Currency Exchange International Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
September 12, 2024

There are 6 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to the Currency Exchange International Third Quarter 20 24 Financial Results Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for a question.

Speaker 1

I

Operator

would now like to turn the conference over to Bill Metellis, Investor Relations Manager. Please go ahead.

Speaker 2

Thank you, operator, and good morning, everyone. Welcome to the Currency Exchange International conference call to discuss the financial results for the Q3 of the fiscal 2024 year. Thanks for joining us. With us today are President and CEO, Randolph Pinup and Group CFO, Gerhard Barnard. Gerhard will provide an overview of CXI's financial results and his latest respect on the company's operations.

Speaker 2

Randolf will then provide his commentary on CXI's strategic initiatives, sales efforts and business activities, after which we will open it up for your questions. Today's conference call is open to shareholders, prospective shareholders, members of the investment community, including the media. For those of you who may happen to leave our call before its conclusion, please be advised that this conference call will be recorded and then uploaded to CXI's Investor Relations website page along with the financial statements and MD and A. Please note that this conference call will include forward looking information, which is based on a number of assumptions and actual results could differ materially. Please refer to our financial statements and MD and A reports for more information about the factors that could cause these different results and the assumptions that we have made.

Speaker 2

With that, I'll turn the call over to Gerhard. Gerhard, please go ahead.

Speaker 1

Thank you, Bill, and thank you everyone for joining today's call. These results are presented in U. S. Dollars. My overview will also incorporate the results of our wholly owned subsidiary, Exchange Bank of Canada.

Speaker 1

The group continues to focus on executing against its strategic plan in which investments are being made in our people through in house training, mentorship programs, and coaching initiatives. CXI and EBC combined have 384 full time and part time employees as at July 31, 2024, a decrease from 391 ending April 30, 2024. As our technology platforms continue to remain a strategic focus and their continued enhancement and additional system implementations are creating planned operational efficiencies. Kyriba, our treasury management system and Alyssa AML compliance software are on schedule for operationalization by the end of this fiscal year. Our IT team continues to leverage the power of the cloud to enhance integration capabilities, improve scalability, performance, and resilience.

Speaker 1

These initiatives and investments among others support the more efficient future growth of the group. On November 29, 2023, the group announced its notice of intention to make a formal course a normal course issuer bid NCIB or share buyback and to purchase for cancellation a maximum amount of 322,169 common shares representing 5% of the company's issued and outstanding common shares. At the end of the Q3, the company bought back roughly 96,000 shares for a total investment of US1.8 million dollars and nearly CAD2.4 million dollars Let's look at the consolidated performance for the 3 months ended July 31, 2024 compared to the previous 3 months ending July 31, 2023. The company reported €3,900,000 of net income, which is slightly lower than the €4,000,000 for the same period last year. Net income in the United States grew 576,000 or 13 percent to €5,140,000 whereas net losses from Canada further declined by 700,000 to a current quarterly loss of 1,200,000.

Speaker 1

The Group's return on equity ROE for the current period was 9% compared to 17% for the same period last year. The company generated revenue of $24,000,000 a 2% increase from the same period last year with noticeable new customer acquisitions in both the banknotes and payments product lines. Now comparing the Q3 of 2024 to the Q2 of 2024, revenue increased by $3,900,000 or 19 percent which is consistent with the cyclical growth patterns. The top 5 currencies by revenue were U. S.

Speaker 1

Dollars, euros, Canadian dollar, British pound sterling and Mexican pesos. The 2% year over year growth in revenue price was primarily due to growth in wholesale banknotes of $365,000 followed by growth in the payments product line of 197,000 whereas direct to consumer or DTC declined by 155,000. Now revenue in the United States increased 661,000 or 3 percent over last year, while in Canada declined 255,000 or 6%. Operating expenses increased slightly by about €100,000 or only 1%. The company recorded net operating income of €6,750,000 in the 3 month period ended July 31, 2024, 5% higher than the same period last year.

Speaker 1

EBITDA margin for the current period was 29% compared to 28% for the same period last year. The following is a highlight on revenue by product line for the 3 months ended July 31, 2024 compared to the previous 3 months July 31, 2023. And I'd like to start off with banknotes. Revenue in the banknotes product line increased by about 210,000 or 1%. Between May 2024 July 2024, approximately 246,000,000 travelers passed through TSA checkpoints in the United States Airports, dollars 15,000,000 or 6% more compared to pre COVID levels.

