Banxa Hldgs Inc

Dominic Crozer. Yeah, my name is Dominic Crozer. With me today is Holger Ardians, our CEO, and Shyam Deo, our CFO. We've just got a few problems in regards to him coming up in terms of his video. So anyway, let's just sort of continue as we are. And moving forward, just to kind of give everyone a bit of an update, what we're going to do is take everyone through a high-level overview of Banksa. And then both Holger and Sian will take you through the business and the financials, and then we'll wrap up and open it up to key questions. And so there's a Q&A button. So please feel free to basically ask questions, feel free to ask questions during and we'll do our best to address every single one. We expect this to go to about 20 minutes, 25 minutes and then Q&A for about 15 minutes for those that are managing time. So really our vision is about democratizing finance and really onboarding the masses by building the fiat to crypto bridge across digital assets. We're actually the world's first stock exchange fintech PSP, payment service provider, red tech company. And so what we're doing is building the bridge between the fiat world. And when I say fiat, I mean US, Euro, Canadian dollar world and the digital asset world. And when I say that, I mean Bitcoin, Ethereum and the other coins. And in effect, the best way to describe the company is we are like the PayPal of the crypto industry. Just from a corporate perspective, we listed both on the TSXV and the OTCQX and in Frankfurt, market cap of around $100 million. Our revenues are, we're trading about 1.2 to 1.5 times revenue to enterprise value and roughly $19 million US cash in the bank, with insiders being absolutely aligned with the performance of the company with around 20%. And there's about 200 people in the company. So at this point, what I'll do is hand over to Holger that will take us through the business.

