Currency Exchange International, Corp.

Good morning, ladies and gentlemen, and welcome to the Currency Exchange International Q1 2024 Financial Results Conference call. At this time, note that all phone lines are in the listen-only mode. Following the presentation, we will conduct a question and answer session. And out of considerations for other callers on the line, we ask that you please limit yourself to two questions and get back in the queue. And if at any time you require immediate assistance, please press star zero for the operator. Also note that the call is being recorded on Thursday, March 14, 2024. And I would like to turn the conference over to Bill Metoulas, Investor Relations Manager. Please go ahead, sir.

Thank you, operator. And good morning, everyone. Welcome to the Currency Exchange International Conference call to discuss the financial results for the first quarter of the 2024 fiscal year. Thanks for joining us. With us today are President and CEO Randolph Finna and Group CFO Gerhard Barnard. Gerhard 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 Gerhard. Gerhard, go ahead.

Thank you, Bill, and thank you, everyone, for joining today's call. I will present a more condensed overview of the results of the consolidated CXI group for the first quarter ending January 31, 2024, to allow more time for questions at the end as requested. These results are presented in U.S. dollars, and my overview will also include some Part-time employees as at January 31st, 24. An increase from 363 from the prior year. And in infrastructure. During the quarter, we added an additional four airport agent locations. We now have 49 in total. And non-airport agent locations are at a total of 231. Our first quarter transaction locations is around 18,500. reflecting an increase compared to the same quarter in 2023 of about 16,500. Technology platforms remains a strategic focus with Gariba, our treasury management system, and Alissa's AML-compliant software making good implementation progress. Our IT team continues to explore ways we can leverage the power of the cloud computing to enhance integration capabilities, improve scalability, performance, and resilience. All of these initiatives and investments support the more efficient future growth of the group. On November 29th, 2023, the group announced its notice of intention to make 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 companies issued and outstanding common shares. During February of 2024, the company bought back its daily maximum allotment of shares for a total of 20,200 shares. Let's look at the consolidated performance for the three months ended January 31st, 2024, compared to the previous three months ending January 31st, 2023. The company generated revenue of 18.1 million, a 7% increase from the same period last year, primarily driven by an increase in activity from travel, resumption towards pre-COVID-19 levels. New customer acquisition in both the banknotes and payment products lines, partially offset by a decline in trade with foreign financial institutions by Exchange Bank of Canada, reflecting reduced demands in USD volumes compared to the same period last year. This 7% growth in revenues of $1.2 million was largely due to growth in the retail market of around $972,000. Revenue in the United States increased by 2.5 million, or 22%, over the same period, while in Canada declined by 1.3 million, or 25%. Corresponding with the revenue growth, operating expenses increased by 1.7 million or 12%, mostly attributable to an increase in salaries and benefits. The company recorded net operating income of 2.2 million in the three-month period ended January 1, 2024, 18% lower than the same period in the prior year. Overall, the company generated 1.3 million in net earnings before income tax during the three months ended January 31st, 2024, which is 20% lower than the $1.6 million of the prior period. It should be noted that the company incurred an income tax expense of about $416,000 in the first quarter of 2024 compared to an income tax benefit of roughly $2,000 for the same period last year. This income tax benefits was the result of utilizing a benefit related to non-capital operating losses incurred in prior years by Exchange Bank of Canada. The top five currencies by revenue remains the United States dollar, Euro, Canadian dollar, Mexican peso, and British pound sterling. Revenue by product line for the three months ended January 31st, 2024, compared to the previous three months ending January 31st, 2023, will now be discussed in more detail. Let's focus on banknotes. Revenue in the banknotes product line increased by 1.34 million, or 10%, due to strong demand from increased travel levels in addition to larger demand on exotic currencies. This was evident by the continued growth in customer demand for foreign currencies as international travel continued to strengthen in both the U.S. and Canada. Between November 2023 and January 24, approximately 201 million travelers passed through TSA checkpoints in the United States airports, on par to pre-pandemic levels. This is an increase of about 5% from the same time last year. Direct-to-consumer banknotes revenues increased by close to a million dollars or 19%. The company's market share has continued to grow via its direct-to-consumer footprint through new locations including agents and its online platform. The growth was attributed to growth in the company-owned retail locations as locations have matured over time and drove higher volumes. The opening of additional airport locations, which further expanded the reach to travelers and increased geographical reach, of the FX online platform with its continued expansion and the addition of the state of Alabama, making it the 41st state that the online FX platform supports. That means the group is now serving close to 90% of the US population. Direct-to-consumer revenues represented 34% of the total revenue in the current three-month period. compared to roughly 30% in the same period in 2023. Now banknotes as a wholesale banknote