Speaker 1

Wholesale banknotes revenue increased 365,000 or 3% as the company continued to grow its wholesale banknotes domestic product line with new customer acquisitions and growth in volumes from existing relationships in both Canada and the United States. The company was able to achieve efficiencies in operating costs associated with wholesale banknotes including shipping costs. Relative to the 3 month period ended April 30, 2024, wholesale banknote revenue increased 2,400,000 or 26 percent, which coincides with the typical seasonal increase in tourism in North America. Overall, Wholesale Banknotes revenue accounted for 49% of the total revenue in the current 3 month period consistent with the prior period in 2023. Direct to consumer banknotes revenue increased $150,000 or 2%.

Speaker 1

The company maintains its market share and growth level despite the tapering of demand in investment currencies. During the Q3, demand for travel currencies grew from last year and revenue from the company's FX online or online FX platform led the growth in revenue for the period. Overall, direct to consumer remained a growing business segment with its diversified delivery channels between company owned branch locations through agents, relationships and using the company's online FX platform where the company successfully added the state of Maryland and Iowa to its network during the Q3, which represents an opportunity for the company to offer its online services to almost 93% of the United States population. Direct to consumer revenue represents 34% of the total revenue in the current 3 months period compared to 35% in the previous period. Now let's look at payments.

Speaker 1

Revenue in the payments product line increased 5% in this 3 month period ended July 31, 2024 compared to last year's. In the United States, the payments revenue grew 27%, now that's in the last 3 months, whereas in Canada declined by 22%. Growth in the United States was primarily driven by new customer acquisitions and increased activity from existing financial institutions, a direct result of the company's continued investment in integrations with core banking platforms. In Canada, the decrease year over year was driven by the economic impact of inflationary pressures in Canada. The company processed nearly 40,000 payments representing 3,380,000,000 in volume in the 3 months period and this compares to roughly 32,700 transactions on RMB2.6 billion in the same period last year.

Speaker 1

Now payments represents roughly 16%, 17% of the total revenue. Now let's look at revenue by geographic location for the 3 month period. In the United States, revenue grew by 3% during the 3 month period as compared to the same period last year, primarily led by the growth in payments, which increased by about $580,000 or 27% and in wholesale banknotes, which increased by 235,000 or 3 percent despite a decrease in direct to consumer banknotes, as I mentioned, of roughly 255,000 or 2%. Revenue in the United States accounted for 83% of the total revenue by geographic location when compared to 82% in the prior period. Let's look at Canada.

Speaker 1

Revenue in Canada declined 6% in the Q3 compared to the same period last year. Growth in domestic banknotes revenue was offset by a notable decline in transacted volumes and revenue from international banknotes clients. Overall, revenue in the banknotes product line increased by 127,000 or 5% and revenue in the payments product line decreased or declined about $382,000 or 22%. Overall revenue in Canada represented a 17% of the total revenue by geographic location in the current 3 months compared to roughly 18% in the prior period. Now operating expenses increased nearly 1% for the 3 months period ended July 31, 2024.

Speaker 1

For the U. S, there's been no increase in operating expenses. As a matter of fact, there was a slight decline of about $150,000 Income tax expense for the current period is related to United States region. It primarily represents taxable income growth and is subject to certain temporary and permanent adjustments to taxable income. The Mexican peso was the largest contributor to net foreign exchange losses for the 3 month period ended 31 July 2024, while it was the largest driver of gains in the same period last year.

Speaker 1

Let's look at the consolidated performance quickly for the total 9 months year to date ended July 31 compared to the prior 9 months. Overall, the company reported CAD5.3 million of net income during the 9 month period ended July 31, 2024, CAD2.6 million or 33 percent lower than the same period last year. Adjusted net income was CAD6.7 million, a decrease of CAD1.2 million or 15% compared to the same period last year. Now adjusted net income for the United States grew by $1,600,000 or 20 percent compared to the same period last year, whereas in Canada, the adjusted net loss increased by $2,800,000 Now this adjusted loss comprised of reported net loss adjusted for the reversal of the deferred tax benefit allowance of 1,430,000,000 in Canada during the current period. The company generated revenue of CAD62,200,000 for the 9 month period, a 5% increase from the same period last year.

