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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

Or

   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission file number: 001-36788

EXELA TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

47-1347291

(State of or other Jurisdiction
Incorporation or Organization)

(I.R.S. Employer
Identification No.)

2701 E. Grauwyler Rd.
Irving, TX

75061

(Address of Principal Executive
Offices)

(Zip Code)

Registrant's Telephone Number, Including Area Code: (844) 935-2832

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, Par Value $0.0001 per share

XELA

The Nasdaq Stock Market LLC

6.00% Series B Cumulative Convertible
Perpetual Preferred Stock, par value $0.0001 per share

Tandem Preferred Stock, par value of $0.0001 per share

XELAP

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer    

Accelerated Filer     

Non-Accelerated Filer     

Smaller Reporting Company   

Emerging Growth Company    

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 

As of May 14, 2024, the registrant had 6,365,351 shares of Common Stock outstanding.

Exela Technologies, Inc.

Form 10-Q

For the quarterly period ended March 31, 2024

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023

1

Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 (Unaudited)

2

Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2024 and 2023 (Unaudited)

3

Condensed Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2024 and 2023 (Unaudited)

4

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (Unaudited)

5

Notes to the Condensed Consolidated Financial Statements (Unaudited)

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

Item 3. Quantitative and Qualitative Disclosures about Market Risk

45

Item 4. Controls and Procedures

46

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

47

Item 1A. Risk Factors

48

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, and Issuer Purchases of Equity Securities

48

Item 3. Defaults Upon Senior Securities

48

Item 4. Mine Safety Disclosures

48

Item 5. Other Information

48

Item 6. Exhibits

50

Signatures

51

Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

As of March 31, 2024 and December 31, 2023

(in thousands of United States dollars except share and per share amounts)

March 31, 

December 31, 

2024

    

2023

    

(Unaudited)

    

(Audited)

Assets

 

  

 

  

Current assets

 

  

 

  

Cash and cash equivalents

$

9,501

$

23,341

Restricted cash

 

24,523

 

43,812

Accounts receivable, net of allowance for credit losses of $5,551 and $6,628, respectively

75,777

76,893

Related party receivables and prepaid expenses

474

296

Inventories, net

12,473

11,502

Prepaid expenses and other current assets

27,651

25,364

Total current assets

 

150,399

 

181,208

Property, plant and equipment, net of accumulated depreciation of $215,449 and $213,142, respectively

55,428

58,366

Operating lease right-of-use assets, net

31,688

33,874

Goodwill

170,355

170,452

Intangible assets, net

157,078

164,920

Deferred income tax assets

2,913

3,043

Other noncurrent assets

 

23,943

 

24,474

Total assets

$

591,804

$

636,337

Liabilities and Stockholders' Deficit

 

  

 

  

Liabilities

 

  

 

  

Current liabilities

Current portion of long-term debt

$

29,057

$

30,029

Accounts payable

66,375

61,109

Related party payables

2,463

1,938

Income tax payable

2,352

2,080

Accrued liabilities

63,404

63,699

Accrued compensation and benefits

74,927

65,012

Accrued interest

29,946

52,389

Customer deposits

23,731

23,838

Deferred revenue

14,524

12,099

Obligation for claim payment

43,336

66,988

Current portion of finance lease liabilities

4,348

4,856

Current portion of operating lease liabilities

10,214

10,845

Total current liabilities

 

364,677

 

394,882

Long-term debt, net of current maturities

1,041,940

1,030,580

Finance lease liabilities, net of current portion

5,170

5,953

Pension liabilities, net

12,617

13,192

Deferred income tax liabilities

12,638

11,692

Long-term income tax liabilities

6,086

6,359

Operating lease liabilities, net of current portion

24,916

26,703

Other long-term liabilities

5,392

5,811

Total liabilities

1,473,436

1,495,172

Commitments and Contingencies (Note 8)

 

  

 

  

Stockholders' deficit

 

  

 

  

Common Stock, par value of $0.0001 per share; 1,600,000,000 shares authorized; 6,365,355 shares issued and outstanding at March 31, 2024 and December 31, 2023

 

261

 

261

Preferred stock, $0.0001 par value per share, 20,000,000 shares authorized at March 31, 2024 and December 31, 2023

Series A Preferred Stock, 2,778,111 shares issued and outstanding at March 31, 2024 and December 31, 2023

1

1

Series B Preferred Stock, 3,029,900 shares issued and outstanding at March 31, 2024 and December 31, 2023

Additional paid in capital

 

1,237,354

 

1,236,171

Accumulated deficit

 

(2,108,993)

 

(2,084,114)

Accumulated other comprehensive loss:

Foreign currency translation adjustment

(6,422)

(7,648)

Unrealized pension actuarial gains (losses), net of tax

37

(174)

Total accumulated other comprehensive loss

(6,385)

(7,822)

Total stockholders’ deficit attributable to Exela Technologies, Inc.

