Currency Exchange International (CXI) discussed its Q1 2024 financial results on March 14, 2024, revealing a 7% increase in revenue to $18.1 million. Despite the rise in revenue, the company experienced an 18% decline in net operating income, which totaled $2.2 million. The revenue bump was attributed to heightened travel activity and the acquisition of new customers, which also led to a 10% increase in bank notes revenue.
However, payments revenue saw a 3% decrease, with contrasting performances in the United States and Canada. CXI's CEO, Randolph Pinna, emphasized the company's focus on growing the payments and bank notes businesses while maintaining control over expenses.
Key Takeaways
- Revenue rose to $18.1 million, a 7% increase from the previous year.
- Net operating income declined by 18% to $2.2 million.
- The company expanded its presence with four new airport agent locations, now totaling 49, and 231 non-airport agent locations.
- CXI bought back 20,200 shares and has approval to purchase up to 5% of its shares.
- The company has a strong capital base of $80.5 million and an EBITDA margin of 13%.
Company Outlook
- CXI plans to grow its domestic bank note business and payments business.
- The company is focusing on expense control and strategic opportunities to increase returns on capital.
- Integration with duty-free and Triple A clubs is in progress, though slower than expected.
- CXI is working on system integrations with providers like Jack Henry and Fiserv (NYSE:FI) for Canadian operations.
Bearish Highlights
- Net operating income has decreased compared to the previous year.
- Payments revenue decreased by 3%, mainly due to a decline in Canada.
- The EBITDA margin reduced to 13% in Q1 2024 from 17% in Q1 2023.
Bullish Highlights
- Bank notes revenue increased by 10% driven by increased travel and demand for exotic currencies.
- The company's technology platforms are showing good progress in implementation.
- CXI has reduced expenses related to lost shipments by 65%, saving $300,000.
Misses
- Revenue in Canada decreased by 25%, contrasting with a 22% increase in the United States.
Q&A Highlights
- CXI is open to acquisitions that are profitable and synergistic with current operations.
- The company aims to manage cash needs through trade volume and transaction predictions, with $46.6 million in available unused lines of credit.
- CXI has a daily loan balance of $12 million to $17 million between the holding company and its subsidiary, Exchange Bank of Canada.
Currency Exchange International (CXI) has reported a solid start to 2024 with a 7% year-over-year revenue increase, primarily driven by a surge in travel and new customer acquisitions. Despite this positive development, the company's net operating income saw a decline, which CXI attributes to various factors including increased operating expenses, particularly in salaries and benefits. The company's strategic initiatives, such as the expansion of airport and non-airport agent locations and the implementation of technology platforms, indicate a commitment to growth in both its bank notes and payments businesses.
CXI's CEO Randolph Pinna remains optimistic about the company's future, citing the bright prospects of the payments sector and the enduring significance of the bank notes business. The company's capital allocation strategy, including a share buyback program, underscores its confidence in the intrinsic value of CXI. The company continues to explore strategic opportunities and cost reduction measures to enhance its market position and financial performance. With a robust capital base and a prudent approach to managing growth and expenses, CXI is positioning itself to capitalize on market opportunities while navigating the challenges of a dynamic financial services landscape.
InvestingPro Insights
Currency Exchange International's (CXI) recent Q1 2024 earnings report highlighted several key financial developments, and real-time data from InvestingPro can provide additional insights into the company's performance and valuation.
InvestingPro Data shows that CXI has a market capitalization of $115.25 million, indicating the size of the company in terms of its equity value. The company's P/E ratio, a measure of its current share price relative to its per-share earnings, stands at 11.52 on an adjusted basis for the last twelve months as of Q1 2024. This metric suggests that investors may find the company's earnings power attractive relative to its share price.
Moreover, CXI's revenue growth for the last twelve months was 18.31%, a strong indication of the company's ability to increase its sales and market presence, which aligns with the reported increase in bank notes revenue due to higher travel activity. The gross profit margin for the same period was an impressive 96.72%, reflecting the company's efficiency in generating profit from its revenue.
InvestingPro Tips for CXI include the fact that the company has high shareholder yield and that its liquid assets exceed short-term obligations, providing it with financial stability and the ability to meet its immediate financial commitments. Additionally, CXI has been profitable over the last twelve months, which is an encouraging sign for investors looking for companies with a solid track record of generating profits.
