UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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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.
Item 2.02 Results of Operations and Financial Condition.
On November 12, 2024, XBP Europe Holding, Inc. (the “Company”) issued a press release reporting financial results for the quarter ended September 30, 2024. The full text of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in Item 2.02 and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 7.01. Regulation FD Disclosure
On November 12, 2024, the Company posted an investor presentation to its website (www.xbpeurope.com). A copy of the investor presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
The information contained in this Item 7.01 and Exhibit 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor will it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d)Exhibits.
Exhibit No. |
| Description |
99.1 | Press Release dated November 12, 2024 announcing the third quarter results. | |
99.2 | ||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: November 12, 2024
XBP EUROPE HOLDINGS, INC. | ||
By: | /s/ Dejan Avramovic | |
Dejan Avramovic | ||
Chief Financial Officer | ||
Exhibit 99.1
XBP Europe Holdings, Inc. Reports Third Quarter 2024 Results
November 12, 2024
Third Quarter Highlights
| ● | Revenue of $35.4 million, decrease of 5.6% year-over-year and increase of 5.5% sequentially |
| ● | Gross margin increased to 32.6%, a 800 bps increase year-over-year and 1,300 bps increase sequentially |
| ● | Operating profit of $2.5 million, an increase of $2.2 million year-over-year and $3.8 million sequentially |
| ● | Net loss of $2.8 million includes $0.7 million of FX losses, a decrease of $0.1 million year-over-year and $2.0 million sequentially |
| ● | Adjusted EBITDA from continuing operations of $4.8 million, an increase of $2.6 million year-over-year and $3.6 million sequentially |
| ● | Announced plans to divest on-demand printing operation |
LONDON, UK and Santa Monica, CA, November 12, 2024 (GLOBE NEWSWIRE) – XBP Europe Holdings, Inc. (“XBP Europe” or “the Company”) (NASDAQ: XBP), a pan-European integrator of bills, payments, and related solutions and services seeking to enable the digital transformation of its clients, announced today its financial results for the quarter ended September 30, 2024.
“Our focus on expanding technology sales and cost structure optimization contributed to our performance in the quarter. Our backlog is rising, and we are ramping up prudently and as fast as we can. We expect these efforts to result in a continued top and bottom line improvement. We are additionally excited by opportunities available to us as a result of being selected for the UK government’s G-cloud 14 framework” said Andrej Jonovic, Chief Executive Officer of XBP Europe.
| ● | Revenue: Total Revenue was $35.4 million, a decline of 5.6% year-over-year and an increase of 5.5% sequentially, primarily due to completion of projects, lower volumes, and client contract ends, offset by positive impact of new business, some of which is in early stage of ramp. |
| ● | Bills & Payments segment revenue was $24.6 million, a decline of 3.1% year-over-year, primarily attributable to lower postage revenue, lower volumes and client contract ends, offset by the positive impact of newly won business, some of which is in early stage of ramp. |
| ● | Technology segment revenue was $10.8 million, a decrease of 10.8% year-over-year, largely due to lower license sales offset by implementation and professional services revenue. |
| ● | Operating Profit: Operating Profit was $2.5 million, compared to $0.3 million in 3Q 2023. This was driven primarily by higher gross margins coupled with SG&A improvement. Our operating expenses include costs associated with accelerated migration to the cloud. |
| ● | Net Loss: Net loss was $2.8 million, compared with a net loss of $2.9 million in 3Q 2023. The year-over-year decrease was primarily driven by higher Operating Profit, offset by higher Income tax expense and interest expense. |
| ● | Adjusted EBITDA(1): Adjusted EBITDA from Continuing Operations was $4.8 million, an increase of $2.6 million or 116% compared to $2.2 million in 3Q 2023. Adjusted EBITDA margin was 13.7%, an increase of 770 basis points from 6.0% in 3Q 2023. |
| ● | Capital Expenditures: Capital expenditures were 2.0% of revenue compared to 0.7% of revenue in 3Q 2023, with the increase primarily due to higher investments for growth during the quarter versus a year ago. |
| ● | Adequate Liquidity: The Company’s cash and cash equivalents totaled $7.8 million as of September 30, 2024 and additional funding available under secured borrowing facilities including the €15 million factoring facility. |
Other Highlights:
| ● | Pending Divestiture: During the third quarter of fiscal year 2024, the Company determined that its certain on-demand printing operation met the criteria to be classified as a discontinued operation, and, as a result, disposable group’s historical financial results are reflected in the Company’s condensed consolidated financial statements as discontinued operations and are presented separately from continuing operations. On a YTD basis, this business had Revenue of approximately $6.8 million and negative Adjusted EBITDA of approximately $3.3 million. |
Segment Revenue and Profitability:
| | Three months ended September 30, 2024 | | |||||||
| | Bills & Payments | | Technology | | Total | | |||
Revenue, net |
| $ | 24,555 |
| $ | 10,845 |
| $ | 35,400 |
|
Cost of revenue | | | 19,402 | | | 4,446 | | | 23,848 | |
Segment Gross Profit | | | 5,153 | | | 6,399 | | | 11,552 | |
| | | | | | | | | | |
| | Three months ended September 30, 2023 | | |||||||
| | Bills & Payments | | Technology | | Total | | |||
Revenue, net | | $ | 25,344 | | $ | 12,152 | | $ | 37,496 | |
Cost of revenue | | | 22,604 | | | 5,637 | | | 28,241 | |
Segment Gross Profit | | | 2,740 | | | 6,515 | | | 9,255 | |
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 third quarter 2024 performance is available at investors.xbpeurope.com. This information has also been furnished to the SEC in a current report on Form 8-K.
