Thank you, Stephanie, and good morning, everyone. Welcome to the Currency Exchange International conference call to discuss the financial results for the first quarter of the 2022 fiscal year.

Thank you all for joining us. With us today are President, CEO, Randolph Pinna and Interim Chief Financial Officer, Alan Stratton.

Alan will begin with his brief comments on the first quarter's financial results followed by his latest perspective on the company's operations. Randolph will then comment on CXI and the Exchange Bank of Canada, the company’s sales initiatives, and its business activities, and after which we will open it up for your questions.

Today's conference call is open to shareholders, prospective shareholders, members of the investment community, including the media. And for those of you who may happen to leave our call before its conclusion, please be advised that this conference call will be recorded and then uploaded to CXI’s Investor Relations website page along with the financial statements and MD&A.

Please note that this conference call will include forward-looking information which is based on a number of assumptions and actual results could differ materially. Please refer to our financial statements and MD&A reports for more information about the factors that could cause these different results and these assumptions that we have made.

With that, I'll turn the call over to Alan. Alan, please go ahead.

Thank you, Bill, and thank you, everyone for joining today's call. I will open by stating that we are very pleased with the Group’s financial performance in the first quarter.

While we had expectations to be profitable, the revenue growth came in stronger than anticipated and that growth came from multiple drivers, which I will discuss in more depth momentarily. However it validates our strategic plan.

To remind everyone, in 2020, we developed a strategy to become a stronger, more resilient company. That strategy was further developed in 2021 and has four key growth pillars.

One is the increased penetration of the U.S. financial institution sector, being a leading provider of foreign exchange products and services; secondly is increasing our penetration in the direct-to-consumer market in the United States; thirdly is the expansion of our international trade and bank notes with foreign financial institutions; and fourthly is building scale in our corporate international payments business pledging our subsidiary at Exchange Bank of Canada.

Now this strategy was designed to build diversification in the company’s revenue streams in order to reduce concentration risk in any one market segment, while also achieving a higher level of scale that will enable the company to weather volatility in earnings from significant stress such as the outsized impact that was suffered as a result of the COVID-19 pandemic. Underpinning the four growth pillars is a fifth one, which is building the infrastructure to support a larger enterprise.

Data is critical to decision making and we need enterprise-grade information systems to support our strategic objectives. I will touch on each of these strategic pillars in relation to the company’s performance as I present an overview of the results for the most recently completed quarter, Q1 2022.

These results are presented in US dollars unless otherwise noted. Q1 represented a milestone for the company as it achieved record revenue for any single quarter.

The net income of $1.5 million was achieved independent of any government support representing a true picture of the company’s ability to generate solid earnings and cash flow in spite of the ongoing pandemic. Revenue increased almost two and one half times in the three months ended January 31, 2022 to $12.5 million from $5.1 million in Q1 2021.

That improvement reflects the successful execution against the strategic pillars noted previously in addition to the gradual recovery in international travel that has occurred over the course of the past year as the vaccines have enabled many countries to relax travel restrictions. The progression has been consistent with double-digit sequential growth each quarter in the past twelve months.

In Q1 2022, our sequential growth was 25%, which is remarkable when considering that historically in pre-pandemic times it was also our lowest quarter in the year due to typical seasonality and demand. Some of the growth reflects the continued recovery in international travel as further relaxation of travel restrictions took effect to the beginning of Q1.

On November 9, the US not only reopened its land borders to non-essential travelers from Canada and Mexico, but also allowed many Europeans the ability to travel to America with the only requirement being a negative pre-departure COVID test. While these measures contributed to an initial spike in demand in Q1, the results show the impact of the omicron variant that dampened demand as many travelers chose to cancel or defer travel.

Omicron reminded us that the pandemic is not yet behind us, but the vaccines have proven effective at limiting severe outcomes such that international travel was not as restricted as it had been during previous variants. Bank note revenue still represents the majority of our revenue accounting for an 83% share in Q1 2022, up from 68% in Q1 2021.

Our bank note revenue increased three-fold to $10.1 million versus $3.4 million the year earlier. The growth was equally split across our direct-to-consumer and wholesale divisions for currencies associated with international travel.

It reflects not only the increase in consumer demand for foreign currencies, most notably the euro, but also the increase in market share. In US, the company has added 428 new wholesale clients in the financial institution segment since Q1 2021.

We have onboarded new clients at a consistent pace this past year acquiring a strong presence in the financial institution segment that’s central to our One Provider One Platform strategy that improves our ability to cross-sell payments and bank notes products. Our direct-to-consumer segment has benefited from not only the ongoing recovery in consumer demand related to international travel, but also the demand for investment currencies that has trended higher than historical norms since the beginning of the pandemic.

One of the benefits of our direct channel has been the ability to reach investors of these currencies and that includes, our online FX platform that has seen significant growth in the past year since we launched it. We secured licensing in five additional states in Q1bringing our total to 36 at present.

That gives us access to 253 million people representing approximately 76% of the U.S. population.

