XBP Europe (XBP) - 2025 Q2 - Quarterly Report

Item 1. Financial Statements This section presents the company's condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, stockholders' deficit, and cash flows, along with detailed explanatory notes Condensed Consolidated Balance Sheets The company's total assets increased by approximately $17.1 million, or 19.5%, from December 31, 2024, to June 30, 2025, primarily driven by increases in accounts receivable and property, plant and equipment | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total Assets | $105,183 | $88,045 | $17,138 | 19.5% | | Total Liabilities | $133,462 | $109,391 | $24,071 | 22.0% | | Total Stockholders' Deficit | $(28,279) | $(21,346) | $(6,933) | 32.5% | | Cash and Cash Equivalents | $6,121 | $12,099 | $(5,978) | -49.4% | | Accounts Receivable, net | $33,610 | $19,810 | $13,800 | 69.7% | | Property, Plant and Equipment, net | $13,530 | $11,272 | $2,258 | 20.0% | | Total Current Liabilities | $89,148 | $68,765 | $20,383 | 29.6% | Condensed Consolidated Statements of Operations For the three months ended June 30, 2025, net revenue increased by 17.6% year-over-year, but net loss widened by 45.9% due to higher selling, general and administrative expenses and related party expenses Condensed Consolidated Statements of Operations (YoY Comparison) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Revenue, net | $39,431 | $33,534 | 17.6% | $76,962 | $71,581 | 7.5% | | Cost of revenue | $27,787 | $27,007 | 2.9% | $54,096 | $55,069 | -1.8% | | Operating loss | $(1,611) | $(1,354) | 19.0% | $(3,398) | $(23) | 14673.9% | | Net loss | $(6,889) | $(4,723) | 45.9% | $(11,239) | $(6,931) | 62.1% | | Basic and diluted EPS | $(0.19) | $(0.16) | 18.8% | $(0.34) | $(0.23) | 47.8% | Condensed Consolidated Statements of Comprehensive Loss The company reported a significant increase in total comprehensive loss for both the three and six months ended June 30, 2025, primarily driven by the net loss and substantial negative foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Loss (YoY Comparison) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Net loss | $(6,889) | $(4,723) | 45.9% | $(11,239) | $(6,931) | 62.1% | | Foreign currency translation adjustments | $(1,432) | $144 | -1094.4% | $(2,008) | $422 | -575.4% | | Unrealized pension actuarial (loss) gain, net of tax | $6 | $247 | -97.6% | $1 | $537 | -99.8% | | Total other comprehensive loss, net of tax | $(8,315) | $(4,332) | 91.9% | $(13,246) | $(5,972) | 121.8% | Condensed Consolidated Statements of Stockholders' Deficit The company's total stockholders' deficit increased significantly from $(21.3) million at December 31, 2024, to $(28.3) million at June 30, 2025, primarily due to a net loss of $(11.2) million and negative foreign currency translation adjustments Stockholders' Deficit Changes (in thousands) | Metric | December 31, 2024 | June 30, 2025 | Change | | :--------------------------------- | :---------------- | :------------ | :----- | | Common Stock (Amount) | $30 | $4 | $(26) | | Additional Paid in Capital | $1,611 | $7,950 | $6,339 | | Accumulated Deficit | $(23,705) | $(34,944) | $(11,239) | | Foreign Currency Translation Adjustment | $474 | $(1,534) | $(2,008) | | Unrealized Pension Actuarial Gains, net of tax | $244 | $245 | $1 | | Total Stockholders' Deficit | $(21,346) | $(28,279) | $(6,933) | - Common stock shares outstanding increased from 30,166,102 at December 31, 2024, to 35,915,548 at June 30, 2025, driven by stock-based compensation and acquisition of membership interest[20] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities decreased by $1.5 million, while net cash used in investing activities increased by $1.4 million Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | | :----------------------------------- | :--------------------------- | :--------------------------- | :----- | | Net cash used in operating activities | $(4,008) | $(5,540) | $1,532 | | Net cash used in investing activities | $(2,136) | $(726) | $(1,410) | | Net cash provided by (used in) financing activities | $(371) | $15,618 | $(15,989) | | Effect of exchange rates on cash and cash equivalents | $614 | $(695) | $1,309 | | Net increase (decrease) in cash and cash equivalents | $(5,901) | $8,657 | $(14,558) | | Cash and equivalents, end of period | $6,205 | $15,562 | $(9,357) | Notes to the Condensed Consolidated Financial Statements This section provides detailed explanatory notes to the condensed consolidated financial statements, covering significant accounting policies, debt, income taxes, and other financial disclosures 1. General XBP Global Holdings, Inc. (formerly XBP Europe Holdings, Inc.) is a pan-European integrator of bills, payments, and related solutions, focusing on digital transformation for over 1,000 clients across EMEA - XBP Global Holdings, Inc. (formerly