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 U.S. generally accepted accounting principles (“GAAP”). XBP Europe believes that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our financial performance, results of operations and liquidity and allows investors to better understand the trends in our business and to better understand and compare our results. XBP Europe’s board of directors and management use constant currency, EBITDA and Adjusted EBITDA to assess XBP Europe’s financial performance, because it allows them to compare XBP Europe’s operating performance on a consistent basis across periods by removing the effects of XBP Europe’s capital structure (such as varying levels of debt and interest expense, as well as transaction costs resulting from the combination with CF Acquisition Corp. VIII. on November 29, 2023). Adjusted EBITDA also seeks to remove the effects of restructuring and related expenses and other similar non-routine items, some of which are outside the control of our management team. Restructuring expenses are primarily related to the implementation of strategic actions and initiatives related to right sizing of the business. All of these costs are variable and dependent upon the nature of the actions being implemented and can vary significantly driven by business needs. Accordingly, due to that significant variability, we exclude these charges since we do not believe they truly reflect our past, current or future operating performance. The constant currency presentation excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency revenue on a constant currency basis by converting our current-period local currency revenue using the exchange rates from the corresponding prior-period and compare these adjusted amounts to our corresponding prior period reported results. XBP Europe does not consider these non-GAAP measures in isolation or as an alternative to liquidity or financial measures determined in accordance with GAAP. A limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in XBP Europe’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures and therefore the basis of presentation for these measures may not be comparable to similarly-titled measures used by other companies. These non-GAAP financial measures are not required to be uniformly applied, are not audited and should not be considered in isolation or as substitutes for results prepared in accordance with GAAP. Net loss is the GAAP measure most directly comparable to the non-GAAP measures presented here. For reconciliation of the comparable GAAP measures to these non-GAAP financial measures, see the schedules attached to this release.
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 XBP Europe, market size and growth opportunities, competitive position and technological and market trends, are forward-looking statements. Some of these forward-looking statements can be identified by the use of forward-looking words, including “may,” “should,” “expect,” “intend,” “will,” “estimate,” “anticipate,” “believe,” “predict,” “plan,” “targets,” “projects,” “could,” “would,” “continue,” “forecast” or the negatives of these terms or variations of them or similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. All forward-looking statements are based upon estimates, forecasts and assumptions that, while considered reasonable by XBP Europe and its management, as the case may be, are inherently uncertain and many factors may cause the actual results to differ materially from current expectations which include, but are not limited to: (1) the outcome of any legal proceedings that may be instituted against XBP Europe or others and any definitive agreements with respect thereto; (2) the inability to meet the continued listing standards of Nasdaq or another securities exchange; (3) the risk that the business combination disrupts current plans and operations of XBP Europe and its
subsidiaries; (4) the inability to recognize the anticipated benefits of the business combination, which may be affected by, among other things, competition, the ability of XBP Europe and its subsidiaries to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees; (5) costs related to the business combination; (6) changes in applicable laws or regulations; (7) the possibility that XBP Europe or any of its subsidiaries may be adversely affected by other economic, business and/or competitive factors; (8) risks related to XBP Europe’s potential inability to achieve or maintain profitability and generate cash; (9) the impact of the COVID-19 pandemic, including any mutations or variants thereof, and its effect on business and financial conditions; (10) volatility in the markets caused by geopolitical and economic factors; (11) the ability of XBP Europe to retain existing clients; (12) the potential inability of XBP Europe to manage growth effectively; (13) the ability to recruit, train and retain qualified personnel, and (14) other risks and uncertainties set forth in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in the Annual Reports on Form 10-K filed on April 1, 2024 and, our subsequent quarterly reports on Form 10-Q and our current reports on Form 8-K as filed with the Securities and Exchange Commission (the “SEC”). These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Nothing in this press release should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. Readers should not place undue reliance on forward-looking statements, which speak only as of the date they are made. XBP Europe gives no assurance that either XBP Europe or any of its subsidiaries will achieve its expected results. XBP Europe undertakes no duty to update these forward-looking statements, except as otherwise required by law.