Or bricks and mortar branch locations are in growth mode again too. While we permanently closed 12 locations in 2020 that did not meet our minimum financial thresholds, we have been selectively pursuing locations that has historically had strong volumes but were vacated by competitors that left the market during the pandemic.

The first new store was in South Coast Plaza in Coast Mesa, California in November 2020. That store has exceeded our expectations after its first year of opening.

On January 3rd of this year, we opened a new branch in the Stanford Shopping Center. This was also the site of a former competitor and ties together our geographic footprint in the popular San Francisco Bay area.

One of the benefits of opening in locations that were operated by former competitors in the FX space is that they are already designed to suite our purpose which limits our build out cost. This is critical to us as we choose not to enter to long-term leases for branch locations given the unpredictable nature of demand experienced during the pandemic.

This provides us with some downside protection should a location’s performance fail to achieve expectations necessitating closure. For this reason, we are also relying more heavily on our agency model to drive expansion in the direct-to-consumer segment.

Through this model, we opened a new location in the Minneapolis, St. Paul International Airport in Q1.

This complements our growing list of high traffic airport locations that include JFK, Newark, Chicago, Portland and Charlotte. Our international bank note channel also experienced strong growth in the quarter.

This was driven in part by Exchange Bank of Canada’s participation in the Federal Reserve Bank of New York’s Foreign Bank International Cash Services program. It was the first full quarter operating in that program.

So we took a gradual approach to increasing volumes while we normalized the operating model. While the margins are lower than our domestic wholesale channels, the international trade compensates with higher volumes.

As we gain more experience, we expect there to be a high degree of predictability as well. CXI also began trading with a Latin American institution in the quarter that includes the exchange of foreign bank notes, which contributed to growth in the segment in the U.S.

We view the international market as an opportunity to diversify from regional fluctuations in demand and therefore continue to seek institutions that meet our rigorous compliance and anti-money laundering standards. Turning to our payments segment, its revenue increased 31% to $2.1 million from $1.6 million in Q1 2021.

This reflects growth in the transaction days from 15,383 in Q1 2021 to 23,478 in Q1 2022 and volume from $1.56 billion to $2.34 billion respectively. The primary reason that revenue has increased at the same rate as transaction volume is related to U.S.

dollar payments stemming from the U.S. The company doesn’t earn a foreign exchange commission on those transactions, but it does earn a fee.

While that impacts the overall margins, we do like this business because it is a low touch model whereby we have very little human involvement in the processing of the transactions. Our financial institution clients are the ones that engage directly with the parties presenting the payments and that comprises both consumer and commercial customers.

We are pleased with the continued growth in this segment in both the US and Canada or in the latter we added 71 new corporate clients in the quarter at Exchange Bank of Canada. While the predominant currency payer is CAD US, which is a competitive space in Canada, we have been effective that increasing margins as the clients come to value the proactive customer service especially around managing their exposure to volatility.

Payments revenue is mainly driven by import export activity and as such it suffers less from seasonality and then travel but does tend to correlate with economic output. While revenue grew by 145%, total operating cost rose 46% to $9.3 million in Q1 2022, compared with $6.4 million in Q1 2021.

This translated into operating leverage of 25% in Q1 2022, compared with negative 25% in Q1 2021. This demonstrates that the company has achieved a reasonable level of scale and represents remarkable turnaround in the course of the year.

Variable expenses accounted for approximately 50% of the increase in operating costs, primarily as a result of the higher volumes rising from $1 million in Q1 2021 to $2.5 million in Q1 2022. These comprise postage and shipping, bank fees, commission expense and third-party technology fees.

Fixed and semi-fixed operating cost accounted for the remaining $1.4 million in expense growth with $594,000 of that attributed to increases in salaries and benefits. While there has been modest growth in the year-over-year headcount to account for part of that increase, the company did implement broad based cost of living adjustments for employees at the start of the fiscal year to counteract the impact of inflation.

Almost all operating expense lines experienced increases relative to Q1 2022, as business activity has recovered. Travel and entertainment has recommenced, but it’s still well below the pre-pandemic peak.

We continue to see above average increases in insurance premiums for all lines of coverage, most notably cyber security and directors and officers’ liability. Losses and shortages increased by $173,000, which is higher than the commensurate increase in bank note activity.

The reason for this related to a burglary that occurred at one of the company’s branches in Q1 resulting in a loss of $50,000. Burglaries are rare, but the company has undertaken a review of its procedures to determine if any changes can be made to further mitigate such an event from occurring.

The company has also increased its investment in information technology, most notably in the pursuit of its strategic pillar around infrastructure. This include an investment in a new customer relationship management platform to support the payments business segment and we expect to implement other applications in the future.

The one area that declined was rent expense as the company settled a dispute in the quarter with one of its landlords for seven branch locations. This resulted in the company recognizing approximately $120,000 in rent abatements and reductions related to prior periods.

Normalizing for the non-recurring rent adjustment, the loss associated with the burglary and the rent payments that are captured as amortization under IFRS 16, the company’s adjusted EBITDA was $2.6 million in Q1 2022 versus negative $1.8 million in Q1 2021. This translates into an adjusted EBITDA margin of 21% versus the reported margin of 25%.

