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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 September 30, 2024

☐ 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	OTC Pink
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	OTC Pink

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 November 13, 2024, the registrant had 6,365,363 shares of Common Stock outstanding.

Table of Contents

Exela Technologies, Inc.

Form 10-Q

For the quarterly period ended September 30, 2024

TABLE OF CONTENTS


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023	1

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023 (Unaudited)	2

Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2024 and 2023 (Unaudited)	3

Condensed Consolidated Statements of Stockholders’ Deficit for the three and nine months ended September 30, 2024 and 2023 (Unaudited)	4

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 (Unaudited)	6

Notes to the Condensed Consolidated Financial Statements (Unaudited)	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

Item 3. Quantitative and Qualitative Disclosures about Market Risk	57

Item 4. Controls and Procedures	57

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	59

Item 1A. Risk Factors	59

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, and Issuer Purchases of Equity Securities	60

Item 3. Defaults Upon Senior Securities	60

Item 4. Mine Safety Disclosures	61

Item 5. Other Information	61

Item 6. Exhibits	62

Signatures	63

Table of Contents

Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

As of September 30, 2024 and December 31, 2023

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


	September 30,		December 31,
	2024		2023
	(Unaudited)		(Audited)
Assets
Current assets
Cash and cash equivalents	$	11,278	$	23,341
Restricted cash		34,146		43,812
Accounts receivable, net of allowance for credit losses of $3,549 and $6,628, respectively		48,579		76,893
Related party receivables and prepaid expenses		160		296
Inventories, net		13,360		11,502
Prepaid expenses and other current assets		27,365		25,364
Assets of disposal group held for sale		4,197		—
Total current assets		139,085		181,208
Property, plant and equipment, net of accumulated depreciation of $218,877 and $213,142, respectively		59,274		58,366
Operating lease right-of-use assets, net		35,822		33,874
Goodwill		170,195		170,452
Intangible assets, net		141,296		164,920
Deferred income tax assets		3,229		3,043
Other noncurrent assets		18,065		24,474
Total assets	$	566,966	$	636,337

Liabilities and Stockholders' Deficit
Liabilities
Current liabilities
Current portion of long-term debt	$	51,184	$	30,029
Accounts payable		61,430		61,109
Related party payables		5,162		1,938
Income tax payable		6,368		2,080
Accrued liabilities		58,496		63,699
Accrued compensation and benefits		77,903		65,012
Accrued interest		31,692		52,389
Customer deposits		19,063		23,838
Deferred revenue		14,838		12,099
Obligation for claim payment		52,707		66,988
Current portion of finance lease liabilities		6,247		4,856
Current portion of operating lease liabilities		12,226		10,845
Liabilities of disposal group held for sale		4,529		—
Total current liabilities		401,845		394,882
Long-term debt, net of current maturities		1,028,072		1,030,580
Finance lease liabilities, net of current portion		8,252		5,953
Pension liabilities, net		12,494		13,192
Deferred income tax liabilities		12,584		11,692
Long-term income tax liabilities		8,205		6,359
Operating lease liabilities, net of current portion		26,129		26,703
Other long-term liabilities		5,567		5,811
Total liabilities		1,503,148		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; 6,365,363 shares issued and outstanding at September 30, 2024 and 6,365,355 shares issued and outstanding at December 31, 2023		261		261
Preferred stock, $0.0001 par value per share, 20,000,000 shares authorized at September 30, 2024 and December 31, 2023
Series A Preferred Stock, 2,778,111 shares issued and outstanding at September 30, 2024 and December 31, 2023		1		1
Series B Preferred Stock, 3,029,900 shares issued and outstanding at September 30, 2024 and December 31, 2023		—		—
Additional paid in capital		1,238,304		1,236,171
Accumulated deficit		(2,158,692)		(2,084,114)
Accumulated other comprehensive loss:
Foreign currency translation adjustment		(10,719)		(7,648)
Unrealized pension actuarial gains (losses), net of tax		416		(174)
Total accumulated other comprehensive loss		(10,303)		(7,822)
Total stockholders’ deficit attributable to Exela Technologies, Inc.		(930,429)		(855,503)
Noncontrolling interest in XBP Europe		(5,753)		(3,332)
Total stockholders’ deficit		(936,182)		(858,835)
Total liabilities and stockholders’ deficit	$	566,966	$	636,337

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

Table of Contents

Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

For the three and nine months ended September 30, 2024 and 2023

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

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue	$	269,168	$	253,125	$	773,632	$	799,683
Cost of revenue (exclusive of depreciation and amortization)		214,907		198,450		604,859		626,976
Selling, general and administrative expenses (exclusive of depreciation and amortization)		35,088		35,367		117,720		111,774
Depreciation and amortization		13,039		14,398		41,529		45,848
Impairment of goodwill		343		—		343		—
Related party expense		2,598		2,845		8,271		8,696
Operating profit		3,193		2,065		910		6,389
Other expense (income), net:
Interest expense, net		23,446		24,708		67,663		113,980
Debt modification and extinguishment costs (gain), net		256		(571)		256		(16,129)
Sundry expense, net		106		298		1,783		2,546
Other income, net		(440)		(1,069)		(1,314)		(1,583)
Loss before income taxes		(20,175)		(21,301)		(67,478)		(92,425)
Income tax expense		(4,762)		(1,807)		(9,937)		(7,005)
Net loss		(24,937)		(23,108)		(77,415)		(99,430)
Net loss attributable to noncontrolling interest in XBP Europe, net of taxes		(915)		—		(2,837)		—
Net loss attributable to Exela Technologies, Inc.	$	(24,022)	$	(23,108)	$	(74,578)	$	(99,430)
Cumulative dividends for Series A Preferred Stock		(1,105)		(1,002)		(3,225)		(2,923)
Cumulative dividends for Series B Preferred Stock		(1,261)		(1,188)		(3,727)		(3,512)
Net loss attributable to common stockholders	$	(26,388)	$	(25,298)	$	(81,530)	$	(105,865)
Loss per share:
Basic and diluted	$	(4.15)	$	(3.97)	$	(12.81)	$	(18.08)

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

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Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

For the three and nine months ended September 30, 2024 and 2023

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

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net loss	$	(24,937)	$	(23,108)	$	(77,415)	$	(99,430)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments		(3,607)		(3,165)		(3,124)		(3,369)
Unrealized pension actuarial gains (losses), net of tax		278		147		814		(58)
Total other comprehensive loss, net of tax		(3,329)		(3,018)		(2,310)		(3,427)
Comprehensive loss		(28,266)		(26,126)		(79,725)		(102,857)
Comprehensive loss attributable to noncontrolling interest in XBP Europe, net of tax		(1,008)		—		(2,666)		—
Comprehensive loss attributable to Exela Technologies, Inc., net of tax	$	(27,258)	$	(26,126)	$	(77,059)	$	(102,857)

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

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Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit

