XBP Global Holdings Inc (XBP) 2025 Q3 法說會逐字稿

Thank you for standing by, and welcome to XBP Global’s third-quarter 2025 earnings conference call. (Operator Instructions)

I would now like to hand the call over to David Shamas, Vice President, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to XBP Global’s third-quarter 2025 earnings call. With me today are our Chief Executive Officer, Andrej Jonovic; and our Chief Financial Officer, Dan Avramovic.

Before we begin, please note that today’s remarks may contain forward-looking statements, including statements regarding our future performance, outlook, and strategy. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those described.

For a detailed discussion of these risks and uncertainties, please refer to our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and our proxy statement and other filings with the SEC, copies of which are available on our Investor Relations website at investors.xbpglobal.com.

In addition, during this call, we will reference certain pro forma and non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release and the appendix to our investor presentation, which are available on our Investor Relations website.

With that, I’ll turn the call over to Andrei.

Good afternoon, everyone, and thank you for joining us today for our first earnings call reporting the consolidated results of XBP Global. I’m thrilled to be speaking with you today as this quarter marks a significant milestone for our company.

The transformative acquisition by XBP Europe of Exela Technologies BPA, completed at the end of July, significantly expands our global footprint, enhances our capabilities, and strengthens our corporate governance with new Directors and institutional shareholders.

Our vision for the company is to grow with purpose. We engineer mission-critical systems that enable hyperautomation through domain expertise, adaptive AI, and measurable outcomes. We’re actively pursuing multiple initiatives to set up XBP Global for long-term growth, including proactive engagement with new and existing clients, investment in new talent across the organization, and investor outreach and communications.

Since this is our first earnings call that reports the results of the combined company, I’d like to spend a little more time talking you through our business, our award-winning solutions, and our scale before turning it over to Dan, who will review our financial results.

Starting with slide three, this slide speaks to the qualitative and quantitative elements of the transaction which created XBP Global. The timing of the transaction was during the quarter, which is why our as-reported and pro forma numbers show our variance. While reported numbers are important, to give you a big picture view, our pro forma trailing 12-month revenue as of Q3 was $916.4 million, along with an adjusted EBITDA of $103.6 million. Our net leverage, also measured on a pro forma trailing 12-month basis, sits at 3.37 times, which is lower than the Russell 2000 average.

Moving to slide four, XBP Global is a true global enterprise with a local focus, boasting over 30 years of experience in our automation journey. We serve over 2,500 clients globally across multiple industries, including many Fortune 100 companies and public sector clients. Our operational scale spans across 20 countries, supported by a dedicated team of nearly 11,000 employees.

Slide 5 covers the focus areas of our business, and I would like to immediately move to slide 6. We’re proud to be a key part of the critical infrastructure in the United States and are deemed an essential services provider. XBP Global is deeply embedded in the operations that underpin our economy and government. Our data management and automation solutions are vital for critical sectors like healthcare, legal, and finance, where we handle vast amounts of sensitive data.

One example is our Department of Veterans Affairs mandate, where we have delivered essential AI-enabled services for many years to help our veterans obtain better and more timely care.

Slide 7 covers some key annual metrics, which are meant to highlight our scale and the criticality of workflows our clients entrust us with. I would like to clarify that these numbers contain both 2024 actual data and estimated data for 2025.

Our commitment to innovation and excellence is consistently recognized by leading analysts, as shown on slides 8 and 9. These accolades validate our strategic direction and the value we deliver to our clients. To summarize, we’re incredibly excited about the future of XBP Global. The acquisition of Exela Technologies BPA created a strong foundation for our future, underpinned by world-class AI, a strong balance sheet, and a clear strategic vision. There remains a lot of work to be done, but I’m thoroughly proud of our team’s progress and look forward to sharing future updates with the investor community.

With that, I’ll now turn the call over to Dan Abramovich, our CFO.

Thank you, Andrei, and good afternoon, everyone. I will now walk you through our financial and operating results for the third quarter. Given the level of complexity this quarter from a US GAAP accounting perspective relative to the acquisition of BPA, my comments will primarily focus on pro forma results to reflect the combined operations of BPA and XBP Europe on an apples-to-apples basis.

Starting on slide 11, for the third quarter of 2025, we reported total consolidated pro forma revenue of $220.4 million. This represents an 18.1% year-over-year decrease versus the third quarter of 2024 on a combined pro forma basis.

Excluding a one-time client notification project from the third quarter of 2024 of approximately $36.5 million in revenue, our revenue decline was 8.3%. This decline was primarily driven by the completion of client projects and client exits in the period.

Our pro forma gross margin expanded to 21.9% in the quarter, up 190 basis points year-over-year. This was driven by operational efficiencies fueled by automation and better operating leverage throughout the organization.

Our pro forma adjusted EBITDA was $24.6 million, an increase of 7.1% year-over-year. Our adjusted EBITDA margin increased by 260 basis points year-over-year to 11.2%, which demonstrates our disciplined approach to cost management and automation.

Turning to slide 12, I’d like to walk you through our reportable segments. Applied workflow automation is our largest segment and contributes approximately 90% of our revenues. The applied workflow automation segment provides services powered by intelligent AI-enabled workflows that generate outcomes for clients’ mission-critical systems.

Revenue primarily stems from transactions processed and includes payment processing, data capture, analysis, decisioning, distribution, and data transformation across industries and public and private sectors, primarily in the Americas and Europe and increasingly in Asia.

The applied workflow automation segment includes the company’s bills and payments, healthcare industry solutions, on-site enterprise solutions, integrated communications, and enterprise legal management business units, which serve leading banks, payers and providers, utilities, as well as federal, regional, and local government entities.