Although CXI does not pay a dividend to shareholders, this could be viewed in the context of the company's focus on reinvesting earnings into growth opportunities and share buybacks, as mentioned in the article.
For readers interested in a deeper analysis, there are additional InvestingPro Tips available for CXI, which can be accessed by visiting the dedicated page at https://www.investing.com/pro/CURN. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of insights and metrics that InvestingPro has to offer.
Full transcript - Currency Exchange International (CURN) Q1 2024:
Operator: 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 a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] Also note that the call is being recorded on Thursday, March 14, 2024. And I would like to turn the conference over to Bill Mitoulas, Investor Relations Manager. Please go ahead sir.
Bill Mitoulas: Thank you, operatora 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 Pinna; and Group Chief Financial Officer, Gerhard Barnard. Gerhard will provide an overview of CXI's financial results and his latest perspective on the company's operations. Randolph and 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.
Gerhard Barnard: Thank you, Bill, and thank you everyone for joining today’s call. I will present a more convinced 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 US dollars and my overview will also include [Audio Gap] part time employees as at January 31, ‘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 Kyriba our treasury management system and Alessa’s AML compliance 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 supports the more efficient future growth of the Group. On November 29, 2023, the Group announced that’s 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 company’s 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 31, 2024, compared to the previous three months ending January 31, 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 bank notes and payment products lines, partially offset by a decline in trade with foreign financial institutions by Exchange Bank of Canada, reflecting reduced demand 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 months 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 31, 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 benefit 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 31, 2024 compared to the previous three months ending January 31, 2023 will now be discussed in more detail. Let’s focus on bank notes. Revenue in the bank notes 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 continue to strengthen in both the US and Canada. Between November 2023 and January ’24, approximately 201 million travelers passed through DSA 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 bank notes revenues increased by close to $1 million 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 has 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 months period, compared to roughly 30% in the same period in 2023. Now, bank notes as a wholesale bank notes revenue, which increased 370,000 or roughly 5% from new customer acquisitions in the domestic wholesale bank notes space volumes also increased. Wholesale bank note revenue represented 45% of the total revenue of the current three months period compared to 47% in the same period last year. Relentless to the most comparable period prior to the pandemic, the three months period ending January 31, 2020, bank notes 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 the United States resulted in a notable growth of roughly 33% for this period. Volumes in Canada resulted in a 33% decline in revenue, quoting 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 months period ended January 31, 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 locations comparing the three months ended January 31, 2024 to the three months ended January 31, 2023. I’ll start with the United States. Revenues grew by 22%, led mainly by growth in the wholesale bank notes of about $1 million or 21%. And 972,000 or 19% in direct-to-consumer bank notes. Payments grew about $600,000 or 33%. The growth in wholesale and direct-to-consumer bank notes revenues were largely impacted by new customer acquisition and an increase in transaction as travel [Audio gap] 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 US represented 78% of total revenues by geographic location in the current three months 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 bank note revenue maintained levels from the same period last year. Revenues in the bank note 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 months period compared to 31% in the same period in 2023. Operating expenses increased 12% for the three months period ended January 31, 2024, compared to the previous three months ending January 31, let’s dive into some of the expenses. Variable cost within operating expenses mostly represented by postage 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 months period ended 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 and cost driven by inflation in base salaries and healthcare cost. Postage and shipping decreased 4%, when compared to the same period last year despite a 10% growth in bank notes 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 an automate systems that integrates with the company 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 the reduced volatility for the period as a result of foreign exchange aging and risk management strategies. Let’s look at the balance sheet for the first quarter ending January 31, 2024. The Group had total available unused lines of credit of roughly $46 million, compared to $27.5 million as at January 31, 2023. The Group supports EBC through its revolving line of credit and as at January 31st, 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 led to the significant reduction in interest expenses. The average interest rates on borrowings was 8.6% for the current period 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 a 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 perspectives. Thank you, Randolph.