Thank you, Dominic. Hello, everyone. I'm Holger Ariant, CEO of Banksa. I just want to touch on the pillars in our business. We really stress that we do have local payments in many, many markets and global payments to reach almost everyone in the world where we are allowed to. Local payments are really important for this industry because local bank transfer is just often more trusted it's in your own currency it usually happens immediately and it goes through um almost 100 so there is no there is less fraud than a credit card payment and there are um it's just a more trusted payment method for consumers and compared to a credit card you don't have to give your details to anyone and it's mostly free So we do that in a number of countries, as you can see here. And that's really one of our core pillars, how we differentiate from the competition as well. Why? Because payments are hard. If you want to have a local payment here in Australia, you do need to have a local bank account for that. You need a local entity directors. People on the ground need to go to the regulators. And that's the next point here. We do have the regulatory licenses and we're registered with the relevant authorities in those countries that we can perform those services and it's not just receiving the payment it's also doing the settlement of the cryptocurrency into the user's wallet and that's where the virtual asset service provider licenses come in and we already have a few and are just subsequently getting those licenses so that we can offer those local services And again, just to draw the bigger picture, why is that important to our partners that we integrate with? Because they really want to deal with the old world, the fiat world, the banks and the regulators. But the moment they offer any payment services, they will have to do transactional monitoring. They will have to receive payments. they would have to do the fraud assessment they have to deal with chargebacks so banks that takes care of all that it's actually quite hard which is good for us because we've been doing this for eight years we know the ins and outs we have the connections we know who to which which stakeholders to engage and how to process those payments with a very high throughput conversion rate which eventually is a win-win-win situation. The user wins because their payment goes through and they can get their coins into their wallet. The partner wins because value is being uploaded into their exchange or platform or wallet, whatever they are offering. And certainly banks have benefits from this as well. So conversion rates is throughput is really, really important. It's like if you go to an ATM and you're not getting your money out, that's a frustrating experience. But with banks, the solution, especially the local payments, you will mostly get through, are able to convert your fear to crypto. The third point here, data science automation. We've built our proprietary platform for many years. It's very, very scalable. It's been pressure tested over the last two years, certainly. And we just continue to build that out. We just hired our chief data officer who's been head of data at EY in Australia before. And there are just so many capabilities. efficiencies that we are working on every day we're really learning what we can do with all this data in terms of customer experience cost optimization and many many other improvements and again we're not just processing a payment we're not a pure payment service provider um we are also settling the coins and that's also quite complex we have to source them at the cheapest price possible and the fastest way possible because um crypto should ideally be very fast so we have to make sure that we um get our coins and get them into the user's wallet as soon as possible in the most economical way and we're working um on improving improving that every day as well um dominic if you don't mind going to the next slide please Just going to touch on a few points here. I already mentioned that we are basically shilling off our partners from any chargebacks or fraud for the services we're providing. So what they're basically just seeing is their users uploading value in form of coins into their platforms. And that's what they want us to do. So we take care of everything that's happening before, if that is the Simon Ruetzmann- ID verification of the customer we check them against sanction lists and political. Simon Ruetzmann- Exposure and we do the whole fraud assessment with internal and external tools and again our idea experience really, really comes into this year because fraud is evolving as well. And then we process the payment again with a very high conversion rate because we offer local payments. And then we do the settlement of the coins. So this whole process is what banks are doing. It's quite complex, but our partners really appreciate that we do the hard work and that they can then continue working in the blockchain world and innovate there while we connect the old world with the new world for them. I'm dumped to the next slide, please. So we've just been continue building our portfolio of partners. We focused really on the big end of town, but it's a long tail of the market because that's where most of the volume is. And if you think about it, those global exchanges, let's take a Binance, for example, it doesn't make too much sense to have local entities and local payments in all those countries. It's not scalable for one business. Banks can do that at scale so that the industry can piggyback on our licenses and our payments. So again, we're building the infrastructure, the plumbing of this industry. And I think that's really what the partners appreciate. And that's where also some of those partners have backed us financially in the early days. So we share this mission of really building the infrastructure and connecting the old with the new world. Dom to the next slide, please. Just an overview of our growth strategy. We really just want to go much, much harder into the execution of onboarding new partners, increasing our TTV. We are going into new Geographic expansion. I've seen that was a question from Usama. We'll get to that later as well. We really want to be more local. The localization of payments of our services and getting the required licenses in many, many more areas. Currently, we're working on LATAM, which is very big territory and has a very high crypto adoption. So we're setting up people on the ground to have those payments and licenses in these areas, certainly looking at more penetration into Asia as well. So there's a lot happening. And I think that's just going to strengthen the core of our business. I'm so sorry. Go ahead, Holger. Now, just to the last point, and Osama, you also asked, or it was someone else, I've seen the question about, are you going into other segments or verticals? Absolutely. So what we're doing is we really just do the conversion of your fiat currency in the safest way. and then we connect all those platforms out there today there are mostly centralized exchanges because that's just where the industry has has gone so far but then we've seen the emergence of nft platforms we've seen decentralized finance platforms um We've talked about the metaverse, whatever that eventually is, but the reality is we need to build a bridge to those use cases. And for banks, it doesn't really matter what the use case is on the other side. We do our bit on the way in and out, do the conversion the settlement of the currency into that platform whatever the platform is doing so we're creating these connectors we integrate with all those sectors blockchain gaming is another one which is emerging um and if you ask me we're just at the very very beginning so um if you look at the on the right side here um i think in total crypto today is a two trillion dollar industry. Apple, which is just one company, is a $3 trillion business. For everything that crypto can do and can replicate in the digital asset space, there is going to be so much more is my personal view. So we have set the foundation. We started with 50 people in, we came with 50 people into 2020. We're now 200 people. And I think we're now at full force to really go out there and sell much harder. and get our product into the market. So very optimistic. And with that, I guess I'm going to hand over to Shyam for financial perspective. Thank you.

