Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis together with our condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q. Among other things, the condensed consolidated financial statements include more detailed information regarding the basis of presentation for the financial data than included in the following discussion. Amounts in thousands of United States dollars.
Unless otherwise indicated or the context otherwise requires, references in this section to “we,” “our,” “us,” “XBP Global”, “the Company” and similar terms are to BPA before the Business Combination, and to XBP Global Holdings, Inc. following the Business Combination.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, our expectations regarding future financial performance, industry conditions, business strategy, and the anticipated effects of our restructuring and related transactions, including the Business Combination. Forward-looking statements are often identified by words such as “may,” “will,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” or similar expressions.
Forward-looking statements are based on management’s current expectations and assumptions and are subject to a number of risks and uncertainties that could cause actual results to differ materially. These risks include, among others, those related to the integration and performance of the combined business, market conditions and demand for our services, competition, technological change, data security, regulatory developments, reliance on third-party service providers, and our ability to meet applicable listing standards, as well as the risk factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and other filings with the SEC.
Forward-looking statements speak only as of the date of this Quarterly Report, and we undertake no obligation to update or revise them as a result of new information, future events, or otherwise. Information contained on any website referenced in this Quarterly Report is not incorporated by reference.
Overview
XBP Global is a multinational technology and services company powering intelligent workflows for organizations worldwide. Our proprietary platforms and agentic AI-driven automation enable our clients to entrust us with their most impactful digital transformations and mission-critical operations. Our operational foundation is further defined by deep domain expertise across industries and the public and private sectors, including decades of experience helping clients navigate shifting global regulatory frameworks and supporting compliance with the rigorous standards required by government entities and highly scrutinized industries, including banking, healthcare and insurance. We pair this expertise with platform-agnostic, end-to-end structured workflows that combine AI-driven automation with dedicated human-in-the-loop exception handling and orchestration software, enabling our clients to transition from labor-intensive, reactive operations to digitally orchestrated, exception-driven workflows. From enabling payment gateways and data exchanges across multiple systems, to matching inputs against contracts and handling exceptions, to ultimately depositing payments and distributing communications, our solutions address the full life cycle of transaction processing and enterprise information management. Our Applied Workflow Automation segment provides services powered by intelligent, AI-enabled workflows that generate outcomes for clients’ systems. Revenue primarily stems from transactions processed and includes payment processing, data capture, analysis, decisioning, distribution and transformation across industries and the public and private sectors, primarily in Americas and Europe, and increasingly in Asia. Our Technology segment primarily focuses on sales of recurring software licenses and related maintenance, hardware solutions and related maintenance and professional services. As of March 31, 2026, we had 10,200 employees in 20 countries operating either remotely from our business facilities or co-located at our clients’ facilities.
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History
XBP Global Holdings, Inc. was originally incorporated as CF Acquisition Corp. VIII, a blank check company formed under the laws of the State of Delaware on July 8, 2020. On March 16, 2021, the Company consummated its initial public offering. The Company’s initial purpose was to effect a business combination with one or more businesses. On October 9, 2022, CF Acquisition Corp. VIII entered into a merger agreement with XBP Europe, Inc., at the time a subsidiary of ETI. The business combination was completed on November 30, 2023, at which time the Company was renamed XBP Europe Holdings, Inc., reflecting the purchase of ETI’s historical European operations, and the Company’s shares and public warrants started trading on The Nasdaq Stock Market LLC under the ticker symbols “XBP” and “XBPEW,” respectively.
On July 29, 2025, XBP Europe Holdings, Inc. finalized its acquisition of BPA, ETI’s historical operations in the Americas and Asia, as part of the Business Combination pursuant to the MIPA. The consideration for the sale was $1.00, reflecting the encumbered nature of BPA which at the time of entry into the MIPA was involved in the Chapter 11 Cases. The Business Combination was subject to certain conditions subsequent including emergence of BPA and certain of its affiliates from the Chapter 11 Cases, which occurred on July 29, 2025 (the Emergence Date). Prior to the Business Combination, the Company and BPA had both been indirect subsidiaries of ETI. ETI remains a stockholder of the Company and a related party; see Note 13, Related-Party Transactions . In connection with the Business Combination, the Company changed its name from “XBP Europe Holdings, Inc.” to “XBP Global Holdings, Inc.”
Together with the European operations acquired in 2023, the Company’s current global platform is built upon a portfolio of acquired and predecessor entities with more than 50 years of commercial and operational history.
The Business Combination was accounted for as a reverse acquisition in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). Under this method of accounting, XBP Europe Holdings, Inc. (now XBP Global) was treated as the “acquired” company for financial reporting purposes even though BPA survives as an indirect wholly-owned subsidiary of XBP Global.
In accordance with ASC 852, Reorganizations (“ASC 852”), BPA was required to apply fresh-start accounting upon its emergence from bankruptcy. The Company evaluated transaction activity of BPA between July 31, 2025 (the Convenience Date) and the Emergence Date and concluded that the Convenience Date was appropriate for the adoption of fresh-start accounting which resulted in BPA becoming a new entity for financial reporting purposes as of the Convenience Date. See Note 1, General and Note 4, Business Combination for additional information.
Predecessor and Successor
The “Predecessor” company information presented refers to the financial information prior to the Emergence Date, which reflects the combined historical financial statements of BPA prepared using BPA’s previous combined basis of accounting. The “Successor” company information refers to the financial information beginning August 1, 2025 and reflects the condensed consolidated financial statements of XBP Global, including the financial statement effects of recording fair value adjustments and the capital structure resulting from the Business Combination and fresh start accounting of BPA. Black lines have been drawn to separate the Successor’s financial information from that of the Predecessor since their financial statements are not comparable as a result of the application of acquisition accounting and the Company’s capital structure resulting from the Business Combination and fresh start accounting of BPA. See Note 1, General for additional information.
Our Segments
Our two reportable segments are Applied Workflow Automation and Technology. These segments are comprised of significant strategic business units that align our products and services with how we manage our business, approach our key markets, and interact with our clients based on their respective industries.
Applied Workflow Automation: the Applied Workflow Automation segment provides services powered by intelligent, AI-enabled workflows that generate outcomes for clients’ systems. Revenue primarily stems from
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transactions processed and includes payment processing, data capture, analysis, decisioning, distribution and transformation across industries and the public and private sectors, primarily in Americas and Europe, and increasingly in Asia. The Applied Workflow Automation segment includes the Company’s Bills & 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.
Technology: 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 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.
Revenues
The Company’s revenues are primarily generated from a transaction based pricing model for the various types of volumes processed and a mix of fixed management fee and transactional revenue for document logistics and location services. Our healthcare services business generates revenues primarily from a transaction based pricing model for the various types of volumes processed for healthcare payers and providers. Our support services in connection with various legal matters generate revenues primarily based on time and materials pricing as well as through transactional services priced on a per item basis. In addition, the Company also sells recurring and perpetual software licenses, as well as maintenance and other professional services. Licensing options are flexible, and clients can purchase a license covering a maximum number of transactions, as well as multi-year term licenses with flexible renewal options.
People
We draw on the business and technical expertise of our talented and diverse global workforce to provide our clients with high-quality services. Our business leaders bring a strong diversity of experience in our industry and a track record of successful performance and execution.
As of March 31, 2026, we had approximately 10,200 employees globally, with approximately 5,100 employees located in Americas and EMEA, and the remainder located primarily in India and the Philippines.
Costs associated with our employees represent the most significant expense for our business. We incurred personnel costs of $91.0 million and $81.2 million for the three months ended March 31, 2026 (Successor) and 2025 (Predecessor), respectively. The majority of our personnel costs are variable and are incurred only while we are providing our services. In certain jurisdictions, for example many countries in Europe, there is a statutory payment requirement for any people made redundant due to automation or relocation of delivery locations.
Key Performance Indicators
We use a variety of operational and financial measures to assess our performance. Among the measures considered by our management are the following:
● Revenue by segment;
● Gross profit by segment; and
● Adjusted EBITDA (which is a non-GAAP financial measure).
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Revenue by segment
We analyze our revenue by comparing actual monthly revenue to internal projections and prior periods across our operating segments in order to assess performance, identify potential areas for improvement, and determine whether segments are meeting management’s expectations.
Gross profit by segment
The Company defines Gross Profit as revenue less cost of revenue (exclusive of depreciation and amortization). The Company uses Gross Profit by segment to assess financial performance at the segment level.
