Goldmoney Inc. Reports Financial Results for Third Quarter 2017Feb 2, 2017
TORONTO – (February 2, 2017) – Goldmoney Inc. (TSX:XAU) (the “Company”), a financial technology company and operator of a global gold-based financial network, today announced financial results for the third quarter ended December 31, 2016. All amounts are expressed in Canadian dollars unless otherwise noted.
Third Quarter Financial Highlights
- Consolidated year to date (“YTD”) Revenue of $391.9 million, an increase of $241.9 million (+62%) over YTD Revenue in Q3 2016.
- Quarter-over-quarter (“QoQ”) Goldmoney Network Revenue growth of 29% from Q2 2017 (274% over Q3 2016).
- Basic and diluted net loss per share of $0.04, improved from $0.05 per share in Q3 2016.
- Q3 Non-IFRS Adjusted Loss of $970,609, improved by $1.3 million year-over-year (“YoY”) and consistent with Q2 2017 Non-IFRS Adjusted Loss of $968,142.
- Results include: Increased YoY investments in new projects at the Goldmoney group level; investments in physical branch locations; new products and features for Goldmoney Network and Wealth, which are anticipated to generate higher unit margins; and professional fees relating to the rollout of the Goldmoney Maximizer loan tool, U.S. P2P transfers, and other one-time platform developments.
- Strong capital position of nearly $59 million, consisting of a liquidity position of $56.5 million and commercial property acquired in Jersey, Channel Islands.
- Currency loans totaling $3.36 million of balance sheet capital extended to users against their fully-reserved metal through Goldmoney Maximizer.
- More than 1.35 million user signups with $1.7 billion in customer assets as at December 31, 2016.
- Platform-wide Goldmoney Mastercard® Prepaid card program growth of 15% QoQ from Q2 2017.
Third Quarter Operational Highlights
- Added the Royal Canadian Mint’s secure precious metal storage facility in Ottawa as a vault on the Goldmoney Network, and entered into an agreement with the Mint to explore future co-marketing activities that aim to boost awareness and accessibility of precious metals.
- Completed the Schiff Gold Acquisition and entered into a Marketing and Service Agreement with Peter Schiff; results reflect 47 days of Schiff Gold operations.
- Launched the new Goldmoney App for iOS and Android.
- Entered the lending space with the launch of the Goldmoney Maximizer tool, which enables verified Canadian Goldmoney Network users to borrow select currencies against up to 85% of their fully-reserved gold assets.
- Extend P2P transfer capabilities to Goldmoney Network users residing in the U.S and registered a U.S. subsidiary with the Financial Crimes Enforcement Network (“FinCEN”).
- Reduced Goldmoney Network fees by 50%, enabling users to deposit, redeem, and make vault-to-vault gold transfers for 0.5% above the spot gold price.
- Doubled user referral rewards for the Goldmoney Personal Golden Heart™ Program.
- Acquired commercial property at 9 Bond Street in St. Helier, Jersey, Channel Islands, which will serve as the second Goldmoney branch location and headquarters for Goldmoney Wealth, thereby reducing future rent expenses by $180,000 per annum.
- Introduced a connection between Goldmoney Network and Wealth that enables Wealth clients to fund their Holdings with gold balances stored in their Goldmoney Network accounts.
The Company made several key advancements following the close of the third quarter:
- Launched Goldmoney Concierge, a luxury bespoke membership service provided exclusively to Goldmoney Wealth clients with Full Holdings, offering world-class travel, dining, and entertainment experiences.
- Extended peer-to-peer transfers to 49 U.S. states, enabling verified Network users in the U.S. to send and receive gold transfers to and from verified Goldmoney Network users worldwide (excluding residents of the U.S. state of Vermont).
- Announced Goldmoney Network accounts and Wealth Holdings had been endorsed as Shariah-compliant by the Shariah Supervisory Board of Amanie Advisors, which issued the fatwa in accordance with the Shariah Standard on Gold set by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and developed in cooperation with the World Gold Council.
- Launched additional payment integrations allowing for direct-to-bank redemptions and credit card processing in Indian rupee for Goldmoney Network.
