XBP Europe Holdings, Inc. (XBP) is a pan-European integrator of bills, payments, and related solutions and services, with a mission to enable the digital transformation of its clients. Headquartered in London, the company has a rich history spanning over 45 years, serving clients across diverse industries and geographies throughout Europe.
Company History and Background
Founded in the mid-1970s, XBP Europe's roots can be traced back to the merger between Texas-based BancTec, Inc. and Recognition International, Inc. in 1995. Over the years, the company has expanded its footprint and capabilities through strategic acquisitions, including the 2018 acquisition of Asterion International and Drescher Full-Service Versand, which further solidified its presence across Europe. XBP Europe was originally incorporated in Delaware in 2022 to facilitate a business combination. Prior to this, it was the core European business of Exela Technologies, Inc. (ETI).
On November 29, 2023, XBP Europe completed a business combination with CF Acquisition Corp. VIII, with XBP Europe becoming a wholly owned subsidiary of the combined company, which was renamed XBP Europe Holdings, Inc. The transaction was accounted for as a reverse capitalization, with XBP Europe as the accounting acquirer. This strategic move has positioned the company for further growth and expansion in the European market.
Operations and Client Base
Today, XBP Europe operates in 16 countries, employing approximately 1,500 people, including 147 part-time employees. The company's diverse client base of over 2,000 organizations spans a wide range of industries, including banking, healthcare, insurance, and the public sector. XBP Europe's ability to deploy its cloud-based solutions in any EMEA market has been a key driver of its growth and success.
Financial Performance
The company's financial performance has been mixed in recent years. In 2023, XBP Europe reported revenue of $180.49 million, a decrease from the previous year. The company's net loss for the year was $7.93 million. Operating cash flow for 2023 was $9.89 million, with free cash flow of $3.52 million.
In the third quarter of 2024, XBP Europe reported revenue of $35.33 million, a 5.6% decrease year-over-year. The revenue decline was primarily attributable to lower postage revenue, lower volumes, and client contract ends, partially offset by the positive impact of newly won business, some of which is in the early stages of ramp. The company reported a net loss of $1.23 million for the quarter. Operating cash flow was negative $8.02 million, with free cash flow at negative $9.14 million.
XBP Europe operates through two main reportable segments: Bills & Payments and Technology. For the three months ended September 30, 2024, the Bills & Payments segment generated $24.55 million in revenue, representing 69.4% of the company's total revenue. The Technology segment generated $10.85 million in revenue, accounting for 30.6% of the total.
Geographic Performance
The company's operations are primarily focused in Europe, with major markets being France, Germany, and the United Kingdom. In the third quarter of 2024, France generated revenue of $11.69 million, Germany $9.16 million, and the United Kingdom $9.60 million.
Notable Contracts and Expansions
One of the highlights for XBP Europe in 2023 was the signing of a multi-year, $40 million contract with His Majesty's Passport Office (HMPO) in the UK. This project aims to digitize the country's historical records and make them available to the General Register Office (GRO). This significant contract win demonstrates the company's ability to secure large-scale, transformative projects that are in high demand across the public and private sectors.
In addition to its core bills and payments business, XBP Europe has also been expanding its capabilities in adjacent areas. In 2024, the company launched Reaktr.ai, a new global business unit focused on providing cybersecurity, data modernization, and multi-cloud management services powered by artificial intelligence. This strategic move positions XBP Europe at the forefront of the rapidly evolving cyber, data, and generative AI landscape.
Liquidity and Financing
As of September 30, 2024, XBP Europe's cash and cash equivalents stood at $7.77 million. The company's debt-to-equity ratio was -1.59, indicating a high level of debt relative to equity. The current ratio was 0.64, and the quick ratio was 0.58, suggesting potential liquidity challenges.
XBP Europe has a $15 million Secured Credit Facility, consisting of a $3 million Term Loan A Facility, a $10.5 million Term Loan B Facility, and a $12 million Revolving Credit Facility. As of September 30, 2024, the company had drawn $12 million under the Revolving Credit Facility.
In June 2024, XBP Europe secured a comprehensive $48 million financing agreement with HSBC, which included $30 million in committed funding and an $18 million accordion feature. This transaction refinanced the company's existing indebtedness and provided additional liquidity to fund its growth initiatives.
Risks and Challenges
XBP Europe operates in a highly competitive industry, with the need to continuously innovate and adapt to changing customer demands. The company also faces currency fluctuations and potential regulatory changes in the various markets it serves. Additionally, the company's reliance on a limited number of large customers could present concentration risks.
The company is currently facing a legal challenge from a group of 71 former employees related to their dismissal resulting from the closure of two production sites in France in 2020. XBP Europe has accrued $1.10 million in Q3 2024 and $2.20 million in FY 2023 based on the estimate of the range of possible losses.
Future Outlook
Looking ahead, XBP Europe's management continues to focus on digital transformation, expanding capabilities in adjacent technologies, and leveraging its recent financing agreement. The company's strategy aims to navigate the challenges in the European bills and payments market while capitalizing on emerging opportunities.
Conclusion
In conclusion, XBP Europe Holdings, Inc. is a seasoned player in the European bills and payments landscape, with a long history of serving clients across various industries. While the company has faced financial headwinds in recent years, its strategic initiatives, including the launch of Reaktr.ai and the recent financing agreement, position it for potential future growth. As XBP Europe continues to support the digital transformation of its clients throughout Europe, it will need to address its financial challenges, improve liquidity, and capitalize on its strengths in technology and innovation to drive sustainable growth in the competitive European market.