XBP Europe Holdings, Inc.) is a pan-European integrator of bills, payments, and related solutions and services, aiming to enable digital transformation for businesses[23] - The company provides business process management solutions with proprietary software and domain expertise, serving over 1,000 clients across Europe, the Middle East, and Africa (EMEA) in industries like banking, healthcare, insurance, and public sector[24] - The financial information in this report does not include the operations of BPA, which was acquired on July 15, 2025 (conditions satisfied July 29, 2025), and therefore is not indicative of the combined company's future results[7] 2. Reverse Recapitalization The business combination on November 29, 2023, was accounted for as a Reverse Recapitalization, with XBP Europe deemed the accounting acquirer - The Business Combination on November 29, 2023, was accounted for as a Reverse Recapitalization, with XBP Europe deemed the accounting acquirer and CF VIII as the accounting acquiree[30] - The Company received net proceeds of $5.2 million from the Business Combination[32] - Transaction costs related to the Merger for the year ended December 31, 2023, totaled $3.3 million, with $0.3 million recorded to additional paid-in capital and $3.0 million expensed[33] 3. Discontinued Operations Certain on-demand printing operations were classified as discontinued operations in Q3 2024, representing a significant strategic shift - Certain on-demand printing operations were classified as discontinued operations in the third quarter of fiscal year 2024, due to meeting criteria for held-for-sale and representing a significant strategic shift[29][37] Financial Results of Discontinued Operations (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue, net | $826 | $2,498 | $2,485 | $4,735 | | Operating loss | $(3,546) | $(1,058) | $(4,386) | $(2,318) | | Net loss from discontinued operations, net of income taxes | $(3,443) | $(1,171) | $(3,939) | $(2,521) | Assets and Liabilities Held for Sale (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total current assets held for sale | $1,236 | $1,378 | | Total current liabilities held for sale | $4,161 | $2,443 | 4. New Accounting Pronouncements The company is evaluating the impact of recently issued ASUs, including ASU No. 2023-09 (Income Taxes), ASU 2024-04 (Debt-Debt with Conversions), and ASC 2024-03 (Income Statement-Expense Disaggregation), on its consolidated financial statements - The FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, effective for fiscal years beginning after December 15, 2024, requiring enhanced tabular effective tax rate reconciliation and disaggregation of income taxes paid[42] - ASU 2024-04, Debt-Debt with Conversions and Other Option (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, was issued in November 2024, effective for annual reporting periods beginning after December 15, 2025, clarifying accounting for induced conversions of convertible debt[43] - ASC 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, issued in November 2024, requires more detailed expense information, effective for fiscal years beginning after December 15, 2026[44] 5. Summary of Significant Accounting Policies This section supplements the 2024 Form 10-K by detailing policies for stock-based compensation, revenue recognition (including disaggregation by geography and contract balances), and net loss per share calculation - Stock-based compensation is accounted for at fair value on the grant date and recognized as expense on a straight-line basis over the vesting period[46] - Revenue is recognized in accordance with ASC 606, primarily from business and transaction processing services, recurring software licenses, and professional services, with variable consideration estimated and allocated to performance obligations[47][48][60] Revenue Disaggregation by Geographic Region (in thousands) | Geographic Region | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | France | $12,106 | $12,773 | $24,831 | $27,001 | | Germany | $10,379 | $8,514 | $21,001 | $18,807 | | United Kingdom | $11,351 | $7,182 | $20,057 | $14,738 | | Sweden | $3,137 | $3,105 | $6,598 | $7,084 | | Other | $2,458 | $1,960 | $4,475 | $3,951 | | Total Revenue, net | $39,431 | $33,534 | $76,962 | $71,581 | Contract Balances (in thousands) | Contract Balance | June 30, 2025 | December 31, 2024 | | :----------------- | :------------ | :---------------- | | Accounts receivable, net | $33,610 | $19,810 | | Deferred revenues | $6,565 | $6,870 | | Customer deposits | $148 | $277 | - Due to net losses, the company did not include the effect of 6,634,980 warrants and 1,052,386 restricted stock units and options in the calculation of diluted loss per share for the three and six months ended June 30, 2025 and 2024, as their effects were anti-dilutive[65] 