Currency Exchange International, Corp. (CXI) Earnings Call Transcript & Summary

The conference is now being recorded.

Good afternoon, ladies and gentlemen. Welcome to the Annual General and Special Meeting of the shareholders of Currency Exchange International Corp. I'm Randolph Pinna, President and Chief Executive Officer of the company. We're going to formally start this here in 2 minutes, just to give everybody the ability to log in and get situated here. So I'm going to wait just until it hits 12:03 PM. And on that third minute, we'll go. Okay. Once again, I'm Randolph Pinna, CEO of CXI. Before proceeding with the formal business of the meeting, I would like to thank you for attending this meeting either online or via telephone. We continue to be in an unprecedented times due to the coronavirus, global pandemic, and we will do our best to ensure that all shareholders have an equal opportunity to participate in this meeting. Accordingly, this year's meeting of shareholders of the company is being conducted online and via teleconference. Shareholders and/or their appointees, directors, officers, and guests participating will be able to listen to a live audiocast of the meeting, ask questions of management online via the blue hand, ask a question button or during periods designated for unmuting phones. Question and answers as well as record of this meeting will be posted to CXI's investor page following the meeting. I would like to highlight to everyone that there are 2 ways to join the webcast, depending on whether or not you are a registered shareholder or attending as a guest. All participants were or are required to first enter their first name, last name and e-mail. Thereafter, choose the appropriate box for you depending on whether you are a shareholder or an appointee or a guest. To access the webcast as a registered shareholder and/or appointee, you will need to enter the registered shareholder name exactly as it is on your record, found on your proxy card. If it does not match exactly, the system will not let you in as a registered shareholder. Online IT support as well as Investor Relations are standing by to assist you during the entirety of this meeting. There is also a user guide posted to the Investor Relations page of the CXI website. As customary, shareholders have provided their voting instructions before the meeting by completing the form of proxy or voting information form that was provided to you. In the instance of proposal table, shareholders may cast their live vote and instructions will be provided. We have the following items for formal business to address today. First, we're presenting the financial statements of the corporation for the year-end October 31, 2020, and the report of the auditors thereon. We're here to appoint Grant Thornton LLP as the auditors of the corporation for the ensuing year and to authorize the directors of the corporation to fix the remuneration. We're going to elect the directors of the corporation for the next year and work to consider and if deemed advisable, to pass with or without variation, an ordinary resolution to approve all unallocated options under the corporation's incentive stock option plan. We are also to transact such any other business as may properly come before the meeting or any adjournments or postponements thereof. Once the formal business of the meeting has been completed, I will provide an update on the current business activities of the organization, following which there will be an opportunity to ask questions. So first, I'd like to formally call the meeting to order and appoint our recording Secretary and the Scrutineer. I will now call the meeting to order and in accordance with the bylaws of the corporation, I shall preside as the Chair of this meeting. Ivy Lumia will act as the recording secretary of the meeting; and Kate Stevens of Computershare Trust Company of Canada will be the scrutineer of this meeting. Today, the scrutineer reports that there are present at this meeting in person or by proxy 37 shareholders holding 4,245,716 common shares. Accordingly, I declare that the requisite quorum of shareholders is present, and I declare that the meeting is duly and properly constituted for the transaction of business. I direct that the scrutineer's complete report on attendance be annexed to the minutes of this meeting. Votes on the matters before this meeting by proxy have been submitted by shareholders. There are several matters that must be dealt with during this formal part of the meeting. In order to expedite these matters, I have requested that certain persons make and second the formal motions, and I will call on these persons at the appropriate time. Shareholders may make comments specific to these motions prior to the vote, but should hold any comments on general matters until the question period to be followed at the following of my presentation. So first is the presentation of the financial statements and the auditor's report. As the first item of business, the company's audited financial statements for the year, October 31, 2020, and the auditors report thereon are hereby placed before the meeting. The audited financial statements, along with the related management discussion and analysis, has been mailed to each shareholder of the company, and I do not propose to read them to the meeting today. So we will now proceed with the appointment. Am I missing [indiscernible] here? We will now proceed with the appointment of the auditors of the company. I've been advised by the scrutineer that the proxies deposited for the meeting have been overwhelmingly voted for the appointment of Grant Thornton as the auditors of the company. I would ask Chitwant Kohli to move the following resolution, please. Be it hereby resolved that Grant Thornton LLP Chartered accountants be and they are hereby appointed as auditors of the company to hold until the close of the next annual meeting of shareholders or until their successors are appointed. At such remuneration as may be fixed by the directors and the directors to be and they are here and hereby authorize to fix such remuneration. Chitwant?