Speaker 1

The revenue increase was driven by strengthening international travel and new customer acquisitions in both banknotes and payment product lines in the United States, partially offset by a decline in trades with foreign financial institutions in Canada. A quick review by product line for the 9 months. Banknotes, revenue in banknotes, product line increased roughly $2,100,000 or 4%. In payments, the product line increased by 9% with a 37% increase in the United States and a 22% decline in Canada as a result of reduced volumes and slower economic conditions. Payments revenue represented 19% of total revenue in the current 9 months period compared to 18% in the previous period.

Speaker 1

Now if you look at revenue by geographic location for the 9 months, in the United States, revenue grew by 10% as a result of strong growth in both product lines. Revenue growth in the payment product line was $2,100,000 or 37 percent for the 9 months. The growth in the banknotes product line was $1,400,000 or 7 percent, where in wholesale banknotes it was RMB1.1 million or 6% in direct to consumer. Revenue in United States accounted for 81% of total revenue by geographic location in the 9 months compared to roughly 77% in the prior period of 2023. In Canada, revenue declined by 12% for the same period last year due to reduced transactional volumes from certain key clients in the payments product line, lower transacted volumes in U.

Speaker 1

S. Dollar with international clients and a decline in domestic banknotes revenue compared to the same period last year. Revenue in Canada represented 19% of the total revenue by geographic location in the current 9 month period, which is a reduction from the previous 23%. Now operating expenses increased 7% for the 9 month period. This 7% is slightly higher than the 5% growth in revenue, primarily due to slower revenue growth in Canada.

Speaker 1

Having said that, variable cost within operating expenses represented by posting and shipping, sales commissions, incentive compensation and bank fees totaled RMB14.4 million and was lower compared to the RMB15.6 million in the same 9 month period in 2023. This represents a 7% decrease from last year and was primarily driven by a decrease in postage and shipping expenses. The ratio comparing total operating expenses to total revenue for the 9 month period was 79% compared to 78% in the previous 9 months. Postage and shipping had a 19% decrease when compared to the same period last year despite the growth in banknotes volumes. Losses and shortages primarily represented the lost transit shipments that the company sells to insurers.

Speaker 1

The Mexican peso was the largest driver of foreign exchange losses for the 9 month period ended July 31, 2024, while the gains in the same period last year represented natural gains from the company's unhedged foreign currency inventory. Interest expense had significantly declined in the current period compared to the same period last year because of a notable decline in average borrowings utilized from funding short term capital needs during the current period. Let's review the balance sheet. As at July 31, 2024, the company had a capital base of $83,000,000 $5,000,000 drawn on its line of credit with $45,000,000 in borrowing capacity. This compares to $14,600,000 drawn $35,500,000 of borrowing capacity for the same 9 months a year ago.

Speaker 1

The average outstanding borrowings by the company amounted to CAD6.3 million during the 9 month period compared to roughly CAD14.8 million in the same period last year. The average interest rate on borrowings was 8.7 percent versus 7.3% in the last period. During the Q3, the group continued its focus on capital allocations with enhanced modeling, a revised capital plan and the normal course issuer bid NCIB or share buyback that confirms both management and the Board's belief that the underlying value of Currency Exchange International may not be reflected in the market price of its common shares from time to time. And at this time, I would like to turn the call over to Randolph Penner, our CEO to provide his perspective. Thank you.

Speaker 3

Good morning. Thank you, Gerard. Thank you everybody for joining this early morning call. I would like to start as I always do focusing on Exchange Bank of Canada, our wholly owned subsidiary. As you can clearly see, the top focus for Harard, myself and the entire management team at the bank is to bring the bank to profitability as quickly as possible, while containing costs are of course one part of that puzzle.

Speaker 3

The biggest is to resume our revenue growth. We will continue to focus on our international expansion. I'm very excited to know that next week we're having our first time trade with a new client based in London, England. We also have 2 other sizable banks in the pipeline that should be starting in the next month or so. So we do anticipate a resumption in increased international revenues as a result of our FIBICS program with the Federal Reserve and our ability to source pesos and other currencies for global distribution in FATF countries.