6. Inventories The company's net inventories increased slightly to $4.0 million as of June 30, 2025, from $3.8 million at December 31, 2024, with a consistent allowance for obsolescence Inventories, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Finished goods | $5,860 | $5,585 | | Allowance for obsolescence | $(1,818) | $(1,762) | | Total inventories, net | $4,042 | $3,823 | 7. Accounts Receivable Accounts receivable, net, significantly increased to $33.6 million at June 30, 2025, from $19.8 million at December 31, 2024, driven by higher billed and unbilled receivables Accounts Receivable, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Billed receivables | $26,511 | $14,554 | | Unbilled receivables | $8,035 | $6,454 | | Less: Allowance for credit losses | $(936) | $(1,198) | | Total accounts receivable, net | $33,610 | $19,810 | Changes in Allowance for Expected Credit Losses (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :------------------------------------------------ | :------------ | :------------ | | Balance at January 1, of the allowance for expected credit losses | $1,198 | $1,183 | | Change in the provision for expected credit losses for the period | $(262) | $184 | | Balance at June 30, of the allowance for expected credit losses | $936 | $1,367 | 8. Property, Plant and Equipment, Net Net property, plant, and equipment increased to $13.5 million at June 30, 2025, from $11.3 million at December 31, 2024, primarily due to additions in computer equipment and software, and machinery and equipment Property, Plant and Equipment, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Buildings and improvements | $9,758 | $8,770 | | Machinery and equipment | $8,780 | $6,935 | | Computer equipment and software | $29,465 | $25,663 | | Total property, plant and equipment, net | $13,530 | $11,272 | - Depreciation expense was $0.5 million for Q2 2025 (vs. $0.6 million for Q2 2024) and $1.0 million for H1 2025 (vs. $1.2 million for H1 2024)[70] 9. Intangible Assets and Goodwill Net intangible assets increased to $1.3 million at June 30, 2025, from $1.1 million at December 31, 2024, primarily due to internally developed software Intangible Assets, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Customer relationships | $608 | $719 | | Internally developed software | $662 | $402 | | Total intangibles, net | $1,270 | $1,121 | - Aggregate amortization expense for intangibles was $0.1 million for Q2 2025 (vs. $0.2 million for Q2 2024) and $0.3 million for H1 2025 (vs. $0.4 million for H1 2024)[72] Goodwill by Reporting Segment (in thousands) | Segment | January 1, 2025 | Currency Translation Adjustments | June 30, 2025 | | :---------------- | :-------------- | :------------------------------- | :------------ | | Bills and Payments | $9,499 | $1,198 | $10,697 | | Technology | $12,167 | $1,497 | $13,664 | | Total | $21,666 | $2,695 | $24,361 | 10. Debt The company utilizes a non-recourse factoring program for accounts receivable and has a 2024 Facilities Agreement with HSBC, comprising Term Loan A, Term Loan B, and a Revolving Credit Facility - The company uses an Amended Factoring Agreement, a non-recourse factoring program, treating it as an off-balance sheet arrangement[76][77] - Outstanding factored accounts receivable totaled approximately $7.5 million as of June 30, 2025[79] - The 2024 Facilities Agreement with HSBC includes a £3.0 million Term Loan A, a €10.5 million Term Loan B, and a £12.0 million Revolving Credit Facility, maturing in June 2028 and June 2027, respectively[80] Debt Outstanding (in thousands) | Debt Instrument | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | 2024 Term Loan A Facility | $3,322 | $3,198 | | 2024 Term Loan B Facility | $9,957 | $9,276 | | 2024 Revolving Credit Facility | $16,193 | $14,218 | | Revolvers | $2,876 | $2,233 | | Total debt | $32,348 | $28,924 | | Less: Current portion of long-term debt | $6,755 | $4,958 | | Long-term debt, net of current maturities | $25,593 | $23,966 | - As of June 30, 2025, the XBP Group was in compliance with all affirmative and negative covenants under the 2024 Facilities Agreement[92] 11. Income Taxes The company recorded income tax expense of $0.5 million for the three months and $1.3 million for the six months ended June 30, 2025 Income Tax Expense and ETR (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Income tax expense | $514 | $542 | $1,276 | $1,002 | | ETR from continuing operations | (17.5)% | (18.0)% | (21.2)% | (29.4)% | - The liability for unrecognized tax benefits increased by $267 thousand during the six months ended June 30, 2025, primarily due to accrued interest and foreign currency remeasurements[98] 12. Employee Benefit Plans The company maintains several defined benefit pension plans in the U.K., Germany, and Norway, with no new employees registered under these plans - The