About XBP Europe
XBP Europe is a pan-European integrator of bills, payments and related solutions and services seeking to enable digital transformation of its more than 2,000 clients. The Company’s name – ‘XBP’ stands for ‘exchange for bills and payments’ and reflects the Company’s strategy to connect buyers and suppliers, across industries, including banking, healthcare, insurance, utilities and the public sector, to optimize clients’ bills and payments and related digitization processes. The Company provides business process management solutions with proprietary software suites and deep domain expertise, serving as a technology and services partner for its clients. Its cloud-based structure enables it to deploy its solutions across the European market, along with the Middle East and Africa. The physical footprint of XBP Europe spans 15 countries and 32 locations and a team of approximately 1,500 individuals. XBP Europe believes its business ultimately advances digital transformation, improves market wide liquidity by expediting payments, and encourages sustainable business practices. For more information, please visit: www.xbpeurope.com.
For more XBP Europe news, commentary, and industry perspectives, visit: https://www.xbpeurope.com/
And please follow us on social:
X: https://X.com/XBPEurope
LinkedIn: https://www.linkedin.com/company/xbp-europe/
The information posted on XBP Europe's website and/or via its social media accounts may be deemed material to investors. Accordingly, investors, media and others interested in XBP Europe should monitor XBP Europe’s website and its social media accounts in addition to XBP Europe’s press releases, SEC filings and public conference calls and webcasts.
Investor and/or Media Contacts:
investors@xbpeurope.com
XBP Europe Holdings, Inc.
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) | | | ||
ASSETS |
| |
|
| |
|
Current assets |
| |
|
| |
|
Cash and cash equivalents | | $ | 7,770 | | $ | 6,537 |
Accounts receivable, net of allowance for credit losses of $1,435 and $1,183, respectively | |
| 24,576 | |
| 30,238 |
Inventories, net | |
| 4,056 | |
| 4,045 |
Prepaid expenses and other current assets | |
| 6,912 | |
| 6,550 |
Current assets held for sale | |
| 4,197 | |
| 2,497 |
Total current assets | |
| 47,511 | |
| 49,867 |
Property, plant and equipment, net of accumulated depreciation of $42,707 and $39,876, respectively | |
| 12,284 | |
| 12,811 |
Operating lease right-of-use assets, net | |
| 6,726 | |
| 5,206 |
Goodwill | |
| 23,281 | |
| 22,823 |
Intangible assets, net | |
| 1,274 | |
| 1,498 |
Deferred income tax assets | |
| 7,689 | |
| 6,811 |
Other noncurrent assets | | | 882 | | | 705 |
Noncurrent assets held for sale | |
| — | |
| 3,018 |
Total assets | | $ | 99,647 | | $ | 102,739 |
| | | | | | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
|
| |
|
|
LIABILITIES | |
|
| |
|
|
Current liabilities | |
|
| |
|
|
Accounts payable | | $ | 11,271 | | $ | 13,281 |
Related party payables | |
| 5,523 | |
| 13,350 |
Accrued liabilities | |
| 22,152 | |
| 23,850 |
Accrued compensation and benefits | |
| 16,623 | |
| 16,268 |
Customer deposits | |
| 723 | |
| 323 |
Deferred revenue | |
| 6,500 | |
| 6,004 |
Current portion of finance lease liabilities | |
| 26 | |
| 91 |
Current portion of operating lease liabilities | |
| 2,118 | |
| 1,562 |
Current portion of long-term debts | | | 5,047 | | | 3,863 |
Current liabilities held for sale | |
| 4,529 | |
| 3,479 |
Total current liabilities | |
| 74,512 | |
| 82,071 |
Related party notes payable | |
| 1,559 | |
| 1,542 |
Long-term debt, net of current maturities | |
| 26,406 | |
| 12,763 |
Finance lease liabilities, net of current portion | |
| — | |
| 23 |
Pension liabilities | |
| 11,430 | |
| 12,208 |
Operating lease liabilities, net of current portion | |
| 4,781 | |
| 3,785 |
Other long-term liabilities | | | 1,720 | | | 1,635 |
Noncurrent liabilities held for sale | |
| — | |
| 1,280 |
Total liabilities | | $ | 120,408 | | $ | 115,307 |
Commitments and Contingencies (Note 12) | |
|
| |
|
|
| | | | | | |
STOCKHOLDERS’ DEFICIT | |
|
| |
|
|
Preferred stock, par value of $0.0001 per share; 10,000,000 shares authorized; none issued and outstanding as of September 30, 2024 and December 31, 2023, respectively | |
| — | |
| — |
Common Stock, par value of $0.0001 per share; 200,000,000 shares authorized; 30,166,102 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively | |
| 30 | |
| 30 |
Additional paid in capital | |
| 885 | |
| — |
Accumulated deficit | |
| (21,039) | |
| (11,339) |
Accumulated other comprehensive loss: | |
|
| |
|
|
Foreign currency translation adjustment | |
| (1,609) | |
| (1,416) |
Unrealized pension actuarial gains, net of tax | |
| 972 | |
| 157 |
Total accumulated other comprehensive loss | |
| (637) | |
| (1,259) |
Total stockholders’ deficit | |
| (20,761) | |
| (12,568) |
Total liabilities and stockholders’ deficit | | $ | 99,647 | | $ | 102,739 |
XBP Europe Holdings, Inc.