(877,762)

(855,503)

Noncontrolling interest in XBP Europe

(3,870)

(3,332)

Total stockholders’ deficit

 

(881,632)

 

(858,835)

Total liabilities and stockholders’ deficit

$

591,804

$

636,337

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

For the three months ended March 31, 2024 and 2023

(in thousands of United States dollars except share and per share amounts)

(Unaudited)

Three Months Ended March 31, 

    

2024

    

2023

Revenue

$

258,811

$

273,620

Cost of revenue (exclusive of depreciation and amortization)

 

201,988

 

216,467

Selling, general and administrative expenses (exclusive of depreciation and amortization)

40,854

44,381

Depreciation and amortization

13,507

16,560

Related party expense

2,391

3,112

Operating profit (loss)

71

(6,900)

Other expense (income), net:

Interest expense, net

21,088

44,180

Debt modification and extinguishment costs (gain), net

(8,773)

Sundry expense, net

1,881

748

Other income, net

(451)

(282)

Loss before income taxes

(22,447)

(42,773)

Income tax expense

(3,126)

(2,663)

Net loss

(25,573)

(45,436)

Net loss attributable to noncontrolling interest in XBP Europe, net of taxes

(694)

Net loss attributable to Exela Technologies, Inc.

$

(24,879)

$

(45,436)

Cumulative dividends for Series A Preferred Stock

(1,053)

(954)

Cumulative dividends for Series B Preferred Stock

(1,224)

(1,153)

Net loss attributable to common stockholders

$

(27,156)

$

(47,543)

Loss per share:

Basic and diluted

$

(4.27)

$

(9.88)

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

For the three months ended March 31, 2024 and 2023

(in thousands of United States dollars except share and per share amounts)

(Unaudited)

Three Months Ended March 31, 

    

2024

    

2023

Net loss

$

(25,573)

$

(45,436)

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments

 

1,303

 

(2,105)

Unrealized pension actuarial gains (losses), net of tax

 

290

 

(89)

Total other comprehensive gain (loss), net of tax

1,593

(2,194)

Comprehensive loss

(23,980)

(47,630)

Comprehensive loss attributable to noncontrolling interest in XBP Europe, net of tax

(538)

Comprehensive loss attributable to Exela Technologies, Inc., net of tax

$

(23,442)

$

(47,630)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit

For the three months ended March 31, 2024 and 2023

(in thousands of United States dollars except share and per share amounts)

(Unaudited)

Accumulated Other
Comprehensive Loss

Unrealized

Foreign

Pension

Currency

Actuarial

Total

Common Stock

Series A Preferred Stock

Series B Preferred Stock

Treasury Stock

Additional

Translation

Losses,

Accumulated

Stockholders'

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Paid in Capital

  

Adjustment

  

net of tax

  

Deficit

  

Deficit

Balances at January 1, 2023

1,393,276

$

162

2,778,111

$

1

3,029,900

$

612

$

(10,949)

$

1,159,577

$

(4,788)

$

(3,583)

$

(1,948,009)

$

(807,589)

Net loss

(45,436)

(45,436)

Equity-based compensation

111

111

Foreign currency translation adjustment

(2,105)

(2,105)

Net realized pension actuarial losses, net of tax

(89)

(89)

Issuance of Common Stock from at the market offerings, net of offering costs

4,977,744

99

66,929

67,028

Balances at March 31, 2023

6,371,020

$

261

2,778,111

$

1

3,029,900

$

612

$

(10,949)

$

1,226,617

$

(6,893)

$

(3,672)

$

(1,993,445)

$

(788,080)

Accumulated Other
Comprehensive Loss

Unrealized

Foreign

Pension

Currency

Actuarial

Non-

Total

Common Stock

Series A Preferred Stock

Series B Preferred Stock

Additional

Translation

Gains (Losses),

Accumulated

Controlling Interest

Stockholders'

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

Paid in Capital

  

Adjustment

  

net of tax

  

Deficit

in XBP Europe

  

Deficit

Balances at January 1, 2024

6,365,355

$

261

2,778,111

$

1

3,029,900

$

$

1,236,171

$

(7,648)