Randolph Pinna: Thank you, Gerhard, and thank you all for joining the call, especially those at west who, I know are up quite early. Today I’d like to focus on both the cost and the revenues of our business starting with CXI. The bright future is ahead of us with payments. We continue to see the integrations while we see the cost of enabling our systems to be able to integrate with the clients that we have in our pipeline. Now the focus is not only just on foreign exchange, we are right now setting up to get a part of the FED direct with the Federal Reserve, so that we can do both international payments and domestic payments. As I said, the pipeline is quite full, we have talents that is experienced in this area and is led by Chris Johnson the VP of Sales for CXI who has been with the company for about 17 years and has done very well in execution on his plan. As we all see, the bank note business continues to be the core of CXI. Our pipeline is very full in the bank notes sector. While many of us think that credit cards and tap and go are eating at the bank note business, cash usage continues to go up as reported quarterly by the Federal Governments in the top five countries we monitor such as the US, Canada, Australia, England and Mexico. That cash usage is evident to us both in our growth, as well as the travel demands we are seeing both in the consumer and the wholesale market. Speaking of wholesale, our pipeline is quite full with banks, even though we service a majority of US banks, our two competitors the other massive banks that we compete against, still have a good hold, as well. And we continue to work away again in this business. We do adding some significant size banks in the next six months and our pipeline as I said is full and our implementation and team to support it is ready and now our systems are there. While we continue to grow, our Managing Director, Wade Bracy is focused on all elements not only being able to service our clients in the top service that we are known for, but also doing so in an improved method. He has developed and improved shipping process and packaging and shipping process, as well as negotiating a reduced shipping process Gerhard has highlighted and you can see the effect of these new processes and pricing from our vendors. This process improvement has been well received by our staff, because it’s made things easier for them as well as our customers because our service levels continued to be very strong. Just as important as a wholesale division, as you see the consumer unit led by Matt Schillo, who has been working with me for probably 25 years is going very well. The consumer unit as I think you know has three components to it. It has our company-owned stores. We are very proud that in the next month or so, we will be opening our newest store in Buckhead, Atlanta, Georgia, which is a very big market and the previous operator who went out of business during the pandemic did very, very well there and we anticipate to also have a good opening and quickly start of profitability at that store. Typically, a new store takes six months to a year, and as Gerhard pointed out in his commentary, some of our other stores we’ve opened are now at contributing levels and giving us regular returning – return on our capital deployed there. So, we do anticipate to open this new store, as well as the rest of the year probably one or two more stores at least in our core markets like New York, maybe even Boston, California, Florida, or Hawaii. So, we will continue to focus on growing our company-owned stores. To complement our stores, we are, as Gerhard pointed out, adding new states to our online store. We now represent over – well over 90% of the whole US population that we can deliver to your home and office if you are not able to go to one of our stores or one of our customer bank branches. So our online store has a very good marketing plan been led by Ryan Graham, who has been working with our Group for probably over a dozen or more years and he is our VP of Marketing. He’s done very well in utilizing online technologies to really grow the web footprint that we have. So we do anticipate continued growth in our online store. Most importantly is our agent relationships, as Gerhard pointed out, we are continuing to add agent locations in quality places like new airports where the agent is the local operator ensuring that the staff maximizes the opportunity, while CXI as its wholesaler and basically the support engine is providing the software, the brand, the cash there and the overheads overall support to the location. That formula between the local operator and CXI is the wholesale agent provider has been very successful and that remains the top focus and we anticipate to continue to grow that agent relationship significantly. So now I do want to talk about EBC. As you saw, the US business was quite healthy and EBC was the complete opposite where we did have a significant decline due to competition in international FX. Ever since the banks have failed over here in the states, we had an extreme tightening of credits, because our bank is quite small. And as a result, volumes have significantly been reduced. We are just now finalized, everything has been agreed with our trust companies and we are now in the final stages of operationalizing this trust account which we set up for each individual bank’s client and that trust account will then provide the comfort to the credit departments of these international banks’ need to resume the old levels that we were doing, as well as we have pretty full pipeline. We have three already ready to go just waiting on this account. So we do anticipate a resumption of international revenues to start going back up quite quickly. Without international, we still have of course, Canada, our Canada expansion plan as you saw, the domestic bank note business is still remaining well and we have a pipeline of several other nice noticeable financial institutions and other types of cash customers in the pipeline and we do have director of our international – I mean, our domestic bank notes expansion and him and I have been working closely together