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XE

XBP Europe Holdings, Inc. (CFFE)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 revenue fell 14.8% year over year to $36.1 million; gross margin contracted to 18.4% and EPS was -$0.16, reflecting weaker license sales and project completions offset partially by new business in early ramp .
  • Adjusted EBITDA dropped to $0.3 million (0.8% margin) versus $4.0 million in Q2 2023, largely on mix and ramp costs; FX losses were $0.7 million in the quarter .
  • Liquidity improved following a new multi-currency revolving credit facility and term loans with HSBC, adding up to $33 million of incremental capacity; cash and equivalents were $15.6 million at quarter-end .
  • Management highlighted near-term catalysts from the HMPO public sector program launching “in the coming weeks,” positioning Q3/Q4 for revenue ramp; no formal quantitative guidance was issued .

What Went Well and What Went Wrong

What Went Well

  • Strategic financing completed with HSBC, refinancing UK debt and providing up to $33 million of incremental liquidity to fund growth opportunities .
  • Public sector momentum: HMPO multi-year program expected to go live soon; management sees an “encouraging” sales funnel and growth trajectory for the rest of 2024 .
  • Technology segment maintained strong unit economics (49.9% segment gross margin in Q2) and continued to be a higher-margin mix contributor relative to Bills & Payments .

Management quotes

  • “We are encouraged by our sales funnel and ramp-up of large public sector contracts, including HMPO which is expected to launch in the coming weeks… we are optimistic about the rest of 2024.” — CEO Andrej Jonovic .

What Went Wrong

  • Top-line decline: total revenue down 14.8% year over year to $36.1 million, driven by lapping a large one-time license sale in Q2 2023 and project completions/client contract ends .
  • Profitability pressure: gross margin contracted to 18.4% (down 920 bps y/y; down 630 bps q/q), and Adjusted EBITDA fell to $0.3 million as mix shifted and ramp costs increased .
  • FX headwind: foreign exchange losses totaled $0.7 million, contributing to net loss of $4.7 million for the quarter .

Financial Results

Consolidated metrics (comparisons vs prior year and prior quarter)

MetricQ2 2023Q1 2024Q2 2024
Revenue ($USD Millions)$42.4 $40.4 $36.1
Gross Margin %27.6% 24.6% 18.4%
Net Loss ($USD Millions)$(0.6) $(2.2) $(4.7)
Diluted EPS ($USD)$(0.03) $(0.07) $(0.16)

Segment revenue breakdown

SegmentQ2 2023 ($USD Millions)Q2 2024 ($USD Millions)
Bills & Payments$30.198 $27.305
Technology$12.169 $8.807
Total$42.367 $36.112

KPIs and other items

KPIQ2 2024
Adjusted EBITDA ($USD Millions)$0.287
Adjusted EBITDA Margin %0.8%
Capital Expenditures (% of Revenue)0.9%
Cash & Equivalents ($USD Millions)$15.6
FX Losses ($USD Millions)$0.7

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2024N/AN/ANo quantitative guidance disclosed in Q2 press release
Gross Margin %FY 2024N/AN/ANo quantitative guidance disclosed in Q2 press release
Adjusted EBITDAFY 2024N/AN/ANo quantitative guidance disclosed in Q2 press release
Liquidity (Facilities)Multi-yearPrior UK facilitiesNew HSBC facilities with up to $33M incremental liquidityRaised capacity

Earnings Call Themes & Trends

(Company furnished a press release and investor presentation; no call transcript was furnished.)

TopicPrevious Mentions (Q1 2024)Current Period (Q2 2024)Trend
Public sector/HMPOAwarded HMPO multi-year program (~$40M TCV) expected to go live by summer 2024 HMPO “expected to launch in the coming weeks” Execution/ramp underway
Financing/LiquidityLower cash at Q1 end; focus on funding growth HSBC revolving and term facilities completed; up to $33M incremental liquidity Strengthened balance sheet
Mix/TechnologyTechnology reached 28.4% of revenue; margin expansion comment Technology revenue declined y/y vs Q2 2023 on lapping a large license; segment gross margin remained strong Short-term pressure, structurally higher margins
ProfitabilityQ1 gross margin 24.6%; Adjusted EBITDA $1.8M Q2 gross margin 18.4%; Adjusted EBITDA $0.3M as ramp/mix weighed Near-term margin compression

Management Commentary

  • “We are encouraged by our sales funnel and ramp-up of large public sector contracts, including HMPO which is expected to launch in the coming weeks. Combined with our recently announced strategic financing transaction… we are optimistic about the rest of 2024.” — CEO Andrej Jonovic .
  • “Strategic financing transaction… provide up to $33 million of incremental liquidity.” (Press release highlights) .

Q&A Highlights

  • The company’s 8-K furnished a press release and investor presentation; a call transcript was not furnished for Q2 2024 .
  • No additional Q&A clarifications were disclosed beyond the press release and investor materials .

Estimates Context

  • S&P Global/Capital IQ consensus for CFFE/XBP was unavailable via our data connector (no CIQ mapping). As a result, no estimate comparisons could be provided.
  • Company materials did not disclose external consensus figures for Q2 2024 .

Key Takeaways for Investors

  • Near-term growth catalysts from HMPO and public sector programs should begin to benefit revenue in Q3/Q4 as ramps progress .
  • Liquidity position improved materially after HSBC facilities; enhances flexibility for organic execution and potential M&A .
  • Profitability headwinds in Q2 reflect mix and ramp costs; Technology segment remains structurally higher-margin, supporting medium-term margin normalization as ramps mature .
  • FX remains a meaningful variable ($0.7M loss in Q2); investors should monitor currency exposure and hedging approach .
  • No formal quantitative guidance was issued; watch for sequential improvements tied to project go-lives and pipeline conversion .

Sources

  • Q2 2024 8-K and press release: exhibits 99.1/99.2 with financial highlights and investor presentation .
  • Q2 2024 10-Q: detailed financial statements and FX/losses .
  • Financing 8-K (HSBC facilities): terms and incremental liquidity .
  • Q1 2024 press release and SEC exhibit: revenue, gross margin, EPS .