Speaker 3

That's where our current focus is for our international expansion. Most importantly and thankfully, our business in Canada continues to remain our most consistent revenue driver. Our financial institutions that are across Canada, We have a very large client in Quebec and another one based in Vancouver that are have operations nationally. That business is very strong. Our money service businesses or other financial institutions are continuing to be strong and have always been a strong revenue driver ever since even previous to being Exchange Bank, Currency Exchange Canada and still now as Exchange Bank.

Speaker 3

It continues to be a revenue consistent source and we are continuing to focus on growing our relationships. We have a new Toronto based financial institution that is starting to do business with us and we hope to expand that on a national scale. Of course, payments is a focus. To see the payment decline in Canada, while we recognize the impressive payment revenue increases in the CXI, we noticed the largest difference is because Canada has been mostly focused on international corporates, corporations based in Canada doing business internationally. And we are now shifting as well to the OPOP strategy, 1 provider, 1 platform, which is utilizing our wire hub for doing transactions for financial institutions.

Speaker 3

We have 2 financial institutions, 1 in Ontario, 1 based in British Columbia that are both in advanced talks about utilizing our wire hub for executing on international payments and even one of the 2 for domestic payments. I'll move to CXI because this is the real core engine of the company. And as you saw the payments business in the U. S. Over the last 9 months has grown 37% and that is directly a result of our working with financial institutions utilizing our OPOP strategy of integrating into core general ledger systems or into core wire hubs that exist in other banks.

Speaker 3

And then most importantly is our own wire hub. A lot of the smaller to mid sized banks look forward to utilizing the system they already have in place for cash and checks for doing foreign currencies to utilize for all wires. We have begun our integration with the Federal Reserve here in the U. S. To be a part of the Fed now and the Fed line, which allows us to enable our clients here in the U.

Speaker 3

S. To process both foreign currency wires, which we do ourselves and also domestic wires across the U. S. Utilizing the Federal Reserve's payment rails called FedLye. This wire hub is enabling us to create new revenues as software as a service where we will be charging fees for the amount of users, the number of locations and depending on the integration support, we will be getting income.

Speaker 3

I'm proud to know that we have 3 banks already lined up to be our first three to start utilizing the wire hub fully for both international and domestic wires. And so this shift both in the U. S. And now with this interested bank in Canada will indicate that we'll be getting revenues from domestic activity and not be dependent on the fluctuations of international. Moving to our consumer unit, you continue to see good revenues from our online store.

Speaker 3

I was very proud to see 2 new states being added and we're getting close to having all 50 one day and we will continue to use our same rule that we won't suffer the cost of getting a license in another state until we have enough business case in that state with agents like the AAA relationship we have nationally to enable us to add additional states. But that is a focus to be able to service 100% of the U. S. Population as opposed to the 93% we currently can service across state lines. We will continue to carefully add select new company owned stores.

Speaker 3

I think you may have heard about the 2 that we one just opened in the Boston area in the Burlington Mall and we also have one opening in the largest mall in Georgia that had been delayed due to permitting challenges. But the store is scheduled to open and it is the largest mall operated by a previous competitor that went out of business for 22 years and it is indicated to be a very good location. In the next year, we will be ideally opening 1 or 2 more stores in key markets, usually in our key states of Florida, California, New York and possibly Hawaii. However, we haven't ruled out any other states that we may not currently operate in as a potential area. Our biggest focus on the consumer unit is our agent relationships.

Speaker 3

They have proven to be very profitable for us as it is a win win win situation as the agents provide the location and hence pay the rent expense and just as importantly they provide the staff who are doing other services for travelers or visitors And this enables them to get new revenues by expanding their product line, utilizing an expert like CXI and its proprietary technology CFIXX, so that they can offer currency exchange services and we do a revenue share. And it's a win win win because the customer now has a new location that they're used to frequently or is on their way and they can now do a currency exchange as opposed to detouring to find 1 of our currency desk or one of our customer bank branches. So our consumer unit led by our online store and our agent growth will continue to see growth in the next years. Lastly, our wholesale business, this is a mature market where we're servicing financial institutions. We still have the 2 usual mega bank Managing Director, Wade Bracey, who has been a leader of the all of our MDs, has been very aggressively proactive to reducing costs and increasing service capabilities and how he is reducing those costs is through a reduction of shipping.