to ensure the execution of our domestic plan, which is not just focused on bank notes even though that too is a core focus of EBC, but also growing our payments business. We do add probably 25, 30 new corporate each month directly that what we’ve recognized with the CXI in the US as their strategy called OPOP, which is One Provider One Platform is being adopted now and well received by existing bank note clients that have recognized that our payment system can do both Canadian dollar domestic payments, as well as international payments. And such integration while having a little bit of cost upfront does reaps the reward of a regular flow of international FX payments and fee income for many domestic payments. So our domestic expansion plan is very strong. Our international expansion plan is strong once we have our trust account fully operationalize, we can resume the growth of international bank note expansion. I do also want to point out that Katie Davis who has been with our Group for quite a while, she is very experienced. She has been our treasurer, which she has been managing the cash positions and all the FX for both Exchange Bank of Canada, as well as CXI has been named and is continuing to remain in the role as EBC’s Interim CFO, knowing the cost growth while we had revenue drop is a focus – an extreme focus for Katie in her role and luckily we have a great team of treasurers behind Katie. So she does have the capacity and time to focus and leading EBC’s this expansion of the business while James Devenish, the Managing Director focuses on growing and executing on our domestic and international sales plans. She is very focused on the expense control and potentially reduction. So, in closing, at the Board level, the Board and I are very focused on executing on our strategic plan. In June, we do have a refreshing of this strategic plan and within that, our primary focus is the return on capital deployed and the execution of our overall plan which includes mergers and acquisitions and identifying the strategic opportunities that are available both in CXI’s wholesale business, CXI’s consumer business, as well as EBC’s growth. So the Board and I understand the need for expense control, while focusing on growing the overall business both in bank notes and payments. So with that being said, I would like to open up the floor if I will to the operator and take any questions you may have. Thank you.
Operator: [Operator Instructions] And your first question will be from Robin Cornwell at Catalyst Research. Please go ahead.
Robin Cornwell: Hi, good morning. I guess, the first question is a – not necessarily a simple one, but, Gerhard, the salaries and benefits, I know in the first quarter was a big increase over the same period last year. But as the year progressed last year, the salaries started to level off a bit. Can we perceive that during the rest of this year that the level will not flatten up but grow less aggressively over last year?
Gerhard Barnard: Robin, thank you for the question and it’s a good one. As I pointed out, we were at 409 people permanent and temporary at the of October 31, or at the yearend October 2023. We are right now at 406 in total and it is our aim to continue to ensure that we don’t grow our staff faster than our revenue growth. So, between Randolph, myself and Khatuna VP of HR, we have a hiring committee and every new employee that joins the Group has to be presented at that quick discussion that we have on it. So, yes, that is a continued focus of us and our eye is on it. Obviously, in salaries and wages, it’s nearly at other items as Randolph just pointed out to me there is DSUs, RSUs. There is some severance payments in there. So certain of those costs are not directly related to our employees, they are related to benefits that linked directly to those individuals.
Robin Cornwell: Okay. That’s – yes, that’s important. And just a comment that, it’s good to see the postage and shipping costs the way they are. Very impressive that – as a result of your repricing. And my next question Randolph is, it’s great to see that the trust agreements are getting in place. You mentioned that you have three almost ready to go. How many do you anticipate that you have to put in place to get the business growing [Indiscernible]?
Gerhard Barnard: Well, the three we have will significantly increase the business alone, but we probably have seven more behind that that are not have been – the three we have had literally, we swapped paper, everything is pretty much ready to go and then we have some that are just behind that that we are in those final stages of negotiation and then the onboarding will quickly happen thereafter. But the three that we have are quite high volume potential customers and we will anticipate good volumes straight away. So, the second quarter that we’ve already half way through. You may not see that lived just yet, because the operationalizing will probably take another few weeks to a month or so. And then, you always do a first time trade test which is a small transaction and then they start going up from there. So we would anticipate the second after the year to really – for the evidence of this to happen. We are focused with the existing customers that have accepted CXI’s corporate guarantee in getting them comfortable to increase the volumes as well as working to grow in markets where we have – where the credit issue is not as much of an issue. But that typically opens up an area which is known as non-tariff. That topic does have some speed bumps along the way with our Board being extremely cautious and we have developed an enhanced due diligence program to provide the comfort that is needed knowing that this trading with the client directly back to the Federal Reserve can happen sooner than later. And therefore we are actively working on it because revenue growth at EBC is one of our top in mind, top focus is. Does that answer your question?
Robin Cornwell: Yes. Thank you. Very well, that’s terrific. And that’s it for me. Thank you.
Operator: Thank you. [Operator Instructions] And next will be Peter Rabover at Artiko Capital. Please go ahead, Peter.