Non-GAAP Financial Measures
To supplement its financial data presented on a basis consistent with GAAP, this report contains certain non-GAAP financial measures, including EBITDA, Adjusted EBITDA and Pro forma Adjusted EBITDA. The Company has included these non-GAAP financial measures because they are financial measures used by management to evaluate the Company’s core operating performance and trends, to make strategic decisions regarding the allocation of capital and new investments. We believe these measures also provide useful information to investors by allowing consistent period-to-period comparisons of our operating results after removing the effects of our capital structure, asset base, and certain non-recurring items. These measures exclude certain expenses that are required under GAAP. The Company excludes these items because they are non-recurring or non-cash expenses that are determined based in part on the Company’s underlying performance.
EBITDA, Adjusted EBITDA and Pro forma Adjusted EBITDA
We define EBITDA as net income (loss), plus taxes, interest expense, and depreciation and amortization. We define Adjusted EBITDA as EBITDA plus non-recurring transaction costs, non-cash equity compensation, restructuring and related expenses, loss/(gain) on sale of assets, impairment of goodwill and other non-recurring items such as reorganization items. We define Pro forma Adjusted EBITDA as Adjusted EBITDA plus management’s estimates of the impact of the Business Combination and Restructuring, had such transactions occurred at the beginning of the earliest period presented.
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Results of Operations
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025:
Successor
Predecessor
Three Months Ended March 31,
Three Months Ended March 31,
2026
2025
Change
% Change
Revenue (including related party revenue):
Applied Workflow Automation
$
178,426
$
177,910
$
516
0.3%
Technology
18,706
14,069
4,637
33.0%
Total revenue
197,132
191,979
5,153
2.7%
Cost of revenue (exclusive of depreciation and amortization):
Applied Workflow Automation
142,991
146,068
(3,077)
(2.1)%
Technology
8,906
4,577
4,329
94.6%
Total cost of revenues (exclusive of depreciation and amortization)
151,897
150,645
1,252
0.8%
Selling, general and administrative expenses
42,814
22,262
20,552
92.3%
Depreciation and amortization
14,849
10,535
4,314
40.9%
Related party expense
2,653
2,553
100
3.9%
Operating profit (loss)
(15,081)
5,984
(21,065)
(352.0)%
Interest expense, net
14,069
23,780
(9,711)
(40.8)%
Debt modification and extinguishment costs (gain), net
—
109
(109)
(100.0)%
Sundry expense (income), net
(392)
1,312
(1,704)
(129.9)%
Other income, net
(561)
(23)
(538)
2339.1%
Loss before reorganization items and income taxes
(28,197)
(19,194)
(9,003)
46.9%
Reorganization items, net
—
(60,845)
60,845
100.0%
Net profit (loss) before income taxes
(28,197)
41,651
(69,848)
(167.7)%
Income tax expense (benefit)
(1,435)
2,028
(3,463)
(170.8)%
Net profit (loss)
$
(26,762)
$
39,623
$
(66,385)
(167.5)%
Revenue
For the three months ended March 31, 2026, our net revenue on a consolidated basis increased by $5.2 million, or 2.7%, to $197.1 million (including related party revenue of less than $0.1 million) from $192 million (including related party revenue of $1.5 million) for the three months ended March 31, 2025.
Applied Workflow Automation and Technology segments constituted 90.5%, and 9.5%, respectively, of our total net revenue for the three months ended March 31, 2026, compared to 92.7%, and 7.3%, respectively, for the three months ended March 31, 2025. The revenue changes by reporting segment were as follows:
Applied Workflow Automation—Net revenue attributable to Applied Workflow Automation segment was $178.4 million for the three months ended March 31, 2026, compared to $177.9 million for the three months ended March 31, 2025. The revenue increase of $0.5 million, or 0.3%, is primarily attributable to inclusion of newly acquired entity in the successor period and revenue from newly won business, offset by lower postage revenue and lower one-time projects.
Technology—For the three months ended March 31, 2026, net revenue attributable to the Technology segment increased by $4.6 million or 33.0%, to $18.7 million from $14.1 million for the three months ended March 31, 2025. The revenue increase in the Technology segment was largely due to inclusion of newly acquired entity in the successor period.
Cost of revenue
For the three months ended March 31, 2026, the cost of revenue increased by $1.3 million, or 0.8%, compared to the three months ended March 31, 2025.
In the Applied Workflow Automation segment, the decrease was primarily attributable to reduced cost resulting from completed projects and optimization efforts. Cost of revenue to the Applied Workflow Automation segment decreased by $3.1 million, or 2.1%.
The cost of revenue in the Technology segment increased by $4.3 million, or 94.6%, primarily due to the inclusion of the newly acquired entity in the successor period within the Technology segment.
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The decrease in cost of revenues as a percentage of revenue on a consolidated basis was primarily due to a change in the revenue mix and executed optimization efforts. Cost of revenue for the three months ended March 31, 2026 was 77.1% of revenue compared to 78.5% of revenue for the three months ended March 31, 2025.
Selling, general and administrative expenses
Selling, general and administrative expenses (“SG&A expenses”) increased by $20.6 million, or 92.3%, to $42.8 million for the three months ended March 31, 2026, compared to $22.3 million for the three months ended March 31, 2025. The increase was primarily attributable to inclusion of newly acquired entity in successor period, an $8.6 million charge to refine the Company's estimate of the general unsecured claims liability based on updated information from the post-emergence claims reconciliation process the original measurement adjustment of which was recognized as gain in Reorganization items, net in the Predecessor period, and an increase in legal and professional fees. SG&A expenses increased as a percentage of revenues to 21.7% for the three months ended March 31, 2026 as compared to 11.6% for the three months ended March 31, 2025.
Depreciation and amortization
Total depreciation and amortization expenses were $14.8 million for the three months ended March 31, 2026 compared to $10.5 million for the three months ended March 31, 2025.
Related party expenses
Related party expense was $2.7 million for the three months ended March 31, 2026 compared to $2.6 million for the three months ended March 31, 2025.
Interest expense, net
Interest expense, net was $14.1 million for the three months ended March 31, 2026 compared to expense of $23.8 million for the three months ended March 31, 2025.
Debt modification and extinguishment costs (gain), net
There was no debt modification and extinguishment cost for the three months ended March 31, 2026 while there was $0.1 million of debt modification and extinguishment cost for the three months ended March 31, 2025.
Sundry expense (income), net
The decrease in sundry expense, net of $1.7 million over the prior year period, was primarily attributable to exchange rate fluctuations on foreign currency transactions.
Other income, net
Other income, net, was a gain of $0.6 million for the three months ended March 31, 2026 compared to other income, net, was a gain of $0.02 million for the three months ended March 31, 2025.
Reorganization items
There were no reorganization items for the three months ended March 31, 2026. Reorganization items for the three months ended March 31, 2025 includes $20.5 million of the legal and professional fees paid in connection with Chapter 11 Cases and $82.0 million on account of derecognition of the unamortized debt premium and $0.6 million of unamortized debts discount and unamortized debt issuance costs.
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Income tax expense (benefit)
We recorded an income tax benefit of $1.4 million for the three months ended March 31, 2026 and an income tax expense of $2.0 million for the three months ended March 31, 2025. The tax expense decreased in three months ended March 31, 2026 compared to the three months ended March 31, 2025 due to changes in valuation allowances and decrease in foreign earnings. Our estimated annual effective tax rate of 5.0% for the three months ended March 31, 2026 differed from the expected U.S. statutory tax rate of 21.0% and was primarily impacted by federal and state change in valuation allowance on disallowed interest coupled with change in valuation allowance related to foreign current year NOL.
Other Financial Information (Non-GAAP Financial Measures)
We view EBITDA, Adjusted EBITDA, and Pro forma Adjusted EBITDA as important indicators of performance. We define EBITDA as net (loss) income, plus income tax expenses, interest expense, net and depreciation and amortization. We define Adjusted EBITDA as EBITDA plus non-recurring transaction costs, non-cash equity compensation, restructuring and related expenses, loss/(gain) on sale of assets, impairment of goodwill and other non-recurring items such as reorganization items. We define Pro forma Adjusted EBITDA as Adjusted EBITDA plus management’s estimates of the impact of the acquisition of XBP Europe Holdings, Inc. and reorganization of BPA, had such transactions occurred at the beginning of the earliest period presented.