Speaker 3

We have opened, I was just last week in our new facility in Louisville, Kentucky, which was the main hub of the other competitor that went out of business. And the advantage of Louisville, it is a central distribution point to the U. S. And it has noticeably reduced our shipping costs. And just as importantly, of course, for me and our whole company is customer service and it has expanded our cutoff time, which our 2 main facilities in LA and Miami have a 5 pm Eastern Time cut off time and now that's expanded to 9 pm because we are at the hub of the shipper, the overnight shipper that we are utilizing getting the better pricing.

Speaker 3

So that facility will enable us to provide better services at a reduced cost. We are really excited about that facility. We are keeping both the Miami and Los Angeles facilities as they are uniquely positioned Miami for the South American and Caribbean area and Los Angeles due to its close connectivity to Asia as one of the banks that we're looking to work with is in Singapore and that will allow us to use our LA facility if they're able to help. So again, the wholesale business continues to be a core part of our group and we look forward to it expanding as well. Lastly, Harard and I are also focused on mergers and acquisitions.

Speaker 3

I know there's questions about that. We have been looking. We've decided to pass on 1 or 2 opportunities. However, there are 1 or 2 that are quite attractive and we are continuing to explore that opportunity. Nothing has been signed.

Speaker 3

So there's no specific news at this stage. I just wanted to let you know besides our businesses and each of their units planning to grow at a high level, the Board and our executives here are looking at strategic opportunities to really significantly grow our group. So that's the end of my update for you and I welcome any questions that you may have. So I'll turn it back over to the operator to allow the calls to roll in. And I do ask that you just keep it to 2, just because I think 1 or 2 times we've run out of time and I try to get everybody's call answered.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question is from Robin Cornwell from Catalyst Research. Please ask your question.

Speaker 4

Hi, good morning. I was a little confused on the Canadian revenue decline. Could you expand a little bit on the payments revenue as to how it's negatively impacted by inflation? And maybe you could expand and just discuss a little bit about the trust agreements. And I know you mentioned that it they're starting to work, but maybe you could just expand on the progress you've made.

Speaker 3

Okay. So Robin, on the payments, what we've recognized not just ourselves, other providers of international wires are all experiencing is a decline in margin. The fintechs of the world have been pushing all the banks and providers like ourselves to lower spreads. And of course, we instead of losing the customer altogether, we're capitulating and lowering our spreads too to compete with that. So while you might have noticed the volume, the number dollar volume we processed was actually up, the profit on that is down and that is clearly a result of the automation of payment processing globally and how that is pushing all, you can see it with the big banks, all of the wire margin, the spread on foreign exchange tighter and that can be overcome through increased customer service relationships or better as our focus is to integrating into other automated payment flows so that when you are using online to online, there is less manual labor behind the scenes and that enables us to profit from a lower spread exchange.

Speaker 3

So I'm not sure if that answered it. The inflation and all of that, there are things are costing more. So we have seen a hesitancy for people to buy as much product as typically a foreign wires when they're buying product for them to sell, like we have a wine distributor to restaurants based in Quebec. And I'm just using that as an example, but they're buying less inventory, partly because they're seeing less sales, but also just as a caution to trying to wait till some of the pricing, this inflationary increase that we saw in the last few years hopefully subside and they can buy wine later might be cheaper than if they buy cases right now. So that answers that.

Speaker 3

As far as the second question on the international and the trust agreement that we established with the multi $1,000,000,000 trust company, while that's in place and ready to work, it has not taken off due to its new instrument. Most banks that deal these and again, we are focused strictly on FATF countries, which means these are the main big countries of the world and of course we're focused on the big, big banks of those main, big countries and they are typically are used to dealing with our big arch rival, the big bank here in the U. S. And they don't ever have to worry about credit. And so when they look at our little baby bank, they expect a banker's guarantee and the banker's guarantee is much more expensive than this trust account.

Speaker 3

So the one large bank that we had thought would be doing business with us has passed on that and we are working with a partner bank, which is a customer of our Fidics program that is comfortable with our group's credit as they've accepted the CXI Group guarantee for its subsidiary. We have working with a three way relationship there that they will be providing euros and they are euro based, we will provide the dollars, but they are accepting the credit risk for the entire transaction. So we are working around it. We do have a bank south of the border that is already trading with us and they are utilizing, they have engaged a U. S.