Peter Rabover: Hey, Randolph, Gerhard. Good morning. Hey, just Randolph, you mentioned you had a bunch of strategic things that you are discussing and I really appreciate the focus on the return on capital and the thinking. Rob, just kind of curious if you could, as much as you can talk about the strategic opportunities that could increase the returns on capital for the company? And I know, there is just a lot of moving parts and so, any color you can share would be appreciated?
Randolph Pinna: Well, I can’t share too much detail, because we don’t have any executed agreements as of yet. But the strategic could be like I said an acquisition or just it’s a significant major expansion with certain types of customers. For example, at the wholesale unit at CXI, we’ve recognized an opportunity with one of the top largest banks in the US acquiring one of the failed banks which was one of our customers. And luckily that business – are you still there, Peter? Because…
Peter Rabover: Yeah, yeah.
Randolph Pinna: My screen looks like it is rebooting. Sorry. So anyways, see, as wholesale business, we do have an opportunity to win the top US bank, because that bank has recognized that we’ve done a very good job servicing now they are part of their home asset group. And so, there is that opportunity in the consumer area. We – as I said continuing to look at opportunities how we can add additional agent locations that are national providers and so forth. And even at Exchange Bank looking more on the domestic processing and so forth. But as far as the specific transaction like an acquisition or so, I can’t do that. There NDAs that restrict any discussion whatsoever. But I can confirm that at each part of our company, the wholesale unit, the consumer unit and even at Exchange Bank, we are looking at continuing to do transactions that are accretive to our shareholders.
Peter Rabover: Do you, it’s been about a year since the bank’s sales that I am sure there were kind of freeze in the financial space for a while. What’s your view on more transactions coming across your table? Or you see is it more assets, is there more opportunities now last ones, and what do you think the constraints to your execution or the price, is it size? Any color you can give me I’d appreciate it. Thank you.
Randolph Pinna: Yes, so, what, luckily, the realization in the payments business that the margins are shrinking, which we are seeing ourselves as part of the reduction and our volume has the owners of their, what I’ll call boutique shops in their select marketplaces have come to the realization that the heated overpriced that some of the acquisitions you’ve seen in the past with payment companies that – so there is that. But the hurdle is still the same thing. An owner feels their business is probably just as valuable as their kid, and hence, there is that mismatch in price. And so, we will not acquire a business unless the return is accretive to us and as you know, our price, it is our share price is actually depressed in my opinion. And therefore, that restricts the amount we would be willing to pay there. But we do are taking a longer term view. We normally would look four, five years out and so, it does enable us to be as far as we are. But I can’t go into any specifics, but doing a deal as you can imagine with the private person trying to convert them in part of a public company is kind of legating the coding process. And so, there is a lot of due diligence needed on both sides and a top level of comfort that needs to happen. So, that’s about as much as I could say on that, Peter.
Peter Rabover: Yeah, yeah. Of course, that – thank you for the color. I appreciate that. And then, kind of last question, maybe one more, but what’s – I know – maybe I missed it, but you said, Gerhard said, the gross debt – the debt was $5.5 million, what was the gross cash for the quarter and I guess, net cash? And then, of that, as you are getting, as there is a lot of moving parts, how much of that cash do you think you need to run the business on a, average basis, I guess?
Randolph Pinna: I’ll let Gerhard answer that.
Gerhard Barnard: Yeah, thank you for that question, Peter, I know it is on everybody’s mind. Challenges for us always determining how much cash do we need to run the business and that depends on the seasonal demand. That depends on volumes that we are predicting or trying to predict as well as unpredictable volumes of people trading x million Mexican pesos in a week that was a miss early day or last week or last year. So you look at our revenue growth and I take that into account and say that puts a strain on our current available cash that we have. So I have said many times before, it really depends on where we are in our current cycle. It’s always a moving target and a moving number for us.
Peter Rabover: Okay. So, but what was the growth in that number for the quarter?
Gerhard Barnard: Peter, it would vary. I would say, it’s probably in the $5 million to $10 million range depending on how we look at and our vaults and cash kept in the vaults and the continued optimization of those stock or bank notes stock in our vaults.
Peter Rabover: Sorry. I think I just asked for the exact number of what was the quarter end cash position?
Gerhard Barnard: Surplus cash, I can’t give you an exact number and we add exactly this because of timing differences and also Q2 anticipated demand.
Randolph Pinna: I think you want to know the total cash we had at quarter end?
Peter Rabover: Yes. That’s all.