For the three and nine months ended September 30, 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 expense	—		—	—		—	—		—	—		—		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)
Net loss	—		—	—		—	—		—	—		—		—		—		—		(30,886)		(30,886)
Equity-based compensation expense	—		—	—		—	—		—	—		—		203		—		—		—		203
Foreign currency translation adjustment	—		—	—		—	—		—	—		—		—		1,901		—		—		1,901
Net realized pension actuarial loss, net of tax	—		—	—		—	—		—	—		—		—		—		(116)		—		(116)
Payment for fractional shares on reverse stock split in May 2023	(5,667)		—	—		—	—		—	—		—		(31)		—		—		—		(31)
Balances at June 30, 2023	6,365,353	$	261	2,778,111	$	1	3,029,900	$	—	612	$	(10,949)	$	1,226,789	$	(4,992)	$	(3,788)	$	(2,024,331)	$	(817,009)
Net loss	—		—	—		—	—		—	—		—		—		—		—		(23,108)		(23,108)
Equity-based compensation	—		—	—		—	—		—	—		—		252		—		—		—		252
Foreign currency translation adjustment	—		—	—		—	—		—	—		—		—		(3,165)		—		—		(3,165)
Net realized pension actuarial gains, net of tax	—		—	—		—	—		—	—		—		—		—		147		—		147
Treasury stock retired										(612)		10,949								(10,949)		—
Balances at September 30, 2023	6,365,353	$	261	2,778,111	$	1	3,029,900	$	—	—	$	—	$	1,227,041	$	(8,157)	$	(3,641)	$	(2,058,388)	$	(842,883)

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

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Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit

For the three and nine months ended September 30, 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				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 expense	—		—	—		—	—		—		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)
Net loss	—		—	—		—	—		—		—		—		—		(25,677)		(1,228)		(26,905)
Equity-based compensation expense	—		—	—		—	—		—		333		—		—		—		44		377
Foreign currency translation adjustment	—		—	—		—	—		—		—		(860)		—		—		40		(820)
Net realized pension actuarial gains, net of tax	—		—	—		—	—		—		—		—		178		—		68		246
Restricted stock units vested	8		—	—		—	—		—		—		—		—		—		—		—
Balances at June 30, 2024	6,365,363	$	261	2,778,111	$	1	3,029,900	$	—	$	1,237,687	$	(7,282)	$	215	$	(2,134,670)	$	(4,946)	$	(908,734)
Net loss	—		—	—		—	—		—		—		—		—		(24,022)		(915)		(24,937)
Equity-based compensation	—		—	—		—	—		—		617		—		—		—		201		818
Foreign currency translation adjustment	—		—	—		—	—		—		—		(3,437)		—		—		(170)		(3,607)
Net realized pension actuarial gains, net of tax	—		—	—		—	—		—		—		—		201		—		77		278
Balances at September 30, 2024	6,365,363	$	261	2,778,111	$	1	3,029,900	$	—	$	1,238,304	$	(10,719)	$	416	$	(2,158,692)	$	(5,753)	$	(936,182)

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

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Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2024 and 2023

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

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities
Net loss	$	(77,415)	$	(99,430)
Adjustments to reconcile net loss to cash used in operating activities
Depreciation and amortization		41,529		45,848
Original issue discount, debt premium and debt issuance cost amortization		(30,494)		9,976
Interest on BR Exar AR Facility		(3,752)		(8,752)	(1)
Debt modification and extinguishment loss (gain), net		256		(17,534)
Impairment of goodwill		343		—
Provision for credit losses		16,990		1,818
Deferred income tax provision		903		680
Equity-based compensation expense		2,378		566
Unrealized foreign currency (gain) loss		27		(143)
Gain on sale of assets		(557)		(6,579)
Fair value adjustment for private warrants liability of XBP Europe		(45)		—
Change in operating assets and liabilities
Accounts receivable		16,395		2,954
Prepaid expenses and other current assets		(3,961)		8,732
Accounts payable and accrued liabilities		22,501		23,667
Related party payables		3,360		668
Additions to outsource contract costs		(676)		(443)
Net cash used in operating activities		(12,218)		(37,972)
Cash flows from investing activities
Purchase of property, plant and equipment		(6,330)		(5,585)
Additions to internally developed software		(2,850)		(2,967)
Proceeds from sale of assets		3,414		29,811
Net cash (used in) provided by investing activities		(5,766)		21,259
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)
Payment for fractional shares on reverse stock split		—		(31)
Borrowings under factoring arrangement and Securitization Facility		496		87,653
Principal repayment on borrowings under factoring arrangement and Securitization Facility		(511)		(90,358)
Cash paid for debt issuance costs		(1,093)		(8,273)
Principal payments on finance lease obligations		(5,765)		(3,477)
Borrowings from BRCC revolver		—		9,600
Proceeds from issuance of April 2026 Notes		500		—
Borrowings from other loans		38,038		21,843	(1)
Cash paid for debt repurchases		—		(11,858)
Proceeds from Senior Secured Term Loan		—		40,000
Proceeds from Second Lien Note		—		31,500
Repayment of Second Lien Note		(4,000)		—
Borrowing under BR Exar AR Facility		45,424		20,000	(1)
Repayments under BR Exar AR Facility		(37,522)		(23,214)	(1)
Repayment of BRCC term loan		—		(48,529)
Principal repayments on senior secured term loans, BRCC revolver and other loans		(39,270)		(74,691)	(1)
Net cash (used in) provided by financing activities		(3,703)		17,193
Effect of exchange rates on cash, restricted cash, cash equivalents, and cash included in assets of disposal group held for sale		148		(53)
Net (decrease) increase in cash, restricted cash, cash equivalents, and cash included in assets of disposal group held for sale		(21,539)		427
Cash, restricted cash, cash equivalents, and cash included in assets of disposal group held for sale
Beginning of period		67,153		45,067
End of period	$	45,614	$	45,494
Supplemental cash flow data:
Income tax payments, net of refunds received	$	2,875	$	3,369
Interest paid		71,985		80,156
Noncash investing and financing activities:
Assets acquired through right-of-use arrangements	$	9,850	$	405
Issuance of April 2026 Notes in exchange of July 2026 Notes		—		764,800
Issuance of April 2026 Notes in exchange of 2023 term loan		—		2,963
Accrued PIK interest paid through issuance of PIK Notes		47,356		44,146
Waiver and consent fee payable added to outstanding balance of Senior Secured Term Loan		1,000		—
Promissory note issued for assets acquisition		2,371		—
Accrued capital expenditures		23		1,778

(1)

Exela restated the condensed consolidated statement of cash flows for the nine months ended September 30, 2023 by reclassifying borrowing and repayments under the BR Exar AR Facility as separate line items. The borrowing and repayments under the BR Exar AR Facility were previously included in borrowings from other loans and principal repayments on senior secured term loans and other loans under cash flow from financing activities. Interest on the 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.

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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” or “Exela”) 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 the Company 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 the Company’s estimates.

The condensed consolidated financial statements are unaudited, but 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.

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

●

a history of net losses, including net losses of $77.4 million for the nine months ended September 30, 2024;

●

net operating cash outflow of $12.2 million for the nine months ended September 30, 2024;

●

a working capital deficit of $262.8 million as of September 30, 2024;

●

an accumulated deficit of $2,158.7 million as of September 30, 2024;

●

delisting of the Company’s common stock by Nasdaq on November 8, 2024;

●

an obligation to make an interest payment due January 15, 2025 on the April 2026 Notes in the amount of approximately $50 million; and

●

other current debt maturities of approximately $51 million within the next twelve months.

The Company’ plans with respect to this uncertainty include the following actions to improve its available cash balances, liquidity or cash generated from operations:

●

completing the process of executing on identified cost savings for fiscal year 2024 and beyond; and

●

obtaining new financing capital and/ or the refinancing or restructuring of existing debt facilities.