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, net | | $ | 35,330 | | $ | 37,429 | | $ | 106,770 | | $ | 116,248 |
Related party revenue, net | |
| 70 | |
| 67 | |
| 217 | |
| 163 |
Cost of revenue (exclusive of depreciation and amortization) | |
| 23,841 | |
| 28,229 | |
| 78,769 | |
| 85,531 |
Related party cost of revenue | |
| 7 | |
| 12 | |
| 35 | |
| 75 |
Selling, general and administrative expenses (exclusive of depreciation and amortization) | |
| 6,818 | |
| 6,846 | |
| 19,785 | |
| 21,448 |
Related party expense | |
| 1,421 | |
| 1,316 | |
| 3,527 | |
| 3,589 |
Depreciation and amortization | |
| 804 | |
| 745 | |
| 2,387 | |
| 2,207 |
Operating profit | |
| 2,509 | |
| 348 | |
| 2,484 | |
| 3,561 |
Other expense (income), net | |
|
| |
|
| |
|
| |
|
|
Interest expense, net | |
| 1,820 | |
| 1,246 | |
| 4,698 | |
| 3,641 |
Related party interest expense (income), net | |
| 23 | |
| 5 | |
| 64 | |
| (1) |
Foreign exchange losses (gains), net | |
| 668 | |
| (530) | |
| 2,016 | |
| 405 |
Changes in fair value of warrant liability | |
| (5) | |
| — | |
| (45) | |
| — |
Pension income, net | |
| (435) | |
| (200) | |
| (1,278) | |
| (589) |
Net income (loss) before income taxes | |
| 438 | |
| (173) | |
| (2,971) | |
| 105 |
Income tax expense | |
| 1,664 | |
| 1,046 | |
| 2,666 | |
| 1,523 |
Net loss from continuing operations | | | (1,226) | | | (1,219) | | | (5,637) | | | (1,418) |
Net loss from discontinuing operations, net of income taxes | | | (1,543) | | | (1,668) | | | (4,063) | | | (4,533) |
Net loss | | $ | (2,769) | | $ | (2,887) | | $ | (9,700) | | $ | (5,951) |
Loss per share: | |
|
|
|
|
| |
|
|
|
|
|
Basic and diluted - continuing operations | | $ | (0.04) | | $ | (0.05) | | $ | (0.19) | | $ | (0.06) |
Basic and diluted - discontinuing operations | | | (0.05) | | | (0.08) | | | (0.13) | | | (0.21) |
Basic and diluted | | $ | (0.09) | | $ | (0.13) | | $ | (0.32) | | $ | (0.27) |
XBP Europe Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 2024 and 2023
(in thousands of United States dollars)
(Unaudited)
| | Nine months ended September 30, | ||||
|
| 2024 |
| 2023 | ||
Cash flows from operating activities | | | | | | |
Net loss | | $ | (9,700) | | $ | (5,951) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
| | | |
|
|
Depreciation |
| | 2,265 | |
| 2,662 |
Amortization of intangible assets |
| | 554 | |
| 289 |
Impairment of goodwill | | | 87 | | | — |
Credit loss expense |
| | 249 | |
| 271 |
Changes in fair value of warrant liability | | | (45) | | | — |
Stock-based compensation expense | | | 885 | | | — |
Unrealized foreign currency losses |
| | 1,976 | |
| 215 |
Change in deferred income taxes |
| | (761) | |
| (357) |
| | | | | | |
Change in operating assets and liabilities |
| | | |
|
|
Accounts receivable |
| | 5,741 | |
| 2,874 |
Inventories |
| | 163 | |
| 326 |
Prepaid expense and other assets |
| | (855) | |
| 1,125 |
Accounts payable |
| | (2,555) | |
| (2,599) |
Related parties payable |
| | (8,350) | |
| (2,246) |
Accrued expenses and other liabilities |
| | (1,428) | |
| 4,758 |
Deferred revenue |
| | 280 | |
| 790 |
Customer deposits |
| | 340 | |
| (414) |
Net cash provided by (used in) operating activities |
| | (11,154) | |
| 1,743 |
| | | | | | |
Cash flows from investing activities |
| | | |
|
|
Purchase of property, plant and equipment |
| | (1,124) | |
| (2,254) |
Additions to internally developed software | | | (317) | | | — |
Net cash used in investing activities |
| | (1,441) | |
| (2,254) |
| | | | | | |
Cash flows from financing activities |
| | | |
|
|
Borrowings under secured borrowing facility |
| | — | |
| 87,769 |
Principal repayment on borrowings under secured borrowing facility |
| | (79) | |
| (90,357) |
Borrowings under 2024 Term Loan A Facility | | | 3,830 | | | — |
Borrowings under 2024 Term Loan B Facility | | | 11,413 | | | — |