Thank you, Holger. And hello, everyone. My name is Shyam Deo. I'm the Group CFO at Banksa. And I just wanted to share with you today, I guess, how the numbers are represented in terms of what Holger and Dominic have mentioned so far. So you've heard about the growth strategy and the focus that Max has had. And there's been certainly strong focus around the partner and volume expansion, as well as coupled with the market tailwinds, which has allowed us to achieve a record quarter of TTV in December for approximately $600 million. This is also translated very positively for banks in terms of a half year revenue number of 40 million. And as you can see on the chart on the right hand side, that approximately achieves close to 90% of the full year FY21 revenue in a half year period. Just moving to the next slide, please. Gareth J. So, in terms of financial highlights the top line has been a strong focus for banks in terms of acquiring new partners, as well as expanding the existing partner user base, and this is all translated into a very stable and expanding liquid asset profile for banks so. So as a December we had $26 million worth of liquid assets comprising of cash deposits and digital assets, and these are the funds that banks are utilizes to fund our trade working capital requirement to expand and grow the transaction volumes that you see today. In terms of the bottom line, the statutory loss of 3.1 million, this includes various non cash items approximately close to 4 million. This comprises of various provisions and share based compensation for management team as well. So just moving on, I do want to step through the three key statements. So starting off with the profit and loss, main point here perhaps to touch on is the net take rate, which is really the expression of gross profit as a percentage of TTV. The net take rate is at 1.9% and it's largely based on the geographic mix and the optimisation that Banksa has been able to achieve in the current period compared to the same period prior year. In terms of our continued investment in OPEX, Banksa has continued to invest in products, talents and systems. This has resulted in our OPEX spend increasing to about 17 million. However, this is in line with our our transaction volume also. So on a like for like basis, it represents about 2% each period of a total transaction volume. Employee costs remains a dominant feature, and we continue to invest in our team. So employee costs for OffOffX is roughly about 60%. And this is largely underpinned by our headcounts. Holger's mentioned we had roughly 200 employees. This is a 3X growth on the same time prior period. And finally, the adjusted EBITDA loss of 2.5 million. This period we're impacted by 3.8 million in terms of FX losses. And this is largely derived from the fact that Australian dollar depreciated against some of the major currencies that we transact with, predominantly Euro and USD. Moving to the next slide. In terms of the balance sheet, and I'll predominantly focus on the chart highlighted in the red text box. As I mentioned, liquid asset is our core focus. It's got a composition of those various items and it's stable and expanding at 26 million. In terms of some of the other key metrics to observe is the net working capital at 19 million. And moving further down is a quick ratio. This has come back somewhat to three times. And that's largely the factor of as the business is expanding, we're carrying greater liability associated with employee entitlements and tax provisioning, but still a very healthy quick ratio of three times. And the final point here is around the debt equity ratio of zero. And I think the key point here is banks at present point has a debt-free balance sheet. and that largely can be credited towards our liquid asset position, which we've maintained and expanded to then for it to be utilized to fund our trade working capital requirements. Okay, great. Thank you for the next slide. And finally, the cashflow. Great place to start on the cashflow is as of the end of December, we had close to 14 million off cash. This is a 4X growth on the same time prior period A key point to mention here is cash excludes deposits held with exchange, and deposits held with exchange are denominated in various fiat currency as well as stable coins, which banks utilise to fund, as I mentioned, our trade working capital. Should this be reclassified as a cash, you would have a situation where the adjusted cash from operating activity would be a positive representation of $1.5 million. So all in all, strong three financial statements for this period. And I'll pause there and I'll pass it on to Dominic.

Thanks, Sharm. By the way, keep those questions flowing through because we'd love to interact with as many people as possible. So really, in summary, and I'm not going to go through every point because I'm just conscious of the time, if you believe the hypothesis that Bitcoin and crypto and NFTs and metaverse and this whole ecosystem is here to stay and will continue growing and the statistics certainly back that up, Then companies like banks are that are providing the bridge between the field world where the majority of people exist to the digital asset world will be, in my view, companies that will will prosper. And just to take a step back and just give people some, I guess, an overview of the market. For the last eight to 10 years in the crypto space, it's predominantly been what you call the early adopters, the crypto nerds, the tech nerds, such as myself, the finance nerds. And what we're really starting to see is that crypto in this ecosystem is now starting to become mass market. And you only need to look at the NFT and the gaming and the metaverse space, which illustrates that. So this is really the next big wave of growth. And I really echo Holger's point around we're just really getting started or this industry is just getting started. So maybe at this point would be good to, I'll stop the presentation. We'll try and take some key questions. I may actually get the deck back up to be able to answer some of those questions. Andrew asks, can you shed some light on NASDAQ? So Andrew, thanks for that question. We are, we're still, it's a work in progress. In fact, I spoke to our legal firm earlier this morning about it. They're in constant discussions with both NASDAQ and the SEC. And all I can say, it's a process. Banksa belongs on NASDAQ. We will get there. It's just a process that we need to go through. I'd expect this half for that to come to fruition. and astro asks how are you planning to increase institutional ownership of the stock and be included in various etfs astro i think just i think the point around nasdaq partly answers that question for 2022 we've also engaged with new investor relation firms in the space and you're going to see us becoming much more active in fact next week we're at a conference and I think we've got conferences most of March and then moving into April. So I'd expect us to continue increasing our visibility. He also asks, what are you doing in terms of analyst coverage? We actually now have a couple of US firms covering us. Lake Street was the latest one that came out. And if you want to drop your email or drop me an email, you've got my email address in the deck, which you can download from the website. I'll add you to the list and send you out some latest research reports. Sam asks, maybe this is one for you, Holger. Do you have a number or ratio of what on and off-ramp market is since it has been launched in relation to TTV? So I think he's asking maybe in relation to us or maybe the industry. Maybe you can shed some light there, Holger.