We present EBITDA, Adjusted EBITDA and Pro forma Adjusted EBITDA because we believe they provide useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP.
Note Regarding Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA, and Pro forma Adjusted EBITDA are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our financial performance and results of operations as our board of directors and management use EBITDA, Adjusted EBITDA and Pro forma Adjusted EBITDA to assess our financial performance, because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization) and items outside the control of our management team. Net income/loss is the GAAP measure most directly comparable to EBITDA, Adjusted EBITDA, and Pro forma Adjusted EBITDA. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures have important limitations as analytical tools because they exclude, some but not all, items that affect the most directly comparable GAAP financial measures. These non-GAAP financial measures are not required to be uniformly applied, are not audited and should not be considered in isolation or as substitutes for results prepared in accordance with GAAP. Because EBITDA, Adjusted EBITDA and Pro forma Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
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Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025
The following table presents a reconciliation of EBITDA, Adjusted EBITDA and Pro forma Adjusted EBITDA to our net profit (loss), the most directly comparable GAAP measure, for the three months ended March 31, 2026 (Successor) and 2025 (Predecessor).
Successor
Predecessor
Three Months Ended March 31,
Three Months Ended March 31,
2026
2025
Net profit (loss)
$
(26,762)
$
39,623
Income tax expense (benefit)
(1,435)
2,028
Interest expense, net
14,069
23,780
Depreciation and amortization
14,849
10,535
EBITDA
721
75,966
Transactions costs (1)
481
—
Non-cash equity compensation (2)
484
105
Loss/(gain) on sale of assets (3)
225
—
Debt modification and extinguishment costs (gain), net
—
109
Reorganization items
—
(60,845)
Adjusted EBITDA
1,911
15,335
Impact of acquisition and reorganization (4)
—
2,644
Pro forma Adjusted EBITDA
$
1,911
$
17,979
(1) Represents non-recurring legal, consulting and other fees and expenses incurred in connection with acquisitions, dispositions, debt-exchanges and other extraordinary transactions and events during the applicable period.
(2) Represents the non-cash charges related to stock-based compensation.
(3) Represents a loss/(gain) recognized on the disposal of property, plant, and equipment and other assets.
(4) Represents management’s estimates of the impact of the acquisition of XBP Europe Holdings, Inc. and reorganization of BPA, had such transactions occurred at the beginning of fiscal 2025.
Liquidity and Capital Resources
Overview
Our primary source of liquidity is principally cash generated from operating activities supplemented as necessary on a short-term basis by borrowings. As of March 31, 2026, we had total indebtedness of $381.2 million, and we incurred interest expense of approximately $14.1 million for the three months ended March 31, 2026 (Successor). We believe our current level of cash and short-term financing capabilities along with future cash flows from operations are sufficient to meet the needs of the business for at least the next twelve months. However, compliance with the Company’s restrictive financial covenants in the Company’s financing agreements is tested as of specified measurement dates and may, from time to time, depend on the Company’s operating performance and the successful execution of planned transactions, including asset dispositions or other balance sheet actions. Our ability to meet those financial covenants can be affected by events beyond our control, and we may not be able to meet those covenants. There can be no assurance that any planned transactions will be completed on a timely basis, on acceptable terms, or at all. Even if the Company is in compliance with its debt covenants as of the date of filing of this Quarterly Report, subsequent developments or our inability to successfully execute planned transactions, could result in non-compliance in future periods.
Liquidity is the availability of adequate amounts of cash with an enterprise to meet its needs for cash requirements. At March 31, 2026 (Successor) and December 31, 2025 (Successor) cash, restricted cash, and cash equivalents totalled $53.1 million and $68.7 million, respectively, including restricted cash of $24.6 million and $31.6 million, respectively.
In the ordinary course of business, we enter into contracts and commitments that obligate us to make payments in the future. These obligations include borrowings, interest obligations, purchase commitments, operating and finance lease commitments, employee benefit payments and taxes. The current maturities of outstanding principal amounts under the Second Lien Note, the secured borrowings under the Amended BR Exar AR Facility, the 2028 Term Loan Facilities, Revolving Credit Facility (each as defined and further described in “Indebtedness” below) and the other debts
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are $12.5 million, $9.7 million, $3.2 million, $1.5 million and $6.6 million, respectively. We were in compliance with all financial covenants as of March 31, 2026 except for the consolidated total leverage ratio covenant and the consolidated interest coverage ratio covenant under the European Senior Credit Facilities Agreement. On May 13, 2026, the Company obtained a formal waiver from the lender of all rights and remedies arising out of or in connection with the failure to meet the requirements of the consolidated total leverage ratio covenant and the consolidated interest coverage ratio covenant under the European Senior Credit Facilities Agreement as of March 31, 2026. See Note 6, Long-Term Debt and Credit Facilities , Note 8, Employee Benefit Plans , and Note 9, Commitments and Contingencies , to our condensed consolidated and combined financial statements herein for further information on material cash requirements from known contractual and other obligations.
The Predecessor recently emerged from the Chapter 11 Cases. As a result, near-term liquidity is expected to be negatively impacted due to the requirement to satisfy certain pre-petition liabilities pursuant to the Plan. This constrained liquidity is expected to continue until such time as these liabilities are fully settled. In addition, our indebtedness that we incurred in connection with or that otherwise survived the Restructuring limits our financial flexibility and requires substantial ongoing cash flows for debt service.
We plan to spend approximately 1.0% of total revenue on total capital expenditures over the next twelve months. Our business model has evolved to leverage cloud hosted platforms. This has reduced our capital expenditures and increased our operating expenses. This is the primary driver of changes in our capital expenditures when compared with historical periods. Our future cash requirements will depend on many factors, including our rate of revenue growth, our investments in strategic initiatives, applications or technologies, operation centers and acquisition of complementary businesses, which may require the use of significant cash resources and/or additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all, which may adversely impact our business, operating results and financial condition.
The Company utilized COVID-19 relief measures in various European jurisdictions, including permitted deferrals of certain payroll, social security and value added taxes. At the end of the third quarter 2024, the Company paid a significant portion of these deferred payroll taxes, social security and value added taxes. The remaining balance of deferred payroll taxes, social security and value added taxes is expected to be paid by April 2027, or later, as per deferment timelines as established by local laws and regulations.
The Company believes the current cash, cash equivalents and cash flows from operating and financing activities are sufficient to meet the Company’s working capital and capital expenditure requirements for a period of at least twelve months. In addition, the Company actively manages its capital structure and evaluates a range of financing alternatives to support its operating plan and long-term objectives. To the extent existing cash, cash from operations, and amounts available for borrowing are insufficient to fund future activities, the Company may need to raise additional capital. The Company may require funding for a variety of reasons, including, but not limited to, investments in strategic initiatives, business development activities, variability in operating results, or to maintain flexibility under the financial covenants in its financing agreements. There can be no assurance that such financing, if and when pursued, would be available on terms acceptable to the Company. To the extent that the Company raises additional funds by issuing equity securities, its stockholders may experience dilution. Any debt financing, if available, may involve restrictive covenants that may impact the Company’s ability to conduct business or return capital to investors. If financing is not available on acceptable terms when needed, the Company may adjust the timing or scope of certain discretionary initiatives in order to align spending with available resources. Further, any failure to comply with the restrictive covenants in the Company’s financing agreements, if not waived or cured, could result in an event of default. In such circumstances, the Company may be required to seek waivers or amendments from its lenders, which may not be granted and, if granted, could impose additional costs, more restrictive terms or other adverse conditions. The Company has historically maintained constructive working relationships with its lenders; in this regard, on May 13, 2026, the Company obtained a formal waiver from the lender under the European Senior Credit Facilities Agreement with respect to its consolidated total leverage ratio covenant and consolidated interest coverage ratio covenant as of March 31, 2026. The need to obtain future waivers or amendments could adversely affect the Company’s liquidity, access to capital and business prospects. An event of default could permit lenders to accelerate the Company’s indebtedness and exercise remedies against collateral securing such indebtedness. The Company actively monitors its covenant compliance, maintains regular dialogue with its lenders, and continues to pursue operational and strategic actions, including ongoing cost optimization
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and disciplined capital allocation, that are intended to ensure sufficient liquidity and enhance capital structure flexibility over time.