Speaker 3

Lawyer to confirm the comfort of this trust account and it is hopeful that they will be the 1st customer to break the ice on this trust account and expand their business because the activity is $5,000,000 or less is what they're comfortable with, although they prefer to trade $10,000,000 to $20,000,000 at a clip. And so this trust account is still on the table as a solution to their credit concerns. So that's the update on the international expansion utilizing the trust account. Did that answer your two questions Robin?

Speaker 4

Yes. Thank you. Could I just extend 1 into the EBC? EBC has reported a couple of the quarters, 1st and second, very big losses. Can you just discuss that for a minute and perhaps what the Q3 looks like?

Speaker 3

So we just this is our Q3 call, so we continue to have losses. That's why I started the call, my speech about the top focus for the Board and the executives here is the profitability of Exchange Bank of Canada and our current strategic plan is to grow the international, because we have been doing a lot of work on that and it's coming to fruition. We have a very good customer in the U. K. That's starting soon that will quickly start ramping back up the revenues because that's been the biggest decline year over year is from that bounce back from the pandemic, we saw a lot of activity, the bounce back year as we called it, that was our record year in 'twenty two.

Speaker 3

And so now you're seeing the decline because it's been stabilizing. We will now be seeing increased revenues from international. Again, our core market of Canada has thankfully been very consistent all throughout except during the pandemic itself and we are in advanced discussions with 2 new banks for both payments and bank notes and we do see the opportunity with additional bank note customers in Canada. So that's going to be continuing to drive our focus on profitability. And then again, the payments utilizing our wire hub has enabled us to get a market that we haven't gotten before in Canada where we're processing banks in Canada's wires or and not just banks, credit unions.

Speaker 3

And so we are very focused on growing our revenues. You've seen a reduction in payroll so that we have tightened the belt where possible. And so it is a top focus for Harard and I to get the bank profitable, all while we look at other opportunities to service other companies or institutions.

Operator

Your next question is from Stephen Renzini from University Bank. Please ask your question.

Speaker 5

Good morning, Reynolds and Hart. Thanks for another great quarter. I have a question on your U. S. Listing, right, there's 3 different levels at OTC Markets that you could have and currently you're at the lowest level, which is the pink tier, right?

Speaker 5

And as a SEDAR filer in Canada, you're piggyback qualified under SEC Rule 12g3-2b to be on the OTCQB or OTCQX exchange. Now all investment bankers tell me spending the money for OTCQX really isn't an official role, but OTCQB, I think, is a much better arrangement on multiple levels than being on PINK. And it's not very expensive at all. I think our bank holding company pays dollars a year beyond the OTCQB exchange, right? But I think there's some definite benefits of being there.

Speaker 5

Have you guys ever considered upgrading your U. S. Listing to OTCQB?

Speaker 3

Thank you, Stephen. I was not aware of that personally. But so at a high level, we have considered getting SEC registered and listing either on NASDAQ or New York. But we have ruled out that our focus is profitability that increased revenues and net income for shareholders will be the number one driver of why our stock will go up. I clearly recognize having a larger market audience of potential shareholders helps.

Speaker 3

So, Gerard, I see him taking notes here, we will be looking into that upgrade. But we have chosen to avoid the SEC. Our group has, what I would almost say too many regulators, but we have plenty of regulators that we can all agree on that. And therefore, we just don't want another regulator and another set of lawyers to assist us with an SEC filing. We have been very pleased with the Ontario Securities Commission.

Speaker 3

We have been very pleased with the Toronto Stock Exchange and of course, because we do have U. S. Shareholders, we did the, I guess, the entry level over the counter, but if there is for a nominal fee and still avoiding an SEC registration, we would absolutely explore that. So thank you for that input and we can maybe even take it offline if, Gerard, you and I want to have a call just to discuss it further, but there's no resistance to paying a little more to get a bigger audience, but we structurally are still against unless there is a major acquisition in the U. S.

Speaker 3

And we're going to have to raise some new capital, then at that point we have a business case to contemplate doing a listing in the U. U. S. And raising capital there. But right now, we feel we have surplus capital.

Speaker 3

We have borrowing capacity. So the transactions at hand that we may consider, we would not be listing. However, we've chosen to avoid the SEC at this time just because we don't want the additional cost and expense in another regulator to work with. So I hope that answered your question, but I appreciate that insight.