I so move.

Thank you, Chitwant. May I have this motion seconded?

I second the motion.

Thank you, Khatuna. I will now call for a vote on the motion. I ask that Stephen Fitzpatrick, who is named the appointee of the shareholders voting by proxy, confirm that a majority of the shareholders present in person or by proxy have provided their votes in favor of, ahead of this meeting.

I so confirm.

Thank you, Stephen. If there are any contrary, please click the raise your hand button. For those joining by teleconference, you may speak now. We're going to wait a couple of seconds here to let people do that.

[Operator Instructions]

Hearing no objections, I hereby declare the resolution appointing the auditors of the company for the ensuing year and authorizing the directors to fix the remuneration has been carried. We will now proceed with the election of directors of the company for the ensuing year. The number of directors to be elected at the meeting is 9. The Governance Committee nominates the following persons as specified in the management information circular delivered with the notice of meeting, namely myself, Randolph Pinna, Joe August, Chirag Bhavsar, Johanne Brossard, Chitwant Kohli, Mark Mickleborough, Stacey Mowbray, James Sardo and Daryl Yeo to be elected to serve as directors of the company to hold office until the next annual meeting of shareholders or until their successors are duly elected or appointed in accordance with the articles of bylaws of the company. If there are any other nominations, please click the ask question button. For those joining by teleconference, you can speak now. I'm going to wait a few seconds again.

[Operator Instructions]

Hearing or seeing no further nominations, I hereby declare the nominations closed. I've been advised by the scrutineer that the proxies deposited for the meeting have been overwhelmingly voted for the election of each of the directors. So with the consent of those shareholders in attendance at this meeting, can I have one motion for the election of the entire slate of directors nominated to stand for the election in the management information circular provided by the shareholders of CXI in advance of the Annual General and Special Meeting of CXI Shareholders? I would once again ask Chitwant Kohli to move the following resolution, please. Be it hereby resolved that the 9 persons nominated by management be elected as directors of the company to hold office until the close of the next annual meeting of the shareholders or until their successors are duly elected or appointed in accordance with the articles and bylaws of our company.

I so move.

Thank you, Chitwant. May I please have this resolution seconded?

I second the motion.

Thank you, Khatuna. Now I will now call for a vote on the motion. I ask that Stephen Fitzpatrick to his name the appointee of the shareholders voting by proxy confirm that a majority of the shareholders present in person or by proxy have provided their votes in favor ahead of this meeting.

I so confirm.