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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. Should the Company be unable to execute on its plans it may need to consider restructuring. Due to the uncertainty associated with Management’s plans, the Company has determined that substantial doubt regarding its ability to continue as a going concern exists as of September 30, 2024. The condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As such, the condensed consolidated financial statements do not 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 September 30, 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 434 shares and 17,066 shares of the Company’s 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 September 30, 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 (1,360 and 2,471 as of September 30, 2024 and 2023, respectively) in the calculation of diluted loss per share for the three and nine months ended September 30, 2024 and 2023, because their effects were also anti-dilutive.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net loss attributable to common stockholders (A)	$	(26,388)	$	(25,298)	$	(81,530)	$	(105,865)
Weighted average common shares outstanding – basic and diluted (B)		6,365,363		6,365,353		6,365,358		5,854,840
Loss Per Share:
Basic and diluted (A/B)	$	(4.15)	$	(3.97)	$	(12.81)	$	(18.08)

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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 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 September 30, 2024. The noncontrolling stockholders' proportionate share of stockholder’s deficit in XBP Europe of $5.8 million and $3.3 million, as of September 30, 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 and warrants started trading on the Nasdaq Stock Market under the ticker symbols “XBP” and “XBPEW,” respectively.

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. 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 included in selling, general and administrative expenses (exclusive of depreciation and amortization) in the condensed consolidated statements of operations for the nine months ended September 30, 2023. 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.

Held for Sale

The Company classifies assets as held-for-sale (“disposal group”) in the period when all of the relevant criteria to be classified as held for sale are met. These criteria include management’s commitment to sell the disposal group in its present condition and the sale being deemed probable of being completed within one year. Assets held for sale are reported at the lower of their carrying value or estimated fair value less cost to sell. The fair values of disposal groups are estimated using accepted valuation techniques, including indicative listing prices. The Company considers historical experience, guidance received from third parties, and all information available at the time the estimates are made to derive fair value. Any loss resulting from the measurement is recognized in the period when the held for sale criteria are met. The Company assesses the fair value of a disposal group, less any costs to sell, each reporting period it remains classified as held for sale and reports any subsequent changes as an adjustment to the carrying value of the disposal group, as long as the new carrying value does not exceed the initial carrying value of the disposal group. Assets held-for-sale are not amortized or depreciated.

As of September 30, 2024, certain on-demand printing operations of XBP Europe met the criteria for classification as held for sale and accordingly, was measured at carrying value since its carrying value was lesser than its estimated fair value less costs to sell. The Company recorded an goodwill impairment charge of $0.3 million relating to the disposal group in impairment of goodwill in the condensed consolidated statement of operations for the three and nine months ended September 30, 2024. The Company determined that the disposal group has not met the criteria to be disclosed as discontinued operations as it does not represent a significant strategic shift that will have a major effect on the Company’s operations and financial results. Assets and liabilities are presented in Assets of disposal group held for sale and liabilities of disposal group held for sale, respectively, in the condensed consolidated balance sheet as of September 30, 2024.

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As of September 30, 2024, the assets and liabilities of the disposable group are classified as current in the Company’s condensed consolidated balance sheets, as it is probable that the sale will occur within one year. The following table presents the major classes of assets and liabilities that were classified as held for sale in the condensed consolidated balance sheet as of September 30, 2024:


	September 30,
	2024
ASSETS
Current assets
Cash and cash equivalents	$	190
Accounts receivable, net of allowance for credit losses of $86		481
Inventories, net		582
Prepaid expenses and other current assets		697
Property, plant and equipment, net of accumulated depreciation of $3,593		855
Operating lease right-of-use assets, net		1,392
Total assets of disposal group held for sale	$	4,197

LIABILITIES
Current liabilities
Accounts payable	$	802
Accrued liabilities		1,463
Accrued compensation and benefits		356
Customer deposits		162
Current portion of finance lease liabilities		353
Current portion of operating lease liabilities		1,393
Total liabilities of disposal group held for sale	$	4,529

Abandonment of Potential Spin-off

On July 1, 2024, the Company had announced that its Board had authorized the Company to consider a spin-off of its wholly-owned subsidiary Exela Technologies BPA, LLC (the holding company for the Company’s business process automation business which includes our HS and LLPS segments and part of our ITPS segment, and collectively with all of its subsidiaries, the “BPA Business”). However, this spin-off plan has now been abandoned by the Company.

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

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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 November 2024, the FASB issued ASC 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to provide more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain expense captions presented on the consolidated statement of operations. This new standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the consolidated financial statements. The Company is currently assessing the impact this ASU will have on the consolidated financial statements and footnote disclosures.

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 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

The Company accounts 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 the Company expects 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 the Company’s material sources of revenue are derived from contracts with customers, primarily relating to the provision of business and transaction processing services within each of the Company’s segments. The Company does not have any significant extended payment terms, as payment is received shortly after goods are delivered or services are provided.

Nature of Services

The Company’s 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. The Company’s obligation to its 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. The Company allocates variable fees to the single performance obligation charged to the distinct service period in which the Company has 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 and nine months ended September 30, 2024 and 2023:

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	Three Months Ended September 30,
	2024								2023
		ITPS		HS		LLPS		Total		ITPS		HS		LLPS		Total
U.S.A.	$	149,846	$	58,780	$	18,430	$	227,056	$	127,074	$	62,090	$	18,885	$	208,049
EMEA		37,228		—		—		37,228		40,035		—		—		40,035
Other		4,884		—		—		4,884		5,041		—		—		5,041
Total	$	191,958	$	58,780	$	18,430	$	269,168	$	172,150	$	62,090	$	18,885	$	253,125


	Nine Months Ended September 30,
	2024								2023
		ITPS		HS		LLPS		Total		ITPS		HS		LLPS		Total
U.S.A.	$	396,234	$	186,567	$	62,127	$	644,928	$	410,598	$	188,740	$	60,095	$	659,433
EMEA		113,306		—		—		113,306		125,107		—		—		125,107
Other		15,398		—		—		15,398		15,143		—		—		15,143
Total	$	524,938	$	186,567	$	62,127	$	773,632	$	550,848	$	188,740	$	60,095	$	799,683

Contract Balances

The following table presents contract assets, contract liabilities and contract costs recognized at September 30, 2024, December 31, 2023 and January 1, 2023:


	September 30,		December 31,		January 1,
	2024		2023		2023
Accounts receivable, net	$	48,579	$	76,893	$	101,616
Deferred revenues		15,945		13,107		17,585
Customer deposits		19,063		23,838		16,955
Costs to obtain and fulfill a contract		1,324		1,400		1,674

The following table describes the changes in the allowance for expected credit losses for the nine months ended September 30, 2024 (all related to accounts receivables):


Balance at January 1, 2024 of the allowance for expected credit losses	$	6,628
Provision for expected loss		16,990
Write-off charged against the allowance		(18,294)
Recoveries collected		(1,708)
Foreign currency exchange rate adjustment		19
Allowance for expected credit losses included in assets of disposal group held for sale		(86)
Balance at September 30, 2024 of the allowance for expected credit losses	$	3,549

Accounts receivable, net includes $24.4 million and $23.9 million as of September 30, 2024 and December 31, 2023, respectively, representing amounts not yet billed to customers. The Company has accrued the unbilled receivables for work performed in accordance with the terms of contracts with customers.