$

(174)

$

(2,084,114)

$

(3,332)

$

(858,835)

Net loss

(24,879)

(694)

(25,573)

Equity-based compensation

1,183

1,183

Foreign currency translation adjustment

1,226

77

1,303

Net realized pension actuarial gains, net of tax

211

79

290

Balances at March 31, 2024

6,365,355

$

261

2,778,111

$

1

3,029,900

$

$

1,237,354

$

(6,422)

$

37

$

(2,108,993)

$

(3,870)

$

(881,632)

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the three months ended March 31, 2024 and 2023

(in thousands of United States dollars except share and per share amounts)

(Unaudited)

Three Months Ended March 31, 

    

2024

    

2023

Cash flows from operating activities

Net loss

$

(25,573)

$

(45,436)

Adjustments to reconcile net loss to cash used in operating activities

Depreciation and amortization

13,507

16,560

Original issue discount, debt premium and debt issuance cost amortization

(9,916)

7,456

Interest on BR Exar AR Facility

(1,110)

(2,232)

(1)

Debt modification and extinguishment gain, net

(9,760)

Credit loss expense

4,491

1,983

Deferred income tax provision

957

521

Share-based compensation expense

1,183

111

Unrealized foreign currency (gain) loss

 

18

 

238

(Gain) loss on sale of assets

(602)

88

Fair value adjustment for private warrants liability of XBP Europe

(37)

Change in operating assets and liabilities

 

 

Accounts receivable

 

(2,624)

 

950

Prepaid expenses and other current assets

(2,818)

(1,494)

Accounts payable and accrued liabilities

(6,420)

(24,232)

Related party payables

346

94

Additions to outsource contract costs

(482)

(116)

Net cash used in operating activities

 

(29,080)

 

(55,269)

Cash flows from investing activities

 

  

 

  

Purchase of property, plant and equipment

(2,378)

(1,888)

Additions to internally developed software

(855)

(1,014)

Proceeds from sale of assets

2,649

Net cash used in investing activities

 

(584)

 

(2,902)

Cash flows from financing activities

 

  

 

  

Proceeds from issuance of Common Stock from at the market offerings

69,260

Cash paid for equity issuance costs from at the market offerings

(2,232)

Borrowings under factoring arrangement and Securitization Facility

348

31,985

Principal repayment on borrowings under factoring arrangement and Securitization Facility

(311)

(31,325)

Cash paid for debt issuance costs

(193)

(6,308)

Principal payments on finance lease obligations

(1,765)

(1,137)

Borrowings under BRCC revolver

9,600

Borrowings from other loans

3,219

2,152

(1)

Cash paid for debt repurchases

(3,633)

Proceeds from Second Lien Note

31,500

Borrowing under BR Exar AR Facility

14,914

10,000

(1)

Repayments under BR Exar AR Facility

(11,103)

(4,130)

(1)

Repayment of BRCC term loan

(34,204)

Principal repayments on senior secured term loans, BRCC revolver and other loans

 

(8,656)

 

(7,745)

(1)

Net cash (used in) provided by financing activities

 

(3,547)

 

63,783

Effect of exchange rates on cash, restricted cash and cash equivalents

82

140

Net increase (decrease) in cash, restricted cash and cash equivalents

 

(33,129)

 

5,752

Cash, restricted cash, and cash equivalents

 

 

Beginning of period

67,153

45,067

End of period

$

34,024

$

50,819

Supplemental cash flow data:

 

 

Income tax payments, net of refunds received

$

594

$

1,147

Interest paid

30,674

65,300

Noncash investing and financing activities:

Assets acquired through right-of-use arrangements

$

491

$

405

Accrued PIK interest paid through issuance of PIK Notes

23,342

Waiver and consent fee payable added to outstanding balance of Senior Secured Term Loan

1,000

Accrued capital expenditures

494

1,945

(1)Exela restated the condensed consolidated statement of cash flows for the three months ended March 31, 2023 by reclassifying borrowing and repayments under BR Exar AR Facility as separate line items which were previously included in borrowings from other loans and principal repayments on senior secured term loans and other loans, respectively under cash flow from financing activities. Interest on BR Exar AR Facility which was previously included in principal repayments on senior secured term loans and other loans under cash flow from financing activities is restated by reclassification as cash flow from operating activities.