And the net income of $1.5 million compares to a net loss of $1.7 million in Q1 2021. That performance translates into earnings per share of $0.23, a significant improvement from the $0.27 loss per share in Q1 of last year.

Turning to our balance sheet, one will see there was significant growth at January 31, 2022 with total assets of $129 million versus $103 million at our most recent year end. That growth was primarily in the form of working capital as increases in cash balances were offset by increases in accounts payable, holding accounts and also the lines of credit.

The increases were primarily driven by the growth in the international bank note trade where single transactions are often in millions of dollars. While the settlement cycle is usually no more than a few days, depending on shipping time, these transactions are normally on a prepaid basis, which means the company does not take on any credit risk.

The payment is made only after the bank notes are received and counted. I will also note that the other current assets include a receivable from the IRS in the amount of $3.4 million that relates to the employee retention credits which the company recognized in Q4 2021 and that I discussed in the previous earnings call.

The claims for those credits were filed in February and our tax advisors have told us to expect the IRS to take up to six months to process them. Irrespective of the time that it takes to receive those funds, the company has a strong liquidity position with $96 million in cash holdings, $52 million in net working capital and an additional $22 million of unused capacity in credit facilities at the end of the quarter.

The net equity position increased to $59 million at the end of Q1, which equates to a net book value per share of $9.25, translated to yesterday’s closing exchange rate puts that book value at $11.77 in Canadian dollars. We recognized that the high quality liquid assets on our balance sheet can support a higher degree of leverage than what currently exists.

We will work to increase our capital efficiency as the company demonstrates the ability to sustain the earnings and cash flows necessary to support additional leverage. While the Q1 2022 performance was strong on a relative basis, what is most important is demonstrating that it is sustainable.

We believe that the fundamental drivers to sustain that performance are in place but we are mindful of the risks to future earnings posed by the emergence of new COVID-19 variants, high oil prices and inflation that may impact consumer demand, as well as the potential for escalation in the Russia Ukraine conflicts. Airport Council International recently released a forecast in February projecting that global passenger aircraft will recover to approximately 70% of 2019 levels this year.

However, they did acknowledge that demand could be dampened by any of the risks that I just mentioned. While we remain optimistic we are taking a prudent approach to planning in the event that there is a regression in demand.

However, the growth in our revenue base from international transactions and payments are improving the resilience of the company in being able to withstand shocks in the domestic bank note market. As we continue to execute on our strategy that resilience should continue to grow.

Finally, I’d like to speak to the ongoing conflict between Russia and Ukraine. The company does not have any significant exposure to either country.

Rubles have never been a significant source of revenue and our holdings in the currency are de minimis. Similarly, very few transactions in our payments business are destined for Russia.

The biggest impact to our business has been the increased measures to ensure compliance with the sanctions, which we take very seriously. The real impact of the conflict is the humanitarian crisis that has been unfolding in front of our eyes each day since the invasion began.

The Ukrainian people are in our thoughts, hearts and prayers during this most difficult time. Now I will turn the call over to Randolph Pinna, our CEO to provide his perspectives.

Thank you, everybody. Thank you, Alan for a very detailed update.

I appreciate that. So I’ll try to keep this high level and not repeat too many things Alan said.

As usual, I would like to start with Exchange Bank of Canada. First of all, if you had noticed, we completed our fifth year at Exchange Bank, which we kind of viewed as our start up years.

We are now in our sixth year and it’s very nice to see that the bank completed the entire quarter profitably and we feel is structured to continue to do so. This next phase of the Bank’s growth is really where we scale up the business in both of its key strategic areas.

As you know the core of Exchange Bank and our Group is bank note exchange starting first with Canada, our domestic business is coming back quite strongly due to the borders now being opened, travel being eased. And so, some of our big bank notes customers pre-pandemic have once again become very active in anticipation of the spring break and summer travels periods.

We are seeing that activity increasing and we do anticipate that it should increase provided none of those risks that Alan mentioned become bigger than they are. Additionally, in bank notes, we have accepted a few select customers internationally.

The Federal Reserve Bank New York relationship is very strategic and a long-term benefit to our Group. It has reduced our sourcing cost or offloading cost on U.S.

dollars allowing for a better profit margin on the U.S., Canadian trade. It also has opened up the door for us to take on select international banks in key markets that we feel are safe and the volumes are quite nice.

So, besides reducing our sourcing cost, we are seeing additional revenues and we anticipate additional customers as we grow the international customer base. Moving on to international payments, as you know, our team is very strong with foreign exchange, relationship banking.

We have continued to grow our corporate relationships. It is right now strong led out of Montreal.

Our team in Montreal has done a great job. They have dealt very well.

As you know the acquisition that we did a while back and the teams that we have grown has been very well in executing on our plan to service small to medium size international businesses that are based in Canada. We have also expanded the team now to Ontario and the Ontario team is also doing quite well and we look to continue to grow that business throughout Canada as the months ahead transpire.

To assist with that as Alan mentioned, we have implemented the leading customer relationship software and that is allowing for better efficiency and improved customer service. I confirm that the pipeline for both domestic and international bank notes, as well as corporations in Canada for FX payments is quite full and having this additional software will allow our team to better maximize and become more efficient.