Goldmoney Network Discussion
“We continue to advance gold ownership and increase client engagement by continually improving the Goldmoney Network user experience and leveraging our innovative technology stack to deliver new services and capabilities that make it easier, safer, and more convenient for individuals and businesses to safeguard their wealth and improve their financial positions,” said Darrell MacMullin, CEO, Goldmoney Network. “We are proud of what we accomplished this past quarter and of the entire Goldmoney team for working tirelessly to reinvent financial solutions for our users. We continued to add new Personal and Business users in Q3 2017, accelerating growth in Network activity, and the enhanced value provided by the new products we introduced to the Network has set us up to further expand our offerings and forge strategic partnerships across the ecosystem.”
Q3 2017 Goldmoney Network Highlights
- Personal Deposit and Transfer Volume: The number of transactions per user and average size of each transaction continue to grow; completed deposits increased by 96%, while the gold gram (GAU) amount of completed payments increased by 309% YoY.
- Global Expansion: The total number of users that made a deposit increased by 79% YoY in Q3 2017, while Europe and the U.K. proved to be one of the fastest-growing regions for deposited users; the total number of deposits in Europe and the U.K. increased by 85% and GAU deposit amounts increased by 154% YoY.
- Customer Accounts: More than 87,000 Network user signups in Q3 2017.
- Customer Engagement: Q3 2017 averaged more than five transactions per active account, a 70% YoY increase from the same period last year.
- Business Payments: Goldmoney Business is showing early signs of traction following its launch in April 2016, with the total number of business payment transactions in GAU having increased by 203% QoQ in Q3 2017.
Goldmoney Wealth Discussion
Goldmoney Wealth continued to see an uptick in business activity with revenues of $76 million for the quarter ended Dec. 31, 2016 vs. $67.6 million for the quarter ended Dec. 31, 2015. The Company guides that Wealth revenues should be analyzed over the long-term and that quarterly figures disguise seasonality in the 16-year-old business (the Wealth business also saw a dip in revenues in Q3 2016
The Company continued to see growth in client assets as measured by weight and client activity on the Wealth platform. The rollout of the refreshed user interface was welcomed by Wealth clients, as was the connection between Network and Wealth. This is in line with the overall business strategy of creating a relationship between Goldmoney Network and Wealth; users with more than 1,000 GAU are now encouraged to apply for a Wealth Holding, through which they receive enhanced client service, a dedicated Relationship Manager, and access to additional account features.
The Wealth business was also enhanced by the addition of real-time reporting for Goldmoney Mastercard Prepaid cards and the complimentary Goldmoney Concierge service, which enables Wealth clients with Full Holdings to make luxury travel, dining, and entertainment arrangements assisted by dedicated lifestyle management specialists.
Financial Discussion and Highlights
The Company held $9.4 million in precious metals at December 31, 2016; however, it offset the risk of precious metal price movement through activities in its investment account. The Company benefited from this strategy, recognizing an investment gain which offsets declines in precious metal prices for the quarter.
The Company takes a long-term view towards foreign currency; internally, it measures the earnings power of the business in currency-neutral GAU. This view allows management to disregard short-term movements in foreign currencies, such as the movement of GBP against CAD, which contributed to unfavourable balance sheet movements this quarter. Management did not choose to directly hedge against CAD, our reporting currency.
With 47 days of Schiff Gold operations, this quarter is the first to include consolidated results from the Schiff Gold business. Despite the slower holiday period, Schiff Gold still produced $13.5 million in revenue and $37,029 in distributable free cash flow to the group.
“The Company made strategic investments to enhance Goldmoney products and services for users and clients in Q3 2017, including the launch of Goldmoney Maximizer, Shariah compliance, and the addition of the Royal Canadian Mint as a vault provider, while continuing to employ cost rationalization and integration efforts across all segments of the business,” said Katie Sokalsky, outgoing CFO of Goldmoney Inc. “These build outs required significant investment in upfront legal and infrastructure expenditures, which are not expected to occur on an ongoing basis. The Company has remained disciplined with day-to-day operating costs, allowing for strategic use of capital; even with additional investments in Q3 2017, the Company showed strong improvements in Gross Profit, Non-IFRS Adjusted Loss, and Non-IFRS Cash Loss – important measures that indicate the true cash outlay of the business.”
|IFRS Consolidated Income Statement Data
(expressed in $000s)
|Q3 2017*||Q3 2016||$ Change||% Change|
|Cost of sales||(137,748)||(79,927)||(57,821)||72%|
|Loss on revaluation of previous metals inventory||(576)||(252)||(324)||129%|
|Total operating expenses||(5,170)||(4,454)||(716)||16%|
|Total comprehensive loss||(2,872)||(2,825)||(47)||2%|
|Non-IFRS Measures **|
|Gross profit excluding loss on precious metals||2,034||1,397||636||46%|
|Non-IFRS Adjusted Loss||(971)||(2,253)||1,283||(57%)|
|Non-IFRS Cash Loss||(1,933)||(2,115)||182||(9%)|
* All financial information prior to the Schiff Gold Acquisition on November 14, 2016 represents only Goldmoney Network and Goldmoney Wealth results.
