Goldmoney Inc. Reports Financial Results for Second Quarter 2019Nov 14, 2018
Goldmoney Inc. (TSX:XAU) (“Goldmoney”) (the “Company”), a precious metal financial service and technology company, today announced financial results for the second quarter ended September 30, 2018. All amounts are expressed in Canadian dollars unless otherwise noted.
- Consolidated Revenue of $118.2 million, stable compared to Q1 2019 despite declining precious metals and cryptocurrency prices Quarter over Quarter (“QoQ”).
- Adjusted Gross Profit1 of $3.1 million, an increase of $1 million (51%) Year over Year (“YoY”) over Q2 2018. IFRS Gross Profit of $2.2 million for Q2 2019.
- Non-IFRS Adjusted Loss2 of $2.9 million. IFRS Loss of $4.5 million for Q2 2019.
- Gross Margin increased by 68% YoY to $1.6 million.
- Precious Metal Gross Margin growth accelerated despite a global and industry-wide slowdown in precious metals sale, achieving an increase of $0.5 million, or 53% growth YoY.
- Precious Metals Revenue increased by $4.7 million (5%) QoQ despite an industry-wide slowdown.
- Cryptocurrency Business revenue of $11 million compared to $17 million in Q1, a decrease of 37%, driven by sector volume slowdown and a high level of volatility in Bitcoin price and a decrease in Ethereum (49%) prices QoQ.
- Tangible Common Equity3 of $109 million, a significant increase of $47.9 million (78%) YoY with strong cash position consisting of $32.2 million in cash, $24.9 million in GIC and $20.2 million in secured loans receivable. Shareholders’ equity of $165 million at Q2 2019.
- Menē Revenue increased $0.6 million (43%) QoQ to $2 million despite minimal inventory levels and a $1 million wait list.
- Currency loans totaling $20.2 million of balance sheet capital extended to users against their pledged precious metals earning interest rates ranging from 2.75% to 4.69%.
- Corporate precious metal position of $22.7 million at September 30, 2018 ($.30 per share), reflecting the company’s commitment to grow long-term precious metal ownership per share from surplus returns on capital.
- Client assets under custody stable at $1.62 billion as of September 30, 2018.
Menē Stock Distribution
Goldmoney is pleased to announce a distribution of 3.99 million Class B subordinate voting shares of Menē Inc. (TSXV:MENE) (“Menē”) from its holdings to the shareholders of Goldmoney on a pro rata basis. The distribution of common shares of Menē is payable on December 7, 2018 to Goldmoney shareholders of record as of the close of business on November 30, 2018. Each Goldmoney shareholder will receive approximately 0.0507 Menē shares for each Goldmoney share. Fractional shares of Menē distributed to shareholders of Goldmoney will be rounded down to the nearest whole share.
Goldmoney currently holds 79.8 million Class B subordinate shares of Menē, representing 36.7 per cent of the issued and outstanding Class B subordinate voting shares and Class A superior voting shares of Menē Inc. on a combined and non-diluted basis. The distribution of the shares to Goldmoney shareholders represents the first escrow release, pursuant to the escrow requirements of the TSX-Venture Exchange. Goldmoney will make further announcements should the board of directors determine to make additional distributions of its Menē Class B subordinate voting shares. The distribution is being effected as a return of capital. Goldmoney shareholders will not be required to pay for any Menē shares that they receive under this distribution, nor will they be required to surrender or exchange any Goldmoney shares in order to receive the Menē Shares or to take any other action in connection with the distribution.
Please visit our SEDAR profile to view the company’s consolidated financial statements and MD&A.