It is being led by a very strong experienced leader James Devenish, and we are very supportive of James’ initiatives to continue to grow the FX payment business, as well as the bank note business. We have a strong executive team.

Besides James, we have several other key executives at the bank and we are very proud of the team that we have as we continue to grow Exchange Bank of Canada. Moving on to CXI, I am proud to announce that if you had noticed this is our tenth year as a publicly traded company on the Toronto Stock Exchange.

We are very proud of our relationship with the TSX and we continue to enjoy the fact that we are a public company and have the benefit of having our stock represented to the world. Active business at CXI, as you know we have all four of our pillars represented.

We have our consumer division, which is continuing to do quite well. Our retail stores as Alan has told you is performing above plan after we reduced our footprint to ensure that we have a good return on the capital deployed.

We are back into a growth mode with the one store that we just recently added in the San Francisco Bay Area and we continue to be very selective with any potential new store openings. We do anticipate, which I’ll tell you in our looking-forward statement is, we are looking at another store in Florida base of CXI.

What’s been really nice is the agent locations where we don’t pay rent, we don’t pay payroll. We work directly with a local retail operator and the ability to open up in airports which is a new industry for our company.

We have serviced other airport operators in the past in a wholesale basis. But that was under their brand.

Now, we are, through this agent location, we are seeing our brand represented in key airports like New York, New Jersey, Minneapolis, Chicago, Alan listed them all and we anticipate that business to continue to grow as the international travel continues. Besides our own retail stores or our agent locations, we are also growing our online foreign exchange business through our website online FX.

Alan mentioned the number of states we are in. We anticipate to grow that.

And this allows for multi-state foreign exchange where we can deliver currency from either the Los Angeles or the Miami Baltic to people’s homes in those states. Additionally, the state licenses allow us to do foreign exchange payments for corporations in those states and we do anticipate growing that business.

On the international side, our hub in Miami continues to take on selective customers, financial institutions in Latin America, in the Caribbean. While this business is only adding, maybe one or two customers a quarter, it is higher volumes and it is a diversification to the domestic currency business in the United States.

The biggest driver of the revenues at CXI is what we call One Provider One Platform. And that is where we have integrated, as you know from past calls with Fiserv and their wire exchange software has been successful and most recently, this quarter, we have finished our integration with Jack Henry’s Silver Lake system and we already have a customer, the first customer on that who just went live this last week.

This business is a focus for us to integrate our system with existing banking systems allowing for that one provider being us in the one platform. The pipeline is full in all categories.

We are very excited about the position we are in. The fact that a large competitor has exited the market has allowed us to take on lots of new customers and have a very strong pipeline.

So as we look forward, we are focused on our four pillars. Our Direct-to-Consumer adding more states continuing to expand our online FX through digital marketing, growing our international customer base in both businesses and our FX payments in both businesses to Exchange Bank of Canada and our One Provider One Platform marketing initiative.

We also separately, Alan and I are looking at accretive merger opportunities. We are active in that.

We don’t have anything to announce at this stage. But we are looking at opportunities to grow and add talent, possibly technology and new customers to our Group.

So this is a focus of our company as we continue to grow the business. To support this as Alan has led, mentioned, we are looking at improving our software systems, growing our correspondent banking relationships around the world and ensuring we have the right operating structure and systems to support a continuing growing business.

Lastly, I do want to touch on the digital currencies. Well, we decided to exit our pilot of selling crypto currencies at our retail stores.

We had a 12 branch pilot and while revenues were good, the impact from a reputational or relationship banking point of view was higher than expected and revenues were still lower than what we had anticipated. We actually have shifted that focus from crypto currencies to be focused on central bank digital currencies as the world’s all the major governments around the world are continuing to explore how to migrate from paper currency to digital currencies.

We are active in participating in the think tanks and working with other financial institutions including central banks, so that the company can become the digital currency exchange of the future. I am happy to answer all your questions.

I did want to remind you today for all of our shareholders and potential shareholders, we are having our Annual Shareholder Meeting at noon. I believe the press release has the dialing instructions for this.

It is a virtual meeting. We anticipate next year to revert back to either being digital and/or you can come in person, which is what I prefer.

But this year we, for safety, we have chosen to be a 100% virtual in our Annual Shareholder Meeting and I hope to see you there. So, I would turn it back to Stephanie to open up the lines for any questions you may have for Alan and I.

Thank you again for your interest and support of Currency Exchange International.

Hi, good morning. That was surprises.

Good morning.

That’s beautiful revenue numbers. I estimate out of the water, which is great.

One quick question before I ask the more pertinent ones. The $1.8 million bankruptcy claim, do you still expect to get 6% to 20% of that back?

That’s a good question. As you know, Robin, we have fully written off the loss that’s – theft that was broad as you may recall.

We have been told by the trustees of the bankruptcy that there will be money given back. They have gotten us forensic.

It’s gone deeper. So, when that will happen we hope it will be this year, it should be.

What that number is? We have no idea, Robin.