company provides pension benefits through plans in the U.K., Germany, and Norway, with specific eligibility criteria and measurement dates, and no new employees are registered under these plans[102][103][104][105] Net Periodic Benefit Cost (in thousands) | Component | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Service cost | $9 | $9 | $17 | $18 | | Interest cost | $836 | $739 | $1,623 | $1,483 | | Expected return on plan assets | $(856) | $(726) | $(1,663) | $(1,455) | | Amortization of net loss | $463 | $305 | $899 | $612 | | Net periodic benefit cost | $452 | $327 | $876 | $658 | - Employer contributions to pension plans were $0.2 million for the three months and $0.9 million for the six months ended June 30, 2025[108] 13. Commitments and Contingencies The company is involved in ongoing litigation with former employees in France, with an appeal pending for 15 remaining claimants - A subsidiary is involved in litigation with 71 former employees in France regarding dismissals from site closures in 2020[109][110] - The company has appealed a court decision and is in settlement negotiations with 15 remaining claimants[112][114] - The company accrued $0.8 million in accrued liabilities as of June 30, 2025 (vs. $1.0 million at December 31, 2024), based on the estimated range of possible losses for the litigation[115] 14. Fair Value Measurement The fair value of most financial instruments approximates their carrying amount due to short maturities - The fair value of Private Warrants liability was $9 thousand as of June 30, 2025 (vs. $7 thousand at December 31, 2024), classified under Level 3 fair value measurement[118][120] - The valuation of Private Warrants uses the Black-Scholes option pricing model, with significant unobservable inputs including exercise price, common stock fair value, risk-free interest rate, expected term, volatility, and dividend yield[118][119] 15. Stock-Based Compensation The XBP Europe 2024 Stock Incentive Plan authorized up to 5,520,270 shares for equity awards - The XBP Europe 2024 Stock Incentive Plan, approved on June 13, 2024, authorizes up to 5,520,270 shares of common stock for equity-based awards[122] - During the six months ended June 30, 2025, 1,967,449 RSUs and 30,951 stock options were granted[123] - Accelerated vesting occurred for 3,873,183 RSUs and 103,951 stock options, resulting in $0.4 million compensation cost for Q2 2025 and $3.8 million for Q1 2025[124] Restricted Stock Unit Activity (Six Months Ended June 30, 2025) | Metric | Number of Units | Average Grant Date Fair Value | | :-------------------------------- | :-------------- | :---------------------------- | | Outstanding Balance as of December 31, 2024 | 3,325,329 | $1.24 | | Shares vested | (4,069,446) | $1.27 | | Addition in the quarter | 1,967,449 | $1.33 | | Outstanding Balance as of June 30, 2025 | 1,052,386 | $1.29 | - As of June 30, 2025, there was $0.9 million of total unrecognized compensation expense related to non-vested restricted stock unit awards[128] 16. Warrants As of June 30, 2025, the company had 6,634,980 common stock warrants outstanding, including Public Warrants (equity-classified) and Private Placement/Forward Purchase Warrants (liability-classified) Outstanding Common Stock Warrants (June 30, 2025) | Warrant Type | Warrants | Exercise Price | | :----------------------- | :---------- | :------------- | | Private Placement Warrants | 135,000 | $11.50 | | Forward Purchase Warrants | 250,000 | $11.50 | | Public Warrants | 6,249,980 | $11.50 | | Total | 6,634,980 | | - Public Warrants are classified as equity and are redeemable by the company if the common stock price equals or exceeds $18.00 for 20 trading days within a 30-trading day period[130][131][132] - Private Placement and Forward Purchase Warrants are classified as a liability, meet the definition of a derivative, and are not redeemable by the company as long as held by Cantor or Permitted Transferees[133] 17. Stockholders' Deficit As of June 30, 2025, the company had 35,915,548 shares of common stock issued and outstanding, an increase from 30,166,102 shares at December 31, 2024 - As of June 30, 2025, there were 35,915,548 shares of common stock issued and outstanding, compared to 30,166,102 shares at December 31, 2024[135] - The company is authorized to issue 200,000,000 shares of common stock and 10,000,000 shares of preferred stock, with no preferred stock issued or outstanding[134][135] 18. Restructuring The company approved a restructuring plan in Q4 2023 to realign its business and workforce - A restructuring plan was approved in Q4 2023 to realign the company's business and workforce[137] Restructuring Liability (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Balance at beginning of the period | $1,685 | $5,267 | | Restructuring charges | $449 | $1,051 | | Payment of benefits | $(1,095) | $(4,634) | | Balance at the end of the period | $1,038 | $1,685 | 19. Related Parties Related party expenses significantly increased to $2.4 million for the three months and $4.0 million for the six months ended June 30, 2025, primarily due to new service agreements with HOV Services Ltd. and Nventr, LLC Related Party Expense (in thousands) | Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Related party shared services (ETI affiliates) | $505 | $839 | $1,353 | $1,583 | | Related party service fee (ETI affiliates) | $290 | $340 | $713 | $522 | | Related party service fee (HOVS limited) | $1,364 | $0 | $1,523 | $0 | | Related party service fee (NVENTR AI) | $258 | $0 | $390 | $0 | | Total related party expense | $2,417 | $1,179 | $3,979 | $2,105 | - New related party service agreements were entered with Nventr, LLC (AI analytics solutions) and HOV Services Ltd. (BPO, outsourcing, management, and financial transaction processing solutions) in February 2025, contributing to increased related party expenses[148][149][151] Related Party Payables and Notes Payable (in thousands) | Related Party | June 30, 2025 (Payables) | June 30, 2025 (Notes Payable) | December 31, 2024 (Payables) | December 31, 2024 (Notes Payable) | | :-------------------- | :----------------------- | :---------------------------- | :--------------------------- | :-------------------------------- | | ETI affiliates | $5,247 | $1,640 | $5,443 | $1,451 | | Nventr, LLC | $616 | $0 | $0 | $0 | | HOV Services Limited | $1,725 | $0 | $0 | $0 | | Total | $7,588 | $1,640 | $5,443 | $1,451 | - On March 24, 2025, the company acquired membership interests in GP2 Holdings (holding Exela 2026 Notes) from ETI for $2.3 million, paid by issuing 1,680,000 shares of XBP common stock[153] 20. Segment Information The company operates in two segments: Bills and Payments, and Technology - The company's two operating segments are Bills and Payments (optimizing bill and payment processing, digital transformation) and Technology (sales of recurring software licenses, maintenance, hardware, and professional services)[154][155][156] Segment Performance (Three Months Ended June 30, 2025, in thousands) | Metric | Bills & Payments | Technology | Total | | :-------------------- | :--------------- | :--------- | :---- | | Revenue, net | $28,764 | $10,851 | $39,615 | | Cost of revenue | $22,390 | $5,405 | $27,795 | | Segment profit | $6,374 | $5,446 | $11,820 | Segment Performance (Three Months Ended June 30, 2024, in thousands) | Metric | Bills & Payments | Technology | Total | | :-------------------- | :--------------- | :--------- | :---- | | Revenue, net | $24,808 | $8,807 | $33,615 | | Cost of revenue | $22,609 | $4,408 | $27,017 | | Segment profit | $2,200 | $4,399 | $6,599 | 21. Subsequent Events Post-period, the company completed the acquisition of Exela Technologies BPA, LLC on July 29, 2025, for $1.00, following BPA's emergence from Chapter 11 bankruptcy - On July 29, 2025, the company completed the acquisition of Exela Technologies BPA, LLC (BPA) for $1.00, after BPA emerged from Chapter 11 bankruptcy[163][166] - In connection with the BPA acquisition, the company's authorized common stock increased to 400,000,000 shares and preferred stock to 20,000,000 shares[166] - It issued 81,799,821 shares of common stock and new warrants to purchase 6,632,418 shares[166] - New exit financing arrangements were entered into, including an Indenture for $183 million of exit notes, a $40 million Gates Exit Facility Agreement, and a $150 million revolving credit facility (ABL Credit Agreement)[166][167][168] - The company adopted a Shareholder Rights Agreement (poison pill) on July 29, 2025, granting one right per share, exercisable if any shareholder acquires 30% or more of common stock, allowing other holders to purchase additional shares at a discount[172] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, and key factors influencing its business performance Overview XBP Global Holdings, Inc. is a pan-European integrator of bills, payments, and related solutions, serving over 2,000 clients across various industries - The company is a pan-European integrator of bills, payments, and related solutions and services, aiming to enable digital transformation for over 2,000 clients across multiple industries and geographies[179][180] - Primary revenue sources include transactions processed by its products (Bills & Payments segment) and sales of recurring software licenses, professional services, and hardware solutions (Technology segment)[182] - The financial results presented in this section do not reflect the acquisition of Exela Technologies BPA, LLC (BPA), which was consummated on July 29, 2025, after BPA emerged from Chapter 11 bankruptcy[175][185][189] - Certain on-demand printing operations were classified as discontinued operations in Q3 