Thank you, Stephen. If there are any contrary, please click the raise your hand button. For those joining by teleconference, you can speak now. Now I will wait a few seconds again, please. Not hearing or seeing any, I hereby declare that the resolution to elect the 9 directors as listed above, has been a success -- are duly elected and appointed has been carried. Thank you. We will now proceed with the approval of all unallocated options under the corporation's incentive stock option plan. The corporation established an incentive stock option plan under which directors, officers, employees and consultants of the corporation may be granted options to acquire common shares. The purpose of the plan is to secure for the corporation, the shareholders and its shareholders, the benefits of incentives inherent in share ownership by directors, officers and employees and consultants of the corporation, who will largely be responsible for our future growth and success. Pursuant to Section 613 of the TSX Company Manual, unallocated options, rights or other entitlements under a security-based compensation arrangement, which does not have a fixed maximum aggregate of securities issuable must be approved by a majority of the issuing -- issuers, directors and security holders, every 3 years. The plan does not have a fixed number of common shares issuable thereunder, but permits the issuance of up to an aggregate of 10% of the outstanding common shares from time to time. The corporation completed its initial public offering and listed common shares on the TSX on March 9, 2012. Subsequently, shareholders have approved the unallocated options issuable pursuant to the plan at the meeting of shareholders held on March 15, 2018. The unallocated rights options or other entitlements under the plan were ratified and approved by the Board on January 28, '21. As of the record date, a total of 504,049 options were outstanding under the plan, representing approximately 7.9% of the outstanding common shares. Based upon this -- the number of 6,414,936 shares issued in outstanding as of the record date and assuming no further grant of options, an aggregate of 137,440 options, representing approximately 2.1% of the outstanding common shares, currently remain issuable under this plan. If approved -- if approval is obtained at the meeting, the corporation will not be required to seek further approval of the grant of unallocated options under the plan until the corporation's 2024 Annual Special Shareholders Meeting provided that such meeting is held on or prior to 17th, 2024. If approval is not obtained at the meeting, the corporation must [ fore with stock ] granting options under the plan and options which are outstanding as of the date of the meeting and are subsequently canceled, terminated or exercised will not be available for a new grant of options until shareholder approval is obtained. However, all options that have been granted until March 15, '21, but not yet exercised, will continue to be unaffected. I have been advised by the scrutineer that the proxies deposited for the meeting have overwhelmingly voted for the approval of the unallocated options under the plan. I would ask Chitwant Kohli to move the following resolution, please. Be it hereby resolved, all unallocated options rights and other entitlements under the corporation's plan as just described and as per the management information circular dated February 4, '21, we -- and are hereby approved. Two, the corporation has the ability to continue granting options, rights and other entitlements under the plan until March 17, '24, and that date, that is the 3 years from the date of this resolution. Any Director or Officer of the corporation is hereby authorized and directed to do all acts and things and to execute and deliver all documents required as in the opinion of such directors or officers may be necessary or appropriate in order to give effect to this resolution.

I so move.

Thank you, Chitwant. May I have this motion seconded?

I second the motion.

Thank you, Khatuna. I will now call for a vote on the motion. I asked that Stephen Fitzpatrick, who has named the appointee of the shareholders voting by proxy, confirm that a majority of the shareholders present in person or by proxy have provided their votes in favor of this meeting.

I so confirm.

Thank you, Stephen. Now if there's any -- to the contrary, please click the ask a question button. Or for those joining by phone, you can speak now. We'll wait. [Operator Instructions] Okay. I have not seen or heard any objections. I declare that this resolution approved and the unallocated options under the incentive stock option plan has been carried. Now lastly, is there any formal business that may be properly brought before this meeting? [Operator Instructions] Remember, regular questions will be after my presentation here in a minute. I'll wait a few seconds. Not hearing or seeing anything being proposed to be discussed, I will now call for the closing of the meeting. This will conclude the formal business brought before the meeting. I wish to thank you for attending, and I would now ask for a motion formally to terminate this meeting.

I move that this meeting be terminated.

Can I get this seconded, please?

I second the motion.

Okay. I will now call for a vote on the motion. Stephen?

I so confirm.