Gerhard Barnard: That’s on the balance sheet. I think it’s $80 million or $90 million.
Peter Rabover: $90 million, is that recent?
Gerhard Barnard: Why don’t you look? We go to the next question person and come back to you, Peter?
Peter Rabover: I didn’t see the filing in the website. So that’s why I asked this morning. So, but anyway, okay we can go to – so that’s why.
Randolph Pinna: Yeah, Gerhard, you will pull it up on his screen here. We’ll give you that number. It’s how you are asking for the surplus cash and that does vary.
Peter Rabover: But I wanted the context first, and there wasn’t filing this morning. So that’s why – at least not on your website. So that’s why I had asked. That wasn’t in the press release. So, but anyway, I’ll let the next caller ask the question. Thanks.
Gerhard Barnard: Thank you, Peter.
Operator: [Operator Instructions] And at this time, it appears we have no other questions. Please proceed.
Randolph Pinna: Peter, okay. Let me real quick, just answer Peter’s question. Peter the total cash at the end of the quarter, this last quarter was $105 million US dollars. And Peter all documents got filed last night on the various portals. So sedar.com and we are also updating our websites with one of these documents, as well today.
Gerhard Barnard: Yes.
Randolph Pinna: Okay. Go ahead. You said there is another caller.
Operator: Yes sir. We do have another question from Bill Bock[Ph] from TH&C[Ph] Investments. Please go ahead.
Unidentified Analyst: Good morning, guys. Two quick questions. Hi, first one, how are things going on the Southern border as far as integration with duty free? And also with respect to the Triple A clubs? And the second one is, how are things going with the system integrations that you mentioned in annual letter at Exchange Bank similar to what you did with CXI? Thanks. Looking forward to seeing you next week.
Randolph Pinna: Likewise. I’ll answer the sales question and Gerhard can answer the financial question. The duty free company, we have a good relationship with them. It is slow. Again, shipping cost is a focus and so that’s part of this renegotiation or expansion with them. We are working through that. So that’s going slower than expected. But that continue to trade with us on the Northern border. However, we are going to update our agreement to couple this – the southern border. And so, the shipping topic is the one thing that’s been slow, because are focused on containing that cost and possibly sharing those costs with the operator. The Triple A locations we continue to open. This is part of the driving factor of why we add new states licenses, because not only does it support our own online store, but Triple A is an agent of us. And therefore, it is required. So, I don’t have the exact statistic of which new clubs we just added in the last month or so. But I can tell you that we continue on this national expansion plan. I know Ohio was one of the new big one that we had added, I believe in the last quarter or two. But the Triple A relationship remains a strong driver as you are seeing in our consumer division numbers continues to grow. And so, they are part of that. So our own stores are growing. Our online store growing and the agents like Triple A and hopefully soon duty free will continue to fuel that growth.
Gerhard Barnard: Bill, the details would be the – your second question, I didn’t hear that clearly.
Unidentified Analyst: Yeah, so in the annual report that you all released, it mentioned that you are working on the system integration with the big providers like Jack Henry and Fiserv and there is another one doing the same thing with Exchange Bank of Canada. So, my question is, how is the implementation of that progressing? Because that’s a big piece I think of the payments. So if you could give us some more color on that that would be great. Thanks.
Randolph Pinna: Yeah, I get that. I can answer that one. Yeah, because, the Fiserv and Jack Henry and all that, that’s a CXI thing and that has been successful that same integration capability exists. However, those software providers are mostly focused in the US. So that same type of implementation is what’s being worked on now for Canada, but it’s not with a Fiserv. It is bank specific and we do have a bank in Ontario, as well as a potential out west that are in discussion with us. But it is a slower process, but it is part of this OPOP Canada plan where we do want to integrate. We do have a fintech provider that has a domestic payment platform based in Quebec that does have customers nationwide. That does domestic payments and we are, right now probably in the third month of the integration and the tying our systems together. And so, within the quarter, we should have a new bucket of customers, because they are turning on their international capability which will be powered by Exchange Bank of Canada. The good news is the integrations are much cheaper and faster, because we’ve already done them in the states. So, our APIs are all built. We have our sandbox where the two tech teams work together to test it and integrate and make sure it’s ready to go live. And so it is underway.
Gerhard Barnard: Yeah, so, I think to complement that, in the US, it’s with Fiserv, Jack Henry and larger organizations. In Canada, it directly with financial institutions. So you will go directly to x bank or Z graded union and tie into their core systems.
