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XE

XBP Europe Holdings, Inc. (CFFE)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 revenue was $40.4M, down 5.7% year-over-year; operating income turned positive at $0.1M while net loss narrowed to $2.2M, including $0.8M FX losses .
  • Gross margin expanded to 24.6%, up 250 bps YoY and 270 bps sequentially, driven by mix shift toward the higher-margin Technology segment (28.4% of revenue vs. 21.6% in Q1 2023 and 27.1% in Q4 2023) .
  • Bills & Payments revenue fell 14.0% YoY on project completions, lower volumes, and contract ends; Technology revenue rose 24.3% YoY on higher license/implementation activity despite softer hardware .
  • XBP won a multi-year His Majesty’s Passport Office (HMPO) UK project with ~$40M TCV, expected to go live by summer 2024—an important near-term catalyst for backlog conversion and margin leverage .
  • No S&P Global consensus estimates were available for CFFE/XBP; comparisons to Wall Street estimates are therefore unavailable (S&P Global data unavailable).

What Went Well and What Went Wrong

  • What Went Well

    • Gross margin improved to 24.6% (+250 bps YoY; +270 bps sequential), benefiting from a rising Technology mix and cost optimization (reduced leases/facilities) .
    • Strong sales execution: new HMPO program (~$40M TCV) and opened new sales offices in Frankfurt and Paris to support growth; CEO: “Our focus on sales execution is paying off…” .
    • Operating income reached $0.1M vs. a $1.0M loss in Q1 2023, aided by higher Technology margins and SG&A optimization .

  • What Went Wrong

    • Consolidated revenue declined 5.7% YoY to $40.4M due to Q1 2023 one-time license sale, project completions, lower volumes, and contract ends .
    • Bills & Payments segment revenue fell 14.0% YoY; segment gross margin dipped to 12.3% (vs. 14.4% last year) amid client delays and volume softness .
    • Adjusted EBITDA decreased 23.4% YoY to $1.8M and FX losses increased to $0.8M; management noted FX headwinds despite improved operating profit .

Financial Results

MetricQ1 2023Q1 2024
Revenue ($USD Millions)$42.8 $40.3
Gross Margin %22.1% 24.6%
Operating Income ($USD Millions)$(1.0) $0.1
Net Loss ($USD Millions)$(2.5) $(2.2)
Diluted EPS ($USD)$(0.11) $(0.07)
Adjusted EBITDA ($USD Millions)$2.39 $1.83

Segment breakdown (Revenue and Gross Profit):

SegmentQ1 2023 Revenue ($USD Millions)Q1 2023 Segment Gross Profit ($USD Millions)Q1 2024 Revenue ($USD Millions)Q1 2024 Segment Gross Profit ($USD Millions)
Bills & Payments$33.6 $4.84 $28.9 $3.56
Technology$9.23 $4.62 $11.48 $6.38
Total$42.80 $9.46 $40.35 $9.94

KPIs:

KPIQ1 2023Q1 2024
Technology Revenue Mix (%)21.6% 28.4%
Capital Expenditures ($USD Millions)$0.62 $0.39
FX Losses ($USD Millions)$0.28 $0.83
Employees (approx.)~1,500 ~1,500

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Capital ExpendituresNext 12 monthsN/A~$1.5–$2.5M total capex + capitalizable contract setup costsNew/maintained outlook disclosed
HMPO Project Timing2024N/AGo-live expected by summer 2024; TCV ≈ $40MNew project timing disclosed
Liquidity FacilitiesOngoingFactoring/secured borrowing facility available€15M non-recourse factoring facility funding limit; UK revolvers extended to Aug 31, 2025Maintained/updated facilities

Earnings Call Themes & Trends

Note: No earnings call transcript for Q1 2024 was found in filings; themes drawn from press releases and 10-Q disclosures [ListDocuments earnings-call-transcript returned none].

TopicPrevious Mentions (Q4 2023 and Q3 2023)Current Period (Q1 2024)Trend
AI/Technology initiativesFY 2023 release references expansion into Reaktr.ai and XBP Omnidirect to drive digital transformation Technology revenue up 24.3% YoY; Technology GM 55.6% contributing to consolidated margin expansion Strengthening tech mix and margin profile
Sales execution/backlogFY 2023: ~$48M TCV win and ~$58M ACV closed; investment in sales functions HMPO ~$40M TCV win; offices opened in Frankfurt/Paris; improving win rate trajectory despite quarter volatility Backlog conversion ramping near term
Macro/FXFY 2023 FX losses of $0.59M Q1 2024 FX losses of $0.83M impacting net results FX headwinds elevated
Regional trendsN/ARevenue by geography: France $14.23M, Germany $12.44M, UK $7.56M, Sweden $3.98M, Other $2.09M France/DE/UK remain key revenue bases
Regulatory/legalN/A disclosed in prior quarter SPAC periodOngoing France labor litigation; $2.2M accrued; decision expected end of June 2024 Legal risk managed, accrual maintained
Internal controlsN/A disclosed in prior SPAC contextMaterial weaknesses noted; remediation via enhanced controls, staffing, and finance COE Remediation in progress

Management Commentary

  • CEO: “Our focus on sales execution is paying off, as evidenced by our recently announced transformation project win for HMPO in the UK…we continue to see solid expansion of our gross margins…well-positioned to execute on our growth objectives” .
  • Strategy: Pan-European integrator for bills & payments with >2,000 clients; cloud-based delivery and flexible licensing models across EMEA; dual-segment structure (Bills & Payments and Technology) to capture digitization and efficiency gains .
  • Cost actions: SG&A optimization (facility/lease costs) supported operating improvement; capex restrained in Q1 with clear 12‑month allocation plans .

Q&A Highlights

  • No Q1 2024 earnings call transcript was available in the filings or document index; therefore, Q&A themes cannot be extracted from a call transcript [ListDocuments earnings-call-transcript returned none].
  • Clarifications from filings: HMPO timing (summer 2024) and TCV (~$40M) ; liquidity capacity via €15M factoring and extended UK facilities ; capex outlook $1.5–$2.5M over 12 months .

Estimates Context

  • S&P Global consensus estimates for EPS/Revenue/Target Price/Recommendation were unavailable due to missing SPGI mapping for ticker; therefore, no comparison versus Wall Street consensus is provided (Values retrieved from S&P Global unavailable).

Key Takeaways for Investors

  • Mix shift is the key margin lever: Technology at 28.4% of revenue with 55.6% GM supports consolidated margin expansion (24.6%) despite top-line declines .
  • Near-term catalysts: HMPO ~$40M TCV project go-live by summer 2024 should aid backlog conversion, utilization, and Bills & Payments leverage .
  • Operating discipline: SG&A optimization and restrained capex ($0.39M in Q1; $1.5–$2.5M plan over 12 months) position XBP to scale efficiently .
  • FX and legacy factors: Elevated FX losses ($0.83M) and ongoing France litigation accrual ($2.2M) remain watch items for net income volatility and legal costs .
  • Liquidity improving: €15M factoring capacity and UK facilities extended to Aug 31, 2025 provide flexibility to fund growth and ramp projects .
  • Sequential context: Q1 margin gains versus Q4 2023 (GM +270 bps) suggest potential further improvement as large programs ramp and tech mix rises .
  • Execution focus: Expanded sales footprint (Frankfurt, Paris) underscores push to win/ramp public sector and enterprise digitization projects across EMEA .