Overview

The Company is a pan-European integrator of bills, payments and related solutions and services seeking to enable digital transformation of its clients. The Company serves over 2,000 clients of varying sizes and across multiple industries and geographies. The Company’s digital foundation was developed to deliver fully outsourced solutions to address current and evolving client needs. The Company hosts its products both on client premises and as a SaaS offering in the cloud.

History

XBP Europe, Inc. was incorporated in Delaware in 2022 to facilitate the Business Combination. In 2023, it became a wholly owned subsidiary of the Company, and the Company’s shares started trading on the Nasdaq Stock Market. The Company’s subsidiaries and predecessor entities have been serving clients in the European marketplace for over 45 years.

Key Factors Affecting Company’s Business

The Company’s performance and future success depend on several factors that present significant opportunities but also pose risks and challenges, as discussed in the 2023 Form 10-K.

Our Segments

The Company has two reportable segments:

1. Bills & Payments: Focuses on optimizing bill and payment processing for businesses, offering automation of AP and AR processes and integration of buyers and suppliers across Europe.

2. Technology: Focuses on sales of recurring and perpetual software licenses, hardware solutions, and professional services.

Key Performance Indicators

The Company uses the following key performance indicators to assess its performance:

• Revenue by segment
• Gross profit by segment
• Adjusted EBITDA (a non-GAAP financial measure)

Non-GAAP Financial Measures

To supplement its GAAP financial data, the Company uses non-GAAP financial measures, including EBITDA and Adjusted EBITDA. These measures exclude certain expenses that are required under GAAP, as they are non-recurring or non-cash expenses determined based on the Company’s underlying performance.

Key Components of Revenue and Expenses

The Company earns revenue from transactions processed using its products and services, as well as from the sale of recurring and perpetual software licenses, maintenance, and professional services. Key expenses include cost of revenue, selling, general and administrative expenses, related party expenses, depreciation and amortization, interest expense, and income taxes.

Results of Operations

For the three and six months ended June 30, 2024 compared to the same periods in 2023:

• Revenue declined by 14.8% and 10.2%, respectively, primarily due to completion of projects, lower volumes, and client contract ends, partially offset by newly won business.
• Cost of revenue decreased by 3.9% and 6.4%, respectively, due to the corresponding decline in revenues.
• Selling, general and administrative expenses decreased by 15.6% and 10.5%, respectively, due to cost optimization initiatives.
• Net loss increased to $4.7 million and $6.9 million, respectively, primarily due to the revenue decline and higher interest expense.

Liquidity and Capital Resources

As of June 30, 2024, the Company had $15.6 million in cash and cash equivalents. The Company expects to spend $1.5 to $2.5 million on capital expenditures and capitalized contract costs over the next twelve months.

The Company has utilized COVID-19 relief measures in various European jurisdictions, including permitted deferrals of certain payroll, social security, and value-added taxes. The remaining balance of these deferred taxes is expected to be paid by April 2027 or later.

The Company believes its current cash, cash equivalents, and cash flows from financing activities are sufficient to meet its working capital and capital expenditure requirements for at least the next twelve months. However, the Company may need to raise additional capital if existing resources are insufficient to fund future activities.