Borrowings under 2024 Revolving Credit Facility | | | 15,425 | | | — |
Cash paid for debt issuance costs | | | (734) | | | — |
Principal payments on 2024 Term Loan A Facility | | | (192) | | | — |
Principal payments on 2024 Term Loan B Facility | | | (571) | | | — |
Principal payments on long-term obligations | | | (15,256) | | | (690) |
Proceeds from Secured Credit Facility |
| | 679 | |
| — |
Principal payments on finance leases |
| | (282) | |
| (660) |
Net cash provided by (used in) financing activities |
| | 14,233 | |
| (3,938) |
Effect of exchange rates on cash and cash equivalents |
| | (583) | |
| (205) |
Net increase (decrease) in cash and cash equivalents |
| | 1,055 | |
| (4,654) |
| | | | | | |
Cash and equivalents, beginning of period, including cash from discontinued operations |
| | 6,905 | |
| 7,473 |
Cash and equivalents, end of period, including cash from discontinued operations | | $ | 7,960 | | $ | 2,819 |
| | | | | | |
Supplemental cash flow data: | |
|
| |
|
|
Income tax payments, net of refunds received | |
| 424 | |
| 1,112 |
Interest paid | |
| 1,869 | |
| 1,309 |
XBP Europe Holdings, Inc.
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 September 30, | ||
($ in thousands) |
| 2024 |
| 2023 |
| | | | |
Revenues, as reported (GAAP) | | 35,400 | | 37,496 |
Foreign currency exchange impact (1) | | (688) | |
|
Revenues, at constant currency (Non-GAAP) | | 34,712 | | 37,496 |
| | | | |
Reconciliation of Adjusted EBITDA from Continuing Operations |
|
|
|
|
| | | | |
| | Three Months ended September 30, | ||
($ in thousands) |
| 2024 |
| 2023 |
| | | | |
Net loss from Continuing Operations (GAAP) | | (1,226) | | (1,219) |
Income tax expense | | 1,664 | | 1,046 |
Interest expense including related party interest expense, net | 1,843 | | 1,251 | |
Depreciation and amortization | | 804 | | 745 |
EBITDA from Continuing Operations (Non-GAAP) | | 3,085 | | 1,823 |
Restructuring and related expenses (2) | | 316 | | 309 |
Employment litigation matter (3) | | 57 | | 64 |
Related party management fee and royalties | | - | | 334 |
Foreign exchange losses, net | | 668 | | (530) |
Non-cash equity compensation (4) | | 725 | | - |
Changes in fair value of warrant liability | | (5) | | - |
Transaction Fees (5) | | - | | 244 |
Adjusted EBITDA from Continuing Operations (Non-GAAP) (6) | | 4,846 | | 2,244 |
Reconciliation of Adjusted EBITDA from Discontinuing Operations |
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| | | | |
| | Three Months ended September 30, | ||
($ in thousands) |
| 2024 |
| 2023 |
| | | | |
Net loss from Discontinuing Operations, Net of Income Taxes (GAAP) | | (1,543) | | (1,668) |
Income tax expense | | 72 | | - |
Interest expense, net | 3 | | 19 | |
Depreciation and amortization | | 135 | | 350 |
EBITDA from Discontinuing Operations (Non-GAAP) | | (1,333) | | (1,299) |
Restructuring and related expenses (7) | | - | | - |
Related party service fees and royalties | | - | | - |
Impairment of goodwill | | 87 | | - |
Foreign exchange losses, net | | 2 | | 1 |
Adjusted EBITDA from Discontinuing Operations (Non-GAAP) (6) | | (1,244) | | (1,298) |
(1) | Constant currency excludes the impact of foreign currency fluctuations and is computed by applying the average exchange rates for the quarter ended September 30, 2023, to the revenues during the corresponding period in 2024. |
(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 the United States (“GAAP”). These non-GAAP financial measures should not be considered as alternatives to operating or net income or cash flows from operating activities, in each case determined in accordance with GAAP. These non-GAAP financial measures are among the indicators used by management to measure the performance of the |
Company’s operations, and also among the criteria upon which performance-based compensation may be based. Adjusted EBITDA also is used by our lenders for debt covenant compliance purposes.
