Currency Exchange International, Corp.

Good morning, ladies and gentlemen, and welcome to the Currency Exchange International CXI Q2 2026 Financial Results Conference Call. At this time, all lines are in 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 Wednesday, June 10, 2026. I would now like to turn the conference over to Bill Mitoulas, Head of Investor Relations with CXI. Please go ahead.

Thank you, Joey, and good morning, everyone. Welcome to the Currency Exchange International conference call to discuss the financial results for the second quarter of the 2026 fiscal year. Thanks for joining us. With us today are President and CEO Randolph Pinna 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, scale of 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. For those of you who may happen to leave the 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 the 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

Thank you, Paul, and good morning to everyone joining today's call. My overview of the company's performance CSI will also incorporate the final results of the discontinued operations of Exchange Bank of Canada, or EBC. These results are presented in US dollars. On May 4, 2026, the company announced the completion of the discontinuance of its wholly owned subsidiary, Exchange Bank of Canada, marking the conclusion of EDC's orderly exit from Canada. On April 29, 2026, the entity was dissolved. On final dissolution, amounts of roughly $6.4 million previously recorded in equity under accumulated other comprehensive losses or AOCL related to the cumulative exchange differences on translating foreign operations were classified to retained earnings through the loss of the tax from discontinued operations. Further, EBC incurred legal and consulting charges of roughly 110,000 in the second quarter and for the six months a loss of roughly 300,000. All of these amounts represented losses that were incurred and the results from discontinued operations for the three and six months period ended April 30th, 2026 of $6.57 million and $6.8 million respectively. There's $6.49 million relating to the AOCL balance. So we really moved that balance through the balance sheet via retained earnings and EDC is finally discontinued. Now, before we go into these results in detail, I'd like to note that the group measures and evaluates its performance using several financial metrics and measures, some of which do not have standardized meanings under general accepted accounting principles, or GAAP, and may not be comparable to other companies. We call these measures non-GAAP financial measures and or adjusted results. Management believes that these measures are more reflective of its operating results and provide a better understanding of management's perspective on performance. These measures enhance the comparability of our financial performance for the current period with the corresponding period in 2025. Now management included a full reconciliation of key performance and non-gap financial measures in the MD&A on page 25. When we refer to reported results, we refer to the results as reported in the financial statements based on IFRS. When we refer to adjusted results, such as adjusted net income, we refer to performance non-GAAP measures. I am excluding the AOCL, which was reported under discontinued operations, Related to cumulative exchange differences from consulating foreign operations And this was as this was one final step in EBC's discontinuance And I'm excluding it as it will improve comparability to the previous year With that, here is a summary of the current second quarter's results compared to the same quarter in 2025 Revenue increased to $18 million by 2.1 million or 13%, driven by a 73% increase in payments revenue and a marginal 1% increase in banknotes revenue. Operating expenses increased 13.6 million by 2.9 million or 27%. Now, this is largely due to a 1.2 million swing in foreign exchange gains and losses. from a $780,000 gain last quarter in 2025 to a $450,000 loss in this quarter, largely as a result of the impact of ongoing geopolitical events. Now, when adjusting for bank charges previously accounted for in discontinued operations under Exchange Bank of Canada, the increase in bank charges is almost entirely attributable to the wire volume. So if one were to exclude the swing in foreign exchange gains and losses and account for the bank charges in continuing operations, expenses rose by 1.2 million or 9%. So moving the foreign exchange gains and losses, looking at the bank charges that is in discontinued operations, adjusting for those, you really sit with a 1.2 million increase in expenses or 9% compared to that revenue increase of 13%. Now reported EBITDA decreased to 4.5 million by 380,000 or 8% and adjusted EBITDA decreased to 4.7 million or roughly 600,000 or 11% which was mostly caused by the restructuring charges immaterial in the current quarter compared to 229,000 in the second quarter of 2025. And stock-based compensation were almost the same in both quarters. So really, stock-based compensation is neutral if you compare quarter over quarter. Now, reported continuing operations net income, that's the CSI business, which excludes losses from discontinued operations, decreased to $2.4 million by $283,000, or 11%. The adjusted continuing group net income was essentially flat at $2.4 million for the second quarter and $4.3 million, or $886,000, almost 25% higher than the previous six months. Now let's look at quarterly revenue in a bit more detail. Revenue growth was driven by the payments product line's growth of $2 million, or as I said, 73%, complemented by a 1% increase in banknotes revenue, resulting in total revenue increasing 13% when compared to the prior second quarter. Because bank payments is roughly 27% of our total revenue, and banknotes is roughly 73% of our total revenue. So that's why that 73% and 1% gets to an accumulative 13% revenue increase. Now, banknotes