XBP Europe Holdings, Inc. Reports Second Quarter 2024 Results
Second Quarter Highlights
● Revenue of
● Gross margin declined to 18.4%, a 630 bps decrease sequentially and 920 bps decrease year-over-year
● Net loss of
● Active revenue ramp of approximately
● Completed a comprehensive financing transaction with HSBC to provide up to
“We are encouraged by our sales funnel and ramp-up of large public sector contracts, including HMPO which is expected to launch in the coming weeks. Combined with our recently announced strategic financing transaction, which provides the Company with ample liquidity for both organic and inorganic growth, we are optimistic about the rest of 2024,” said
● Revenue: Total Revenue was
- Bills & Payments segment revenue was
$27.3 million , a decline of 9.6% year-over-year, due to completion of projects, lower volumes, and client contract ends, offset by small positive impact of~$25 million ACV won business in various stages of ramp.
- Technology segment revenue was
$8.8 million , a decrease of 27.6% year-over-year, largely due to higher license sales in 2Q 2023, offset by higher implementation and professional services revenue.
● Operating Loss: Operating loss was
● Net Loss: Net loss was
● Adjusted EBITDA(1): Adjusted EBITDA was
● Capital Expenditures: Capital expenditures were 0.9% of revenue compared to 3.2% of revenue in 2Q 2023, with the reduction primarily due to less investment in PP&E during the quarter versus a year ago. The Company expects to spend approximately
● Adequate Liquidity: The Company’s cash and cash equivalents totaled
Other Highlights:
- Strategic Financing Transaction: As announced on
June 27, 2024 , certain of XBP Europe’s subsidiaries entered into a comprehensive financing agreement withHSBC UK Bank plc to refinance the Company’sUK subsidiary’s existing indebtedness and provide up to$33 million of incremental liquidity.
Segment Revenue and Profitability:
Three months ended |
||||||||
Bills & Payments | Technology | Total | ||||||
Revenue, net | $ | 27,305 | $ | 8,807 | $ | 36,112 | ||
Cost of revenue | 25,074 | 4,408 | 29,482 | |||||
Segment Gross Profit | 2,231 | 4,399 | 6,630 | |||||
Three months ended |
||||||||
Bills & Payments | Technology | Total | ||||||
Revenue, net | $ | 30,198 | $ | 12,169 | $ | 42,367 | ||
Cost of revenue | 26,465 | 4,215 | 30,680 | |||||
Segment Gross Profit | 3,733 | 7,954 | 11,687 |
Below is the note referenced above:
(1) Adjusted EBITDA is a non-GAAP measure. A reconciliation of Adjusted EBITDA is attached to this release.
Supplemental Investor Presentation
An investor presentation relating to our second quarter 2024 performance is available at investors.xbpeurope.com. This information has also been furnished to the
About Non-GAAP Financial Measures
This press release includes constant currency, EBITDA and Adjusted EBITDA, each of which is a financial measure that is not prepared in accordance with
Forward-Looking Statements
This press release contains certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act, including certain financial forecasts and projections. All statements other than statements of historical fact contained in this press release, including statements as to future results of operations and financial position, revenue and other metrics planned products and services, business strategy and plans, objectives of management for future operations of
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Condensed Consolidated Balance Sheets
As of
(in thousands of
2024 (Unaudited) |
2023 | |||||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 15,562 | $ | 6,905 | ||
Accounts receivable, net of allowance for credit losses of |
27,935 | 30,795 | ||||
Inventories, net | 4,689 | 4,740 | ||||
Prepaid expenses and other current assets | 9,482 | 7,427 | ||||
Total current assets | 57,668 | 49,867 | ||||
Property, plant and equipment, net of accumulated depreciation of |
12,715 | 13,999 | ||||
Operating lease right-of-use assets, net | 6,365 | 6,865 | ||||
