Goldmoney Inc. Reports Financial Results for Third Quarter 2020Feb 14, 2020
TORONTO – (February 14, 2020) – Goldmoney Inc. (TSX:XAU) (US:XAUMF) (“Goldmoney” or the “Company”), a precious metal financial service and technology company, today announced financial results for the third quarter ended December 31, 2019. All amounts are expressed in Canadian dollars unless otherwise noted.
- IFRS Revenue of $108.1 million, an increase of $24.1 million (29%) Year-over-Year (“YoY”).
- Gross Margin of $2.5 million, an improvement of $0.9 million (58%) YoY.
- Gross Margin Percentage expanded by 31 basis points Quarter-over-Quarter (“QoQ”) from 1.97% in Q2 2020 to 2.28% in Q3 2020.
- IFRS Gross Profit of $4.4 million, compared to $4.2 million in Q3 2019, an improvement of 5% YoY.
- Tangible Common Equity(2) of $122.3 million, compared to $126 million at March 31, 2019
- Currency and Precious Metal Loans totaling $23.1 million of balance sheet capital extended to users against their pledged precious metals, earning interest rates up to 4.72%.
- Total Comprehensive Loss of $5.8 million, a $35.3 million decrease compared to Q3 2019.
- SchiffGold Revenue increased by 26% YoY to $41.3 million. Net Income rose by 195% due to favourable precious metals prices.
- Client Asset Under Custody increased by 14% from $1.75 billion as at March 31, 2019 to $2 billion as at December 31, 2019.
Statement from the Chief Executive Officer
Fiscal Q3 2020 was a transition quarter because we crossed an important threshold in resolving several regulatory matters that have been lingering for nearly three years. Throughout this process, the Company viewed these events as non-material and within the ordinary course of business. They were headwinds to be expected given our grand ambition to make physical gold accessible to anyone, everywhere.
Because of this guiding ethos and because we are the sector’s leader, we have been on the front lines and addressed these matters by engaging the best law firms, auditors, and regulatory experts to assist us. The costs we have incurred are approaching $10 million and have been reflected in an abnormally high ‘Professional Fees’ line-item. We have been guiding shareholders that eventually this line-item will begin to decline towards a normalized rate of a regulated public company. We believe that moment has arrived in this transition quarter. Going forward we expect a significantly reduced level of spending on regulatory matters.
To adapt to the present regulatory environment, we have adjusted our business model in several ways. For example, we exited cryptocurrency, began charging a minimum fee, and augmented our bank-like KYC (know your customer) and AML (anti-money laundering) processes to achieve an industry-leading standard. We estimate that 70% of our payroll costs have been attributed to compliance matters, which reflects the state of financial services today.
The good news is that we have navigated our company safely through this period, and over the past three years, our brand equity, balance sheet, revenues, and client assets have all grown to new records. We have positioned our long-term business model to deal with the regulatory realities of the day. The future of Goldmoney Inc. is not only bright for clients, but shareholders too. With this transition quarter behind us, they can begin to appreciate the long-term earnings potential of our business when adjusting for non-cash and extraordinary items.
For example, over the past 9 months, Goldmoney Inc. has generated $14.1 million of Gross Profit on $294.4 million of Revenue vs. $10.3 million of Gross Profit on $217.4 million of Revenue one year ago. Against that Gross Profit ($24.4 million in cash generated over 18 months of operations), Goldmoney Inc. spent $8.8 million on professional fees, of which approximately 80% is attributed to the exceptional regulatory issues referred to above. Adjusting our operating performance for these and other non-cash and extraordinary line items (Stock Based Compensation, Foreign Exchange movements, Depreciation and Amortization) shows a growing business that can produce significant free cash flow (50% or more of Gross Profit).
Further, these figures include significant R&D and capex spending on innovative ventures within the group that are expensed through the Payroll, Technology and Development Cost line items. We believe that one of these new ventures has the potential to deliver Menē Inc. like returns to the group over the next few years.
Appreciating this picture of long-term profitability, applying appropriate multiples on such profitability in this current environment, and netting our significant tangible capital, results in a measurable intrinsic value for Goldmoney Inc.
In conclusion, Goldmoney Inc. is well positioned to deliver long-term returns to shareholders. With this transition quarter behind us, we intend to deliver those results in the near future.
I would like to thank our team members across five offices around the world for their hard work. It was their work and steadfast morale that has brought our company to our present position.
I would also like to thank our clients for continuing to trust us with their hard-earned savings. While clients may no longer be able to purchase and sell cryptocurrency, buy gold with every kind of payment processor, or find Goldmoney the most convenient place to make and receive gold payments, Goldmoney remains the gold-standard in physical custody of precious metal savings outside the fractional reserve banking system. Safeguarding the assets owned by our customers is our core business, and it is ultimately the most important service we can provide.
– Roy Sebag, Chairman and Chief Executive Officer
Financial Information and IFRS Standards
The selected financial information included in this release is qualified in its entirety by, and should be read together with, the Company’s consolidated financial statements for the quarter ended December 31, 2019 and prepared in accordance with International Financial Reporting Standards (“IFRS”) and the corresponding management’s discussion and analysis, which are available under the Company’s profile on SEDAR at www.sedar.com.
Investor Relations Questions
Shareholders of Goldmoney are encouraged to submit questions to management by emailing [email protected]. The Company will periodically publish responses to selected questions received in order to allow all investors ongoing access to information about Goldmoney’s strategy, operations, and business plans.
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 Gain1 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 Equity2 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.
Adjusted Gross Profit3 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.
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 quarter ended December 31, 2019.
About Goldmoney Inc.
Goldmoney Inc. (TSX: XAU) is a precious metal focused investment company. Through its ownership of various operating subsidiaries, the company is engaged in precious metal investment, custody and storage, jewelry, coin retailing, and lending. Goldmoney manages and oversees in excess of $2.0 billion in assets for clients around the world. The company’s operating subsidiaries include: Goldmoney.com, Menē Inc. (TSXV: MENĒ), SchiffGold.com, and Lend & Borrow Trust. Through these businesses and other investment activities, Goldmoney gains long-term exposure to precious metals. 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. 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.