Goldmoney Inc. Reports Financial Results for First Quarter 2018Aug 11, 2017
TORONTO – (August 11, 2017) – Goldmoney Inc. (TSX:XAU) (“Goldmoney”) (the “Company”), a precious metal financial service and technology company, today announced financial results for the first quarter ended June 30, 2017. All amounts are expressed in Canadian dollars unless otherwise noted.
- Quarterly IFRS Profit of $2 million and Adjusted Profit of $3.3 million – the first in the group’s history.
- Non-IFRS Cash and Tangible Common Equity of $61.2 million, up $2.4 million from $58.8 million at March 31, 2017.
- Quarterly revenue of $125 million and quarterly earnings per share of $0.03, improved from $112 million and a loss per diluted share of ($0.03) year over year (“YoY”).
- Non-IFRS Adjusted Quarterly Profit of $3.33 million or $0.05 per share.
- YoY Revenue growth of 11%.
“We are happy to report our first-ever quarterly profit under both IFRS and what is in my view the more relevant adjusted cash basis,” said Goldmoney CEO Roy Sebag. “Our group achieved this feat only eight quarters after our first platform launch and sales, and, while we continue to invest in new product and growth, we remain disciplined and focused on our long-term vision following the recent consolidation of our two operating platforms into one unified service offering: the Goldmoney® Holding. The group is now positioned for the next phase of our growth strategy from a strong base of capital. We are looking forward to the renewed marketing campaign, the launch of our global physical branches, growth from our partnerships and ecosystem investments in peer-to-peer lending platform Lend and Borrow Trust and investment jewelry platform Menē, and the continuation of client-focused growth initiatives such as the enhanced Goldmoney Holding service.”
Prudent Capital Management and Continued Focus on Long-Term Earnings Power
“As we continue to build the business from the ground up, our goal is to achieve annual IFRS profitability and revenue growth, though our profitability will remain volatile quarter-over-quarter as we build new business lines, expand to new client segments, and make strategic investments and expenditures,” said Sebag. “From a balance sheet perspective, the figures reported this quarter are even more impressive when considering that they include sizeable capital and operational expenditures associated with physical branches, our new lending business, and the new jewelry venture. Moreover, the strengthening of the Canadian dollar to the tune of nearly 12 percent and falling prices for silver and gold was more than offset by investment gains from management’s capital and currency risk management strategy. All in all, as we view the business, the group grew our net worth on a return on metal weight (ROMW) basis of 48.6 kilograms or 1,562 Troy Ounces of gold. This surplus was added to our long-term precious metal holdings, which totaled nearly $10 million at quarter end.”
“As seen in our highlighted results, the group continues to produce stable Gross margins despite the volatility in top line revenues from changing conditions in the precious metal markets. While still in the early days of growth and utilization for the platform we’ve invested in, our core business is generating nearly $2 million of Gross margin each quarter excluding movements in precious metals,” said CFO Josh Crumb. “Our activities on the capital allocation side have more than offset unfavourable operating currency and precious metal movements, and this quarter resulted in significant net gains from currency and precious metal positioning, increased interest margins on loans and cash balances, and realized gains from the liquidation of accumulated cryptocurrencies from digital currency-processed deposits. This quarter saw nearly $4.4 million of such additional gains, but it would be incorrect to assume this was the sole reason for our profit. Our core operations and the client relationships that custody nearly $2 billion of metal are what position our business for these asymmetric gains in an era of structurally changing currency markets, which is ultimately the intrinsic value in our business.”
Ongoing Unification, Stable Operations & Recurring Cash Flow Production
“The Company’s year over year revenue growth was achieved despite last year’s Brexit volatility, which contributed significant skew to our normalized operation. The transition from Network accounts to Goldmoney Holdings is progressing at a heightened pace; we have added nine additional staff members to help facilitate this transition and have already seen thousands of clients initiate the migration process,” said Crumb. “The Company’s acquisition of Schiff Gold has also led to increased year over year revenue, but in management’s view, it is incorrect to view the Schiff Gold subsidiary as the sole contributor to revenue growth as we have been migrating clients’ physical redemptions from the Holding platform to Schiff Gold, through which we earn higher margins and clients obtain enhanced service. Over the next few quarters we will further integrate Schiff Gold and expand this business segment.
Physical Branch Strategy
While Goldmoney is predominantly an online business, management believes that physical branches will help promote the integrity of the Goldmoney brand, increase trust among potential and current clients. As such, the Company has been developing the Goldmoney branch concept since the fall of 2016. Physical branches will offer: client education, bespoke customer service, accelerated onboarding, the ability to view and hold physical gold products such as the 18K Goldmoney Mastercard Prepaid Cards and Goldmoney bullion bars, the Company’s latest brochures and research, Goldmoney t-shirts and other branded products, as well as books from a library of 200 titles carefully selected by the Goldmoney Insights research team.
The Toronto branch, located at 38 Avenue Road, will be open to the public by September 2017. The branch at the Company’s owned headquarters, located at 9 Bond Street in St. Helier, Jersey, Channel Islands, will be open by October 2017. The Company plans to open two or more additional branches by mid-2018 and is in the early stages of negotiating leases for branch locations in: Manhattan, New York; Dallas, Texas; London, England; Zurich, Switzerland; and Madrid, Spain.
Lending-Driven Earnings Power, Client Value & Assets under Custody
The Company’s lending business, which provides precious metals-secured loans, continues to grow and has contributed to both inflows of assets under custody and increased revenue per user. Since started in December 2016, the lending business has grown to $8.9 million in loans as at June 30, 2017. Including a $5 million loan extended after the end of the quarter, the group is now earning approximately $450,000 in net interest margin annually from loans secured by precious metals.