Known Trends and Uncertainties
The workflow automation and business process services industry continues to face pricing pressure from competitive bidding and accelerating disruption from agentic AI and intelligent automation. During the first quarter of 2026, these dynamics intensified as enterprise clients moved more rapidly toward outcome-based and AI-augmented delivery models, which may compress renewal pricing on long-term contracts, prompt productivity-sharing arrangements with clients, and lengthen sales and implementation cycles for newer AI-enabled offerings. We are exposed to these trends through our reliance on long-term contracts that may be renewed at lower rates or terminated early.
Although no single client exceeded 10% of revenue, concentration remains in financial services, healthcare, and government, where regulatory complexity, procurement cycles, and budgetary constraints can affect contract timing and renewal economics. We continue to absorb transitional impacts from the July 2025 restructuring, including residual client and vendor uncertainty and integration costs, which continued to weigh on year-over-year revenue comparability during the first quarter of 2026. Persistent inflation, foreign-exchange volatility, and tariff and energy-related cost pressures observed during the quarter may further weigh on near-term revenue conversion and input costs.
We believe these trends are reasonably likely to affect our future results of operations and liquidity. Management is addressing them through cost optimization, expansion of offshore and automated delivery, targeted client retention initiatives in regulated and mission-critical workflows, and continued integration of the acquired operations. During the first quarter of 2026, we advanced these initiatives through the launch of our agentic AI-enabled service offerings and additional multi-year wins in European public-sector and financial-services accounts, which we expect to partially offset the revenue impact of project completions and client exits experienced during the post-restructuring transition.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Successor
Predecessor
Three Months Ended March 31,
Three Months Ended March 31,
2026
2025
Change
Net cash used in operating activities
$
(5,045)
$
(43,719)
$
38,674
Net cash used in investing activities
(1,556)
(1,773)
217
Net cash provided by (used in) financing activities
(8,453)
38,253
(46,706)
Subtotal
$
(15,054)
(7,239)
$
(7,815)
Effect of exchange rates on cash, restricted cash and cash equivalents
(509)
108
(617)
Net decrease in cash, restricted cash and cash equivalents
$
(15,563)
$
(7,131)
$
(8,432)
Analysis of Cash Flow Changes between the three months ended March 31, 2026 and March 31, 2025
Operating Activities—The reduction of $38.7 million in net cash used in operating activities for the three months ended March 31, 2026 (Successor) was primarily due to a $27.0 million favorable change in accounts receivable, no cash paid for reorganization activities in 2026 compared to $20.5 million paid in 2025, higher gross profit (revenue less cost of revenue) by $3.9 million and lower interest payment. This reduction in net cash used in operating activities was partially offset by increase in payments for accounts payable and accrued liabilities by $20.0 million.
Investing Activities— Net cash used in investing activities decreased by $0.2 million, from $1.8 million used in the three months ended March 31, 2025 (Predecessor) to $1.6 million used in the three months ended March 31, 2026 (Successor). The decrease was primarily due to a $0.2 million reduction in cash paid for purchases of property, plant and equipment and a $0.1 million increase in proceeds from the sale of property, plant and equipment, partially offset by $0.1 million increase in additions to internally developed software.
Financing Activities— Net cash used in financing activities was $8.5 million for the three months ended March 31, 2026 (Successor), compared with net cash provided by financing activities of $38.3 million for the three months
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ended March 31, 2025 (Predecessor), a decrease of $46.7 million. Cash inflows during the three months ended March 31, 2026 (Successor) consisted primarily of $133.7 million of proceeds from the ABL Facility, $20.0 million of borrowings under the amended BR Exar AR Facility, $10.2 million of proceeds from other loans, and $4.0 million of proceeds from the Super Senior Term Loan. These inflows were more than offset by $141.4 million of repayments on the ABL Facility, $0.8 million of principal repayments on 2028 Term Loan Facilities, $17.2 million of principal repayments on senior secured term loans and other loans, $10.3 million of repayments under the Amended BR Exar AR Facility and $1.4 million of repayment under the BR Exar AR Facility, $3.3 million of repayment of the Second Lien Note, $1.1 million of principal payments on finance lease obligations, $0.8 million of cash paid for debt issuance costs, and $0.1 million of cash paid for withholding taxes on vested RSUs.
Net cash provided by financing activities of $38.3 million for the three months ended March 31, 2025 (Predecessor) primarily reflected $50.0 million of proceeds from new-money loans borrowed pursuant to a debtor-in-possession (“DIP”) financing agreement entered into in connection with the Chapter 11 Cases (“DIP New Money Loans”), $10.7 million of borrowings under the BR Exar AR Facility, and $0.4 million of proceeds from other loans. These inflows were partially offset by $12.3 million of repayments under the BR Exar AR Facility, $9.3 million of principal repayments on senior secured term loans and other loans, $1.2 million of principal payments on finance lease obligations, and less than $0.1 million of cash paid for debt issuance costs (all as defined and described further in the description of “Indebtedness” below).
Indebtedness
Following is a description of the Company’s principal indebtedness.
July 2030 Notes
On July 29, 2025, Exela Technologies BPA, LLC and Exela Finance Inc., wholly-owned subsidiaries of the Company (for this purpose, together, the “2030 Notes Issuers”), certain guarantors and U.S. Bank Trust Company, National Association, as trustee, entered into an indenture (the “July 2030 Notes Indenture”) governing the Company’s 12.0% First-Priority Senior Secured Notes due 2030 (the “July 2030 Notes”). The Company issued approximately $183.0 million aggregate principal amount of the July 2030 Notes pursuant to the Plan, which may be supplemented by additional issuances in accordance with the July 2030 Notes Indenture. In December 2025, the Company issued an additional $4.0 million in aggregate of principal amount of the July 2030 Notes generating net proceeds of $3.5 million. The July 2030 Notes bear interest at a fixed rate of 12.0% per annum, payable quarterly on January 15, April 15, July 15 and October 15 of each year, commencing January 15, 2026, and mature on July 15, 2030. Interest on overdue amounts accrues at the stated rate plus 2.0% per annum. $187.0 million aggregate principal amount of the July 2030 Notes remained outstanding as of March 31, 2026.
The July 2030 Notes may be redeemed, in whole or in part, at the 2030 Notes Issuers’ option at any time, upon not less than 10 nor more than 30 days’ prior notice, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to, but excluding, the redemption date. In addition, the July 2030 Notes are subject to repurchase requirements upon the occurrence of certain specified events, including upon a change of control, at 101% of principal plus accrued and unpaid interest and on certain asset sales or debt proceeds at 100% of principal plus accrued and unpaid interest.
The July 2030 Notes Indenture limits the ability of the 2030 Notes Issuers and the guarantors to incur additional debt, pay dividends or make other restricted payments, make certain investments, create or permit liens on assets, sell or dispose of assets, and enter into transactions with affiliates, in each case subject to specified exceptions. Events of default include the failure to pay principal, interest or other amounts when due, the failure to comply with covenants or other agreements in the July 2030 Notes Indenture, defaults on other material indebtedness of the 2030 Notes Issuers or the guarantors, certain bankruptcy or insolvency events, and the entry of material judgments against the 2030 Notes Issuers or the guarantors. If an event of default occurs and is continuing, the July 2030 Notes may be declared immediately due and payable, and in the case of bankruptcy or insolvency events, the July 2030 Notes automatically become immediately due and payable.
The obligations under the July 2030 Notes are fully and unconditionally guaranteed on a senior secured basis by the 2030 Notes Issuers’ U.S. subsidiary guarantors and are secured by liens on the collateral of the 2030 Notes Issuers and such guarantors, subject to permitted liens and the terms of the Super Senior, ABL and Equal Priority Intercreditor
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Agreements. Under these agreements, the ABL Lenders (as described below) hold first-priority liens on receivables, inventory, cash and related assets, while the Super Senior Term Loan Lenders (as described below) and July 2030 Noteholders hold junior liens on such assets. With respect to fixed assets, equity interests, intellectual property and related assets, the Super Senior Term Loan Lenders hold first-priority liens and July 2030 Noteholders share equal second-priority liens on a pari passu basis with holders of outstanding general unsecured claims in the Chapter 11 Cases, while the ABL Lenders hold junior liens.