Deferred revenues relate to payments received in advance of performance under a contract. A significant portion of this balance relates to maintenance contracts or other service contracts where the Company received payments for upfront conversions or implementation activities which do not transfer a service to the customer but rather are used in fulfilling the related performance obligations that transfer over time. The advance consideration received from customers is deferred over the contract term. The Company recognized revenue of $2.0 million and $9.7 million during the three and nine months ended September 30, 2024, respectively, that had been deferred as of December 31, 2023. The Company recognized revenue of $1.6 million and $16.4 million during the three and nine months ended September 30, 2023, respectively, that had been deferred as of January 1, 2023. The Company recognized revenue of $17.3 million during the year ended December 31, 2023 that had been deferred as of January 1, 2023.

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Costs incurred to obtain and fulfill contracts are deferred and presented as part of intangible assets, net and expensed on a straight-line basis over the estimated benefit period. The Company recognized $0.2 million and $0.2 million of amortization for these costs for the three months ended September 30, 2024 and 2023, respectively, within depreciation and amortization expense in the Company’s condensed consolidated statements of operations. The Company recognized $0.7 million and $0.6 million of amortization for these costs for the nine months ended September 30, 2024 and 2023, respectively, within depreciation and amortization expense in the Company’s condensed consolidated statements of operations. These costs represent incremental external costs or certain specific internal costs that are directly related to the contract acquisition or fulfillment and can be separated into two principal categories: contract commissions and fulfillment costs. Applying the practical expedient in ASC 340-40-25-4, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred, if the amortization period would have been one year or less. These costs are included in selling, general and administrative expenses. The effect of applying this practical expedient was not material.

Customer deposits consist primarily of amounts received from customers in advance for postage. These advanced postage deposits are used to cover the costs associated with postage, with the corresponding postage revenue being recognized as services are performed.

Performance Obligations

At the inception of each contract, the Company assesses the goods and services promised in its contracts and identify each distinct performance obligation. The majority of the Company’s contracts have a single performance obligation, as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts. For the majority of the Company’s business and transaction processing service contracts, revenues are recognized as services are provided based on an appropriate input or output method, typically based on the related labor or transactional volumes.

Certain of the Company’s contracts have multiple performance obligations, including contracts that combine software implementation services with post-implementation customer support. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which the Company estimates its expected costs of satisfying a performance obligation and add an appropriate margin for that distinct good or service. The Company also uses the adjusted market approach whereby it estimates the price that customers in the market would be willing to pay. In assessing whether to allocate variable consideration to a specific part of the contract, the Company considers the nature of the variable payment and whether it relates specifically to its efforts to satisfy a specific part of the contract. Certain of the Company’s software implementation performance obligations are satisfied at a point in time, typically when customer acceptance is obtained.

When evaluating the transaction price, the Company analyzes, on a contract-by-contract basis, all applicable variable consideration. The nature of the Company’s contracts gives rise to variable consideration, including volume discounts, contract penalties, and other similar items that generally decrease the transaction price. The Company estimates these amounts based on the expected amount to be provided to customers and reduce revenues recognized. The Company does not anticipate significant changes to its estimates of variable consideration.

The Company includes reimbursements from customers, such as postage costs, in revenue, while the related costs are included in cost of revenue.

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Transaction Price Allocated to the Remaining Performance Obligations

In accordance with optional exemptions available under GAAP, the Company does not disclose the value of unsatisfied performance obligations for (a) contracts with an original expected length of one year or less, and (b) contracts for which variable consideration relates entirely to an unsatisfied performance obligation, which comprise the majority of the Company’s contracts. The Company has certain non-cancellable contracts where the Company receives a fixed monthly fee in exchange for a series of distinct services that are substantially the same and have the same pattern of transfer over time, with the corresponding remaining performance obligations as of September 30, 2024 in each of the future periods below:


Estimated Remaining Fixed Consideration for Unsatisfied Performance Obligations

Remainder of 2024	$	3,111
2025		9,320
2026		6,097
2027		3,454
2028		1,934
2029 and thereafter		120
Total	$	24,036

4. Intangible Assets and Goodwill

Intangible Assets

Intangible assets are stated at cost or acquisition-date fair value less accumulated amortization and consists of the following:


	September 30, 2024
	Gross Carrying		Accumulated		Intangible
	Amount (a)		Amortization		Asset, net
Customer relationships	$	505,005	$	(396,600)	$	108,405
Developed technology		88,553		(88,441)		112
Trade names (b)		5,300		—		5,300
Outsource contract costs		18,403		(17,079)		1,324
Internally developed software		58,738		(49,078)		9,660
Purchased software		26,749		(10,254)		16,495
Intangibles, net	$	702,748	$	(561,452)	$	141,296


	December 31, 2023
	Gross Carrying		Accumulated		Intangible
	Amount (a)		Amortization		Asset, net
Customer relationships	$	507,930	$	(380,580)	$	127,350
Developed technology		88,554		(88,085)		469
Patent		15		(14)		1
Trade names (b)		5,300		—		5,300
Outsource contract costs		17,734		(16,334)		1,400
Internally developed software		56,066		(43,499)		12,567
Purchased software		26,749		(8,916)		17,833
Intangibles, net	$	702,348	$	(537,428)	$	164,920

(a)	Amounts include intangible assets acquired in business combinations and asset acquisitions.

(b)	The carrying amount of trade names for 2024 and 2023 is net of accumulated impairment losses of $44.1 million. Carrying amount of $5.3 million as at September 30, 2024 represents indefinite-lived intangible assets.

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Aggregate amortization expense related to intangible assets was $8.2 million and $27.2 million for the three and nine months ended September 30, 2024, respectively. Aggregate amortization expense related to intangible assets was $9.5 million and $30.5 million for the three and nine months ended September 30, 2023, respectively.

Estimated intangibles amortization expense for the next five years and thereafter consists of the following:


	Estimated
	Amortization
	Expense
Remainder of 2024	$	7,702
2025		26,422
2026		21,577
2027		17,665
2028		13,737
2029 and thereafter		48,893
Total	$	135,996

Goodwill

The Company’s operating segments are significant strategic business units that align its products and services with how it manages its business, approaches the markets and interacts with customers. The Company is organized into three segments: ITPS, HS, and LLPS (See Note 13 – Segment and Geographic Area Information).

Goodwill by reporting segment consists of the following:


	Balances as at January 1, 2024 (a)			Additions		Deletions			Impairments			Currency Translation Adjustments		Balances as at September 30, 2024 (a)
ITPS	$	64,801	$	—	$	—		$	(343)	(c)	$	86	$	64,544
HS		86,786		—		—			—			—		86,786
LLPS		18,865		—		—			—			—		18,865
Total	$	170,452	$	—	$	—		$	(343)		$	86	$	170,195

	Balances as at January 1, 2023 (a)			Additions		Deletions			Impairments			Currency Translation Adjustments		Balances as at December 31, 2023 (a)
ITPS	$	81,151	$	—	$	(16,500)	(b)	$	—		$	150	$	64,801
HS		86,786		—		—			—			—		86,786
LLPS		18,865		—		—			—			—		18,865
Total	$	186,802	$	—	$	(16,500)		$	—		$	150	$	170,452

(a)

The goodwill amount for all periods presented is net of accumulated impairment amounts. Accumulated impairment relating to ITPS was $488.0 million and $487.7 million as at September 30, 2024 and December 31, 2023, respectively. Accumulated impairment relating to LLPS was $243.4 million as at September 30, 2024 and December 31, 2023.

(b)	The deletion in goodwill is due to derecognition of allocated goodwill on sale of the high-speed scanner business in the second quarter of 2023. Refer to Note 1—General.

(c)	The impairment in goodwill is due to held for sale classification as discussed in Note 1 above in the third quarter of 2024. Refer to Note 1—General.