Speaker 1

Thank you, Stephen. I'll reach out.

Speaker 5

Yes. No, I agree 100% with your conclusion that SEC registration at this time does not make sense. Our own analysis and again the investment bank's advice to us is that it only makes sense for a financial company like yours or ours to be at full SEC registered when we have the market cap necessary to reach into becoming a member of the Russell 2,000 Index. And the cutoff there right now last year this current year, the cutoff is $159,000,000 of market cap. So, you're not there yet, right?

Speaker 5

But once you were there, having higher profitability, it'd make a lot of sense because you'd have about 10% of your outstanding shares snatched up by index funds, which would be uplift in the share price for sure, right, if your shareholders loyal and stick with you through that transition. And frankly, that's our intermediate term goal ourselves is to get the probability up so that we could be includeable in the Russell and then get SEC registered, right, because it's a transformative moment for your company in a positive way for the shareholders. So I do have a second question. You guys have a buyback program authorized by the Toronto Stock Exchange, 5% of your shares, but most recent quarter you didn't buy back any stock. Is there a reason why you're not buying back stock at this time even though you've got the authorization in place?

Speaker 3

I'll let Gerard, but we would buy there's a restriction on how much you can buy per day. So I don't know, Gerard, do you want to add anything to that?

Speaker 1

Stephen, we did buy shares back in Q3. We continue to buy shares pretty much on a daily basis. We have a maximum allotted daily purchase allotment of 13.25 shares. So if you look at our I think it's 95,780 shares that we've purchased so far. And if I recall, we were probably in the 65,000, 70,000 at the end of Q2.

Speaker 1

So we are doing that on a daily basis if shares are available to the maximum of 1325.

Speaker 5

So on that, wouldn't it make sense to mention the buyback program in each quarterly press release because I think shareholders look very favorably on companies that are buying in shares on a continuous basis, right? Like your press release does not highlight that. And it's Kevin, right?

Speaker 1

It definitely could. I do know that it is in our MD and A. So there is eyes on that, but you know what point taken, it can definitely be highlighted a bit more if our disclosure committee see that fit. Thank you for that point.

Speaker 5

Great. And thanks for both answers. And yes, if you want to talk about OTCQB, list thing offline, always available to you, you know how to get a hold of me and happy to talk about our own very positive experiences there and how that can benefit the company and the shareholders.

Speaker 1

Thank you. And Stephen, just to clarify, we bought roughly 43,500 shares in this quarter. But what I'm also gathering is, we'll make sure that the quarter over quarter gets a bit more attention. Thank you for your questions.

Speaker 5

Thank you. Yes. Thanks. Thank you again for a great job. Another good quarter as you're progressing with the company.

Speaker 3

Thank you.

Operator

Thank you. There are no further questions at this time. Please proceed.

Speaker 3

Okay. Well, thank you everybody for your call. Should there be a question that we are able to answer, please reach out to Gerard, Bill or myself. We'll be happy to schedule an individual call with you. We appreciate your support of the Currency Exchange International Group and look forward to our next call or next meeting.

Speaker 3

Thank you.

Speaker 1

Thank you, everyone.

Operator

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may always connect your lines.

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Key Takeaways

  • Q3 net income was US$3.9 million (vs US$4.0 million a year ago) on US$24 million of revenue, yielding a 29% EBITDA margin (up from 28%) and a 9% ROE (down from 17%).
  • U.S. revenue grew 3% (led by a 27% jump in payments), while Canadian revenue fell 6% as payments margins tightened and inflation dampened client demand.
  • CXI is investing in technology—implementing Kyriba for treasury, Alyssa for AML and enhanced cloud integrations—to drive operational efficiencies and support future growth.
  • The company repurchased ~96,000 shares under its NCIB for US$1.8 million, signaling management’s confidence that the stock is undervalued.
  • CEO highlighted strategic growth levers: restoring Exchange Bank of Canada profitability via new international bank clients, ramping up U.S. FedNow/FedLine wire‐hub integrations, expanding DTC online FX to 93% of the U.S. population, boosting agent partnerships, and cutting wholesale costs with a new Louisville hub.
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Earnings Conference Call
Currency Exchange International Q3 2024
00:00 / 00:00