Super Senior Term Loan
On July 29, 2025, Exela Technologies BPA, LLC and Exela Finance Inc. (for this purpose, together, the “Super Senior Term Loan Borrowers”), each subsidiary of Exela Technologies BPA, LLC, as guarantors, Ankura Trust Company, LLC, as administrative agent and collateral agent, and certain lenders (the “Super Senior Term Loan Lenders”) entered into a Financing Agreement (as amended, the “Super Senior Term Loan”), in accordance with the Plan. The Super Senior Term Loan provided for an aggregate principal amount of up to $46.0 million in senior secured term loans, consisting of (i) $40.0 million in new-money term loans, used to refinance obligations under BPA’s prepetition senior secured financing agreement and pay related fees and expenses, and (ii) $6.0 million in term loans issued to DIP lenders in exchange for and in full satisfaction of $10.0 million of DIP claims as contemplated by the Plan. On February 13, 2026, the Company entered into an amendment to the Super Senior Term Loan pursuant to which entities controlled by Avenue Capital Group, one of the three largest beneficial owners of the Company, agreed to extend incremental term loans in an aggregate principal amount of $4.0 million for working capital and general corporate purposes, bringing total outstanding borrowings under the Super Senior Term Loan to $50.0 million. Interest on the Super Senior Term Loan accrues, at the Super Senior Term Loan Borrowers’ election, either (a) at the Reference Rate, meaning the greatest of 4.0% per annum, the Federal Funds Effective Rate plus 0.5% per annum, one-month Term SOFR plus 1.0% per annum, or the Wall Street Journal Prime Rate plus 10.7% per annum, or (b) at Term SOFR, subject to a 4.0% floor, plus 11.7% per annum. Interest on Reference Rate Loans is payable monthly in arrears, while interest on SOFR Loans is payable at the end of each applicable interest period. Upon the occurrence of an event of default, all outstanding amounts bear interest at the applicable rate plus 2.0% per annum, payable on demand.
As of March 31, 2026, there were borrowings of $50.0 million outstanding under the Super Senior Term Loan. The Super Senior Term Loan is scheduled to mature on July 28, 2028. Voluntary prepayments are permitted at any time with five business days’ notice, provided accrued interest is paid and, if applicable, a prepayment premium is payable at a rate of 2.0% if prepaid prior to the first anniversary of the Emergence Date, 1.0% if prepaid on or after the first anniversary but prior to the second anniversary, and 0% thereafter. In addition, the Super Senior Term Loan is subject to mandatory prepayments of principal with accrued interest in certain circumstances, including (a) 25.0% of annual Excess Cash Flow (beginning with the fiscal year ending December 31, 2026, payable within ten business days after delivery of annual financial statements), (b) 100% of net cash proceeds from non-permitted asset sales in excess of $0.5 million in any fiscal year subject to reinvestment rights, (c) 100% of net cash proceeds from the issuance of indebtedness or equity securities (other than permitted issuances), and (d) certain extraordinary receipts, such as insurance recoveries and condemnation awards, subject to reinvestment rights. Upon the occurrence of an event of default such as payment defaults, covenant breaches, bankruptcy or insolvency, cross-defaults to other significant indebtedness, and judgment defaults, the obligations under the Super Senior Term Loan may be accelerated and become immediately due and payable.
The obligations under the Super Senior Term Loan are guaranteed on a joint and several basis by substantially all of the Super Senior Term Loan Borrowers’ subsidiaries and are secured by a first-priority lien on substantially all of the assets of the Super Senior Term Loan Borrowers' and the guarantors, subject to permitted liens and the terms of the ABL Intercreditor Agreement (as described below) and that certain Super Senior Intercreditor Agreement. The Super Senior Term Loan contains customary affirmative and negative covenants, including limitations on additional indebtedness, the granting of liens, asset sales, restricted payments, affiliate transactions, and changes in business. It also includes a financial covenant requiring the Issuer to maintain the ratio of (a) Indebtedness to (b) Covenant Consolidated EBITDA of no greater than 1.00 to 1.00 based on the trailing 12 months ended as of the last day of the most recently ended fiscal quarter. The Super Senior Term Loan Borrowers are also required to maintain liquidity of at least $2.0 million (or $10.0 million after the incurrence of any Incremental Facility). The Super Senior Term Loan Borrowers were in compliance with such financial covenants as of March 31, 2026.
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Second Lien Note
On February 27, 2023, BPA, through its subsidiary Exela Receivables 3, LLC, and BRF Finance Co., LLC entered into a Secured Promissory Note pursuant to which BPA borrowed $31.5 million from BRF Finance Co., LLC secured by a second lien pledge of Exela Receivables 3, LLC, a subsidiary of BPA (as amended, the “Second Lien Note”). The Second Lien Note was originally scheduled to mature on June 17, 2025 and bears interest at a per annum rate of one-month Term SOFR plus 7.5%. On July 29, 2025, BPA entered into an Amended and Restated Second Lien Credit Agreement with BRF Finance Co., LLC. The amendment was executed in connection with BPA’s emergence from the Chapter 11 Cases to align the terms of the Second Lien Note with the Company’s new capital structure and intercreditor arrangements. The Second Lien Note matures on September 30, 2026.
The obligations under the Second Lien Note are fully and unconditionally guaranteed by certain subsidiaries of BPA and are secured by liens on BPA’s and certain guarantors’ assets, including accounts receivable, inventory, cash and deposit accounts, equipment, real property, equity interests in subsidiaries, intercompany obligations, general intangibles, and other related assets. Pursuant to the ABL Intercreditor Agreement, BRF Finance Co., LLC’s liens are subordinated to the liens securing the Company’s senior debt facilities; specifically, the ABL Facility with respect to receivables, inventory, cash, and related assets, and the Super Senior Term Loan and July 2030 Notes with respect to fixed assets, equity interests, and other non-ABL assets. As a result, the obligations under the Second Lien Note are effectively second-priority liens behind the senior secured debt. The Second Lien Note requires the borrowers to maintain a minimum fixed charge coverage ratio, calculated on a trailing twelve-month basis. The minimum required ratio varies depending on the period: for the defined periods tested quarterly through December 31, 2025, and monthly from January 1, 2026, through June 30, 2026, the fixed charge coverage ratio must be not less than 0.85 to 1.00. Thereafter, for the defined periods tested monthly from July 1, 2026, through the maturity date, the fixed charge coverage ratio must be not less than 1.00 to 1.00. The Company was in compliance with such financial covenants as of March 31, 2026.
During the periods August 1, 2025 to December 31, 2025 (Successor) and January 1, 2025 to July 31, 2025 (Predecessor), the Company repaid $3.8 million and $6.0 million, respectively, in principal amount of the Second Lien Note. During the three months ended March 31, 2026 (Successor), the Company repaid $3.3 million principal amount of the Second Lien Note. The loss on early extinguishment of debt during the three months ended March 31, 2026 (Successor) and March 31, 2025 (Predecessor) totaled $0 and $0.1 million, respectively and represents write off of debt issuance costs. Loss on the early extinguishment of debt is reported within debt modification and extinguishment costs (gain), net within the Company’s condensed consolidated and combined statements of operations. As of March 31, 2026 (Successor), there were borrowings of $12.5 million outstanding under the Second Lien Note included in the current portion of long-term debt in the condensed consolidated balance sheet.
ABL Facility
On July 29, 2025, Exela Technologies BPA, LLC and certain of its subsidiaries (collectively, the “ABL Borrowers”) entered into a $150.0 million Asset-Based Lending Credit and Security Agreement (as amended, the “ABL Facility”) with MidCap Funding IV Trust, as administrative and collateral agent (the “Agent”), and a syndicate of lenders (the “ABL Lenders”). The ABL Facility was executed in connection with BPA’s emergence from the Chapter 11 Cases and provides for revolving commitments of up to $150.0 million, with an option to increase to $175.0 million through an additional tranche. The borrowing availability under the ABL Facility is limited to the lesser of (i) the aggregate revolving commitments and (ii) the borrowing base, which is calculated by reference to eligible billed and unbilled receivables, certain other receivables, eligible cash, and related assets, reduced by reserves established by the Agent. Borrowings under the ABL Facility bear an interest at Term SOFR plus an applicable margin ranging from 3.8% to 4.3%, depending on the ABL Borrowers’ trailing twelve-month EBITDA, subject to a 1.0% SOFR floor. Interest is payable monthly, with a 2.0% default premium. In addition to interest, the ABL Borrowers are required to pay an unused commitment fee of 0.5% per annum on the average daily unused portion of the commitments, customary letter of credit fees on the face amount of each outstanding letter of credit, a collateral management fee payable to the Agent, and a minimum balance fee if borrowings under the ABL Facility fall below 20.0% of the Borrowing Base.