Thank you, Stephen. If -- does anybody object to ending this formal meeting and getting on with the Annual Shareholder Meeting presentation? [Operator Instructions] I'll wait a few more seconds. Okay. I don't see anybody objecting to ending the formal part of the meeting. We can now go over to our PowerPoint slide presentation that our executive team and I put together to go over our business. Okay. So here's the agenda before we get into the details. We already did the meeting and reading all the formal stuff. We're now in this presentation session. And then at the end, as I said, we'll be doing a question-and-answer period. There's Stephen and I, a couple of year old picture, I guess, we're going to need to get new ones. And so next, please. This statement is just a legal disclaimer. I have a tendency to share my optimism and any forward-looking-type statements should be taken with your own thoughts and you make your own decisions based on your own assessment. Okay. Well, as you know, we've had, and we still are in a bad pandemic globally while we see in the U.S. and the news and see it live here in Orlando, which was just rated by a very large travel company that's assessed the next 1.8 million flights that Orlando is the top destination in the world right now. Even still, we are respecting the need to protect our employees and our customers we're honoring these travel restrictions. Any company travel must be preapproved, which has been discouraged unless required. Again, we've been working very closely with our building cleaning companies and ensuring regular cleaning. Almost all of our offices are using this new digital world of video conferencing. Again, our vaults and operations staff, they are deemed essential workers, and they obviously have to be in the vault to process transactions. But we have separated space, and we've done a very good job, and I'm very pleased with our team's efforts. We have been using all this IT again. As you may -- some of you may recall, we were very quick to get into this new Zoom environment, and we also use Microsoft Teams as well as some of our clients require that. And we feel we've done a very good job. And looking forward, as the big banks all are considering at what time a return to work plan may occur, we put a stake in the round of September as this seems to be commonplace both in the U.S. and in Canada as a time to consider a return to work to plan, which will likely be a rotation schedule of 2 or 3 days in and 2 or 3 days working from home. In our Zoom Analytics capabilities and reporting has been very effective in ensuring that team members are maximizing their work time. We do have a great team. I'm very proud to look at this list here and see that very few changes have occurred from -- in the last year. So our senior executive team has remained intact. I'm proud to show some promotions that are on there. So Katie Davis is now and has been our formerly our Treasurer. As you may -- if you were on our earnings call recently, you probably know that we did do a group restructure. I'm very pleased and thankful for Matthew Schillo to remain as the Chief Operating Officer of not only CXI but also for Exchange Bank of Canada with his focus primarily on banknote operations. Wade Bracy, another long time veteran of the group has also been promoted to run the group's payment operations for both Exchange Bank as well as CXI. And our internal auditor, our good Tony, which was an excellent representation of KPMG has retired. And Reema is now our chief internal auditor. And we've been very pleased to see our compliance and risk team grow with Nick Tory now being a Director of risk there in Toronto. So again, not much changes there, but good improvements. And this is the team that's leading our group for the next years ahead. I would like to think everybody knows what we do as shareholders and owners of our company, but we do have some guests in attendance, some prospective new shareholders possibly. So I will just remind everybody what we do as a group. Obviously, CXI and Exchange Bank of Canada are 2 separate entities, Exchange Bank of Canada being a Schedule 1 Bank focus on the B2B space, which is businesses or banks, where CXI does that and has a consumer direct division. So what we offer is currency exchange, the physical cash money and now we've just broken the ice this year with the new digital assets that are coming to life. Our core focus going forward is now on payments. Both spot and forward transactions around foreign exchange, and we've always had a successful check clearing business using our relationships with our correspondent banks. This is all done through our proprietary software, which we nicknamed CEIFX. It's officially CXI FX for Canada and EBCFX -- I'm sorry, CXI FX for CXI and EBCFX for Exchange Bank. All of our transactions and all of our logistics, inventory management is embedded within that. Exchange Bank has also expanded with other software systems like the FX Now and that allows for corporate payments as well. So our technology is continuing to be a top focus of our organization. We consider ourselves a fin-tech company as technology is definitely a part of our financial services and will remain a core focus of our group. Our distribution, as I said, was servicing other banks. We've been very successful over the last decade in CXI with growing our bank relationships to expand over 20,000 transacting locations. Similarly, in Canada, we have very high-profile bank relationships in Canada as well as some nonbank financial institutions as well. And that is expanding now, as you'll hear later internationally in select countries. We do still have our direct-to-consumer location, which we used to call retail. That has expanded because our online store has been very