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Exela Technologies, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(in thousands of United States dollars except share and per share amounts or unless otherwise noted)

(Unaudited)

1.     General

These condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements as of and for the year ended December 31, 2023 included in the Exela Technologies, Inc. (the “Company,” “Exela,” “we,” “our” or “us”) annual report on Form 10-K for such period (the “2023 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on April 3, 2024 and available at the SEC’s website at http://www.sec.gov.

The accompanying condensed consolidated financial statements and related notes to the condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and XBP Europe Holdings, Inc. (“XBP Europe”), a publicly traded company that is majority-owned by the Company. The accompanying condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X under the Securities Act of 1933, as amended (the “Securities Act”), as they apply to interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These accounting principles require us to use estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from our estimates.

The condensed consolidated financial statements are unaudited, but in our opinion include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results for the interim period. The interim financial results are not necessarily indicative of results that may be expected for any other interim period or the fiscal year.

Going Concern

The Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its obligations as they become due within one year after the date that the financial statements are issued. Management’s evaluation does not initially take into consideration the potential mitigating effects of management’s plans that have not been fully implemented as of the date the financial statements are issued. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

In performing this evaluation, the Company concluded that the following conditions raised substantial doubt about its ability to continue as a going concern:

a history of net losses, including net losses of $25.6 million for the three months ended March 31, 2024;
net operating cash outflow of $29.1 million for the three months ended March 31, 2024;
a working capital deficit of $214.3 million as of March 31, 2024; and
an accumulated deficit of $2,109.0 million as of March 31, 2024.

The Company has undertaken and/or completed the following plans and actions to improve its available cash balances, liquidity or cash generated from operations:

6

identified and in the process of executing on significant cost savings for fiscal year 2024; and
issued approximately $764.8 million aggregate principal amount of April 2026 Notes (as defined in Note 5 – Long-Term Debt and Credit Facilities) in exchange for $956.0 million aggregate principal amount of existing 2026 Notes that provide flexibility to pay up to 50% of the interest payments in 2024 using April 2026 Notes instead of cash.

In addition to these actions, management has reviewed the Company's operational plans which include executing on price increases, and projected growth of margins. The Company will have to continue to achieve positive operating cash flows and restore profitability over the next twelve months and otherwise execute its business plan. However, the Company’s ability to execute its operational plans is uncertain and its ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, the Company’s performance and investor sentiment with respect to the Company and its industry, and considering these factors are outside of the Company’s control, substantial doubt about the Company’s ability to continue as a going concern exists. The condensed consolidated financial statements do not, however, include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

Net Loss per Share

Earnings per share (“EPS”) is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, using the more dilutive of the two-class method and the if-converted method in the period of earnings. The two class method is an earnings allocation method that determines earnings per share (when there are earnings) for common stock and participating securities. The if-converted method assumes all convertible securities are converted into common stock. Diluted EPS excludes all dilutive potential shares of common stock if their effect is anti-dilutive.

As the Company experienced net losses for the periods presented, the impact of the Company’s Series A Perpetual Convertible Preferred Stock (“Series A Preferred Stock”) and Series B Cumulative Convertible Perpetual Preferred Stock (the “Series B Preferred Stock”), was calculated using the if-converted method. As of March 31, 2024, the outstanding shares of the Company’s Series A Preferred Stock and Series B Preferred Stock, if converted would have resulted in an additional 413 shares and 16,565 shares of our Common Stock outstanding, respectively, however, they were not included in the computation of diluted loss per share as their effects were anti-dilutive (i.e., if included, would reduce the net loss per share).

Similarly, the Company also did not include the effect of 1,978 and 2,433 shares of Common Stock issuable upon exercise of 7,913,637 and 9,731,819 outstanding warrants as of March, 2024 and 2023, respectively, sold in a private placement of securities on March 18, 2021 or the effect of the aggregate number of shares issuable pursuant to outstanding restricted stock units, performance units and options (2,442 and 2,477 as of March 31, 2024 and 2023, respectively) in the calculation of diluted loss per share for the three months ended March 31, 2024 and 2023, because their effects were also anti-dilutive.

Three Months Ended March 31, 

    

2024

    

2023

Net loss attributable to common stockholders (A)

$

(27,156)

$

(47,543)

Weighted average common shares outstanding – basic and diluted (B)

6,365,355

4,814,152

Loss Per Share:

Basic and diluted (A/B)

$

(4.27)

$

(9.88)

Merger Agreement

On October 9, 2022, the Company entered into a definitive merger agreement to merge its European business with CF Acquisition Corp. VIII (“CFFE”), a special purpose acquisition company, to form a new publicly-traded

7

company XBP Europe Holdings, Inc. (“XBP Europe”), which is a part of the ITPS segment (as defined in Note 3 – Significant Accounting Policies). The business combination was accounted for as a reverse capitalization in accordance with GAAP. Under this method of accounting, CFFE was treated as the “acquired” company for financial reporting purposes with XBP Europe surviving as a direct wholly-owned subsidiary of CFFE.