As of March 31, 2026 (Successor), there were borrowings of $70.2 million outstanding under the ABL Facility. There were unamortized debt issuance costs of $1.9 million on the ABL Facility as of March 31, 2026 included in other noncurrent assets on the condensed consolidated balance sheet. The ABL Facility matures on July 29, 2028, and may be
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prepaid at any time without penalty (other than breakage costs). Mandatory repayments are required from proceeds of dispositions of the ABL Priority Collateral, certain insurance proceeds, or upon acceleration following an event of default. The events of default include failure to pay principal, interest or fees when due; breaches of covenants or other material contractual obligations; materially inaccurate representations or warranties; failure to pay specified other indebtedness above $25.0 million; bankruptcy or insolvency; final unsatisfied judgments; ERISA-related defaults; and a change in control.
The obligations under the ABL Facility are guaranteed on a joint and several basis by substantially all of the ABL Borrowers’ U.S. subsidiaries. The liens securing the ABL Facility are subject to an Intercreditor Agreement (the “ABL Intercreditor Agreement”) dated July 29, 2025, among MidCap Funding IV Trust, Ankura Trust Company, LLC, as Term Agent, BRF Finance Co., LLC, as Riley Agent, and U.S. Bank Trust Company, National Association, as July 2030 Notes Trustee. The ABL Intercreditor Agreement governs lien priorities including (i) relative priorities for the collateral securing the ABL Facility obligations, the Super Senior Term Loan obligations, the July 2030 Notes Indenture obligations and the Second Lien Note obligations; (ii) collateral priorities securing (a) any Second Lien Note obligations, (b) any Super Senior Term Loan obligations, (c) any July 2030 Notes Indenture obligations, or (d) any Excess ABL Debt; and (iii) prohibition on contesting liens. The ABL Facility is secured by a first-priority lien on certain ABL Priority Collateral (including receivables, cash, inventory, deposit accounts, and related assets) and a junior lien on certain Term Priority Collateral (as defined therein), subject to the ABL Intercreditor Agreement.
The ABL Facility includes customary affirmative covenants such as reporting, collateral maintenance, insurance, and inspections, and negative covenants, including restrictions on additional indebtedness, liens, asset sales, investments, affiliate transactions, and changes in business, with a minimum fixed charge coverage ratio. The ABL Facility requires the ABL Borrowers to maintain a minimum fixed charge coverage ratio, calculated on a trailing twelve-month basis. The fixed charge coverage ratio is defined as the ratio of EBITDA less Unfinanced Capital Expenditures less Capitalized Software Expenditures, to Fixed Charges (as such terms are defined in the ABL Facility). The minimum required ratio varies depending on the period: for the defined periods tested quarterly through December 31, 2025, and monthly from January 1, 2026 through June 30, 2026, the fixed charge coverage ratio must be not less than 0.85 to 1.00. Thereafter, for the defined periods tested monthly from July 1, 2026, through the maturity date, the fixed charge coverage ratio must be not less than 1.00 to 1.00. On March 6, 2026, the ABL Borrowers, the Agent and the ABL Lenders entered into a Limited Waiver and Third Amendment to the ABL Facility. Among other things, this amendment (i) eliminates a covenant requiring the ABL Borrower to maintain a minimum excess availability of $7.5 million; (ii) implements a temporary availability block through June 30, 2026, which reduces borrowing capacity by the greater of $3.75 million or 5.0% of the borrowing base if the ABL Borrower’s fixed charge coverage ratio falls below 1.00 to 1.00; (iii) temporarily increases the advance rate for eligible investment grade billed accounts to 95.0% through September 30, 2026; (iv) adjusts the calculation of the borrowing base; (v) amends the mechanics governing the cash dominion period; and (vi) resets the deferred revolving loan origination fee. The Company was in compliance with such financial covenants as of March 31, 2026.
European Senior Credit Facilities Agreement
In June 2024, XBP Europe, Inc., a wholly owned subsidiary of the Company, together with certain other subsidiaries, entered into a Facilities Agreement (the “Facilities Agreement”) with HSBC UK Bank plc (“HSBC”) for a £15.0 million and €10.5 million secured credit facility consisting of (i) a single draw, secured Term Loan A facility in an aggregate principal amount of £3.0 million (the “2028 Term Loan A Facility”), (ii) a single draw, secured Term Loan B facility in an aggregate principal amount of €10.5 million (the “2028 Term Loan B Facility”, collectively with the 2028 Term Loan A Facility, the “2028 Term Loan Facilities”) and (iii) a multi-draw, multi-currency secured revolving credit facility in an aggregate principal amount of £12.0 million (the “Revolving Credit Facility”), and, together with the 2028 Term Loan Facilities, (the “European Senior Credit Facilities”). Pursuant to the original Facilities Agreement, the 2028 Term Loan Facilities mature on June 26, 2028, and the Revolving Credit Facility matures on June 26, 2027, with certain extension rights at the discretion of HSBC. Borrowings under the 2028 Term Loan A Facility, the 2028 Term Loan B Facility and Revolving Credit Facility bear interest at a rate per annum equal to the SONIA plus the applicable margin of 3.25%, Euro Interbank Offered Rate (“EURIBOR”) plus the applicable margin of 3.25% and Reference Rate plus the applicable margin of 3.25%, respectively. “Reference Rate” for any period means (i) Secured Overnight Financing Rate (“SOFR”) for funds extended in U.S. Dollars; (ii) the EURIBOR, for funds extended in Euros; (iii) the SONIA, for funds
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extended in Pounds Sterling; and the Stockholm Interbank Offered Rate (“STIBOR”) for funds extended in Swedish Krona.
On July 25, 2025, an amendment to the Facilities Agreement was executed to permit the borrowing of an additional sum of €16.1 million, the equivalent of £14.0 million, under the Revolving Credit Facility. The drawdowns were made in Euro and used for general corporate purposes. This amendment extended the maturity of the Revolving Credit Facility to June 26, 2028, and updated certain definitions and covenants reflecting the Company’s new corporate structure following the Business Combination as discussed in Note 4 , Business Combination .
The European Senior Credit Facilities continue to be secured by first-ranking security interests over substantially all assets of XBP Europe, Inc. and other borrower and guarantor subsidiaries, including cash, receivables, inventory, intercompany receivables, shares in subsidiaries, and related assets. The amendment added a new covenant restricting XBP Global Holdings, Inc., as the parent of XBP Europe, Inc., from providing certain guarantees or other credit support. Except as otherwise provided by applicable law, all obligations under the Facilities Agreement are jointly and severally unconditionally guaranteed by the European subsidiaries of XBP Europe, Inc.
The outstanding principal amount of the 2028 Term Loan A Facility is scheduled to be repaid in fifteen (15) equal quarterly installments of £150 thousand, which commenced September 30, 2024, with the remaining outstanding principal amount of £750 thousand payable at maturity along with accrued and unpaid interest. The outstanding principal amount of the 2028 Term Loan B Facility is scheduled to be repaid in fifteen (15) equal quarterly installments of €525 thousand, which commenced September 30, 2024, with the remaining outstanding principal amount of €2.6 million payable at maturity along with accrued and unpaid interest. The Company may, at any time, prepay the principal of the Senior Credit Facilities. Each prepayment shall be accompanied by the payment of accrued interest, without any premium or penalty. However, the Company is limited to a maximum of four voluntary prepayments of the Revolving Credit Facility within any consecutive twelve-month period. During the three months ended March 31, 2026 (Successor), the Company repaid $0.8 million of outstanding principal amounts under the 2028 Term Loan A Facility and 2028 Term Loan B Facility. As of March 31, 2026 (Successor), the outstanding balance of the 2028 Term Loan A Facility, the 2028 Term Loan B Facility, and the Revolving Credit Facility was approximately $2.6 million, $7.8 million, and $34.8 million, respectively.
