Currency Exchange International, Corp. (TSX: CXI; OTCQX: CURN) Q2 2025 Earnings Call | 06/12/2025

Discontinuation of Exchange Bank of Canada (EBC)

• CXI announced its decision to cease operations of its wholly-owned subsidiary, Exchange Bank of Canada (EBC), by August 2025. This voluntary discontinuance is expected to be completed in Q4 2025, pending regulatory approvals.
• As per IFRS 5, EBC's results are now presented as discontinued operations.
• In Q2 2025, CXI reported $2.7 million in net income from continuing operations (US operations) and a net loss of $0.7 million from EBC (discontinued operations), which included pre-tax restructuring charges of approximately $300,000.
• The adjusted net income increased by 18% to $2.3 million, and adjusted diluted earnings per share were $0.36, up 24%.
• CXI anticipates approximately $3 million (after tax) in annualized estimated costs that were previously shared with EBC to now be fully borne by CXI after EBC's exit. Management is actively working to reduce these expenses.
• The discontinuance plan is on schedule, with most customers off-boarded by May 30th and all operations ceasing by August 30th.

Continuing Operations Performance (United States)

• Revenue from continuing operations was approximately $16 million, a 3% decrease from the prior year, primarily due to a decline in the banknotes product line. This decline was attributed to reduced demand for foreign currency as travel activity tapered.
• The payments product line showed growth, with revenue increasing by 5% and trading volume by 13%.
• Operating expenses decreased by 10% ($1.2 million).
• Operating income increased by 16% to $5.1 million, despite the revenue decline. This was largely due to a $780,000 foreign currency exchange gain from a weaker US dollar against foreign currency banknote holdings, contrasting with a $513,000 loss in the prior year.
• Adjusted EBITDA for the quarter was $5.1 million, a 15% increase.
• For the six-month period, revenue increased by 3%, driven by growth in both product lines and increased demand for exotic currencies in Q3 2024.
• Direct-to-consumer banknotes revenue slightly increased, reaching 46 states, and growth was noted in domestic financial institution customers.

Strategic Initiatives and Outlook

• CXI is now 100% focused on its US businesses and is developing an updated strategic plan for profitable growth.
• Payments Business: Remains a high-growth area, with continued efforts to add new customers and integrate with trading and wire platforms. CXI has three clients on its domestic payment platform utilizing the Federal Reserve Direct program, offering "software as a service" income.
• Banknote Business: Remains a top focus. The Louisville facility expansion has been successful, allowing for later cut-off times for shipments and increased efficiency through recycling machines. The pipeline for new banknote clients (wholesale and direct-to-consumer) is strong.
  • The online FX platform now serves 46 states, covering over 92% of the US population.
  • Opportunities for significant growth are seen through the agent program (shared revenue model, lower overhead) and selective expansion of physical retail stores in key markets like Florida, California, Hawaii, and New York.
  • Despite a softening in inbound travel due to political tariffs and market noise, the outbound business remains strong.
• Mergers and Acquisitions: The executive team continues to review M&A opportunities in both the banknotes and payments sectors.

Financial Position

• As of April 30, 2025, CXI had a strong financial position with net working capital of $60 million and total equity of $81 million.
• The company also has a 100% available unused line of credit amounting to $40 million.
• CXI is executing a share buyback program to purchase a maximum of 316,646 common shares by December 1, 2025. During the six-month period, 80,500 shares were purchased and canceled for $1.2 million.