2024[190] Key Factors Affecting Company's Business The company's performance and future success are influenced by various factors, including political and economic conditions, cybersecurity risks, competition, technological developments, and regulatory actions - Key factors affecting the company's business include political and economic conditions, cyber incidents, competition, technological development, terrorism/natural disasters, legislative/regulatory actions, operational failure, and intellectual property infringement[177] - These factors present both significant opportunities and pose risks and challenges, as discussed in the company's 2024 Form 10-K under 'Risk Factors'[191] Our Segments The company operates through two reportable segments: Bills & Payments, which focuses on optimizing bill and payment processing and digital transformation, and Technology, which concentrates on sales of software licenses, maintenance, hardware, and professional services - The Bills & Payments segment focuses on optimizing bill and payment processing, offering automation of Accounts Payable and Accounts Receivable processes, and includes digital transformation revenue[192] - The Technology segment primarily focuses on sales of recurring and perpetual software licenses, related maintenance, hardware solutions, and professional services[193] Key Performance Indicators Management uses revenue by segment, gross profit by segment, and Adjusted EBITDA (a non-GAAP measure) to assess performance, identify areas for improvement, and make strategic decisions - Key performance indicators used by management include revenue by segment, gross profit by segment, and Adjusted EBITDA[195] - Gross Profit is defined as revenue less cost of revenue (exclusive of depreciation and amortization) and is used to assess financial performance at the segment level[196] Non-GAAP Financial Measures The company uses non-GAAP financial measures, EBITDA and Adjusted EBITDA, to evaluate core operating performance and trends - EBITDA is defined as net income (loss) plus taxes, interest expense, and depreciation and amortization[198] - Adjusted EBITDA further adds restructuring and related expenses, non-cash equity compensation, foreign exchange gains or losses, changes in fair value of warrant liability, and non-recurring transaction costs[198] Reconciliation of Adjusted EBITDA from Continuing Operations (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss from continuing operations | $(3,446) | $(3,552) | $(7,301) | $(4,410) | | EBITDA from continuing operations | $(302) | $(752) | $(1,024) | $1,094 | | Adjusted EBITDA from continuing operations | $3,280 | $1,198 | $6,974 | $4,142 | Reconciliation of Adjusted EBITDA from Discontinued Operations (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss from discontinued operations, net of income taxes | $(3,443) | $(1,171) | $(3,938) | $(2,521) | | EBITDA from discontinued operations | $(3,409) | $(1,019) | $(3,859) | $(2,209) | | Adjusted EBITDA from discontinued operations | $(1,825) | $(911) | $(2,634) | $(2,021) | Key Components of Revenue and Expenses This section defines the primary components of the company's revenue and expenses, including revenue from transaction processing and software licenses, cost of revenue, selling, general and administrative expenses, and related party expenses - Revenue is earned from transactions processed by products and services, as well as from recurring/perpetual software licenses, maintenance, and professional services[203][204] - Cost of revenue primarily includes salaries, employee benefits, facility costs, and product costs[205] - Selling, general and administrative expenses consist mainly of administrative personnel salaries, legal/audit expenses, insurance, and operating lease expenses[206] - Related party expenses include shared service costs, service fees, royalties, and management fees from affiliates[207] Results of Operations This section analyzes the company's financial performance for the three and six months ended June 30, 2025, compared to the prior year periods Three months ended June 30, 2025 compared to three months ended June 30, 2024 For the three months ended June 30, 2025, consolidated net revenue increased by 17.9% to $39.6 million, driven by growth in both Bills & Payments (15.9%) and Technology (23.2%) Revenue and Cost of Revenue (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change | % Change | | :--------------------------------- | :--- | :--- | :----- | :------- | | Revenue, net | $39,615 | $33,615 | $6,000 | 17.9% | | Bills and Payments Revenue | $28,764 | $24,808 | $3,956 | 15.9% | | Technology Revenue | $10,851 | $8,807 | $2,044 | 23.2% | | Total cost of revenue | $27,795 | $27,017 | $778 | 2.9% | | Cost of revenue as % of revenue | 70.1% | 80.3% | -10.2% | | Expenses and Other Items (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change | % Change | | :--------------------------------- | :--- | :--- | :----- | :------- | | Selling, general and administrative expenses | $10,407 | $5,998 | $4,409 | 73.5% | | Related party expense | $2,417 | $1,179 | $1,238 | 105.0% | | Depreciation and amortization | $607 | $775 | $(168) | -21.7% | | Interest expense, net | $1,999 | $1,461 | $538 | 36.8% | | Foreign exchange losses (gains), net | $(311) | $596 | $(907) | -152.2% | | Net loss before income taxes | $(2,932) | $(3,010) | $78 | -2.6% | Six months ended June 30, 2025 compared to six months ended June 30, 2024 For the six months ended June 30, 2025, consolidated net revenue increased by 7.8% to $77.3 million Revenue and Cost of Revenue (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change | % Change | | :--------------------------------- | :--- | :--- | :----- | :------- | | Revenue, net | $77,288 | $71,728 | $5,560 | 7.8% | | Bills and Payments Revenue | $55,075 | $51,445 | $3,630 | 7.1% | | Technology Revenue | $22,213 | $20,283 | $1,930 | 9.5% | | Total cost of revenues | $54,113 | $55,097 | $(984) | -1.8% | | Cost of revenue as % of revenue | 70.0% | 76.8% | -6.8% | | Expenses and Other Items (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change | % Change | | :--------------------------------- | :--- | :--- | :----- | :------- | | Selling, general and administrative expenses | $21,360 | $12,966 | $8,394 | 64.7% | | Related party expense | $3,979 | $2,105 | $1,874 | 89.0% | | Depreciation and amortization | $1,234 | $1,583 | $(349) | -22.0% | | Interest expense, net | $3,720 | $2,878 | $842 | 29.3% | | Foreign exchange losses (gains), net | $(382) | $1,349 | $(1,731) | -128.3% | | Net loss before income taxes | $(6,025) | $(3,408) | $(2,617) | 76.8% | Liquidity and Capital Resources This section discusses the company's cash position, debt, capital expenditures, and ability to meet its financial obligations Overview As of June 30, 2025, cash and cash equivalents totaled $6.1 million, a decrease from $12.1 million at December 31, 2024 - Cash and cash equivalents totaled $6.1 million at June 30, 2025, down from $12.1 million at December 31, 2024[249] - Total debt increased by $3.4 million as of June 30, 2025, compared to December 31, 2024, primarily due to foreign currency fluctuations[250] - The company expects to spend approximately $2.0 to $3.0 million on total capital expenditures and capitalizable contracts set-up costs over the next twelve months[250] - Management believes current cash, cash flows from operations, and available borrowings are sufficient to meet working capital and capital expenditure requirements for at least the next twelve months[252] Cash Flows For the six months ended June 30, 2025, net cash used in operating activities decreased by $1.5 million, while net cash used in investing activities increased by $1.4 million Summary of Cash Flows (in thousands) | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | | :----------------------------------- | :--------------------------- | :--------------------------- | :----- | | Net cash used in operating activities | $(4,008) | $(5,540) | $1,532 | | Net cash used in investing activities | $(2,136) | $(726) | $(1,410) | | Net cash provided by (used in) financing activities | $(371) | $15,618 | $(15,989) | | Net increase (decrease) in cash and cash equivalents | $(5,901) | $8,657 | $(14,558) | - The $1.5 million decrease in cash used in operating activities was largely due to higher inflows from accrued expenses and other liabilities and related parties payable, partially offset by higher outflows from accounts receivable[255] - The $16.0 million increase in net cash used in financing activities was primarily due to lower borrowings under the revolving credit facility[258] Indebtedness The company's indebtedness includes a non-recourse factoring program with approximately $7.5 million in outstanding factored accounts receivable and the 2024 Facilities Agreement with HSBC - The company's outstanding factored accounts receivable totaled approximately $7.5 million as of June 30, 2025, under the Amended Factoring Agreement[261] - The 2024 Facilities Agreement with HSBC includes a £3.0 million Term Loan A, a €10.5 million Term Loan B, and a £12.0 million Revolving Credit Facility[262] Outstanding Balances of 2024 Facilities Agreement (in millions) | Facility | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Term Loan A Facility | $3.5 | $3.4 | | Term Loan B Facility | $10.5 | $9.8 | | Revolving Credit Facility | $16.7 | $14.7 | - As of June 30, 2025, the XBP Group was in compliance with all affirmative and negative covenants under the 2024 Facilities Agreement[273] Restructuring Activities The company's management approved a restructuring plan in Q4 2023 to realign business and strategic priorities by