22,315 | 22,910 | |||||
Intangible assets, net | 1,270 | 1,498 | ||||
Deferred income tax assets | 6,768 | 6,861 | ||||
Other noncurrent assets | 930 | 739 | ||||
Total assets | $ | 108,031 | $ | 102,739 | ||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||
LIABILITIES | ||||||
Current liabilities | ||||||
Accounts payable | $ | 17,086 | $ | 14,414 | ||
Related party payables | 11,108 | 13,350 | ||||
Accrued liabilities | 21,282 | 24,742 | ||||
Accrued compensation and benefits | 16,777 | 16,583 | ||||
Customer deposits | 713 | 536 | ||||
Deferred revenue | 5,194 | 6,004 | ||||
Current portion of finance lease liabilities | 436 | 638 | ||||
Current portion of operating lease liabilities | 1,902 | 1,941 | ||||
Current portion of long-term debts | 5,373 | 3,863 | ||||
Total current liabilities | 79,871 | 82,071 | ||||
Related party notes payable | 1,497 | 1,542 | ||||
Long-term debt, net of current maturities | 26,837 | 12,763 | ||||
Finance lease liabilities, net of current portion | — | 23 | ||||
Pension liabilities | 11,875 | 12,208 | ||||
Operating lease liabilities, net of current portion | 4,674 | 5,065 | ||||
Other long-term liabilities | 1,657 | 1,635 | ||||
Total liabilities | $ | 126,411 | $ | 115,307 | ||
Commitments and Contingencies (Note 12) | ||||||
STOCKHOLDERS’ DEFICIT | ||||||
Preferred stock, par value of |
— | — | ||||
Common Stock, par value of |
30 | 30 | ||||
Additional paid in capital | 160 | — | ||||
Accumulated deficit | (18,270) | (11,339) | ||||
Accumulated other comprehensive loss: | ||||||
Foreign currency translation adjustment | (994) | (1,416) | ||||
Unrealized pension actuarial gains, net of tax | 694 | 157 | ||||
Total accumulated other comprehensive loss | (300) | (1,259) | ||||
Total stockholders’ deficit | (18,380) | (12,568) | ||||
Total liabilities and stockholders’ deficit | $ | 108,031 | $ | 102,739 |
Condensed Consolidated Statements of Operations
For the three and six months ended
(in thousands of United States dollars except share and per share amounts)
(Unaudited)
Three months ended |
Six months ended |
|||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||
Revenue, net | $ | 36,031 | $ | 42,294 | $ | 76,315 | $ | 85,072 | ||||
Related party revenue, net | 81 | 73 | 147 | 96 | ||||||||
Cost of revenue (exclusive of depreciation and amortization) | 29,472 | 30,668 | 59,868 | 63,958 | ||||||||
Related party cost of revenue | 10 | 12 | 28 | 63 | ||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization) | 6,905 | 8,181 | 14,851 | 16,595 | ||||||||
Related party expense | 1,215 | 1,133 | 2,177 | 2,298 | ||||||||
Depreciation and amortization | 923 | 946 | 1,880 | 1,856 | ||||||||
Operating profit (loss) | (2,413) | 1,427 | (2,342) | 398 | ||||||||
Other expense (income), net | ||||||||||||
Interest expense, net | 1,466 | 1,187 | 2,893 | 2,440 | ||||||||
Related party interest expense (income), net | 22 | (51) | 41 | (6) | ||||||||
Foreign exchange losses, net | 704 | 661 | 1,536 | 940 | ||||||||
Changes in fair value of warrant liability | (3) | — | (40) | — | ||||||||
Pension income, net | (421) | (197) | (843) | (389) | ||||||||
Net loss before income taxes | (4,181) | (173) | (5,929) | (2,587) | ||||||||
Income tax expense | 542 | 385 | 1,002 | 477 | ||||||||
Net loss | $ | (4,723) | $ | (558) | $ | (6,931) | $ | (3,064) | ||||
Loss per share: | ||||||||||||
Basic and diluted | $ | (0.16) | $ | (0.03) | $ | (0.23) | $ | (0.14) | ||||
Condensed Consolidated Statements of Cash Flows
For the six months ended
(in thousands of
Six months ended |
||||||
2024 | 2023 | |||||
Cash flows from operating activities | ||||||
Net loss | $ | (6,931) | $ | (3,064) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Depreciation | 1,520 | 1,663 | ||||
Amortization of intangible assets | 360 | 228 | ||||
Credit loss expense | 176 | 124 | ||||
Changes in fair value of warrant liability | (40) | — | ||||
Stock-based compensation expense | 160 | — | ||||
Unrealized foreign currency losses | 1,323 | 734 | ||||