Yeah, absolutely. There is no specific number on fiat on an off-ramp value available. We certainly just have that from our own experience. What we're seeing, though, is from inside our partners, so take a Binance or KuCoin, how much of the market we have there because we know how many users there are. Jan Bogaertdorf, And how many users, we have, and the reality is just a fraction again we're just starting the more payment methods we roll out more we're able to onboard users in local. Jan Bogaertdorf, Local area so as an example we're setting up an entity in latam. In a specific country there, and the moment we're able to process those local payments and the local currency with a bank to bank transfer and much more trusted and usually no fees compared to a credit card. the platform or partner binance can then promote that to their users in that country and they will be able to just onboard locally what they've done so far is either they have to swallow the pill of making a payment a credit card transaction which is very expensive or what they do is a do the local bank transfer with a local exchange because the local exchanges are on the ground they offer this and then they send their crypto from there over to the global platform Binance in this case that takes time and it's costly because it goes on on the blockchain so the number of transactions involved which we will then eventually cut out so we really want to have the direct onboarding So unfortunately, the moment we get this number from market intelligence of off-ramp volume, we'll certainly share this, but at the moment, this number is not available.

Okay. Thanks, Holger. Max and a couple other investors asked with TTV for January being $169 million, what should investors be thinking for the last two months of the March quarter, so February, March? And I think Nicholas also asks, we've noticed that March Q trading is volume on the exchanges has been weak across the entire industry, even though January numbers good. How, how's February etc. Now, obviously we can't go and provide any information that we haven't provided in the public domain, for obvious reasons, you know, suffice to say we trade in line with, you know, there's a couple of key sort of key metrics, and Holger, feel free to jump in. One is the volatility. Is the price stable? What's the exchange volume? What's the price of Bitcoin? How fast is it going up and how fast is it going down geopolitical? So there are many, many factors that affect it. And as you saw in 2021, um you know we had a a quarter and then that quarter was down and then the quarter after that was double that other quarter so you know the whole sector is is quite um volatile and uh that that's just not us that's just the industry but i think if you take a longer term horizon my view is it's all the way up. It's like the Bitcoin price. And we can talk forever about the whole Bitcoin price and the long-term potential. Holger, anything else?

Yeah, yeah, totally. Everything you said is exactly right. um i think we if we look at the technology and the evolution of the technology um and take again this long-term view that you um mentioned um we're just really at the beginning um last year we saw the emergence of nfts although they've been around for two years already before that um there is a lot more coming at nfts from what we've seen so far just scratching the surface again um right now they're being used for um collectibles digital art um but they're representing digital property right so they can go in any other area and we're seeing that with more platforms coming out already if it wasn't for nfts and all other technological innovations in this space i'd say that the last two years were really really amazing and now There is not much coming, but the nfts are really building the bridge to the mainstream adoption. It's probably for the first time in crypto. The consumer case that most people understand cryptocurrency was always very, very technical and nerdy. But now, for the first time, there is a use case for consumers for the mainstream adoption. That's what banks are. That's we're onboarding the masses to crypto. We will see much, much more of that. And even if there are tensions in the world right now and in the global markets, we're taking a long-term view. The infrastructure is what's really supporting this whole industry, whatever is going to be built on top. So lots of confidence here. Fantastic.

And Max asks, should investors continue to assume a 4.7% run rate to revenue for the rest of FY22? Shah, maybe this is a question for you, noting that we obviously can't provide forecasts to the market.

Yeah, thank you, Dom. I think in regards to the gross take rate of 4.7%, there's certainly a number of different dynamics that underpin that. We monitor that internally. quite closely and in terms of going forward it will continue to monitor that quite strongly internally as well that said there's areas within that gross take rate where banks has great opportunities and levers to manage that for the future periods so we're comfortable with regards to the 4.7 that we've that we've been able to achieve to date

Excellent. And Nicholas asks, how many countries are you operating in and how has that changed over the last 12 months? And also questions around the coins and the coins expansion. I think it's maybe worth Holger talking about the philosophy and really the big push in terms of Layer 2 and maybe just to give people an overview on what are Layer 2 coins and why are they important as part of the ecosystem?