revenue increased 1% year-over-year, driven by new business and growth in certain non-airport agent locations, largely offset by volume declines from existing financial institution customers and some money service businesses. If you could wholesale banknotes, revenue grew 11%, supported by certain large trades that occurred during the current period and New Domestic Financial Institution customers mitigating volume declines from other key customers. In contrast, revenue from the online FX platform and company-owned branches decreased by 28% and 10% respectively due to lower demand for exotic currencies and certain travel foreign currencies as a result of the geopolitical gains. Also, banknotes trading volumes increased 12% while all other banknotes segments experienced volume declines. Overall, wholesale banknotes' revenue increased by 806,000, or 11%, representing 47% of total revenue. Now, our online ethics platforms' revenue decreased by 265,000, or 28%, due to a decline in the demand for exotic foreign currencies. Partially offset by a slight increase in foreign travel currencies, primarily the Euro During the current quarter, the company added North Dakota to the state in which OnlineFX operates CFI now offers its services in 48 states, plus the District of Columbia Revenue from the OnlineFX platform represented roughly 4% of the total revenue compared to 6% for the same quarter last year CXI's company-owned branch revenue decreased by 429,000, or 10%, driven by weaker demand for exotic foreign currencies and the temporary closure of three stores between the fourth quarter of 2025 and the first quarter of 2026 due to required relocations, as well as a permanent closure of the Santa Monica branch in the third quarter of 2025. For those two new locations, Scottsdale, Arizona and Woodbury, New York, were opened in the second half of 2025, they have not yet fully matured to fully offset the lost revenue from the closed locations and branches. Revenue from the company-owned branches represented 22% of the total revenue, down from roughly 28% a year ago. Payments revenue increased by $2 million. or 73% in the three-month period ended April 30, 2026, driven by a 43% increase in trading volumes. Growth was driven by the continued onboarding of new customers, increased transaction activity from existing financial institutions and credit union clients, investments in core banking system integrations and scalable infrastructure. Enabling Improved Service Offerings Business trading volumes were north of $2 billion for the current quarter compared to $1.4 billion for the prior period. Growth in payments revenue increased its contribution to the company's total revenue to 27% in the current three-month period compared to 17% last year. The following is a highlight of operating expenses from continuing operations for the second quarter of 2026 compared to the prior year's second quarter. Now, CSI's operating expenses increased by 2.9 million, as I mentioned, or 27%, compared to the same three-month period in the prior year. Variable costs within operating expenses, represented by postage and shipping, Bank Service Charges, Sales Commission, and Incentive Compensation totaled 3.8 million in the current quarter compared to 2.7 in the three-month period ended April 30, 2025. Now that's a 40% increase primarily attributable to Bank Service Charges. The ratio comparing total operating expenses to total revenue for the three months ended April was 76% compared to 68%. Now let's deal with bank service charges. It represents fees associated with processing payments in banknotes transactions, but are primarily driven by our banknotes product, our payments product line. The significant increase in the quarter was driven by two main factors. Firstly, the substantial increase, almost 17,000 additional payments were processed in the second quarter, with quarterly payment transaction volumes increasing to almost 65,000 from 46,000. Secondly, as mentioned before, CXI transitions its payments processing activity away from EBC during the first quarter of 2025, which resulted in having 100% of CXI's bank charges being incurred within continuing operations for the current quarter, whereas In the same quarter last year, roughly 450,000 in bank charges were recorded under EDC in the discontinued operations. Now adjusting for this 433,000, the increase of 268,000 in bank charges is almost entirely related to the volume Growth of 17,000 additional wires in this quarter. Foreign exchange losses of 421,000 for the current quarter were primarily driven by the depreciation of foreign currency denominated inventory against the US dollars during the first two months of the quarter. This was influenced by heightened geopolitical uncertainty related to the Middle East conflict. which supported safe haven demand for the U.S. dollars as well as a divergent monetary policy and interest rate differentials that contribute to hedging costs. The largest contributor of the quarterly net loss was elevated carrying costs associated with the Mexican peso positions against the U.S. dollar combined with increased market volatility. In comparison, the prior year experienced significant remember that's $779,000 Significant U.S. dollar weakening following announced freight, tariffs, and policy shocks, resulting in the foreign exchange gain of $780,000 in the previous quarter. This represents the $1.2 million swing between these two quarters as mentioned. Now, if we were to take bank charges, the $443,000 from discontinued operations and the large swing of $1.2 million in foreign exchange gains Into losses and normalized this or adjust this, operating expenses increased 9%. Let's look at salaries and benefit. It increased due to several factors, including the full absorption cost of staff and directors from EBC following their cessation of cost sharing with EBC during the fourth quarter of 2025, and an increase in sales commission primarily