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.
(7) | Adjustment represents costs associated with restructuring related to employee severance. |
Source: XBP Europe Holdings, Inc.
| ©XBP EUROPE 2024 Third Quarter 2024 Results November 12, 2024 |
| ©XBP EUROPE 2024 Safe Harbor Statements Forward-Looking Statements: Certain statements included in this presentation are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as “may”, “should”, “would”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “seem”, “seek”, “continue”, “future”, “will”, “expect”, “outlook” or other similar words, phrases or expressions. These forward-looking statements include statements regarding our industry, future events, estimated or anticipated future results and benefits, future opportunities for XBP Europe Holdings, Inc. (“XBP Europe” or the “Company”), and other statements that are not historical facts. These statements are based on the current expectations of XBP Europe management and are not predictions of actual performance. These statements are subject to a number of risks and uncertainties, including without limitation (1) the outcome of any legal proceedings that may be instituted against XBP Europe or others and any definitive agreements with respect thereto; (2) the inability to meet the continued listing standards of Nasdaq or another securities exchange; (3) the risk that the business combination disrupts current plans and operations of XBP Europe and its subsidiaries; (4) the inability to recognize the anticipated benefits of the business combination, which may be affected by, among other things, competition, the ability of XBP Europe and its subsidiaries to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees; (5) costs related to the business combination; (6) changes in applicable laws or regulations; (7) the possibility that XBP Europe or any of its subsidiaries may be adversely affected by other economic, business and/or competitive factors; (8) risks related to XBP Europe’s potential inability to achieve or maintain profitability and generate cash; (9) the impact of the COVID-19 pandemic, including any mutations or variants thereof, and its effect on business and financial conditions; (10) volatility in the markets caused by geopolitical and economic factors; (11) the ability of XBP Europe to retain existing clients; (12) the potential inability of XBP Europe to manage growth effectively; (13) the ability to recruit, train and retain qualified personnel, and (14) other risks and uncertainties set forth in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in the Annual Reports on Form 10-K filed on April 1, 2024 and subsequent filings with the Securities and Exchange Commission (the “SEC”). In addition, forward-looking statements provide XBP Europe’s expectations, plans or forecasts of future events and views as of the date of this communication. XBP Europe anticipates that subsequent events and developments will cause XBP Europe’s assessments to change. These forward-looking statements should not be relied upon as representing XBP Europe’s assessments as of any date subsequent to the date of this presentation. Non-GAAP Financial Measures: This presentation includes constant currency, EBITDA and Adjusted EBITDA, each of which is a financial measure that is not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). XBP Europe believes that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our financial performance, results of operations and liquidity and allows investors to better understand the trends in our business and to better understand and compare our results. XBP Europe’s board of directors and management use constant currency, EBITDA and Adjusted EBITDA to assess XBP Europe’s financial performance, because it allows them to compare XBP Europe’s operating performance on a consistent basis across periods by removing the effects of XBP Europe’s capital structure (such as varying levels of debt and interest expense, as well as transaction costs resulting from the business combination with CF Acquisition Corp. VIII on November 29, 2023). Adjusted EBITDA also seeks to remove the effects of integration and related restructuring expenses and other similar non-routine items, some of which are outside the control of our management team. Restructuring expenses are primarily related to the implementation of strategic actions and initiatives related to right-sizing of the business. All of these costs are variable and dependent upon the nature of the actions being implemented and can vary significantly driven by business needs. Accordingly, due to that significant variability, we exclude these charges since we do not believe they truly reflect our past, current or future operating performance. The constant currency presentation excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency revenue and Adjusted EBITDA on a constant currency basis by converting our current-period local currency financial results using the exchange rates from the corresponding prior-period and compare these adjusted amounts to our corresponding prior period reported results. XBP Europe does not consider these non-GAAP measures in isolation or as an alternative to liquidity or financial measures determined in accordance with GAAP. A limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in XBP Europe’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures and therefore