The way to look at this reportable segment is as a continuation of the bills and payments reportable segment at XBP Europe. Those of you who have followed XBP Europe’s journey might recall that we grew the gross margin of that larger segment from 10.8% in the third quarter of 2024 to 22.2% in the second quarter of 2025, which is the largest last reported quarter by XBP Europe.

Our goal is to now expand our quest and grow the applied workflow automation segment in a similar fashion. The technology segment focuses on the sale of recurring and perpetual software licenses, software maintenance and professional services, as well as hardware solutions and maintenance. The company offers an industry-agnostic and cross-departmental suite of products with a primary focus on scalable workflows leveraging AI through neural networks together with deep domain expertise.

The company also offers industry-specific platforms for the banking and healthcare industries. While this segment only makes up about 10% of our revenues, it contributes approximately 30% of our gross profit since the gross margin of this segment tends to be in the range of 55% to 65%.

In the third quarter, the applied workflow automation segment had a year-over-year revenue decline of 18.9%. Excluding the client notification project I mentioned earlier, this decline would have been 8%. From a gross margin perspective, our gross margins in this segment grew by 160 basis points year-over-year and 60 basis points sequentially to 17.3%.

Our technology revenue, which consists of both recurring and variable project-based revenue, declined by 10.2% year-over-year. This decrease was primarily driven by the expected completion of several one-time projects and, to a lesser extent, the exits of certain customers.

Turning to slide 13, I’d like to talk about our revenue declines head-on, as I’m sure that’s a topic on everyone’s mind. As you can appreciate, over time, BPA’s perceived financial risks created headwinds for the company from a sales perspective, as procurement teams and risk management departments were essentially forced to diversify a portion of their services with us to other providers.

Since the acquisition, our teams have been proactive, having proactive talks with new and existing clients who are genuinely receptive to our story. As you might have seen, we’ve announced a number of exciting new contracts in recent weeks.

The first was with the New York City Department of Finance for XBP Lockbox Services to streamline their financial transactions related to parking violations. The second was a multi-year contract with a large insurance carrier for our re-mail processing services to assist them in streamlining their open rate for return mail, a solution that utilizes our intelligent document processing technology.

Now, while this growth isn’t evident in our results yet, you can see from the chart on the left that our revenue declines are beginning to moderate. Overall, we feel pretty good about our ability to win back lost business and improve our win rate through a robust pipeline growth.

Our adjusted EBITDA grew this quarter to $24.7 million. Again, this figure is adjusted to reflect pro forma run rate EBITDA for three full months of the combined company. Given the current state of our sales pipeline, high operating leverage, and increasing emphasis on automation, we believe that further uptake in revenue will be highly accretive to the adjusted EBITDA.

Finally, many investors have asked whether we will be offering guidance. In short, we’re not providing guidance this quarter considering we closed the transaction with BPA in the third quarter, but do expect to provide guidance in the future. Overall, we aim to increase our transparency for investors, and we look forward to continued dialogue with the investor community.

Now, I’ll turn it back to Andrei, who will give you some additional color on our automation efforts and our client metrics.

Thanks, Dan. Turning to slide 14, I’d like to focus on the impact AI automation has not just had on our clients, but also our operations. As you can see, we’ve seen a steady decrease in our headcount, which is primarily due to efficiency gains made possible by progress in our AI deployments.

We all know there’s an AI mania out there, and the CEOs are practically banned from not talking about AI. Let us, for a moment, share with you how we’ve learned to grow with AI in a responsible and prudent way. I’m not going to show you our AI spend, but rather the results made possible by AI adoption.

In some of our marquee AI-enabled accounts, we’re achieving an automation rate of up to 70% to 75% using our intelligent document processing IDP workflow. This workflow is powered by neural networks trained to accurately predict field coordinates and extract both printed and handling data. A human-in-the-loop system is used to efficiently manage any exceptions.

In the example of healthcare, the primary application involves leveraging agentic AI to extract data from complex health claims. If required, the system then routes the claim either to an AI agent for automated coding or to a human agent for necessary correction.

This serves as a prime example of a hybrid agentic AI workflow, incorporating a critical human-in-the-loop component to deliver substantial value through hyperautomation. When contextualized, as shown on the right-hand side of slide 14, our revenue per employee stands out, ranking near the top of our peer set at over $80,000.

This significantly exceeds the average of approximately $57,000 for this particular group, many of which are peers that are considerably larger companies by revenue and market cap. Notably, we have consistently improved this ratio over time. With the continued expansion of our automation footprint, we anticipate further gains in efficiency.

Next, I would like to talk to you about some of our client metrics on slides 15 and 16. In total, we have more than 2,500 clients globally. In terms of our client concentration, no single client makes up more than 7.5% of our revenue. Our top 10 clients contribute 34% to our top line, and the top 50 clients contribute to around 59% of our total revenue on a trailing 12-month basis. You can see that our industry coverage is well distributed. While we have a firm presence in healthcare and BFSI, we do not appear to be overexposed to a single industry.

Moving to slide 16, this is where we show metrics related to our revenue renewals, new wins, and average tenure of our top accounts. The notable fact is the tenure among our largest 25 accounts, which stands at 15 years. We’re investing in our sales force, focusing on strategic partnerships and ensuring we can help our clients with our mission-critical outcomes. I hope we can report on progress from these efforts in the coming quarters.

With that, I’ll turn it over to the operator.

(Operator Instructions)

As there are no questions in queue, this does conclude today’s conference call. Thank you for participating. You may now.