revenue, which increased 370,000 or roughly 5% from new customer acquisitions in the domestic wholesale banknotes space volumes also increased. Also banknote revenue represented 45% of the total revenue of the current three-month period compared to 47% in the same period last year. Relative to the most comparable period prior to the pandemic, the three-month period ending January 31st, 2020, Banknote's revenue has increased by close to 60%, reflecting the impact of our market penetration. Now let's go over to our other main product line, payments. Revenue in the payments product line decreased 120,000 or 3%. The growth in customer acquisition in United States resulted in a notable growth of roughly 33% for this period. Volumes in Canada resulted in a 33% decline in revenue, causing an overall 3% reduction in this product line when consolidated. The company processed nearly 35,600 payment transactions representing 2.99 billion in volume in the three-month period ended January 31st, 2024. And this compares to 28,500 transactions on 3.1 billion of volume in the same period in 2023. with the majority of the growth relating to United States. Payments represents 21% of total revenue. Now let's break it down by geographic location, comparing the three months ended January 31st, 2024 to the three months ended January 31st, 2023. I'll start with the United States. revenues grew by 22%, led mainly by growth in the wholesale banknotes of about a million dollars or 21%, and 972,000 or 19% in direct-to-consumer banknotes. Payments grew about 600,000 or 33%. The growth in wholesale and direct-to-consumer banknotes revenues were largely impacted by new customer acquisition and an increase in transaction as travel to and from the United States continued to increase. Whereas in the payment product line, the growth was primarily a result of new customer acquisition and activity growth by certain key customers locally in the United States. Revenues in the U.S. represented 78% of total revenues by geographic location in the current three-month period compared to 69% in the same period in 2023. Now let's focus on Canada. Revenues declined by 25%, mainly due to a decline in transacted volumes for US dollars with international clients. However, domestic banknote revenue maintained levels from the same period last year. Revenues in the banknote product line declined by about 600,000 or 19% while the payments product line declined about 700,000 or 33% compared to the same period last year. The decline in payments was impacted by the reduced transaction volumes from key clients in addition to unfavorable foreign exchange movements that impacted trends locally in transaction volumes. Revenues in Canada represented a 22% share of total revenues by geographic location in the current three-month period compared to 31% in the same period in 2023. Operating expenses increased 12% for the three-month period ended January 31st, 2024 compared to the previous three months ending January 31st. Let's dive into some of the expenses. Variable cost within operating expenses. mostly represented by posting and shipping, sales commission, incentive compensation, and bank fees, have remained consistent with the prior year and totaled 3.88 million. The ratio comparing total operating expenses to total revenue for the three-month period in the 31st of January 2024 was 88% compared to 84% for the prior period. Salaries and benefits increased 19%, mostly driven by incremental growth in headcount as the company opened new branch locations, increased staff and IT, business intelligence to further strengthen the talent needed to deliver on the strategic initiatives and growth, in addition to partial increases in cost driven by inflation in base salaries and healthcare costs. Postage and shipping decreased when compared to the same period last year, despite a 10% growth in banknotes volume. This cost decline reflects management's continued initiatives to control the increase in shipping prices, which were adopted during the second half of 2024. The favorable variance in losses and shortages, a decrease of nearly $300,000, or 65%, was primarily due to a decrease in lost shipments and as a result of management's initiatives and continued focus on working with our clients and vendors on this challenge. Information technology expenses included non-capital expenditure on software and related service contracts that do not meet the capitalization criteria. Additional costs were incurred to develop and automate systems that integrates with other companies' core banking systems and enables us to process image cash letters in addition to certain security system costs that the company incurred in the normal course of business. Foreign exchange gains reflected reduced volatility for the period as a result of foreign exchange hedging and risk management strategies. Let's look at the balance sheet for the first quarter ending January 31st, 2024. The group had total available unused lines of credit of roughly $46 million, compared to $27.5 million as of January 31, 2023. The group supports EBC through its revolving line of credit, and as of January 31, the intercompany loan balance payable by EBC to CXI was roughly $14 million, an increase from $10.6 million at year-end. This intercompany loan is eliminated upon consolidation. The average outstanding borrowings by the company amounted to 5.5 million compared to more than 20 million during the same period last year, which leads to the significant reduction in interest expenses. The average interest rate on borrowings was 8.6% for the current period versus 6.6 for the same period last year. The group's capital base has grown to 80.5 million with an EBITDA margin of 13% for the first quarter of 2024 compared to 17% for the first quarter in 2023. The group's continued focus on capital allocation and the normal course issuer bid or share buyback 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. At this time, I will turn the call over to Randolph Pinna, our CEO, to provide his perspective. Thank you, Randolph.