successful, especially when the malls were locked down. And that is strictly CXI only. While that division did shrink considerably due to the effect of the travel restrictions, we still have a very robust retail network of the core markets where we feel like New York, like California, like Florida and Hawaii. These are core markets long-term for our group. I was talking about the software. Why large banks, major financial institutions, both in the U.S. and in Canada, and now we're even seeing some selectively internationally use us is because of our software system. What is the key component of our software system that's attractive is its compliance. We built this internally, designed it with the focus around customer activity. Our old software in my previous work was focused around the foreign exchange transaction, which obviously is very important, too. But as laws changed, the focus came to the customer and what that customer does. So at the heart of this, what we call, CVS, is this robust engine, keeping track of customer activity, whether they sell currency, buy currency, do a wire, do a check, all the admin around that, such as pricing and fees, and most importantly, the bottom circle is the reporting of this. Our system also checks live against other watch lists, 21 different watch list, like the OFAC list in the U.S., the Canada consolidated list in Canada, FBI list, Interpol list, et cetera. There are some examples of these lists that we do. That is customizable by our customer and ourselves. As which list will be checked. Some banks choose not to check the Hong Kong monetary authority, for example, which is their right as their own bank to choose which lists are scrubbed. The minimum requirements, like in the U.S., OFAC is always a requirement, and that cannot be turned off. Next, please. I wanted to do some shout outs on things we did in the 2020 year. I have to start before even going into the list. It's crazy to think we had the worst financial year of my career being an executive running a foreign exchange by far. I've never -- I don't even think we've had a loss, much less a loss of the size we had. However, it was the busiest year of my work career. And I think I share that with a lot of the executives and maybe even in your own businesses outside of this, you can acknowledge that it's been a very difficult year dealing with keeping your business going resizing, making difficult discussions around people that, unfortunately, after years working with the organization had to be let go because of the effect of this nasty pandemic. Even still, we accomplished amazing things. Like we integrated our acquisition, which took a long time for approval. And while it took a long time, it ensured that we were able to do it quickly and effectively. And we're very proud to have that Montreal-based team now part of Exchange Bank of Canada. That team was really the nucleus that helped us grow our operations and payments. A year ago, we did a recruitment. We looked for the best salesperson that we felt that knows banking, knows foreign exchange, knows customer first, understands risk and compliance. And we recruited and interviewed many people, and we feel we chose the best person. Mr. James Devenish has been almost a year with us as our Senior Vice President of Sales. And his focus, of course, is to grow corporate international payments. Of course, banknotes is not to be ignored. It is always a core part of our group. However, James has come in. We did advertising and we've been very pleased to grow our team, mostly in Montreal, although I believe we have one person out West, and we've had people in Toronto. So he's really organized our sales and efforts at Exchange Bank. And that's a major accomplishment that is really taking off, and hats off to him. We also joined a great retailer based here in Florida, but operating globally. Duty-free Americas, that's the division we're dealing with, who runs the northern and Southern border duty-free stores as well as select airport locations. In our first year, we were successful in rolling out the northern border, which pre pandemic was doing very well for us. Considering you don't pay any rent or any payroll, but when you're coming over the bridge from -- going into Buffalo, you would see their location or vice versa because they're on the U.S. side. And they've been very successful. We are expanding now with Phase II, which is the southern border because the Mexican -- like Florida, Mexico is open, and we've had a lot of activity with peso-U.S. dollars there as well. New bank clients. We continue to operate with our core business of servicing banks in the U.S. and Canada. We've added 750 new bank and corporate relationships in between the 2 businesses. Our retail division, as I said, shrunk from 46. We cut 12 of our stores down to 34, but then we took one of our -- used to be our -- one of our -- the biggest competitor in North America exited the Americas. Their business was hit very hard as well, and their Board of Directors recapitalize themselves with the focus of not operating in the Americas. Because of that, we have been successful in receiving a lot of new business, wholesale client relationships, both in the U.S. and Canada as well as our retail footprint now in many cities are the only retail option other than a bank that may do the service as well. There's the results on this page. As you saw, we've seen volumes drop. We've seen revenues drop tremendously. Our assets have increased because we have been wise in utilizing our lines where we need them to ensure that we have the liquidity to provide to the hopefully soon rebounding business, which has actually started because of spring break. There's a revenue by geography. I'm happy to see how Canada continues year after year to grow our