Unidentified Analyst: Very good. I guess, since I am – I have asked those, I guess, one more if you could just comment on the – in general without releasing anything specific. The nature of the kinds of acquisitions in terms of – are you looking at cloud currency providers on the payments side? Are there any – is there any color that you can provide in terms of criteria that you are thinking about.
Randolph Pinna: Well, we are not restricted just payments and cash would be a consideration that there is such an opportunity which that could be and we – the criteria is we are not – we would not acquire a business that is a dream that’s losing money now, but you got conduce something in three years, we would only be acquiring a business that would be accretive as I said that they have a book revenue profitable business. We have the same type of thing and we are recognizing on the back end, the back office could be sharing the compliance and risk cost and so forth. And so, we have – and as far as the target size, we are not trying to buy something bigger than ourselves unless there was such an event where we could. So we are looking more at the tuck-in types or bigger. But nothing too large, because we do would need finance that with debt which we have some guys that have expressed interest in helping us with that. So these are right-size or a little bigger opportunities that we see.
Unidentified Analyst: Okay. Very good. Thank you, Randolph and Gerhard, will see you next week.
Randolph Pinna: I’ll see you next week. Thank you.
Gerhard Barnard: Thank you.
Unidentified Analyst: All right. Bye, bye.
Operator: Thank you. Next question will be from Paul Farrell at Mayborn Partners. Please go ahead.
Paul Farrell: Thank you. Thank you for taking my questions.
Randolph Pinna: Hello.
Paul Farrell: Hello, this is Paul Farrell. Just two quick questions. I may have missed it, but what was the amount of the share repurchase during the quarter? And what’s your strategy in terms of becoming more aggressive there?
Gerhard Barnard: So we purchased for cancellation 20,200 shares in the month of February. And we have approval to continue with a maximum of 5%, which is roughly 322,000 shares. We continuously discuss this with our Board and progressed on a structured path.
Randolph Pinna: We are restricted that there is only so much we can buy per day, right.
Gerhard Barnard: 1,325 per day.
Paul Farrell: Okay. Thank you. I appreciate that. I may have missed that in the commentary earlier. My second question is, most companies have a working capital line of revolving credit line to finance the seasonal and unexpected swings in working capital. Your product is cash. So, is there an impediment to having a revolving credit type set up to fund the seasonal swings and unexpected spikes in your working capital, i.e. cash needs? So that you actually can kind of figure out how much excess cash you have available?
Gerhard Barnard: We – well, two things. We really hope that or we are continuously trying to predict trades volumes and transactions of travelers and obviously customers. Our challenge and something that benefits us right now is we see continuous growth in those sections. So, on a practical level, if client A does a large cash transaction of Pesos, US in a week from now and that wasn’t necessarily anticipated or predicted, you can understand that that has a drain on our available free cash or available cash. We do have facilities in place whereby we can fund that working capital. And as I mentioned, those lines are mostly undrawn.
Paul Farrell: What is the total?
Gerhard Barnard: Total undrawn is $46 million. $46.6 million unused lines of credit. But as I also mentioned, Paul, if you look at we also – CXI is also funding in the company loan balance between the holding company and its subsidiary Exchange Bank of Canada of roughly $12 million to $17 million on a daily basis. So there is some need for that facility just to create working capital in Exchange Bank of Canada, as well.
Paul Farrell: Okay. Thank you.
Operator: Thank you. And at this time, we have no other questions. Please proceed.
Randolph Pinna: Okay. Well, thank you everybody for joining. As you know, Gerhard and I are available to have one-on-one calls as well. We can’t disclose anything further than what was released in our press release and what was discussed today. But we are happy to clarify if there is any question around that you didn’t understand today. So please reach out to Bill Mitoulas to coordinate a time. I am on the road extrapolating internationally starting tomorrow for a few days. But I will be in Toronto at the Annual Shareholder Meeting. We are doing a reception for an hour. After that there will be quite a few Board Members. We invite you to come to our Annual Shareholder Meeting they are on Bay Street and watch our presentation and then of course, interact with myself, Board Members Gerhard and anyone else will have some of our other top executives there, as well. So we look forward to hopefully seeing you next week. And I thank all of you for your participation in Currency Exchange International and thank you.
Gerhard Barnard: Thank you very much. And have a good day.
Operator: Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Have a good day.
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