the basis of presentation for these measures may not be comparable to similarly-titled measures used by other companies. These non-GAAP financial measures are not required to be uniformly applied, are not audited and should not be considered in isolation or as substitutes for results prepared in accordance with GAAP. Net loss is the GAAP measure most directly comparable to the non-GAAP measures presented here. For reconciliation of the comparable GAAP measures to these non-GAAP financial measures, see the slide titled Reconciliation of non-GAAP measures. Rounding: Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect absolute figures. Supplemental Information: These slides are not intended to be a stand-alone presentation but should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto included in our public filings. |
| ©XBP EUROPE 2024 About XBP Europe 3 Listed on NASDAQ - see our website here. Where Secure hybrid cloud infrastructure enables XBP Europe to deploy its solutions to clients across the European market, along with the Middle East and Africa. Our physical footprint spans 15 countries in over 32 locations supported by our ~1,500 employees. What We provide bills and payments process management by partnering with our clients, enabling their data modernization and AI journeys with suites of solutions and services. Who XBP Europe Holdings, Inc. (Nasdaq: XBP, XBPEW), is a pan-European integrator of bills, payments, and related solutions and services seeking to enable the digital transformation of our clients. We serve many of the largest private and public sector clients in the UK and Europe, and our extensive network reaches majority of populations in key European markets. Why As a public company, we are able to participate in the large European economy, grow with our clients, and create value for our employees and stakeholders. Who, Where, Why & What |
| ©XBP EUROPE 2024 XBP Europe product suites - Summary 4 Banking & Finance One of largest non-bank processors of payments in Europe ● Request to Pay (RtP/UK, R2P/EU) ● Confirmation of Payee (CoP) ● Know Your Customer (KYC) ● Mortgage & Loan Origination ● Payment Processing ● Foreign Exchange & Cross-Border Payments ● Check clearing infrastructure Enterprise Information Management Scan, process, digitize documents and get usable data ● Intelligent Document Processing ● Document Digitization ● Data Visualisation ● Big Data Analytics ● Infrastructure AI Finance & Accounting Enhanced invoicing, payments, reporting, analysis ● Exchange for Bills & Payments (XBP) ● Procure to Pay (P2P) ● Order to Cash (O2C) ● F&A Outsourcing ● ERP Data Consolidation Cloud & AI powered Cyber Security ● AI enabled cyber security ● Data modernization ● Cloud migration and management Integrated Communications Optimize communications over physical/digital channels ● XBP OmniDirect ● Print & Mail ● Contact Center Services Work From Anywhere Digital workplace and remote working technologies ● Digital Mailroom (DMR) ● Smart Lockers ● Digital Signature (Drysign) Small & Medium Businesses (SMB) Modular SaaS solutions that scale with a business ● XBP SMB ● DMR SMB ● Beats ● Peri Intelligent Process Automation Automate to digitally transform manual processes ● Workflow Automation ● Robotic Process Automation ● Data Science Projects |
| ©XBP EUROPE 2024 We serve a diversified base of public and private sector customers 5 Large Enterprises and Small Businesses Finance Departments F&A, IPA, WFA, SaaS We empower accounting and finance through a suite of solutions that offer automation, communication, and business insights to seamlessly manage transactions and help to improve liquidity. Financial Institutions, Banks & Insurance Companies Digital Banking, Financial BPO Services We help financial institutions to provide a better experience to billers, payers, and clients, thereby optimizing payment transactions and improving satisfaction, loyalty, and retention. Governments & Public Sector Organizations BPO We help governments and public sector organizations on their digital transformation journey, including workflow solutions, documents processing, and content management. Industry Specific and Industry Agnostic Enterprise Software and Services #Banking • 30 top global and European banks • Provider of state-of-the-art technology platform that processes 100% of UK cheque clearing • XBP Europe’s technology supports ~63 million online banking customers #Public Sector Serving 55+ central & local governmental entities across 7 countries #Financial Services 50+ Enterprise level clients across all regions |
| ©XBP EUROPE 2024 3Q 2024 Financial Summary and Highlights 6 |
| ©XBP EUROPE 2024 YoY +10.2% Sequentially +12.1% YoY +7.7% Sequentially +10% 3Q 2024 at a Glance 7 YoY +8.0% Sequentially +13.0% Revenue $35.4M YoY -5.6% Sequentially +5.5% Gross Margin 32.6% Adj EBITDA1 $4.8M YoY -0.4% SG&A $6.8M YoY +$2.6M Sequentially +$3.6M 1: Adj EBITDA from Continuing Operations - Reference Adj EBITDA reconciliations on slide 13 YoY +5.4% Sequentially +9.1% Technology segment Gross Margin 59.0% Adj EBITDA Margin 13.7% Sequentially +14.2% Note: Unless otherwise noted, any references within this presentation relate to continuing operations Bills & Payments Gross Margin 21.0% ~$25M Active ACV Ramp YoY +$2.2M Sequentially +$3.8M Operating Profit $2.5M Bills & Payments: 69.4% Technology: 30.6% Revenue Mix |