So, if any money comes in, which we do anticipate money coming in, but how much? I have no clue.

It is out of our hands and we do hope to just bring closure. So that’s behind us and there would be nice to see a chunk of money come back to Exchange Bank of Canada.

Okay.

From this process.

Okay. My main question is, bank notes, because, obviously, it recovered very strongly and I am curious as to – you mentioned euros were very strong.

What other currencies were strong? That too notes…

Sorry, Robin. Yes, the Mexican Peso has been the strongest currency in the last year.

This quarter, the reason euro, it had always been the euro was always our number one currency exchange for CXI. Obviously, in Canada, the number one currency would be USD and then euro.

But Mexico, for both Canada and the U.S. in the last year including this last quarter is one of the top currencies for U.S.

it was the number one currency exchange and euro was right there with it. So, we are seeing the rebound in international travel as well as for Americans domestic travel just going south over the border.

And I’m curious of the progression through the quarter of the revenues. So, did you see it even throughout the quarter or was it building higher revenue, the revenue build was higher, say in January than December, than November?

Was there a trend to – that you noticed?

Well, it follows – it follows the usual trend. So, you could imagine December would be busier than January, because of the Christmas and holiday seasons.

All the celebrations that happen at the calendar year end. January is strong.

So, but we are seeing – realize when we forecasted the year, we anticipated a return of travel. Obviously, the numbers were higher.

There is clearly strong pent-up demand that is emerging. I mean, it is clearly happening, but it’s – now it’s, here I am sitting in Florida, it’s spring break.

It’s – the city is full around that. And so, it is continuing.

So we planned on increasing month-over-month for the rest of the year and so far, as this first quarter showed that the volumes are higher than what we planned. But typically, as Alan said, the first quarter is usually our slowest quarter and so, we would anticipate the second quarter being the stronger because it starts the spring break season which is always been an active time pre-pandemic.

Now that the pandemic is subsiding, it is expected that the normal travel trends, which is spring. Spring break is very busy.

But the busiest of course would be the third quarter where we go into the summer travel seasons.

Well that’s – so, impressive was the, the volume in the first quarter. I think that’s, how should I say, a record level.

Yes.

For all quarters and definitely you don’t get that level of volume until the summer season, so, it also, that’s a question that because you have these other pillars, are you going to release some, perhaps revenue numbers as these pillars build, so you did the payments? And now, this direct – the agency is what’s got my curiosity because, between the online FX and the ability to sell in 36 states in the U.S., strikes me that this could be a very big revenue producer.

Am I too early on this?

Robin, I can appreciate you share the same optimism as myself. I will take it away as a note on this call to explore if and when we would split out consumer bank note activity from our wholesale bank note activity.

The problem comes into cost of goods sold, because of the wholesale division, if you want to use that term is where the vaults are stored and the retail and consumer online stores are using the vaults. So, it’s not as easy as just cutting it where payments are clearly a different business and it is now obviously more than 10% which is the usual threshold to do so.

But I’ll take that away. That’s a good question Robin.

Thank you.

And the last question I will slip in is, your, I guess, merger opportunities. I know you can’t discuss them, but, my question is do you see quite a few or is it very spotty?

That’s just open in this.

Well, there is – for any price of money there is tons of businesses to consider. We are only looking at strategic opportunities and strategic in our definition is things that will provide diversified revenue.

So our focus is on payments businesses than cash businesses, because our bank note business is growing nicely, organically. And it’s because of our core business that you know, but the reason volumes are higher is because we had now international customers in the quarter doing bank notes, but to the merger side, we are looking at payment companies and some of the prices that international well-funded companies are paying right now have driven up price.

And so, while, we’ve looked at a few. It did not meet our value.

We have – we are going to invest capital. We expect a significant return and so, we can’t overpay.

So, therefore, knowing that we are looking for strategic long-term opportunities that would bring, again technology and new payment revenue and people that there is only a few that we can consider and then again, it’s looking for the right partner that is looking to see the value of putting those – their business with our business and the one plus one sort of two should hopefully equal three or four at least. And so, that’s why it’s difficult and slow – slow process.

Did that answer your question, Robin?

Yes. Thank you.

Thank you. And that’s it for me and congratulations again on a good quarter.

Thank you, Rob.

Good morning.

Yes. Good morning, gentlemen.

Thanks for taking my questions. Randolph, you mentioned the seasonality – season are normal periods here over the course of …

More normal, yeah.

Certainly, Q1 is typically the weakest quarter as you mentioned. So it’s safe to say you are seeing return of spring break, the return of travel and you are anticipating higher bank note business for the course of the year?

In a normal world, yes, we have that optimism. That is not just my own personal optimism.

When you read the headlines, if you want to Google Airbnb’s bookings, they have announced that Airbnb bookings have for the first time ever exceeded pre-pandemic levels. I believe it was Expedia one of the major travel sites have shown that bookings internationally both inbound to the U.S.

and out of the U.S. is very strong for the summer periods.

So, we do have some travel indicators that support why the summer should be as it usually had been our busiest quarter of the year. However, we have a potential world war sitting out there and we have – as we seen in the last few years, you have a potential for another serious variant to shake in and scare the world and governments could go back to locking things down.

