safe to assume that you raised another $101 million or so under our ATM III.
Does that sound about right.
Yes, correct on a gross basis on.
On a gross basis, yes, and then so implying at the end of the year, you probably had around 120 lapsed under that ATM three.
In terms of.
Plans for additional usage, how do you kind of anticipate using any additional proceeds I mean, given where the March 10th share count was in the share count was at the end of the year you can kind of back into it based off of <unk>. So it looks like you might have raised anywhere between 55 to 60 million potentially.
So far in the first quarter.
I'm not sure if that's in the ballpark or how you kind of anticipate to use those proceeds I would imagine some of those went towards the revolver pay down.
Just curious how you guys kind of think about tapping into the balance of that ATM and what the.
Uses of use of proceeds would be from those.
Yeah, I think I covered it on the earlier question, right, which kind of remains and I just want to.
I just wanted to emphasize not being J G not being Oh, there's a question it is dependent on R&D.
And only thing that I would say is the prepayment of the Rcs.
If you have to happen right. So we.
We are going to figure out and match our uses and sources.
If that gives you a better answer for you, but I wouldn't put it that way.
Got it thank.
Thank you.
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.
What's the breakdown kind of between IP PFS health care in our Rps for your renewals.
Ron Let me help you with the renewal of the pressure in the market.
You know Alex we might have to make that our last question. If you don't mind.
Sure.
One of our slides that deals with.
Yeah.
Okay.
So Ron sorry to interrupt I think there is.
Some static with discipline.
Oh, sorry can you hear me better now.
Yes.
Sorry.
Alright, sorry, Alex.
Microphone malfunction.
One of the things that that we like to point to point folks toward is the 15th.
<unk> 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 and we called it land and expand you've heard me talk about that in the past.
These are the things that we tried to do with new statements of work a new Master service agreements and so as we come along and we come up to renewal tip.
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 I'm sure you know in the market like we have today with some of the challenges out there.
Sometimes we do experienced that but we've 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 'twenty two with the.
Renewals that come into place then.
Understood.
That's very helpful. Yeah, I appreciate that thank you.
This concludes our question and answer session I would like to turn the conference back over to Ron 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 he would like to have further information or talk with us on one on one basis, just reach out to our folks at the Investor Relations group and we will set a private call.
All up with you and answer your questions.
And of course, when the 10-K is filed some of those questions might be answered.
Thanks, again, and we look forward to speaking with you on the.
First quarter soon thank you bye.
Conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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