** Refer to “Use of Non-IFRS Financial Measures” and “Reconciliation of Non-IFRS Financial Measures” in the MD&A.
Goldmoney Group Discussion
“The group continued to build out long-term infrastructure for a global gold-based financial institution this quarter; we remain focused on the long-term returns with several initiatives and projects that will reduce friction, innovate, educate, and market to our existing and growing base of clients. As owner-managers, we fuel this activity through disciplined capital allocation and a sense of prudence, which is required as fiduciaries of nearly $2 billion of precious metal assets,” said Roy Sebag, CEO of Goldmoney Inc. “While it’s been less than two years since we launched the Goldmoney Network as BitGold, the predecessor for the Goldmoney group, we now sit in an enviable position with a growing and diversified income stream from savings, transfers, physical trading, and cards – all of which are translatable into distributable earnings at our choosing.”
The decision to reinvest in growth, technology, and market and business development is guided by the group’s belief that it gains more in long-term distributable earnings power than it loses in the outflow of investment capital expenditures. Should that view change, the group will focus on more sustainable capital expenditures and a return of capital to investors.
“It is my belief that up to 70% of our operating expenditures can be reduced under such scenario and it is how I personally analyze the results of the business as the single largest shareholder of the group,” Sebag said. “Such a reduction would free up significant distributable earnings that are, in our case, effectively similar to a precious metal royalty stream.”
“We continue to invest in new projects and expect to unveil details about at least one new subsidiary we have been developing with our existing technology, supply chain, and expertise in retail marketing and distribution channels by Q2 2018. While these new investments and subsidiaries will continue to be focused on the retail gold sector, they will increasingly move into products with higher margin potential while expanding on our original mission of broadening access to physical gold,” said Josh Crumb, chief strategy officer and incoming CFO of Goldmoney Inc. “In addition to ongoing investments in our core retail gold products and distribution, we also initiated new projects in gold supply chain and started on product enhancements to utilize the Goldmoney Network in enterprise partnerships. We’re currently ramping up investments in B2B applications for the Goldmoney technology, and expect to reveal more about our institutional projects and partnerships over the next three to six months.”
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 months ended December 31, 2016, 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.
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 Loss 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.
Non-IFRS Cash Loss is a non IFRS financial measure. This figure excludes from comprehensive loss the impact of non-cash items, including the amortization of intangible assets or stock based compensation. Refer to the MD&A for a detailed breakdown of these items.
Liquidity position is a non-IFRS measure. This figure excludes from total assets (i) prepaids and other assets, (ii) property and equipment, (iii) intangibles, and (iv) goodwill, and is useful to demonstrate the liquid net assets the company has on hand to meet current and future obligations.
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 management’s discussion and analysis for the quarter ended December 31, 2016.
About Goldmoney Inc.
Goldmoney Inc. (TSX:XAU) is a mission-driven financial technology company that operates the world’s largest 100%-reserved gold-based savings and payments network. Goldmoney® provides financial services as a trusted third-party, combining the unique attributes of gold with technology-driven innovation. Through the Goldmoney Network, comprised of Goldmoney Personal and Goldmoney Business, anyone with internet access can buy, sell, transfer, earn, or redeem physical allocated gold. Goldmoney Wealth offers bespoke precious metals custody and wealth services, trading and execution, card services, tax-free retirement accounts and independent research to high net worth individual investors and institutions. Goldmoney Inc. has more than 1.38 million user signups from more than 150 countries and $1.76 billion in client assets (as at February 2, 2017). Goldmoney Network is registered with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) in Canada and the Financial Crimes Enforcement Network (“FinCEN”) in the U.S. Goldmoney Wealth is regulated as a Money Services Business by the Jersey Financial Services Commission. 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.