related to the growth in payments as volume. These increases were partially offset by a reduction in headcount resulting from the closure of the Miami vault, partially of 67%, by the closure of the Miami vault and slower hiring of certain roles to gain efficiency, due to gained efficiency. CSI made a strategic hire and we are very pleased to announce that Steve Mosinski will join the executive team as managing director e-commerce for the group. Steve will drive our e-commerce and group marketing strategy. Welcome Steve. Post-season shipping increased 12% due to wholesale banknotes volume as a result of an 11% increase in revenue during the current quarter as well as costs incurred from measures mitigating the loss of shipments with contracted carriers including expanded use of armored services and the reduction of maximum package size Now information technology increased partly as a result of absorbing the full cost from software licenses that were partially offset to EDC in the prior period. Increased software costs related to a 73% increase in firewall volumes, swift usage, and cybersecurity costs incurred in the normal course of growing this business. CXI increased its service tiers in NetSuite and Kariba Now let's dive into a summary of the current six-month period's results compared to the same six-month period in 2025. Revenue increased to $33.4 million by $2.1 million, or 7%, driven by a six-month increase of roughly 61% in payments revenue and a 5% decrease in banknotes revenue. Operating expenses increased to $25.8 million by $3.5 million, or 15%. Now again, this is largely due to a $1.35 million increase in bank charges and the impact of share price movement on stock-based compensation. Again, I'm going to explain the bank charges here. Actual bank charges, excluding the impact of cost sharing, reflected a 40% increase year over year, which is aligned with the actual volume growth seen in the payments business. That's 61% I mentioned. Overall, total operating expenses adjusted for these two items which led to an increase of 2.2 million or 9% which was inflationary increases in personnel costs in addition to absorption of costs previously shared with EBC. Reported EBITDA decreased to 7.8 million by 920,000 or 11% and adjusted EBITDA decreased to $8.5 million by $558,000 or 6%, which resulted from adding back the stock-based compensation of about $500,000 in the current six-month period compared to $88,000 in the prior six-month period and restructuring costs of roughly $200,000. Now salaries and benefits for the six months increased 7% due to several factors, As we mentioned, the EVC cost sharing and also a change in the vacation policy from last year. These increases were partially offset, as I mentioned, by a reduction of almost $800,000 in salaries and wages resulting from the closure of the Miami vault. Information technology increased 33%. As a result of the absorption of the full cost, the increase of their cost As mentioned, relates to an increase in wire volumes, swift usage, and cybersecurity costs. Now, marketing and publicity increased 26%, primarily due to the company's focus on marketing growth initiatives. CFI onboarded an external performance marketing agency in February to refocus ad spend and accelerate travel currency growth, focusing on campaigns, Retail investments and establishing customer referral programs that support the corporate goals with a focus to direct the consumer's business growth. Very excited about this. Interest revenue of $440,000 was primarily driven by CXI's increased investment cash balances. As of April 30, 2026, CXI had $30 million in AAA-rated money market funds. In addition to interest earned on other investments, interest-bearing bank accounts in the normal course of business. The increase in interest income reflects a significant rise in the daily investment balance, partially resulting from reduced working capital or zero working capital requirements related to EVC. Now let's review the year-end balance sheet. Due to the company's business being subjected to seasonality, CFI uses a 12-month trading adjusted net income amount and that calculates ROE at roughly 14% CFI's net working capital of 80 million and total equity of 85.3 million and a 100% available unused line of credit amounting to 40 million CFI reported cash and cash equivalent balance of 109.9 million now including 4.5 million return of invested capital distribution from EBC which was received on April 29, 2026. CSI had almost 58 million cash held in the form of banknote inventory in transit, vaults and tolls and on consignment locations at the quarter end. CSI maintains cyclical banknotes inventories which average levels range between 50 and 75 million depending on the travel season. Cash deposited in bank accounts totals roughly 52 million. This total of 52 million includes the 30 million in excess cash of minimum operating requirements and cash required to settle of accounts payable, of accounts receivable and accounts payable balances related to customer trainings at the quarter end. The remaining balance is comprised of minimum cash reserves maintained by CXI bank accounts with selected banking partners to support banknote settlement activities as well as operating cash balances corresponding to payment settlement activities. It is important to note that cash serves as CXI's primary product. Its widgets, primarily utilized for transactional activities, within the banknotes segment and both wholesale and customer transactions. Now, maximizing shareholder returns remains a top focus of management with improved operating efficiencies and through CXI's share buybacks under a normal cost issuer bid or NCID. During the six-month period ended April 2026, CXI acquired and canceled 211,000 common shares at prevailing market prices on the TSX, totaling 3.6 million. At this time, I would like to turn the call over to Randolph Pinna, our CEO, to provide his perspective. Thank you, Randolph.