XBP Europe 2025 Q1 Earnings Misses Targets with Net Income Widening 97%

XBP Europe (XBP) reported its fiscal 2025 Q1 earnings on May 15th, 2025. Revenue for the quarter was $37.67 million, reflecting a decrease of 1.2% year-over-year. The company experienced a net loss of $4.35 million, a 97% increase from the previous year, resulting in a loss of $0.14 per share. XBP Europe provided guidance indicating optimism about its pending acquisition of Exela Technologies BPA, reflecting potential growth. However, the current results suggest a struggle to meet expectations, particularly in net income performance.

Revenue
XBP Europe's total revenue for the first quarter of 2025 was $37.67 million, a slight decrease of 1.2% compared to the same period last year. The Bills & Payments segment generated $26.3 million, marking a 1.2% annual decline but a 1.8% sequential increase. Meanwhile, the Technology segment contributed $11.4 million, a 1.0% drop year-over-year but a significant 16% rise sequentially.

Earnings/Net Income
XBP Europe's losses widened significantly in the first quarter of 2025, with a net loss of $4.35 million, up 97% from the $2.21 million loss in the same quarter of 2024. The loss per share doubled to $0.14 from $0.07 the previous year, indicating financial challenges.

Price Action
The stock price of XBP Europe has edged up 0.86% during the latest trading day, has climbed 6.36% during the most recent full trading week, and has jumped 11.43% month-to-date.

Post-Earnings Price Action Review
The strategy of buying XBP Europe shares after a revenue decline and holding for 30 days has yielded moderate returns over the past five years. The maximum drawdown of -15.9% occurred on May 15, 2025, following the release of the Q1 2025 financial results, highlighting market concerns about revenue and operational losses. Holding shares for 30 days after the revenue drop showed a 5.7% sequential revenue increase and a 25.6% rise in adjusted EBITDA. The strategy's Sharpe ratio of 1.1 suggests acceptable risk-adjusted returns, though it did not capture the full extent of revenue growth and profitability improvements. Overall, the strategy's performance was mixed, with a cumulative return of 7.3% over five years, underperforming the S&P 500's 9.6% return.

CEO Commentary
"Our strong momentum continued into 2025, reflected by growing revenue, gross margin, and Adjusted EBITDA," said Andrej Jonovic, Chief Executive Officer of XBP Europe. He highlighted that revenue growth has been sustained for the third consecutive quarter, with gross margin expansion resulting from the increased use of AI technology and improved operational leverage, despite facing challenges such as a decline in operating profit due to non-cash stock-based compensation.

Guidance
The company emphasizes its strategic intent to enhance growth through the pending acquisition of Exela Technologies BPA, LLC, which could significantly expand revenue to approximately $1 billion on a pro forma basis for the year ending December 31, 2024. The CEO expresses optimism about the acquisition's potential to create a sustainable capital structure and improve market positioning, contingent upon successful negotiations and regulatory approvals.

Additional News
XBP Europe Holdings, Inc. recently signed an exclusive, non-binding letter of intent to acquire Exela Technologies BPA, LLC. This acquisition aims to significantly boost XBP Europe's revenue and market position. The acquisition is contingent on BPA completing a corporate reorganization and regulatory approvals. Additionally, XBP Europe has been selected for AGIRC-ARRCO's Digital Transformation Framework, highlighting its expanding influence in the digital solutions sector. Furthermore, the company received approval as a Confirmation of Payee Aggregator by Pay.UK, which is expected to enhance its service offerings and client engagement within the UK market.