The Facilities Agreement contains financial covenants including, but not limited to, (i) a consolidated total leverage ratio of not greater than 2.50 to 1.00 (with step-downs to (a) 2.25 to 1.00 starting January 1, 2025 and (b) 2.00 to 1.00 starting January 1, 2026); (ii) a cash flow coverage ratio of at least 1.10:1.00; and (iii) a consolidated interest coverage ratio of not less than 4.00 to 1.00. The Facilities Agreement and indenture governing the Senior Credit Facilities contains certain affirmative and negative covenants limiting the ability of the XBP Europe, Inc. to effect mergers and change of control events as well as certain other limitations, including limitations on (i) incurrence of additional indebtedness or liens, (ii) dispositions of assets, (iii) substantial changes of the general nature of the business, (iv) entering into restrictive agreements, (v) making certain investments, loans, advances, guarantees and acquisitions, (vi) prepaying certain indebtedness, (vii) the declaration and payment of dividends or other restricted payments, (viii) engaging in transactions with affiliates, or (ix) amending certain material documents. As of March 31, 2026, the Company was not in compliance with the consolidated total leverage ratio covenant and the consolidated interest coverage ratio covenant under the Facilities Agreement. On May 13, 2026, the Company obtained a formal waiver from the lender of all rights and remedies arising out of or in connection with the failure to meet the requirements of the consolidated total leverage ratio covenant and the consolidated interest coverage ratio covenant as of March 31, 2026. As of March 31, 2026, the Company was in compliance with all other affirmative and negative covenants under the Facilities Agreement pertaining to its financing arrangements.
BR Exar AR Facility
On February 12, 2024, certain of the Company’s subsidiaries entered into a receivables purchase agreement with BR Exar, LLC (“BREL”), an affiliate of B. Riley Commercial Capital, LLC (as subsequently amended on various dates in connection with each monthly sale of certain existing receivables, up to and including December 31, 2025 (the “BR Exar AR Facility”)). The Company received an aggregate of $15.2 million and $22.1 million, net of legal and other fees of $1.8 million and $1.6 million, respectively, under the BR Exar AR Facility during the periods August 1, 2025 to December 31, 2025 (Successor) and January 1, 2025 to July 31, 2025 (Predecessor), respectively. Under the terms of the BR Exar AR Facility during the periods August 1, 2025 to December 31, 2025 (Successor) and January 1, 2025 to July
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31, 2025 (Predecessor), certain of the Company’s subsidiaries agreed to sell certain existing receivables and all of their future receivables to BREL until such time as BREL shall have collected $17.0 million and $25.5 million, respectively, net of any costs, expenses or other amounts paid to or owing to the buyer under the agreement. BREL collected $23.0 million and $25.8 million under the BR Exar AR Facility during the periods August 1, 2025 to December 31, 2025 (Successor) and January 1, 2025 to July 31, 2025 (Predecessor), respectively. As of December 31, 2025, there was a $1.4 million of outstanding balance under the BR Exar AR Facility included in the current portion of long-term debt in the condensed consolidated balance sheet. During the three months ended March 31, 2026, BREL collected $1.4 million under the BR Exar AR Facility. There was no amount outstanding under the BR Exar AR Facility as of March 31, 2026.
Under the BR Exar AR Facility, transfers of accounts receivable from certain of the Company’s subsidiaries to BREL are treated as secured borrowings under ASC 860, Transfers and Servicing and are not accounted for as a reduction in accounts receivable. Accordingly, the Company treated total of $0 and $0.1 million of legal fee and other expense incurred under the BR Exar AR Facility as debt issuances cost, and $0 and $0.4 million of difference between the net proceeds received by the Company and total amount collected by BREL under the BR Exar AR Facility as original issue discount during the three months ended March 31, 2026 (Successor) and 2025 (Predecessor).
Amended BR Exar AR Facility
On January 21, 2026, certain of the Company’s subsidiaries entered into an Amended and Restated Receivables Purchase Agreement with BREL (as subsequently amended on February 10, 2026 and March 27, 2026 (the “Amended BR Exar AR Facility”)), pursuant to which they agreed to sell certain existing receivables and all of their future receivables to BREL until such time as BREL shall have collected $20.0 million, net of any costs, expenses or other amounts paid to or owing to the buyer under the agreement. The Company received $19.5 million, net of amendment and legal fees of $0.5 million, in cash consideration for sale of these receivables under the Amended BR Exar AR Facility during the three months ended March 31, 2026 (Successor). As of March 31, 2026, the Company accrued $1.0 million of unpaid amendment fee for the amendment executed on March 27, 2026. During the period January 1, 2026 through March 31, 2026, BREL collected $10.3 million of outstanding principal amount under the Amended BR Exar AR Facility. There was $9.7 million outstanding under the Amended BR Exar AR Facility as of March 31, 2026 (Successor).
Under the Amended BR Exar AR Facility, transfers of accounts receivable from certain of the Company’s subsidiaries to BREL are treated as secured borrowings under ASC 860, Transfers and Servicing and are not accounted for as a reduction in accounts receivable. Accordingly, the Company treated a total of $1.5 million of amendment and legal fees incurred under the Amended BR Exar AR Facility as debt issuances cost during the three months ended March 31, 2026 (Successor).
Amended Factoring Agreement
On September 15, 2023, certain European subsidiaries of the Company entered into an amendment to a secured borrowing facility (the “Amended Factoring Agreement”) for a non-recourse factoring program pursuant to which an unrelated third party (the “Factor”) purchases certain approved and partially approved accounts receivables (as defined in the Amended Factoring Agreement) from certain subsidiaries of the Company (the “Relevant Entities”) up to a maximum amount of €15.0 million while assuming the risk of non-payment on the purchased accounts receivables up to the level of approval. The Relevant Entities have no continuing involvement in the transferred accounts receivable, other than collection and administrative responsibilities and, once sold, the accounts receivable are no longer available to satisfy creditors of the relevant entities.
The Company accounts for the transactions under the Amended Factoring Agreement as a sale under ASC 860, and as an off-balance sheet arrangement. Net funds received from the transfers reflect the face value of the account less a fee, which is recorded as an increase to cash and a reduction to accounts receivable outstanding in the condensed consolidated balance sheets. The Company reports the cash flows attributable to the sale of accounts receivables to the Factor and the cash receipts from collections made on behalf of and paid to the Factor under the Amended Factoring Agreement, on a net basis as trade accounts receivables in cash flows from operating activities in the Company’s consolidated statements of cash flows.
As of March 31, 2026, the Company’s outstanding factored accounts receivable totalled approximately $3.3 million pursuant to the Amended Factoring Agreement, representing the face value of the factored invoices. The
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Company recognizes factoring costs upon disbursement of funds. The Company incurred a loss on sale of accounts receivables including expenses pursuant to the Amended Factoring Agreement totalling approximately $0.1 million for the three months ended March 31, 2026 (Successor).
Additional Information with Respect to the Super Senior Term Loan Borrowers
Under the terms of the Super Senior Term Loan, the Company is required to present additional information that reflects the condensed consolidated and combined financial condition, results of operations and cash flows of the Super Senior Term Loan Borrowers separate from the condensed consolidated financial condition, results of operations and cash flows of the rest of the Company as of and for the periods presented. This additional information for 2026 is presented below.