Statement from the CEO
“Goldmoney Inc. continues to deliver shareholder value while growing long-term optionality on a rising precious metal environment. This quarter was no different as we continued to preserve our balance sheet while demonstrating our Company’s unique ability to create value organically through the spinoff and listing of Menē Inc. (TSXV: MENE) on November 6, 2018. Menē, a nascent direct-to-consumer jewelry brand which now averages over $1 million of monthly revenues, was an idea that began as an exploratory venture within Goldmoney two years ago. This idea has now produced a $60 million windfall (non-IFRS mark to market accounting) for Goldmoney Inc. shareholders from a $2 million cash investment, and the leveraging of our existing group infrastructure. To be clear, even these quarterly financials consolidate, rather than mark to market, the value of our 79.8 million MENE shares as required by IFRS accounting standards. This asset however, is very real, as demonstrated by our decision to distribute 3.99 million shares of MENE to Goldmoney Inc. shareholders. For the time being, the remaining stake in MENE is being held for investment purposes and reclassified effective November 1, 2018 under the equity accounting method. That means that Menē will no longer be consolidated as a subsidiary within Goldmoney’s accounts, bringing more clarity to the group’s core business, opex, capex, and earnings power. We continue to enhance our core businesses, which generate stable recurring cash flows and allow us to grow our long-term precious metal position which now stands at $.30 per outstanding share of Goldmoney. We are also observing strengthening signs across our other business lines. Our coin business SchiffGold, has recently seen significant increases in both sales and profitability, some of which is visible in this reporting period. Moving forward, we see a great opportunity in further consolidation of this space and growth opportunities both organically and through M&A. There are two things I would like to leave with our shareholders with this quarter. The first is that I believe you will start to see a serious transition in terms of capex, opex, professional fees over the ensuing quarters as we simplify certain pillars of our core business. I am aiming for our reported, non Menē, cash opex including professional fees to normalize to no more than $2 million per quarter in the near future. I know this has been an important point for many investors. The second is that our operations team led by Steve Fray and Paul Mennega, have identified significant cost savings in our business structure which will materialize in further opex reductions into 2019. These two enhancements to our activity should result in a clearer picture of the intrinsic value in our core businesses and allow long-term shareholders to better calculate the sum-of-parts valuation of Goldmoney Inc., which will now include: (1) our tangible capital per share (2) our investments in Menē and Lend & Borrow Trust Company, and (3) the value of our custody, coin, and cryptocurrency (BlockVault) businesses. The last item I want to discuss is Goldmoney China. We have decided to suspend this joint venture for a variety of reasons. The main reason is due to the Peoples Bank of China requirement announced after we began this initiative, unilaterally requiring digital gold bullion sellers to register and deposit a large amount of capital under a 51%/49% structure with local entities owning the majority. This rule (“Internet Gold Business Provisional Administrative Measures” (互联网黄金业务暂行管理办法) was surprisingly announced in May 11th of 2018 (6 months after the signing of our JV and the investment of capital in establishing a Chinese subsidiary). We have been working with our JV partner to seek economical solutions in light of this measure. Unfortunately, we have been unable to find a path forward. We retain our intellectual property assets in China and have capped our total investment at $1 million. This investment will be written down over the ensuing quarters unless circumstances change. It is disappointing to me that China’s central bank has imposed difficult impediments on the retailing of digital gold and, more importantly, imposes unfair capital requirements for foreign investors. It was this fear which regulated our foray into China and why the board treaded carefully in terms of capital outlays. Over time, we will continue to take such calculated risks with our capital and earnings power when we feel there exists a great opportunity to expand our enterprise. Some risks will succeed as in the case of Menē, SchiffGold, BlockVault, and some will fail as may be the case with Goldmoney China. Both successes and failures are shared equally by all shareholders and management. As the development of our group and balance sheet show, we are clearly outperforming our peers and building significant shareholder value in what is a challenging precious metal environment. Thank you for your continued support.’” – Roy Sebag, Chairman, President and CEO
Statement from the CFO
“This was a good quarter for Goldmoney Inc. It is important to remember that these financial results include the consolidation of Menē Inc. which was in its ramp up phase having been only in its sixth operating month during the quarter. The good news is that following the Menē spinoff, our next quarterly financials will account for Menē as an Equity Method removing the consolidated balance sheet and revenue volatility. I am proud of the work our team has done on Menē and believe there exists great potential to further develop this business. On the Goldmoney Inc. side, this transition in accounting will better highlight the core business operations and earnings potential. As Roy Sebag has advised, we are considering several opportunities to further optimize our core business structure and look forward to presenting these achievements in subsequent quarters. “ Steve Fray – CFO & Corporate Secretary
The selected financial information included in this release is qualified in its entirety by, and should be read together with, the Company’s unaudited condensed consolidated interim financial statements for the three and six months ended September 30, 2018 prepared in accordance with International Financial Reporting Standards (“IFRS”) and corresponding management’s discussion and analysis, which are available under the Company’s profile on SEDAR at www.sedar.com.
Conference Call Information
The Company will be hosting its conference call to discuss earnings, and a general corporate update on, November 14, 2018 at 10 am (EST). The call is open to investors and will be held by Roy Sebag, CEO of Goldmoney Inc. Steve Fray, CFO of Goldmoney Inc. and Paul Mennega, COO of Goldmoney Inc.
PARTICIPANT ACCESS CODE: 362764
Toronto: +1 647 478 7145
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London: +44 203 769 6819
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Please note that the conference line will be muted to all callers. Questions to be answered during the call can be emailed ahead of time to: [email protected].
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.
Adjusted Gross Profit1 is a non IFRS financial measure, also referred to as Gross profit excluding gain/(loss) on revaluation of precious metals inventories. This figure excludes from Gross profit the gain (loss) on revaluation of precious metals inventories.
Non-IFRS Adjusted Profit2 is a non IFRS financial measure. This figure excludes from IFRS Net Income the impact of non-cash items, including the amortization of intangible assets and stock-based compensation. Refer to the MD&A for a detailed breakdown of these items.
Tangible Common Equity3 is a non-IFRS measure. This figure excludes from total shareholder 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 year ended March 31, 2018.
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 $1.6 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, palladium and cryptocurrencies that are 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.
Media and Investor Relations inquiries:
Director of Global Communications
Chief Financial Officer
+1 647 499 6748
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 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; the ability to identify opportunities for growth internally and through acquisitions and strategic relationships on terms which are economic or at all; 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.