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5. Long-Term Debt and Credit Facilities

July 2026 Notes

As of January 1, 2023, there was outstanding $980.0 million aggregate principal amount of 11.5% First-Priority Senior Secured Notes scheduled to mature July 15, 2026 (the “July 2026 Notes”) issued by Exela Intermediate LLC and Exela Finance Inc. (together, the “Issuers”), wholly-owned subsidiaries of the Company. The July 2026 Notes are guaranteed by nearly all U.S. subsidiaries of Exela Intermediate LLC. The July 2026 Notes bear interest at a rate of 11.5% per year. The Company is required to pay interest on the July 2026 Notes on January 15 and July 15 of each year, and commenced making such interest payments on July 15, 2022. The Issuers may redeem the July 2026 Notes in whole or in part from time to time, at a redemption price of 100%, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

On July 11, 2023, the Issuers, certain guarantors and U.S. Bank Trust Company, National Association, as trustee, entered into an indenture (the “April 2026 Notes Indenture”) governing the 11.5% First-Priority Senior Secured Notes scheduled to mature April 15, 2026 (the “April 2026 Notes”), and the Issuers issued approximately $764.8 million aggregate principal amount of the April 2026 Notes as consideration for the exchange of $956.0 million aggregate principal amount of the Issuers’ existing July 2026 Notes pursuant to a public exchange offer (the “2023 Exchange”), which was equivalent to issuing $800 of the April 2026 Notes per $1,000 principal amount of the existing July 2026 Notes. The Company performed an assessment of the 2023 Exchange and determined that it met the criteria to be accounted for as a troubled debt restructuring under GAAP. The undiscounted cash flows associated with the April 2026 Notes issued were compared to the carrying value of the exchanged July 2026 Notes and since the undiscounted cash flows of the April 2026 Notes exceeded the carrying value of the exchanged July 2026 Notes, the carrying value of the April 2026 Notes was established at the carrying value of the exchanged July 2026 Notes and the Company established new effective interest rates based on the carrying value of the exchanged July 2026 Notes prior to the 2023 Exchange. The difference between the principal amount of the issued April 2026 Notes and their carrying value was recorded as a premium and is included in long-term debt on the Company’s condensed consolidated balance sheets. The Company recorded a premium of $142.3 million on the notes exchange, which will be reduced as contractual interest payments are made on the April 2026 Notes.

On July 11, 2023, the Company entered into a seventh supplemental indenture to the indenture governing the July 2026 Notes which eliminated substantially all of the restrictive covenants, eliminated certain events of default, modified covenants regarding mergers and consolidations and modified or eliminated certain other provisions, including certain provisions relating to future guarantors and defeasance, contained in the July 2026 Notes Indenture and the July 2026 Notes. In addition, all of the collateral securing the July 2026 Notes was released pursuant to the seventh supplemental indenture.

The July 11, 2023 transaction resulted in cancellation of debt income (“CODI”) for tax purposes. Absent an exception, a debtor recognizes CODI upon discharge of its outstanding indebtedness for an amount of consideration that is less than the outstanding debt. The Internal Revenue Code of 1986, as amended, (the “Code”), provides that a debtor may wholly or partially exclude CODI from taxable income but must reduce certain of its tax attributes by the amount of CODI excluded from taxable income. Pursuant to the U.S. tax rules, the Company computes the final CODI calculation based on the tax basis as of the last day of the fiscal tax year (i.e., December 31, 2023) which includes the date in which the debt transaction occurred. For the year ended December 31, 2023, the Company generated CODI in the amount of $780.0 million, of which $54.0 million was included in the fiscal year 2023 taxable income and $726.0 million was excluded from taxable income, resulting in the elimination of $624.0 million gross federal and state net operating losses.

As a result of the 2023 Exchange and periodic repurchases, $24.0 million aggregate principal amount of the July 2026 Notes maturing July 15, 2026 remained outstanding as of September 30, 2024.

Senior Secured April 2026 Notes

On July 11, 2023, the Issuers issued approximately $767.8 million aggregate principal amount of the April 2026 Notes under the April 2026 Notes Indenture, which includes the April 2026 Notes issued pursuant to the 2023 Exchange

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(as described above) and $3.0 million issued in exchange of other indebtedness. The April 2026 Notes are scheduled to mature on April 15, 2026.

Interest on the April 2026 Notes will accrue at 11.5% per annum and will be paid semi-annually, in arrears, on January 15 and July 15 of each year, beginning July 15, 2023. Interest will be payable in cash or in kind by issuing additional April 2026 Notes (or increasing the principal amount of the outstanding April 2026 Notes) (“PIK Interest”) as described below: (A) for the July 15, 2023 interest payment date, such interest was paid in kind as PIK Interest, (B) for each interest payment date from and including the January 15, 2024 interest payment date through and including the July 15, 2024 interest payment date, such interest shall be paid in cash in an amount equal to (i) 50% of such interest plus (ii) an amount not to exceed an amount that, pro forma for such payment, would leave the issuers with Unrestricted Cash (as defined in the April 2026 Notes Indenture) of at least $15.0 million, with the remaining interest paid in kind as PIK Interest, and (C) for interest payment dates falling on or after January 15, 2025, such interest shall be paid in cash.

On July 15, 2023, the Company issued $44.1 million in aggregate principal amount of the April 2026 Notes as a payment for PIK Interest that would otherwise have been due to holders of the July 2026 Notes that participated in the Public Exchange on July 15, 2023. On January 15, 2024, the Company issued $23.3 million in aggregate principal amount of the April 2026 Notes as a payment for PIK Interest due on January 15, 2024 in respect of the April 2026 Notes. On July 15, 2024, the Company issued $24.0 million in aggregate principal amount of the April 2026 Notes as a payment for PIK Interest due on July 15, 2024 in respect of the April 2026 Notes. On September 30, 2024, the Company, through one of its subsidiaries, sold $3.0 million face value of April 2026 Notes for a net sale consideration of $0.5 million to affiliates of the Executive Chairman (see note 12). $862.3 million aggregate principal amount of the April 2026 Notes remained outstanding as of September 30, 2024.

The Issuers’ obligations under the April 2026 Notes and the April 2026 Notes Indenture are irrevocably and unconditionally guaranteed, jointly and severally, by the same guarantors (the “Guarantors”) that guarantee the July 2026 Notes (other than certain guarantors that have ceased to have operations or assets) and by certain of the Issuers’ other affiliates (the “Affiliated Guarantors”). The April 2026 Notes and the related guarantees are first-priority senior secured obligations of the Issuers, the Guarantors and Affiliated Guarantors.

The issuers may redeem the April 2026 Notes at their option, in whole at any time or in part from time to time, at a redemption price of 100%, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. In addition, the April 2026 Notes will be mandatorily redeemable in part upon the sale of certain assets that constitute additional credit support.

The April 2026 Notes Indenture contains covenants that limit the Issuers’ and the Affiliated Guarantors and their respective subsidiaries’ ability to, among other things, (i) incur or guarantee additional indebtedness, (ii) pay dividends or distributions on, or redeem or repurchase, capital stock and make other restricted payments, (iii) make investments, (iv) consummate certain asset sales, (v) engage in certain transactions with affiliates, (vi) grant or assume certain liens and (vii) consolidate, merge or transfer all or substantially all of their assets. These covenants are subject to a number of important limitations and exceptions. In addition, upon the occurrence of specified change of control events, the Issuers must offer to repurchase the April 2026 Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date. The April 2026 Notes Indenture also provides for

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events of default, which, if any of them occurs, would permit or require the principal, premium, if any, interest and any other monetary obligations on all of the then outstanding April 2026 Notes to be due and payable immediately.