| ©XBP EUROPE 2024 3Q 2024 Financial Highlights 8 • Sequential revenue growth as ~$25 million of active project ramp-ups accelerate, including recent go-live of His Majesty’s Passport Office (HMPO) • Gross margin improvement driven by better operational leverage, automation, and optimization flow-through • Adjusted EBITDA margin expansion and improving EPS trajectory 1: Reference Adj EBITDA reconciliation on slide 13 Note: Unless otherwise noted, any references within this presentation relate to continuing operations ($ in thousands, unaudited) |
| ©XBP EUROPE 2024 Segment Profitability 9 • Gross margin improvement at both Bills & Payments and Technology segments as large contracts are ramped and effects of savings initiatives are realized • Technology segment Gross Margin of 59% is the highest achieved in the last five quarters Note: Unless otherwise noted, any references within this presentation relate to continuing operations ($ in thousands, unaudited) |
| ©XBP EUROPE 2024 Appendix 10 |
| ©XBP EUROPE 2024 Our presence in EMEA 11 XBP Europe Solutions reach majority of populations in key markets. The Company processed several hundred million payment transactions in 2023. United Kingdom (population 67 million) ~100% of all check payments archived or processed Sweden (population 10 million) ~7 million individuals and 500,000+ companies use bank giro processed by XBP Ireland (population 5 million) process~95% of all payments by check Norway (population 5 million) process 100% of bank giro Germany (population 83 million) technology is used to support 50+ million online banking customers Pan-European Presence 15 Countries1 32 Locations 1. Physical locations with XBP employee presence 11 |
| ©XBP EUROPE 2024 Client and industry diversification 12 $167M FY2023 Revenue 40% Western Europe 31% Central Europe 18% UK & Ireland 11% Northern Europe Bills and Payments 73% 22% Top 2 -10 13% Top 11 - 20 22% Top 21 - 50 40% All Other 3% - Top client Diversified client base Services & Products Geography Technology 27% 12 |
| ©XBP EUROPE 2024 Adjusted EBITDA Reconciliation From Continuing Operations 13 ($ in thousands) 13 (1) Adjustment represents costs associated with restructuring, including employee severance and vendor and lease termination costs. (2) Represents litigation settlement and associated expenses incurred in connection with the Company subsidiary litigation. (3) Primarily represents management fee incurred in exchange for services, which included provision of legal, human resources, corporate finance, and marketing support. The management services agreement was terminated in connection with the Business Combination and was replaced by the related party service fee pursuant to the Services Agreement which reduced the fee and modified the services provided. (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 the United States ("GAAP"). These non-GAAP financial measures should not be considered as alternatives to operating or net income or cash flows from operating activities, in each case determined in accordance with GAAP. These non-GAAP financial measures are among the indicators used by management to measure the performance of the Company's operations, and also among the criteria upon which performance-based compensation may be based. Adjusted EBITDA also is used by our lenders for debt covenant compliance purposes. 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. |
| ©XBP EUROPE 2024 Non-GAAP Reconciliation 14 |
| ©XBP EUROPE 2024 Footnotes to Non-GAAP Reconciliation 15 1) Constant currency excludes the impact of foreign currency fluctuations and is computed by applying the average exchange rates for the quarter ended September 30, 2023, to the revenues during the corresponding period in 2024. 1) Adjustment represents costs associated with restructuring, including employee severance and vendor and lease termination costs. 1) Represents the litigation settlement and associated expenses incurred in connection with the Company subsidiary litigation. 1) Represents the non-cash charges related to restricted stock units and options. 1) Represents transaction costs incurred as part of the Business Combination. 1) Supplemental financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”). These non-GAAP financial measures should not be considered as alternatives to operating or net income or cash flows from operating activities, in each case determined in accordance with GAAP. These non-GAAP financial measures are among the indicators used by management to measure the performance of the Company’s operations, and also among the criteria upon which performance-based compensation may be based. Adjusted EBITDA also is used by our lenders for debt covenant compliance purposes. 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. 1) Adjustment represents costs associated with restructuring related to employee severance. |
| ©XBP EUROPE 2024 Defined Terms in Presentation and Notes 16 • ACV: Annual contract value in dollars • Gross Margin: Total revenue less cost of revenue as a percentage of total revenue • Capital Expenditures: Funds used to buy, maintain, or improve physical or fixed assets used in the Company’s operations • New Business Win Rate: ACV closed in the period versus prior period • SG&A: Selling, General, and Administrative Expense • F&A: Finance & Accounting • IPA: Intelligent Process Automation • WFA: Work from Anywhere • SaaS: Software as a Service • BPO: Business Process Outsourcing |