Condensed Consolidated Balance Sheets as of March 31, 2026:
Successor (1)
Non-Super Senior Term Loan Borrower Subsidiaries (2)
Eliminations (3)
Super Senior Term Loan Borrowers (4)=(1)-(2)-(3)
Consolidated
Non-GAAP
Non-GAAP
Non-GAAP
March 31,
March 31,
March 31,
March 31,
2026
2026
2026
2026
Assets
Current assets
Cash and cash equivalents
$
28,464
$
25,437
$
—
$
3,027
Restricted cash
24,639
—
—
24,639
Accounts receivable, net
130,253
30,073
—
100,180
Related party receivables and prepaid expenses
987
—
(35,030)
36,017
Inventories, net
11,385
4,013
—
7,372
Prepaid expenses and other current assets
26,681
5,348
—
21,333
Total current assets
222,409
64,871
(35,030)
192,568
Property, plant and equipment, net
78,055
13,289
—
64,766
Operating lease right-of-use assets, net
27,856
4,531
—
23,325
Goodwill
189,881
55,956
—
133,925
Intangible assets, net
335,232
36,124
—
299,108
Other noncurrent assets
18,008
35,671
(32,000)
14,337
Total assets
$
871,441
$
210,442
$
(67,030)
$
728,029
Liabilities and Stockholders' Equity
Liabilities
Current liabilities
Current portion of long-term debt
$
32,260
$
4,505
$
—
$
27,755
Accounts payable
69,775
25,369
—
44,406
Related party payables
4,968
38,833
(34,369)
504
Income tax payable
5,747
1,678
—
4,069
Accrued liabilities
51,987
16,620
—
35,367
Accrued compensation and benefits
56,892
24,291
—
32,601
Accrued interest
9,374
246
(661)
9,789
Customer deposits
18,359
153
—
18,206
Deferred revenue
14,197
6,083
—
8,114
Obligation for claim payment
53,203
—
—
53,203
Current portion of finance lease liabilities
4,325
(2)
—
4,327
Current portion of operating lease liabilities
9,592
1,564
—
8,028
Total current liabilities
330,679
119,340
(35,030)
246,369
Long-term debt, net of current maturities
348,947
59,773
(32,430)
321,604
Finance lease liabilities, net of current portion
5,818
—
—
5,818
Net defined benefit liability
6,161
5,573
—
588
Deferred income tax liabilities
48,546
2,366
—
46,180
Long-term income tax liabilities
11,188
—
—
11,188
Operating lease liabilities, net of current portion
20,224
3,085
—
17,139
Other long-term liabilities
37,318
1,531
—
35,787
Total liabilities
808,881
191,668
(67,460)
684,673
Total stockholder's equity
62,560
18,774
430
43,356
Total liabilities and stockholder's equity (deficit)
$
871,441
$
210,442
$
(67,030)
$
728,029
57
Table of Contents
Condensed Consolidated Income Statements for the three months ended March 31, 2026:
Successor (1)
Non-Super Senior Term Loan Borrower Subsidiaries (2)
Eliminations (3)
Super Senior Term Loan Borrowers ((4)=(1)-(2)-(3))
Consolidated
Non-GAAP
Non-GAAP
Non-GAAP
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2026
2026
2026
2026
Revenue
$
197,085
$
31,328
$
—
$
165,757
Related party revenue
47
95
(1,198)
1,150
Cost of revenue (exclusive of depreciation and amortization)
151,897
22,981
—
128,916
Selling, general and administrative expenses (exclusive of depreciation and amortization)
42,814
7,678
—
35,136
Depreciation and amortization
14,849
1,553
—
13,296
Related party expense, net
2,653
2,237
(1,198)
1,614
Operating loss
(15,081)
(3,026)
—
(12,055)
Other expense (income), net:
Interest expense, net
14,069
1,602
46
12,421
Sundry expense (income), net
(392)
746
—
(1,138)
Other income, net
(561)
(216)
—
(345)
Loss before reorganization items and income taxes
(28,197)
(5,158)
(46)
(22,993)
Reorganization items, net
—
—
Loss before income taxes
(28,197)
(5,158)
(46)
(22,993)
Income tax expense (benefit)
(1,435)
70
—
(1,505)
Net loss
$
(26,762)
$
(5,228)
$
(46)
$
(21,488)
58
Table of Contents
Condensed Consolidated Cash Flow Statements for the three months ended March 31, 2026 :
Successor (1)
Non-Super Senior Term Loan Borrower Subsidiaries (2)
Eliminations (3)
Super Senior Term Loan Borrowers ((4)=(1)-(2)-(3))
Consolidated
Non-GAAP
Non-GAAP
Non-GAAP
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2026
2026
2026
2026
Cash flows from operating activities
Net loss
$
(26,762)
$
(5,228)
$
(46)
$
(21,488)
Adjustments to reconcile net loss to cash used in operating activities
Depreciation and amortization
14,849
1,553
—
13,296
Original issue discount, debt premium and debt issuance cost amortization
1,832
59
46
1,727
Provision for credit losses
(611)
(129)
—
(482)
Deferred income tax provision
(4,182)
—
—
(4,182)
Equity-based compensation expense
484
484
—
—
Unrealized foreign currency loss
37
968
—
(931)
Loss on sale of assets
225
—
—
225
Fair value adjustment for private warrants liability
(2)
(2)
—
—
Payment-in-kind interest
1,174
—
—
1,174
Change in operating assets and liabilities, net of effect from acquisitions
Accounts receivable
639
(702)
—
1,341
Prepaid expenses and other current assets
(1,109)
(1,895)
—
786
Accounts payable and accrued liabilities
9,148
900
—
8,248
Related party receivables (payables)
(626)
26,349
—
(26,975)
Additions to outsourced contract costs
(141)
—
—
(141)
Net cash used in operating activities
(5,045)
22,357
—
(27,402)
Cash flows from investing activities
Purchase of property, plant and equipment
(1,088)
(205)
—
(883)
Additions to internally developed software
(552)
(149)
—
(403)
Proceeds from sale of assets
84
64
—
20
Net cash used in investing activities
(1,556)
(290)
—
(1,266)
Cash flows from financing activities
Cash paid for debt issuance costs
(834)
—
—
(834)
Cash paid for withholding taxes on vested RSUs
(73)
(73)
—
—
Principal payments on finance lease obligations
(1,101)
—
—
(1,101)
Borrowings from other loans
10,236
516
—
9,720
Proceeds from Super Senior Term Loan
4,000
—
—
4,000
Proceeds from ABL Facility
133,700
—
—
133,700
Repayments on ABL Facility
(141,376)
—
—
(141,376)
Repayment of Second Lien Note
(3,250)
—
—
(3,250)
Repayments under BR Exar AR Facility
(1,440)
—
—
(1,440)
Borrowing under Amended BR Exar AR Facility
20,000
—
—
20,000
Repayments under Amended BR Exar AR Facility
(10,290)
—
—
(10,290)
Repayments on 2028 Term Loan Facilities
(817)
(817)
—
—
Principal repayments on senior secured term loans and other loans
(17,208)
(1,844)
—
(15,364)
Net cash used in financing activities
(8,453)
(2,218)
—
(6,235)
Effect of exchange rates on cash, restricted cash and cash equivalents
(509)
(509)
—
—
Net increase (decrease) in cash, restricted cash and cash equivalents
(15,563)
19,340
—
(34,903)
Cash, restricted cash and cash equivalents
Beginning of period
68,666
6,097
—
62,569
End of period
$
53,103
$
25,437
$
—
$
27,666
Supplemental cash flow data:
Income tax payments, net of refunds received
$
1,261
$
421
$
—
$
840
Interest paid
14,705
950
—
13,755
Noncash investing and financing activities:
Assets acquired through right-of-use arrangements
467
—
—
467
Amendment fee payable on Amended BR Exar Facility accrued
1,000
—
—
1,000
Accrued capital expenditures
46
—
—
46
Potential Future Transactions
We may, from time to time, explore and evaluate possible strategic transactions, which may include joint ventures, as well as business combinations or the acquisition or disposition of assets. In order to pursue certain of these opportunities, additional funds will likely be required. Subject to applicable contractual restrictions, to obtain such financing, we may seek to use cash on hand, or we may seek to raise additional debt or equity financing through private placements or through underwritten offerings. There can be no assurance that we will enter into additional strategic transactions or alliances, nor do we know if we will be able to obtain the necessary financing for transactions that require additional funds on favorable terms, if at all. In addition, pursuant to certain registration rights agreements we have entered into with certain of our stockholders, such holders have the right to demand underwritten offerings of our Common Stock. We may from time to time in the future explore, with certain of those stockholders, the possibility of an underwritten public offering of our Common Stock held by those stockholders. There can be no assurance as to whether or when an offering may be commenced or completed, or as to the actual size or terms of the offering.
59
Table of Contents
Critical Accounting Policies and Estimates
The preparation of financial statements requires the use of judgments and estimates. The critical accounting policies provide a better understanding of how the Company develops its assumptions and judgments about future events and related estimations and how they can impact the Company’s financial statements. A critical accounting estimate is one that requires subjective or complex estimates and assessments and is fundamental to the Company’s results of operations. The Company bases its estimates on historical experience and on various other assumptions it believes to be reasonable according to the current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company believes the current assumptions, judgments and estimates used to determine amounts reflected in the condensed consolidated financial statements are appropriate; however, actual results may differ under different conditions. This discussion and analysis should be read in conjunction with the Company’s financial statements and related notes included elsewhere in this report. Refer to “Critical Accounting Policies and Estimates” contained in Part II, Item 7 of our 2025 Form 10-K for a complete discussion of critical accounting estimates. There have been no material changes to our critical accounting policies or our use of estimates during the three months ended March 31, 2026.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.