Currency Exchange International, Corp.

Good morning, ladies and gentlemen, and welcome to the Currency Exchange International 2023 Q3 Financial Results Conference Call. At this time, our lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, September 14, 2023. I would now like to turn the conference over to Mr. Bill Matulas, Investor Relations. Please go ahead, sir.

Thank you, Laura, and good morning, everyone. Welcome to the Currency Exchange International Conference Call to discuss the financial results for the third quarter of the 2023 fiscal year. Thanks for joining us. With us today are President and CEO Randolph Finna, Group CFO Gerhard Barnard, and CFO of Exchange Bank of Canada, Alan Stratton. Alan will begin with his brief comments on EBC's third quarter performance, followed by Gerhard, who will provide an overview of CXI's financial results and his latest perspective on the company's operations. Randolph will then provide his commentary on CXI's strategic initiatives, sales efforts, and business activities, after which we'll open it up for your questions. Today's conference call is open to shareholders, prospective shareholders, members of the investment community, including the media. And 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&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&A reports, for more information about the factors that could cause these different results and the assumptions that we have made. With that, I'll turn the call over to Alan. Alan, please go ahead.

Thank you, Bill. I'll start by saying that the first three months ended July 31, 2023. Exchange Bank of Canada generated U.S. $4.3 million in revenue. Now, this represented a 12% increase relative to Q2 of 2023, but a 9% decline compared with Q3 2022. Our payment segment generated 3% year over year growth, but a significant 31% improvement over the prior quarter ended April 30th of 2023. That was encouraging and indicative that the Q2 performance was impacted by temporal factors as many clients returned to more typical purchase and sale patterns as supply chain issues eased in late 2022 and early 2023. We continue to organically acquire new clients at a healthy rate, and client satisfaction remains high as we completed a survey in Q2 that resulted in a net promoter score of 85 for the corporate payment segment. Turning to the banknote segment, It generated $2.6 million in revenue, which was flat when compared to the prior year as well as Q2 of this year. Our domestic client base performed well as the recovery and travel contributed to develop strong demand through our wholesale channels. The international segment, however, continued to underperform as the bank was challenged in being able to trade with new clients and volume from some existing accounts in the Americas region experienced declines. What we have learned is that the patterns for the flow of US dollars can change over time. Significant appreciation or depreciation in the US currency seems to be a factor in impacting this. Our long-term strategy is to diversify geographically such that the bank becomes less dependent on any one region. We do have prospective clients in new regions that we expected would begin trading in Q3 once our parent guarantee structure was in place. However, this was not the case as financial institutions have become much more risk-averse this year to credit exposure, even for short-term settlement risk associated with our cash-for-cash trades. Recognizing the ABC size is the chief barrier to onboarding international clients, we decided to move forward with the implementation of a trust account structure. This is a tried-and-true structure that eliminates the residual risk but requires some operational changes to accommodate. We have been provided with assurances from our nearest prospects that this structure will be acceptable to their credit risk departments. We are in the process of working with an international banking partner to open a trust account, and we expect it to be operational by the end of the fourth quarter. While we are disappointed that we haven't been able to grow the international segment as planned this year, there hasn't been any change to our view of the market opportunity for the bank or our resolve to penetrate it. I'd especially like to thank our group treasurer, Katie Davis, for her tireless efforts in first working through the parent guarantee structure and now the trust account. Unfortunately, due to the negative growth in our international segment, the bank's operating leverage was negative in the quarter as the expense growth outpaced revenue growth. Part of this was due to increases in shipping costs that were primarily driven by abrupt changes made by our primary carrier in late Q1. On July 1st, we implemented two mitigating actions. Firstly, we migrated to a more cost-effective carrier in the southern Ontario market, which is our largest market. Secondly, we eliminated subsidies on shipping to our non-financial institution clients, making it mandatory that all of them pay for the true cost of shipping. For our financial institution clients, we have commenced negotiations to amend contracts, and when those are completed, we should be able to recover all of our outbound shipping costs. The operating structure has also increased over the past year as we have invested in the infrastructure to support our strategy. While inflation has driven some increases, building up key support functions and implementing new technology have been the predominant drivers, which Gerard will speak further about. Turning to the bank's balance sheet, its total assets of $54.3 million were well within the typical operating range. As cash is the largest asset on the balance sheet and has a low credit risk weighting, the bank's risk-weighted assets were $36.5 million at the end of the quarter. The capital position is strong with a Tier 1 capital ratio of 24.3%, a total capital ratio of 34.5%, and a leverage ratio of 15.1%. These are well above the internal minimum limits established annually in the bank's capital management policy. I'll now turn it over to Gerard Barnard to discuss the group's financial performance. Gerard?