XBP Global Holdings, Inc. Q2 FY2026 earnings call

• Core Strategic Transformation: The company is deliberately converting legacy workflow platforms into high-margin agentic AI pipelines, focused on mission-critical, regulated end markets including healthcare, public sector, and BFSI. The strategy leverages deep domain expertise and a human-in-the-loop model: when AI encounters complex edge cases (approximately 50% of exceptions in mature deployments), subject matter experts adjudicate cases and their judgments are used to continuously retrain models, elevating staff rather than replacing them.
• AI Ecosystem Integration: The company is capitalizing on the growth of enterprise-grade open-weight AI models, which can be rapidly integrated into deployed agentic pipelines. This model keeps client data strictly within enterprise boundaries to meet regulatory requirements such as the EU AI Act.
• Quarterly Financial Performance: Total Q2 pro forma revenue was $191.3 million, down 14% year-over-year, in line with expectations from planned legacy contract exits and 2025 restructuring. Adjusted gross margin (which normalizes one-time severance and restructuring costs) expanded for the fourth consecutive quarter to 24.9% (the highest level on record), up 290 basis points year-over-year and 140 basis points sequentially. Normalized EBITDA hit $21.9 million, up 8.4% year-over-year and 40.6% sequentially, for a normalized EBITDA margin of 11.5%.
• Commercial Activity: Total Q2 bookings reached $121.3 million in total contract value, up 51.6% year-over-year and 12.2% sequentially. New annual contract value (ACV) bookings hit $36 million, up 57% year-over-year and 32.1% sequentially. Total sales pipeline stood at $2.5 billion as of June 30, flat sequentially and up 17.2% year-over-year. Strong demand was observed for secure, on-premise AI-powered hyper-automation with data sovereignty guardrails in healthcare and public sector healthcare, and the company closed a new agentic AI infrastructure deal for global airline fleet maintenance lifecycle management.
• Operational Efficiency & Labor Productivity: Annualized operational efficiency targets were raised to $65 to $75 million, up from the prior target of $55 to $60 million, with an expected 2026 in-year benefit of approximately $35 million. The increase was driven by newly identified non-payroll efficiency opportunities including third-party vendor cost savings. The company projects a 20% workforce reduction by the end of 2026 relative to year-end 2025. Revenue per employee grew to approximately $89,000 (from $82,000 last quarter), and is projected to reach $100,000 by year-end, well above the peer group average of ~$60,000.
• Business Diversification: Client concentration is low, with the top 10 clients representing only 34% of total revenue. The business is diversified across verticals, and average client tenure among the top 25 clients is approximately 15 years.
• Strategic Process Update: The strategic alternatives process announced last quarter is ongoing, with a financial advisor engaged; updates will be provided as appropriate.

XBT Global has two operating product segments:

1. Applied Workflow Automation: Q2 2026 revenue was $166.8 million, representing a 16.7% year-over-year decline. This segment contributes 87.2% of total company revenue. Its adjusted gross margin reached 19.2%, an increase of 120 basis points year-over-year.
2. Technology: Q2 2026 revenue was $24.5 million, representing a 9.8% year-over-year increase. This segment contributes 12.8% of total company revenue. Its adjusted gross margin expanded to 64.2%, an increase of 690 basis points year-over-year.

• Management expects a revenue inflection (return to growth) in the second half of 2026, paired with continued gross margin expansion and SG&A cost savings that will drive further normalized EBITDA growth through the end of 2026 and into 2027.
• Annualized operational efficiency targets were revised upward to $65 to $75 million from the prior range of $55 to $60 million, reflecting newly identified organizational efficiency opportunities.
• The company maintains its projection of a ~20% workforce reduction by the end of 2026 relative to year-end 2025, and projects revenue per employee will approach $100,000 by the end of 2026.
• The company's core focus remains on value over volume, prioritizing margin expansion over top-line growth in the near term as the transformation progresses.

• Overall public sector contract timing remains volatile, primarily due to ongoing geopolitical uncertainty, even as demand for healthcare-focused public sector solutions strengthens.
• Forward-looking statements about future transformation performance, AI integration, and financial results are subject to inherent risks and uncertainties that could cause actual outcomes to differ materially from expectations, as detailed in the company's SEC filings.
• Lower year-over-year and sequential revenue is expected in the near term as a result of planned legacy contract exits and volume reductions tied to 2025 restructuring.

No questions were raised by meeting participants during the scheduled Q&A session, so this section has no content to summarize.