Following the closing of the transaction on November 29, 2023, the Company’s European business operates as XBP Europe, and the Company owns 72.3% of the outstanding capital stock of XBP Europe as of March 31, 2024. The noncontrolling stockholders' proportionate share of stockholder’s deficit in XBP Europe of $3.9 million and $3.3 million, as of March 31, 2024 and December 31, 2023, respectively, is reflected as noncontrolling interest in XBP Europe in the accompanying condensed consolidated balance sheets. Beginning on November 30, 2023, XBP Europe shares started trading on the Nasdaq Stock Market under the ticker symbol “XBP” and its warrants started trading on the Nasdaq Stock Market under the ticker symbol “XBPEW”.

Sale of Non-core Assets

On June 8, 2023, the Company completed the sale of its high-speed scanner business, which was a part of its ITPS segment (as defined in Note 3 – Significant Accounting Policies), for a purchase price of approximately $30.1 million, subject to final working capital adjustments. The sale of the high-speed scanner business does not represent a strategic shift that will have a major effect on the Company’s operations and financial results. As a result of this transaction, the Company disposed of $16.5 million of goodwill based on the relative fair value of the high-speed scanner business to the total fair value of the ITPS reporting unit. This transaction resulted in a total pre-tax gain of $7.2 million. Per the terms of the sales agreement, the Company may receive additional cash consideration (“Contingent Consideration”) upon the future occurrence of certain earn out events described in the sales agreement. The Contingent Consideration, if any, will be recognized in the period the earn out event occurs, and the Contingent Consideration is realizable.

2.    New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Effective January 1, 2024, the Company adopted Accounting Standards Update (“ASU”) No. 2023-01, Leases (Topic 842): Common Control Arrangements that clarifies the accounting for leasehold improvements associated with common control leases by requiring that leasehold improvements associated with common control leases be amortized by the lessee over the useful life of the leasehold improvements to the common control group (regardless of the lease term), as long as the lessee controls the use of the underlying asset through a lease. Additionally, leasehold improvements associated with common control leases should be accounted for as a transfer between entities under common control through an adjustment to equity, if, and when, the lessee no longer controls the use of the underlying asset. The adoption had no impact on the Company’s consolidated results of operations, cash flows, financial position or disclosures.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires retrospective disclosure of significant segment expenses and other segment items on an annual and interim basis. Additionally, it requires disclosure of the title and position of the Chief Operating Decision Maker (“CODM”). This ASU is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that adopting this standard will have on its consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires an annual tabular effective tax rate reconciliation disclosure including information for specified categories and jurisdiction levels, as well as, disclosure of income taxes paid, net of refunds received, disaggregated by federal, state/local, and significant foreign jurisdiction. This ASU is effective for fiscal years beginning

8

after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that adopting this standard will have on its consolidated financial statements.

3.     Significant Accounting Policies

The information presented below supplements the Significant Accounting Policies information presented in the 2023 Form 10-K.

Revenue Recognition

We account for revenue by first evaluating whether a performance obligation exists. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. All of our material sources of revenue are derived from contracts with customers, primarily relating to the provision of business and transaction processing services within each of our segments. We do not have any significant extended payment terms, as payment is received shortly after goods are delivered or services are provided.

Nature of Services

Our primary performance obligations are to stand ready to provide various forms of business processing services, consisting of a series of distinct services, but that are substantially the same, and have the same pattern of transfer over time, and accordingly are combined into a single performance obligation. Our obligation to our customers is typically to perform an unknown or unspecified quantity of tasks and the consideration received is contingent upon the customers’ use (i.e., number of transactions processed, requests fulfilled, etc.); as such, the total transaction price is variable. We allocate variable fees to the single performance obligation charged to the distinct service period in which we have the contractual right to bill under the contract.

Disaggregation of Revenues

The Company is organized into three segments: Information & Transaction Processing Solutions (“ITPS”), Healthcare Solutions (“HS”), and Legal & Loss Prevention Services (“LLPS”) (See Note 13 – Segment and Geographic Area Information). The following tables disaggregate revenue from contracts by segment and by geographic region for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,