So, we don’t know. So, it’s to say, the next quarters are going to be great or would be not fair, because we are aware.

The key point that I think Alan was trying to drive is that, as we restructured our business during the pandemic, we tried a more variabilize our business, like the agent model allows. We do share revenues with the operators as they deserve it.

And so, the higher the volumes, the higher commissions go. Same for the sales people.

They are on low pay. We’ve motivated our teams both in the U.S.

and Canada with low base and high variable. And so, if we have great months like you and I both hope for this summer, you will see my – couple sales people – sales executives, sales leaders making more money than me as the CEO, but I am happy for that because they worked very hard to do that and they have taken a risk by accepting a low base in exchange for having that variable.

So, to your question, I don’t know. Typically, yes, I confirm that the first quarter is slower.

It gets busier in the second because of the spring break and as I said before, the summer is the busiest because that’s when schools out and everybody travels around the world. And so, we are hopeful for that and that’s what we had budgeted for and so far we are ahead of our planning.

Okay. That’s great.

Maybe just on the payments business, that’s $2.2 million this quarter roughly $2.1 million a quarter prior. Is that’s kind of the runrate in terms of growth we should anticipate kind of a base business to $2 million to $2.5 million a quarter or you anticipate stronger or weaker growth than that in the coming quarter?

We are very focused on continuing to grow that. One of our, when we do our strategic planning, we do the typical SWAT analysis and our biggest weakness or fear is that we are so dependent on bank note revenues.

And so, we continue to invest in that. And so, do I think it will grow significantly more next quarter than this one, it will have the growth rate that you are seeing unless there is an acquisition that we bolt-on.

But it is a growing business and as Alan said, it’s a much more stable business than it is with the travel seasons. And so, we should continue to see that grow quite nicely.

Okay. That’s great.

And then maybe just a couple of the expense items. Alan, you mentioned that the rents decreased in the quarter.

Maybe just give us an idea of what that number looks like on a go forward basis. I also noticed legal costs were down conservatively quarter-over-quarter and not surprisingly shipping was increased.

Maybe just talk about a few of those expense items and maybe what you are seeing if there is any pressure on shipping and logistics, obviously, oil prices are pushing up, gasoline as well. So, maybe just a few highlights on the expense side would be great.

Sure, Jim, happy to. So, your first question was around the rent expansion.

Normalizing for that adjustments relating to settling the agreement with the landlord through a number of locations, the rent expense would have been around $290,000. So, probably up around $30,000 or $40,000 over the prior year, which is in that significant given that we have two additional locations, what we will see is that, for a number of the stores, there is a variable component to the rent expense.

And so, that as recovery continues and those stores generate higher revenues and profits. We’ll see some of that going back to the landlords that most of them haven’t had to pay in the last couple of years.

But it will be in line with what we have seen in the past. The postage and shipping has gone up.

There have been increases due to inflation in the fuel surcharges. But we also find that the postage and shipping cost for our international bank notes business as a percentage of revenue tend to be higher than the domestic business, but the international involves, flights, armor transport and so forth.

But overall, that business tends to have a nice contribution because we often don’t have to do a lot of the touching of the money. So, overall, I think as the continued domestic piece grows, then we will see postage and shipping should still normalize relative to what we have seen in the past.

Okay. And maybe just a last one from – sorry, go ahead.

Yes, legal. You were asking about legal and professional which have also increased from the previous year by about $260,000.

And so there is a lot of different cost that go in there. But during the pandemic, we really throttled back on any discretionary spending in those areas.

And so, now that we are back to more normalizing levels of activity, we are spending in some of those areas and certainly areas such as internal audit, tax compliance and other project-related pieces that fall in there that are strategically important for us we do need spend on now. If you go back and look at our pre-pandemic levels, this is in line with what we did back in 2019.

So it’s – I think it’s more reflective of the fact that last year’s activity was just abnormally low.

Okay. I mean, I just leave with the bottom-line question is, the profitability on your adjusted number 21%, the reported number 25% EBITDA margins.

Is that a number that we should be using going forward? Do you feel like that’s an attainable level?

Or is there something out of the norm that revenues grow so fast this quarter that you – that expenses didn’t keep up? I just want to get an idea of the future opportunity on the margin side?

Well, the fixed expense is, like those legal and professional shouldn’t continue to grow at a significant pace. But the variable expenses obviously can model those out and they will grow commensurate with the revenues.

So, there will be overall expense growth, but our – what we are seeing is that there are certain segments like our payments that haven’t quite achieved the level of scale that we are targeting for and as we do achieve scale in all segments, we should see continued improvement in the EBITDA margins. Does that help?

Yes. That’s perfect.

Maybe just sort of last one. I wonder if you could just comment on consumer behavior.

Obviously, you are seeing a rebound in volume every time in traffic. Our people using more cash right now than they did pre-pandemic or is there any way that you could help us understand how the return of the travelers?

What’s the impact in terms of consumer behavior?

Alan, I can take that. I wish just James Devenish and I were just in Washington DC at the Annual Bank Note Currency Conference that’s held there.