2023 Term loan

As a result of certain private exchanges, repurchases and periodic principal repayments, $48.4 million aggregate principal amount of the term loans outstanding under its credit agreement (“2023 Term Loan”) were outstanding as of July 11, 2023, the date the Company fully repaid and discharged the remaining outstanding balance of the 2023 Term Loans by making a cash payment of $44.8 million and by issuance of $3.0 million principal amount of Senior Secured April 2026 Notes. The Company recorded $0.6 million debt extinguishment gain on repayment of the 2023 Term Loans under ASC 470-50 and reported within debt modification and extinguishment costs (gain), net within the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2023. There were no amounts outstanding under the 2023 Term Loan as of September 30, 2024.

Repurchases

In July 2021 the Company commenced a debt buyback program to repurchase senior secured indebtedness, which is ongoing. During the three and nine months ended September 30, 2024, the Company repurchased $4.0 million principal amount of the Second Lien Note (as defined below) for a net cash consideration of $4.0 million. The loss on early extinguishment of debt during the three and nine months ended September 30, 2024 totaled $0.3 million and is inclusive of $0.3 million write off of debt issuance costs.

During the nine months ended September 30, 2023, the Company repurchased $13.8 million principal amount of the Issuers’ 10.0% First Priority Senior Secured Notes due 2023 (“2023 Notes”) for a net cash consideration of $4.4 million. The gain on early extinguishment of debt during the nine months ended September 30, 2023 totaled $9.9 million and is inclusive of less than $0.1 million write off of original issue discount and debt issuance costs, respectively. During the nine months ended September 30, 2023, the Company repurchased $15.1 million principal amount of the 2023 Term Loan for net cash consideration of $8.0 million. The gain on early extinguishment of debt during the nine months ended September 30, 2023 totaled $7.1 million and is inclusive of less than $0.1 million write off of original issue discount and debt issuance costs, respectively. Gain or loss on the early extinguishment of debt is reported within debt modification and extinguishment costs (gain), net within the Company’s condensed consolidated statements of operations.

BRCC Facility

On November 17, 2021, GP2 XCV, LLC, a subsidiary of the Company (“GP2 XCV”), entered into a borrowing facility with B. Riley Commercial Capital, LLC (which was subsequently assigned to BRF Finance Co., LLC (“BRF Finance”)) pursuant to which such subsidiary was able to borrow an original principal amount of $75.0 million, which was later increased to $115.0 million as of December 7, 2021 (as the same may be amended from time to time, the “BRCC Term Loan”). On March 31, 2022, GP2 XCV and B. Riley Commercial Capital, LLC amended this facility to permit GP2 XCV to borrow up to $51.0 million under a separate revolving loan (the “BRCC Revolver”, collectively with the BRCC Term Loan, the “BRCC Facility”).

The BRCC Facility is secured by a lien on all the assets of GP2 XCV and by a pledge of the equity of GP2 XCV. GP2 XCV is a bankruptcy-remote entity and as such its assets are not available to other creditors of the Company or any of its subsidiaries other than GP2 XCV. Interest under the BRCC Facility accrues at a rate of 11.5% per annum (13.5% per annum default rate) and is payable quarterly on the last business day of each March, June, September and December. The purpose of BRCC Term Loan was to fund certain repurchases of the secured indebtedness and to provide funding for certain debt exchange transactions. The purpose of BRCC Revolver is to fund general corporate purposes.

The BRCC Facility matured on June 10, 2023. As of December 31, 2023, the Company had fully repaid the outstanding balance under the BRCC Term Loan. During the nine months ended September 30, 2024, the Company repaid $14.0 million of outstanding principal amount under the BRCC Revolver. As of September 30, 2024, there remained borrowings of $5.9 million outstanding under the BRCC Revolver. The outstanding principal amount under the

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BRCC Revolver is payable in two (2) monthly installments of $2.0 million in November 2024 and December 2024, with the remaining outstanding principal balance of $1.9 million payable on January 31, 2025.

Senior Secured Term Loan

On July 11, 2023, Exela Intermediate LLC and Exela Finance Inc., wholly-owned subsidiaries of the Company, entered into a financing agreement with certain lenders and Blue Torch Finance LLC, as administrative agent, pursuant to which the lenders extended a $40.0 million term loan (“Senior Secured Term Loan”). On the same date, the Company used proceeds of this term loan to repay a corresponding amount of its existing debt. On January 12, 2024, $1.0 million of certain waiver and consent fees payable by subsidiaries of the Company under the term of Senior Secured Term Loan were added to outstanding balance of the Senior Secured Term Loan.

The Senior Secured Term Loan shall be, at the option of the Company, either a Reference Rate Loan, or a Secured Overnight Financing Rate (“SOFR”) Loan. Each portion of the Senior Secured Term Loan that is a Reference Rate Loan bears interest on the principal amount outstanding from the date of the Senior Secured Term Loan until repaid, at a rate per annum equal to the Reference Rate plus the Applicable Margin. “Reference Rate” for any period means the greatest of (i) 4.00% per annum, (ii) the federal funds rate plus 0.50% per annum, (iii) the Adjusted Term SOFR (which rate shall be calculated based upon an interest period of 1 month and shall be determined on a daily basis) plus 1.00% per annum, and (iv) the rate last quoted by the Wall Street Journal as the "Prime Rate" in the United States. “Applicable Margin,” with respect to the interest rate of (a) any Reference Rate Loan is 10.39% per annum, and (b) any SOFR Rate Loan is 11.39% per annum. SOFR Rate Loans shall bear interest on the principal amount outstanding, at a rate per annum equal to the Adjusted Term SOFR rate for the Interest Period in effect for the Term Loan plus Applicable Margin. “Adjusted Term SOFR” means the rate per annum equal to Term SOFR for such calculation, plus 0.26161%. “Term SOFR,” for calculation with respect to a SOFR Rate Loan, is the per annum forward-looking term rate based on secured overnight financing rate for a tenor comparable to the applicable interest period on the day that is two business days prior to the first day of such interest period. However, with respect to a Reference Rate Loan, “Term SOFR” means the per annum forward-looking term rate based on secured overnight financing rate for a tenor of three months on the day that is two business days prior to such day. If Term SOFR as so determined shall ever be less than 4.00%, then Term SOFR shall be deemed to be 4.00%.

The Company may, at any time, elect to have interest on all or a portion of the loans be charged at a rate of interest based upon Term SOFR (the “SOFR Option”) by notifying the administrative agent at least three (3) business days prior to the proposed change. Such notice needs to be provided in the case of the continuation of a SOFR Rate Loan as a SOFR Rate Loan on the last day of the then current interest period. The Company shall have not more than 5 SOFR Rate Loans in effect at any given time, and only may exercise the SOFR Option for SOFR Rate Loans of at least $500,000 and integral multiples of $100,000 in excess thereof.

As of September 30, 2024, there were borrowings of $39.0 million outstanding under the Senior Secured Term Loan. The outstanding principal amount of the Senior Secured Term Loan shall be repaid in seven (7) equal quarterly installments of $0.5 million commencing December 31, 2024, with the remaining outstanding principal amount of $35.5 million payable at maturity along with accrued and unpaid interest. The maturity date of the Senior Secured Term Loan is January 14, 2026.