The Company plans to continue underwriting loan demand from precious metal owners who are already clients as well as from new clients who are prepared to move their investment-grade gold and silver bars to our platform. We estimate that total demand will exceed $100 million over time, which offers the opportunity to earn additional net interest margin. The Company can accommodate this demand beyond its own funding resources by syndicating loans to its own high net worth clients or external institutions that wish to earn interest income from loans secured by investment-grade gold and silver bars.
October Launch of Menē Inc.
The Company is also anticipating additional revenue from the October 2017 launch of Menē. Beyond Goldmoney’s 40% equity stake in the jewelry venture, all precious metals used to manufacture Menē 24 karat gold jewelry will be purchased through Goldmoney, thereby positioning the group for significant revenue and margin growth should the venture prove successful. Importantly, this revenue growth would be achieved with nearly zero marketing spend by Goldmoney.
Shareholders have enquired about the normal course issuer bid and this is to remind shareholders that, as per applicable policies, the Company is unable to engage in share buybacks so long as it may be engaged in any M&A activity or any other activity that may be material and non-public. The acquisitive nature of the group coupled with earnings black-outs make executing such buybacks difficult. The Company remains committed to using its surplus capital to execute buybacks when it is able, and will do so in accordance with the rules and policies of the Toronto Stock Exchange.
This news release contains non-IFRS financial measures; the Company believes that these measures provide investors with useful supplemental information about the financial performance of its business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating its business. Although management believes these financial measures are important in evaluating the Company’s performance, they are not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with IFRS. These non-IFRS financial measures do not have any standardized meaning and may not be comparable with similar measures used by other companies. For certain non-IFRS financial measures, there are no directly comparable amounts under IFRS. These non-IFRS financial measures should not be viewed as alternatives to measures of financial performance determined in accordance with IFRS. Moreover, presentation of certain of these measures is provided for year-over-year comparison purposes, and investors should be cautioned that the effect of the adjustments thereto provided herein have an actual effect on the Company’s operating results.
Non-IFRS Adjusted Profit is a non-IFRS financial measure. This figure excludes from comprehensive loss the impact of the following amounts: (i) any gains or losses on precious metals inventory, (ii) non-cash items, including the amortization of intangible assets or stock based compensation, (iii) the impact of foreign exchange gains or losses, and (iv) unrealized gains or losses on investments held for sale. Refer to the MD&A for a detailed breakdown of these items.
Tangible Common Equity is a non-IFRS measure. This figure excludes from total shareholders’ equity (i) intangibles, and (ii) goodwill, and is useful to demonstrate the tangible capital employed by the business.
For a full reconciliation of non-IFRS financial measures used herein to their nearest IFRS equivalents, please see the section entitled “Reconciliation of Non-IFRS Financial Measures” in the Company’s MD&A for the three months ended June 30, 2017.
About Goldmoney Inc.
Goldmoney Inc., a financial service company traded on the Toronto Stock Exchange (TSX:XAU), is a global leader in precious metal investment services and the world’s largest precious metals payment network. Safeguarding nearly $2 billion in assets for clients located in more than 150 countries, Goldmoney is focused on a singular mission to make precious metals-backed savings accessible to all. Powered by Goldmoney’s patented technology, the Goldmoney Holding® is an online account that enables clients to invest, earn, or spend gold, silver, platinum, and palladium that is securely stored in insured vaults in seven countries. All bullion assets are fully allocated and physically redeemable property. Goldmoney Wealth Limited is regulated by the Jersey Financial Services Commission (JFSC) as a Money Services Business. Goldmoney Network is a reporting entity to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), and is registered with the Financial Crimes Enforcement Network (FinCEN) in the U.S. For more information about Goldmoney, visit goldmoney.com.
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This news release contains or refers to certain forward-looking information. Forward-looking information can often be identified by forward-looking words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “estimate”, “may”, “potential” and “will” or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. All information other than information regarding historical fact, which addresses activities, events or developments that the Goldmoney Inc. (the “Company”) believes, expects or anticipates will or may occur in the future, is forward looking information. Forward-looking information does not constitute historical fact but reflects the current expectations the Company regarding future results or events based on information that is currently available. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking information will not occur. Such forward-looking information in this release speak only as of the date hereof.
Forward-looking information in this release includes, but is not limited to, statements with respect to: service times for transactions on the Goldmoney network; growth of the Company’s business, expected results of operations, and the market for the Company’s products and services and competitive conditions. This forward-looking information is based on reasonable assumptions and estimates of management of the Company at the time it was made, and involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Such factors include, among others: the Company’s limited operating history; history of operating losses; future capital needs and uncertainty of additional financing; fluctuations in the market price of the Company’s common shares; the effect of government regulation and compliance on the Company and the industry; legal and regulatory change and uncertainty; jurisdictional factors associated with international operations; foreign restrictions on the Company’s operations; product development and rapid technological change; dependence on technical infrastructure; protection of intellectual property; use and storage of personal information and compliance with privacy laws; network security risks; risk of system failure or inadequacy; the Company’s ability to manage rapid growth; competition; effectiveness of the Company’s risk management and internal controls; use of the Company’s services for improper or illegal purposes; uninsured and underinsured losses; theft & risk of physical harm to personnel; precious metal trading risks; and volatility of precious metals prices & public interest in precious metals investment; and those risks set out in the Company’s most recently filed annual information form, available on SEDAR. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company undertakes no obligation to update or revise any forward-looking information, except as required by law.