The Federal Reserve Bank was there as well and the key distributor of US dollars domestically for the U.S. relationships on the international distribution side.

But the – one of the keynote speakers was a Federal Reserve leader that distributes dollars and he did report that ATM usage, which is a key indicator of cash usage was up the last year and while places like Canada were more aggressive in saying cash could pass the COVID and they allowed businesses to go cashless. In the U.S., we saw that cash usage have gone up.

So you can Google that yourselves and see that cash has not been hurt by the pandemic, nor has it been hurt by digital payments or credit cards or anything. I don’t think people are running more to cash than they would in the past like, god I’d use my cash, but I think the behavior continues to be when people travel internationally, well they of course have their plastic in their wallet.

They still do want to have 500 or 1,000 bucks of local hard currency. So they can tip and go in a market and buy things and so forth.

So, I don’t think there has been any radical change to consumer behavior around bank notes. I think it’s the usual is take a little bit of currency to have it.

And so I don’t think it’s gone too much either direction and well as we saw in the quarter, and that’s why euros went way up is people were buying for their spring, Europe trips or their summer Europe trips and we are happy to see that. We – the old saying was cash is queen, we believe cash is queen, a cash is king, now it’s cash is queen.

But the overall consumer behavior is very similar in my opinion and we are seeing just the pent-up demand, people didn’t travel. They have the money saved up now and they are going and we hope that continues and provided that we don’t have a war or any locking down again, I think it’s likely that you’ll see the normal travel patterns recent.

But we can’t predict that at all.

Alright. Thanks guys.

I appreciate it.

Thank you, Joe.

Welcome.

Good morning, Peter

Hey, good morning. Hey, first of all, great quarter.

That’s – hey team that’s could say on the phone, but that really was a great quarter. Alan, thanks for the detailed update that was great as well.

I am going to tie up kind of the same question that others have asked but maybe in a different way. I guess, first, maybe more on the revenue line on the bank notes.

I know you guys have mentioned your direct-to-consumer business 36 states and can you guys comment maybe on the – of the 10 or so million of revenues? How much that direct-to-consumer business was like the online FX?

As Robin asked the question, we currently don’t, we don’t separate out those numbers and so for us to throw a number out, that’s not in our MD&A or in our I am not sure if we can give that clarity at this time. We will review that question because I can understand its origin.

However, I can confirm that the bank note revenue, to Jim’s question, to those know and there was no one thing that’s why it was so high. It was our bank note revenues grew because of our own domestic consumer locations, our agent locations, like duty free America we announced.

We can comfortably talk about them. The borders are opened.

So you can anticipate that now the border is open, those life patients on the Canadian U.S. border obviously had nice increases that were better than planned.

And the international customers for both CXI and Miami and for ABC with the Fed contributed to that. So, yes, consumer was definitely part of it.

But exactly how much of that overall bank note revenues we currently don’t disclose that split between our consumer division, our agent division and our wholesale division. It’s all comes out of – in and out of the vaults and currently it’s all buckled it’s all together.

And so we don’t provide that number and I couldn’t give you that over the phone. I don’t believe.

Okay. That’s fair enough.

Okay, let me ask kind of a different question, but maybe same on the consumer. So, I think your revenue runrate was fairly close to pre-pandemic levels in terms of, I think you guys were as $42 million for 2019 and because you are about $10 million for the quarter – this quarter, which is lower seasonally quarter.

But you have 36 locations versus 46 back then. So, is it fair to say, sell in more or is it as a result of the branches that you are – I guess, are not in the official count.

The airport locations that are kind of more of a franchise locations.

That’s correct. That’s a ladder.

In other words, you are – even though we have less company-owned stores, we have exceeded the total number of consumer direct transacting locations due to the agent locations. So those airports are definitely a part of this undoubtedly.

Can you tell us how many agent locations do you have versus, I guess, both in absolute number and relative to 2019?

Well, I think we released our total transacting locations, let me explain, I’ll use the JFK Airport that I - that literally flew through it just recently. So, there is five booths at the airport.

But they are not all open at the same time. So the local operator and this is a business we’ve never done ourselves, because it’s a very difficult business to deal with incoming and outgoing planes that are often delayed and so forth.

So the local operator utilizes those booths that are closest to the active gates. So, that number changes, what I am saying.

Certain times they have three of the five open. Sometimes they may only have one of the five open.

And so that number moves. So we don’t – we have a total number of transacting locations that we report.

But I couldn’t tell you right now exactly how many active – today how many of the five will be open at JFK, because we don’t get into those details. That’s why we do this revenue share where the local operator maximizes the location, we provide the support of the brand, the software.

It’s a true partnership that we have with our agent relationships.

Okay. Fair enough.

I appreciate the granularity. Now moving down to more of the expense line.

So, the Fed relationship, it sounds like it’s going great. Where do we see the impact of that relationship?

Do we see that on a like, more net revenue line? Or is that concentrated what are the…

So, it’s dollar-for-dollar. It’s a great question and in fact, I am glad you asked it, because I did have someone enquired directly to me about the total volume, wow, you get billion dollars and but – when you look at the revenue per volume exchange, you say your margins are shrinking because it’s dollar-for-dollar.