The Company may, at any time, prepay the principal of the Senior Secured Term Loan. Each prepayment shall be accompanied by the payment of accrued interest and the applicable premium, if any. Each prepayment shall be applied against the remaining installments of principal due on the Senior Secured Term Loan in the inverse order of maturity. The applicable premium shall be payable in the form of a make-whole amount if prepayment is made within one year of the borrowing date (the “First Period”). If optional prepayment is made after the year one anniversary of the borrowing date to the date of the two-year anniversary (the “Second Period”), the applicable premium shall be an amount equal to 1% times the amount of the principal amount of the Senior Secured Term Loan being paid on such date. The applicable premium shall be zero in case of prepayment after the date of the two-year anniversary of the borrowing date. Further, during the Second Period, if the prepayment is because of an event of default or termination of contract for any reason, the applicable premium shall be 1% times the aggregate principal amount of the Senior Secured Term Loan outstanding on such date.

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The Senior Secured Term Loan contains customary events of default, cross-default provisions, affirmative and negative covenants, including limitation on the Company’s and certain of its subsidiaries’ ability to create, incur or allow certain liens; enter into sale and lease-back transactions; make any restricted payments; undergo fundamental changes, as well as certain financial covenants. The cross-default provisions are triggered if the parent, borrower, affiliates, or significant subsidiaries defaults on any debt that is greater than $25 million if the effect of such default or event is to (i) accelerate, or to permit the acceleration of, the maturity of such indebtedness; (ii) allow such indebtedness to be declared due and payable or (iii) required such indebtedness to be prepaid (other than by a regularly scheduled required prepayment) or redeemed, in each case, prior to the stated maturity thereof. The Company was in compliance with all financial covenants as of September 30, 2024.

Securitization Facility

On June 17, 2022, the Company entered into an amended and restated receivables purchase agreement (as amended, the “Amended Receivables Purchase Agreement”) under an existing $150.0 million securitization facility (the “Securitization Facility”) among certain of the Company’s subsidiaries, Exela Receivables 3, LLC (the “Securitization Borrower”), Exela Receivables 3 Holdco, LLC (the “Securitization Parent SPE,” and together with the Securitization Borrower, the “SPEs”) and certain global financial institutions (the “Purchasers”). The Amended Receivables Purchase Agreement extended the term of the Securitization Facility such that the SPEs may sell certain accounts receivable to the Purchasers until June 17, 2025. Under the Amended Receivables Purchase Agreement, transfers of accounts receivable from the SPEs are treated as sales and are accounted for as a reduction in accounts receivable, because the agreement transfers effective control over and risk related to the accounts receivable to the Purchasers. The Company and related subsidiaries have no continuing involvement in the transferred accounts receivable, other than collection and administrative responsibilities, and, once sold, the accounts receivable are no longer available to satisfy creditors of the Company, the operating subsidiaries of the Company that agreed to sell receivables in connection with the Securitization Facility (the “Securitization Originators”), or any other relevant subsidiaries.

The sales of accounts receivable under the Amended Receivables Purchase Agreement are transacted at 100% of the face value of the relevant accounts receivable, resulting in derecognition of the accounts receivable from the Company’s condensed consolidated balance sheet. The Company de-recognized $522.7 million of accounts receivable under this agreement during the year ended December 31, 2023. The amount remitted to the Purchasers during fiscal year 2023 was $507.6 million. The Company de-recognized $126.5 million and $377.1 million of accounts receivable under this agreement during the three and nine months ended September 30, 2024, respectively. The Company de-recognized $119.3 million and $382.2 million of accounts receivable under this agreement during the three and nine months ended September 30, 2023, respectively. The amount remitted to the Purchasers during the three and nine months ended September 30, 2024 was $127.7 million and $377.0 million, respectively. The amount remitted to the Purchasers during the three and nine months ended September 30, 2023 was $119.0 and $385.5 million, respectively. Unsold accounts receivable of $29.0 million and $41.2 million were pledged by the SPEs as collateral to the Purchasers as of September 30, 2024 and December 31, 2023, respectively. These pledged accounts receivables are included in accounts receivable, net in the condensed consolidated balance sheets. The program resulted in a pre-tax loss of $2.4 million and $6.7 million for the three and nine months ended September 30, 2024, respectively. The program resulted in a pre-tax loss of $2.0 million and $5.9 million for the three and nine months ended September 30, 2023, respectively.

The fair value of the sold accounts receivable approximated their book value due to their short-term nature. Sold accounts receivable are presented as a change in receivables within operating activities in the condensed consolidated statements of cash flows.

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BR Exar AR Facility

On February 12, 2024, certain of the Company’s subsidiaries entered into a receivables purchase agreement with BR Exar, LLC (“BREL”), an affiliate of B. Riley Commercial Capital, LLC (as subsequently amended on February 29, 2024, March 29, 2024, March 31, 2024, April 24, 2024, May 24, 2024, June 25, 2024, July 29, 2024, August 13, 2024, August 30, 2024 and September 27, 2024 the “BR Exar AR Facility”). The Company received an aggregate of $45.0 million, net of legal and other fees of $0.4 million, under the BR Exar AR Facility. Under the terms of the BR Exar AR Facility, certain of the Company’s subsidiaries agreed to sell certain existing receivables and all of their future receivables to BREL until such time as BREL shall have collected $50.0 million, net of any costs, expenses or other amounts paid to or owing to the buyer under the agreement. BREL collected $41.3 million under the BR Exar AR Facility during the period from February 2024 to September 2024. As of September 30, 2024, there was a $8.7 million outstanding balance under the BR Exar AR Facility.

Under the BR Exar AR Facility, transfers of accounts receivable from certain of the Company’s subsidiaries are treated as secured borrowings under ASC 860, Transfers and Servicing and are not accounted for as a reduction in accounts receivable because the agreements do not transfer effective control over and risk related to the accounts receivable to BREL. Accordingly, the Company treated total of $0.4 million of legal fee and other expense incurred under the BR Exar AR Facility as debt issuances cost and $4.5 million of difference between the net proceeds received by the Company and total amount collected by BREL under the BR Exar AR Facility as original issue discount. Debt issuance cost and original issue discount relating to the BR Exar AR Facility are included in interest expense, net in the condensed consolidated statements of operations for the three and nine months ended September 30, 2024.

Second Lien Note

On February 27, 2023, the SPEs and B. Riley Commercial Capital, LLC entered into a new Secured Promissory Note (which was subsequently assigned to BRF Finance) pursuant to which B. Riley Commercial Capital, LLC agreed to lend up to $35.0 million secured by a second lien pledge of the Securitization Borrower (the “Second Lien Note”). The Second Lien Note is scheduled to mature on June 17, 2025 and bears interest at a per annum rate of one-month Term SOFR plus 7.5%. The SPEs are party to the Amended Receivables Purchase Agreement, thus the transactions necessitated amendments to that agreement and related documents to permit the addition of subordinated debt and additional borrowing capacity into that transaction structure, in addition to providing for a $5.0 million fee to the lenders for facilitating the transaction. In connection with the above-described facility, the Company also amended the BRCC Term Loan and BRCC Revolver to provide for $9.6 million of borrowing capacity, which was drawn as described above.

As of September 30, 2024, after repurchases (discussed above), there were borrowings of $27.5 million outstanding under the Second Lien Note payable at maturity.