Change in deferred income taxes | (80) | (30) | ||||
Change in operating assets and liabilities | ||||||
Accounts receivable | 1,799 | 3,409 | ||||
Inventories | (83) | 135 | ||||
Prepaid expense and other assets | (2,482) | 1,061 | ||||
Accounts payable | 3,000 | (3,426) | ||||
Related parties payable | (2,221) | 1,695 | ||||
Accrued expenses and other liabilities | (1,528) | (2,184) | ||||
Deferred revenue | (708) | (1,903) | ||||
Customer deposits | 195 | 89 | ||||
Net cash used in operating activities | (5,540) | (1,469) | ||||
Cash flows from investing activities | ||||||
Purchase of property, plant and equipment | (553) | (1,993) | ||||
Additions to internally developed software | (173) | — | ||||
Net cash used in investing activities | (726) | (1,993) | ||||
Cash flows from financing activities | ||||||
Borrowings under secured borrowing facility | — | 62,962 | ||||
Principal repayment on borrowings under secured borrowing facility | (18) | (63,571) | ||||
Borrowings under 2024 Revolving Credit Facility | 15,339 | — | ||||
Principal payments on long-term obligations | (468) | (456) | ||||
Proceeds from Secured Credit Facility | 972 | — | ||||
Principal payments on finance leases | (207) | (381) | ||||
Net cash provided by (used in) financing activities | 15,618 | (1,446) | ||||
Effect of exchange rates on cash and cash equivalents | (695) | (86) | ||||
Net increase (decrease) in cash and cash equivalents | 8,657 | (4,994) | ||||
Cash and equivalents, beginning of period | 6,905 | 7,473 | ||||
Cash and equivalents, end of period | $ | 15,562 | $ | 2,479 | ||
Supplemental cash flow data: | ||||||
Income tax payments, net of refunds received | 60 | 568 | ||||
Interest paid | 1,053 | 888 |
Schedule 1: Reconciliation of Adjusted EBITDA and constant currency revenues
Reconciliation of Non-GAAP Financial Measures to GAAP Measures | ||||
Non-GAAP constant currency revenue reconciliation | ||||
Three Months ended |
||||
($ in thousands) | 2024 | 2023 | ||
Revenues, as reported (GAAP) | 36,112 | 42,367 | ||
Foreign currency exchange impact (1) | 259 | |||
Revenues, at constant currency (Non-GAAP) | 36,371 | 42,367 | ||
Reconciliation of Adjusted EBITDA | ||||
Three Months ended |
||||
($ in thousands) | 2024 | 2023 | ||
Net loss (GAAP) | (4,723) | (558) | ||
Income tax expenses | 542 | 385 | ||
Interest expense including related party interest expense, net | 1,488 | 1,136 | ||
Depreciation and amortization | 923 | 946 | ||
EBITDA (Non-GAAP) | (1,770) | 1,909 | ||
Restructuring and related expenses (2) | 249 | 472 | ||
Employment litigation matter (3) | 917 | 345 | ||
Related party management fee and royalties | - | 421 | ||
Foreign exchange losses, net | 704 | 660 | ||
Non-cash equity compensation (4) | 160 | - | ||
Changes in fair value of warrant liability | (3) | - | ||
Transaction Fees (5) | 30 | 202 | ||
Adjusted EBITDA (Non-GAAP) (6) | 287 | 4,009 |
(1) Constant currency excludes the impact of foreign currency fluctuations and is computed by applying the average exchange rates for the quarter ended
(2) Adjustment represents costs associated with restructuring, including employee severance and vendor and lease termination costs.
(3) Represents the litigation settlement and associated expenses incurred in connection with the Company subsidiary litigation.
(4) Represents the non-cash charges related to restricted stock units and options.
(5) Represents transaction costs incurred as part of the Business Combination.
(6) Supplemental financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in
Similar non-GAAP financial measures may be calculated differently by other companies, including other companies in our industry, limiting their usefulness as comparative measures. Because of these limitations, you should consider the non-GAAP financial measures alongside other performance measures and liquidity measures, including operating income, various cash flow metrics, net income and our other GAAP results.
Source:
Source: XBP Europe