rightsizing its workforce in certain regions - A restructuring plan was approved in Q4 2023 to realign the company's business and strategic priorities by rightsizing its workforce in certain regions[275] Potential Future Transactions The company may explore strategic transactions, including joint ventures, business combinations, or asset acquisitions/dispositions, which may require additional funding through debt or equity financing - The company may explore strategic transactions such as joint ventures, business combinations, or acquisitions/dispositions of assets, which may require additional funds[276] - Additional financing may be sought through cash on hand, debt, or equity financing (private placements or underwritten offerings), with no assurance of availability on favorable terms[276] Critical Accounting Estimates The company's critical accounting estimates, which involve subjective judgments and assumptions, remain consistent with those discussed in Part II, Item 7 of its 2024 Form 10-K - The company's critical accounting estimates require subjective or complex estimates and assessments, based on historical experience and reasonable assumptions[277] - There have been no material changes to the critical accounting estimates from the 2024 Form 10-K[279] Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to the company's market risk exposure during the three months ended June 30, 2025, as previously disclosed in its 2024 Form 10-K - There have been no material changes to the company's market risk during the three months ended June 30, 2025[280] - For a discussion of market risk exposure, refer to the 2024 Form 10-K[280] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, concluding they were effective at a reasonable assurance level - Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, concluding they were effective at the reasonable assurance level[281][282] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[283] PART II — OTHER INFORMATION This section provides additional information on legal proceedings, risk factors, equity sales, defaults, mine safety, other disclosures, and exhibits Item 1. Legal Proceedings The company is involved in ongoing litigation with 71 former employees in France regarding dismissals - A subsidiary is involved in litigation with 71 former employees in France regarding dismissals from site closures in 2020[285] - An appeal is pending for 15 remaining claimants, with a hearing scheduled for September 8, 2025[289] - The company accrued $0.8 million in accrued liabilities as of June 30, 2025 (vs. $1.0 million at December 31, 2024), based on the estimate of possible losses for the litigation[291] - Management believes other legal proceedings will not have a material adverse effect on the company's financial position, results of operations, or cash flows[292] Item 1A. Risk Factors The company refers readers to the risk factors described in Part I, Item 1A of its 2024 Form 10-K, noting that additional risks not currently known or deemed immaterial could also materially affect its business - Readers should carefully consider the risk factors described in Part I, Item 1A of the 2024 Form 10-K[293] - Additional risks and uncertainties not currently known or deemed immaterial may also materially and adversely affect the business[293] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, and Issuer Purchases of Equity Securities There were no unregistered sales of equity securities or issuer purchases of equity securities during the reporting period - No unregistered sales of equity securities or issuer purchases of equity securities occurred[294] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred[295] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[296] Item 5. Other Information During the three-month period ended June 30, 2025, none of the company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three-month period ended June 30, 2025[297] Item 6. Exhibits This section lists the exhibits filed with the quarterly report, including certifications from the Principal Executive Officer and Principal Financial Officer, and XBRL taxonomy documents List of Exhibits | Exhibit No. | Description | | :---------- | :---------- | | 31.1* | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 31.2* | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 32.1* | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 32.2* | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 101.INS | XBRL Instance Document | | 104 | Cover Page Interactive Data File | Signatures The report is duly signed on behalf of the registrant by Andrej Jonovic, Chief Executive Officer, and Dejan Avramovic, Chief Financial Officer, on August 14, 2025 - The report was signed by Andrej Jonovic, Chief Executive Officer, and Dejan Avramovic, Chief Financial Officer, on August 14, 2025[302]