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Long-Term Debt Outstanding

As of September 30, 2024 and December 31, 2023, the following long-term debt instruments were outstanding:



	September 30,		December 31,
	2024		2023
Other (a)	$	37,865	$	21,101
Secured borrowings under BR Exar AR Facility (b)		7,857		—
Senior secured term loan maturing January 14, 2026 (c)		37,177		37,921
July 2026 Notes maturing July 15, 2026 (d)		23,091		22,788
April 2026 Notes maturing April 15, 2026 (e)		941,524		931,293
Secured borrowings under BRCC Facility matured on June 10, 2023		5,896		19,898
Second lien note maturing June 17, 2025 (f)		25,846		27,608
Total debt		1,079,256		1,060,609
Less: Current portion of long-term debt		(51,184)		(30,029)
Long-term debt, net of current maturities	$	1,028,072	$	1,030,580

(a)

Other debt represents outstanding loan balances associated with various hardware and software purchases, and maintenance and leasehold improvements, along with other loans and receivables factoring arrangements entered into by subsidiaries of the Company. Other debt includes $17.3 million and $12.8 million of outstanding balances under certain revolving credit facilities of XBP Europe as of September 30, 2024 and December 31, 2023, respectively, and $14.1 million and $3.8 million of outstanding term loans of XBP Europe as of September 30, 2024 and December 31, 2023, respectively.

(b)	Net of unamortized net original issue discount of $0.8 million and less than $0.1 million of debt issuance as of September 30, 2024.

(c)	Net of unamortized debt issuance costs of $1.1 million and net original issue discount of $0.7 million as of September 30, 2024; and unamortized net original issue discount of $1.6 million as of December 31, 2023.

(d)	Net of unamortized net original issue discount of $0.7 million and debt issuance costs of $0.2 million as of September 30, 2024; and unamortized net original issue discount of $0.9 million and debt issuance costs of $0.2 million as of December 31, 2023.

(e)	Inclusive of unamortized net debt exchange premium of $79.3 million and $119.4 million as of September 30, 2024 and December 31, 2023, respectively.

(f)	Net of unamortized debt issuance costs of $1.7 million and $3.9 million as of September 30, 2024 and December 31, 2023, respectively.

6. Income Taxes

The Company applies an estimated annual effective tax rate (“ETR”) approach for calculating a tax provision for interim periods, as required under GAAP. The Company recorded an income tax expense of $4.8 million and $1.8 million for the three months ended September 30, 2024 and 2023, respectively. The Company recorded an income tax expense of $9.9 million and $7.0 million for the nine months ended September 30, 2024 and 2023, respectively.

The Company expects U.S. consolidated taxable income for the year ended December 31, 2024, primarily due to inability to deduct most interest expense in accordance with Internal Revenue Code (IRC) Section 163(j). Since the enactment of IRC 163(j), the Company has been able to claim net operating loss deductions to eliminate U.S. consolidated tax liabilities. On July 11, 2023, a supplemental indenture was entered into with respect to the July 2026 Notes, which generated significant cancellation of indebtedness income (CODI) for tax purposes, most of which was excluded from taxable income. Under the provisions of IRC Section 108, on January 1, 2024 the Company reduced tax attributes, including all its Exela U.S. consolidated net operating loss carryforwards and tax credits. Accordingly, in 2024 the Company will generate current U.S consolidated tax liabilities, which is reflected in the income tax expense for the three and nine months ended September 30, 2024.

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The Company's ETR of (23.6)% and (14.7)% for the three and nine months ended September 30, 2024 differed from the expected U.S. statutory tax rate of 21.0% and was primarily impacted by permanent tax adjustments, state and local current tax expense, foreign operations, remeasurement of existing uncertain tax positions, and valuation allowances, including valuation allowances on a portion of the Company’s deferred tax assets on U.S. disallowed interest expense carryforwards under the provisions of The Tax Cuts and Jobs Act (“TCJA”).

For the three and nine months ended September 30, 2023, the Company's ETR of (8.5)% and (7.6)% differed from the expected U.S. statutory tax rate of 21.0% and was primarily impacted by permanent tax adjustments, state and local current tax expense, foreign operations, and valuation allowances, including valuation allowances on a portion of the Company’s deferred tax assets on U.S. disallowed interest expense carryforwards under the provisions of the TCJA.

During the nine months ended September 30, 2024, the Company’s liability for unrecognized tax benefits (including interest and penalty) increased by $2.9 million due to remeasurement of existing uncertain tax positions in Germany and Canada.

The Organization for Economic Co-operation and Development reached agreement on Pillar Two Model Rules (“Pillar Two”) to implement a minimum 15.0% tax rate on certain multinational companies. Participating countries are in various stages of proposing and enacting tax laws to implement the Pillar Two framework. We determined these rules did not have a material impact on our taxes for the nine months ended September 30, 2024 and will continue to evaluate the impact of these proposals and legislative changes as new guidance emerges.

7. Employee Benefit Plans

German Pension Plan

The Company’s subsidiary in Germany provides pension benefits to certain retirees. Employees eligible for participation include all employees who started working for the Company or its predecessors prior to September 30, 1987 and have finished a qualifying period of at least 10 years. The Company accrues the cost of these benefits over the service lives of the covered employees based on an actuarial calculation. The Company uses a December 31 measurement date for this plan. The German pension plan is an unfunded plan and therefore has no plan assets. No new employees are registered under this plan and the participants who are already eligible to receive benefits under this plan are no longer employees of the Company.

U.K. Pension Plan

The Company’s subsidiary in the United Kingdom provides pension benefits to certain retirees and eligible dependents. Employees eligible for participation include all full-time regular employees who were more than three years from retirement prior to October 2001. A retirement pension or a lump-sum payment may be paid dependent upon length of service at the mandatory retirement age. The Company accrues the cost of these benefits over the service lives of the covered employees based on an actuarial calculation. The Company uses a December 31 measurement date for this plan. No new employees are registered under this plan and the pension obligation for the existing participants of the plan is calculated based on actual salary of the participants as at the earlier of two dates, the participants leaving the Company or December 31, 2015.

Norway Pension Plan

The Company’s subsidiary in Norway provides pension benefits to eligible retirees and eligible dependents. Employees eligible for participation include all employees who were more than three years from retirement prior to March 2018. The Company accrues the cost of these benefits over the service lives of the covered employees based on an actuarial calculation. The Company uses a December 31 measurement date for this plan. No new employees are registered under this plan and the pension obligation for the existing participants of the plan is calculated based on actual salary of the participants as at the later of two dates, the participants leaving the Company or April 30, 2018.

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Asterion Pension Plan

In April 2018, through its acquisition of Asterion International Group, the Company became obligated to provide pension benefits to eligible retirees and eligible dependents of Asterion. Employees eligible for participation include all full-time regular employees who were more than three years from retirement prior to July 2003. A retirement pension or a lump-sum payment may be paid dependent upon length of service at the mandatory retirement age. The Company accrues the cost of these benefits over the service lives of the covered employees based on an actuarial calculation. The Company uses a December 31 measurement date for this plan. No new employees are registered under this plan and the pension obligation for the existing participants of the plan is calculated based on actual salary of the participants as at the earlier of two dates, the participants leaving the Company or April 10, 2018.

Tax Effect on Accumulated Other Comprehensive Loss

As of September 30, 2024 and December 31, 2023 the Company recorded actuarial gain of $0.7 million and actuarial losses of $0.2 million in accumulated other comprehensive loss on the condensed consolidated balance sheets, respectively, which is net of a deferred tax benefit of $2.0 million for each period.

Pension Expense

The components of the net periodic benefit cost are as follows:

Exela Technologies, Inc. 10-Q