So if I am selling usually on international the banks would be buying let’s say $10 million US and they are paying us $10 million for the $10 million and then we charge a percentage of so many tips basis points to fee. And so that’s fee income.

The beauty of it is, is that it’s dollar-for-dollar. So there is no foreign exchange exposure and it’s fee income.

But you will continue to see over the next year that our dollar value of money exchanged similar to the U.S. dollars, wires that Alan was saying, in the U.S.

the majority of wires that leap here internationally aren’t in U.S. dollars.

But we charge fees for that. So you see that in the fee income.

You’ll see it in additional revenues on the top-line.

Okay. That’s it.

But I thought that, I guess the savings would have shown up in the …

Well, the savings – the savings is in the cost of goods sold. I am sorry, these are new revenues from the new banks.

The existing dollars we had a pretty significant U.S. dollar business where we were paying sourcing cost of 10 basis points typically up to 15 if it was mint currency.

And now we pay pretty much nothing. It’s part of the fee relationship we have.

And so, we no longer have a premium to source dollars or offload dollars. And so that you are seeing that in the net savings of the flows there.

But new business it’s all – we are selling dollars for dollars for a fee.

Got it. Okay.

That makes sense. I appreciate the color.

And then, just, I think the previous caller has sort of ask you questions about margins and expenses, maybe I want to ask that in a different way. So you had Q1-to-Q1 $7.4 million increase in revenue which amazing.

And you had about $2.9 million increase in expenses, of which you said $1.5 million was increase variable expenses and cost. So that’s about a 20%, it’s about 60%, 70% flow through and 20% of which is pure variable.

And then, on the other $1.4 million, is that, what’s the – and I am just asking big picture, so, I guess, is that an annual out of the $9.3 million expenses, of total expenses, I guess, what I am trying to ask is how much of that is fixed then and I think you had the number of like $30 million a few years – a couple of years ago at your Annual Meeting. Has that changed?

The most of the flow through starts at $30 million or is there a different number then?

I’ll let Alan answer that if he can.

Yes. I think our model has changed since a couple of years ago when you are probably looking at the $30 million and so that additional $1.4 million in operating expenses it’s fixed or semi-fixed will – is probably reflective of what we would expect to see moving forward, because those we need that cost to think the business right now.

But we are continuing to be mindful of not growing those costs anymore than we need to as Randolph mentioned, we have been working on shifting to more of the variable model. But I think what you are seeing is that the business – the enterprise is growing.

So, the cost structure to support the enterprise at a larger revenue base than it had prior to the pandemic of course is going to be higher, but then you're going to have the benefit of scale and an enterprise that should be generating and capable of generating a higher revenue base. So I think it's more around how we can grow the revenue base.

And some of that is his auto car control related to the – those macro factors. But I think what we've indicated is that we're still working on generating scale, especially in the payments business and that we're getting close to that phase.

So what I look at is Q1 is a very good picture of what the company can generate today at that level of revenue. And so it's not a cloudy picture in terms of looking backwards.

It's certainly difficult from a relativity standpoint, but I think it's a good baseline to use as you look moving forward.

Okay, great. And then maybe just a, I guess, I know, payments is still a relatively new business.

And you're – there's lots of puts in the books and then you had – you said you had mentioned, you just started Jack Henry, the relationship last week, officially. So, the growth rate kind of fluctuates between 93% down to 31%.

Is there may be a natural growth rate at the – at maybe there's like $9 million run rate level that you're expecting, that we should look at, or any color you can give us on that would be great?

As I told Jim on the call, we are very focused on continuing to grow that and it is a more stable business line. And how we're continuing to grow that is not only just acquiring customers in our current model, we – these integrations, for example, open up a whole new bucket of customers.

So using the Jack Henry, they have a whole roster of customers that utilize the Jack Henry system. And now that we're integrated with them, they can go ahead and use us as their provider and still stay with their one platform that they're running their financial institution on.

And so we anticipate to grow that business. We also did to add a focus specialized product manager or product owner, whatever term you want to call it, but we have invested into human capital to explore and help guide us as we diversify and add new verticals in the payment channel.

And so now that our Head, Wade Bracy, has been with the group since we started, who's running our payment operations. He's got a straight through process rate that, as Alan indicated, is almost touchless, where the majority of our payment activity is very efficient, it allows for us to continue to add new volumes without the costs, adding every X customers, I got to add this many bodies, we have invested in and succeeded in becoming quite efficient in our payments activity.

So I think you can see that growth rate continue, and hopefully, even higher – a higher acceleration rate. But again, that's up to our salespeople to develop these relationships, but the infrastructures in place to support us eventually doubling or tripling the revenues from payments over the years ahead.

Okay. Well, I just thank you.

This is the first time I think we've exceeded our time. So I appreciate all the detailed questions.

If any of you didn't get to ask a question, please reach out to Alan, Bill or I. And if we can, we will be happy to answer that.

But again, I thank you for your support of Currency Exchange International, and we look forward to talking to you again. Thank you.

Thank you.