totally so number of countries we're operating in um we do have um local teams on the ground in australia in the netherlands um lithuania um licenses in the uk um or registrations and licenses in the uk in canada um and um we're just rolling um result in in a number of other regions um however we only getting those licenses and registrations if they are needed to have a local payment. So there are countries that do not have regulated this space yet. We all know it's going to come and that's what we're prepared to do. But for us, most importantly, is to have those local payments. to do those, to offer those ideally without having a local entity, without having to obtain a local license so that we are just quicker in those markets. So that's really what we're looking for to go into many more geographies. Where can we offer a local payment today? And where do we need to set up a local entity? And where do we then need to obtain a license or registration? So there is a lot in the works in the background. I'm not going to go into detail into which countries those are, but again, the regions are certainly LATAM because it's a very, very big territory with high crypto adoption. Asia Pacific, again, and we just want to be fast. That's most important. So we're working on all those fronts at the same time. In terms of Layer 2, what we've been pioneering really is to Jan-Willem Wasmann, offer people the way into crypto and layer two is just emerged as cerium as a smart contract platform and has faced scaling issues there the transactions there only. 30 transactions per second or so that are coming through. And with the adoption certainly of NFTs that are built on the Ethereum blockchain, there's just been a lot of congestion and high gas fees, transaction costs. So a number of solutions have emerged, alternative layer ones, which is an alternative to the Ethereum blockchain and layer twos that built onto the Ethereum blockchain. And as I said before, Banksa just connects the old world with the new world. So we just do the connectors into those new blockchains, offer those coins directly so that people don't have to do the hops themselves between blockchains and coins. and that was quite complex before now people can go into those various coins directly and just to add to that there's another question about how many coins and chains do we have today we have around 80 coin and chain combinations that we're offering and there was also a question about our customer account we call our um customers partner on that level um we're a b2b to see business our partners um last time we mentioned we had 80 now we're at 100 um 100 that we um have in total and some of them Well, all of them signed, but not all of them live yet, because there's certainly a bit of a backlog with integration due to high demand. But we continue to build out our dev team, customer support team. There was another question from Astro, just to cover that one. Astro Soro, I'm sorry, about, you know, there were some users waiting for banks to respond to them. Our average respond time is six hours. And if they're not hearing us for days, that's an issue we have to really look into. And I'd love for you to maybe get in touch with me after this, but our average respond time is six hours. We wanna drop that to one or two hours, because that's just what I would expect. But why are people getting in touch with us? because their transaction has stalled because we need extra KYC documents. We're heavily regulated in many markets. So we do need to do the right thing. And there's unfortunately a bit of back and forth involved with the customers. And sometimes those emails might end up in a junk folder. But that's pretty much what's happening. And we just continue to optimize our service all across the board. I've probably touched on a few questions here, but I hope that I gave you the answers you were looking for.

Fantastic. Thank you, Holger. Annie asks, given the low share price, are you looking into a potential buyback of the banks of shares, which could be highly creative? And when are we targeting positive earnings? I'll address, I guess, the first question in respect to a share buyback. You know, we do have a board meeting tomorrow. And in fact, I'm sure that will be one of the topics that would, you know, you'd expect a board in this current position to discuss, particularly when it feels it's undervalued. And I guess your next question around positive earnings. As Sharm mentioned, over the last 12 months, our cash has remained stable at around 18 to 19 million US cash in the bank. Even though we've grown the business, you know, 3, 4X, we've grown our team 3, 4X. And so in that respect, to a degree, we're kind of, you know, self-sustaining. And so in that respect, you know, to take a further step back. The objective is really a land grab. And if we wanted to move the company, and I sometimes get this question from investors, what happens if we enter a bear market, a crypto winter, which we've seen before? We've done it before. We've been here for eight years. This wouldn't be the first. We're able to effectively scale back, move into profitability mode. But our view is this whole industry is going to continue growing faster. notwithstanding some of the geopolitical issues that are currently going on um you know there's a lot of growth in in nfts and metaverse and and and decentralized finance or sometimes called d5 that this whole industry is going to continue growing i mean i'm very bullish in the fact um that you know from an industry perspective i think it makes sense for people to be bullish um we've maybe got a time for a couple of more couple more questions And he asks, what solutions have you found to increase the volume? And there was another question coming through about NASDAQ. Somebody maybe came in a little bit later. We are working on that. It's a work in progress. Expect to occur sometime this half. And he asks, are you positioning yourself for an inbound sale, et cetera, et cetera? uh you know end of the day if something comes up we'll obviously announce it to the marketplace but right now as we say in australia uh head down bum up we know exactly what we need to do in the industry uh and uh and it's just really about you know continue to provide a really good customer service continue building the bridge doing all the things that we've been doing over the last um couple of years so i think really at this point we're going been going for 40 minutes I think this is a good time to do a wrap. I'd like to thank all of our shareholders and stakeholders who have joined the webinar and thank Holger and Shyam as well. Good day, everyone. Cheers.