total group pie of revenues, and we anticipate that to continue. As I mentioned on the call yesterday and on previous calls, partly because of the pandemic, but partly because our old 3-year plan was near the end. We engaged a consultant. We took a very hard look at our current core businesses, our strengths, our weaknesses, what opportunities that the pandemic has presented itself, and we've completely updated our 3-year strategic plan. There's 4 pillars to the plan. And then there's really a fifth one, which is to strengthen and optimize the corporate infrastructure to ensure that we can execute on the plan. So those are the 4 pillars that our businesses are focused on. And I'm going to go into detail of each of those. But at a high level, we anticipate growing both businesses globally. While the pandemic has affected all banks foreign exchange volume globally, the fact that if we can get a bank that's, let's say, in a country that has a low-risk rating that we feel comfortable in doing, that's new business for us, and that's why we are looking at select customers and accepting these customers to our businesses in the U.S. and Canada because these are new revenues. And as the world reopens, those revenues will hopefully grow both internationally as well as domestically. Our consumer division, we are currently not anticipating opening more retail locations. However, there are a few flagship locations from the competitor that's left the marketplace. So those are being considered. However, our focus right now is to maximize the consumer division with the team we have and the products we offer. The corporate international payments is primarily at the bank,for our corporate business, at CXI, it's more on the bank-to-bank business, but growing international payments is in both businesses. And then lastly, are expanding the U.S. banks and credit unions, that's been our core, that's gotten us to here, and that's still remaining 4 pillars. So now we'll go into each of these a little in more detail. So we have to focus on our process improvements in automation, centralize our systems and all have an ongoing focus on our cybersecurity. We will continue to invest into this. So we are enabling our team and the company to provide and execute on its strategic plan. The expansion of wholesale bank notes, I already started talking about, but we've noticed because of a competitor leaving the marketplace, because of our ability to source currencies like Mexican pesos, like U.S. dollars, like Canadian dollars, it has opened the opportunity for us to really expand our banknote business. So while our core focus is international payments, we are not ignoring that at the heart of our company has been banknotes, and we still see the opportunities that present themselves because we have become the largest nonbank distributor of foreign exchange in the U.S. and possibly even in Canada. Okay. We want to expand our services with U.S. banks. That is our main, original business. We've named this OPOP, One Provider. One Platform. And this is with integrating with bank's core systems. I mentioned this on our call yesterday, we did an integration already with Fiserv's wire exchange. That has proven to be profitable. And we are now working through the details of integrating with another core software provider, Jack Henry. Between Fiserv and Jack Henry, that represents, I believe, 40% or 50% of all cores operating system for banks and financial institutions in the U.S. So by doing these integrations, we have roughly up to half of the banks able to use us with a straight-through process and not have to toggle between their core and the CEIFX system as currently done with a lot of our customers. Next, please. This is the growth of corporate international payments. I call it relationship banking. Our entire team is focused on what we feel customer first. We obviously keep risk and compliance in mind. So that's always up there right alongside with customer first. However, our focus has been to continue to service our clients with top-notch service. We are focused more on the small to medium-sized businesses, although I'm quite impressed with some of the larger customers that our bank has already begun servicing. We have been building a team of experienced banking partners. When we are recruiting, we are looking for people that have a good experience, good customer relation skills and are excited about helping us grow our international payment business. Some have asked me, are you looking to buy more businesses? And the M&A is not off the table. It's not a top focus of the 4 pillars. However, we do see opportunities in the marketplace. And so Stephen and I will and always continue to have in our mind is there another opportunity like the one we -- that was very successful in Montreal or even previous from years ago, the one we did in Texas. And so we will continue to have that as part of our plan. And this, as it did with the one in Montreal, helped us with our corporate international payments. Next. The consumer to direct offering, what's new? We added cryptocurrencies. Last year, we did the currency price protection. And these are new revenue lines going to our existing stores. Again, we focused our long-term retail landlord relationships in the key markets that we have a good footprint in, we feel are core long-term to the business. Our online store has been successful and very profitable. We have a dedicated person to the online business. And it's like a branch manager, but we have a manager for the online store, and they are very focused on that business and how we are going to continue to market, expand it by getting licensing in other states where currently, we're not allowed to sell for home delivery because it's considered money transmission. And then lastly, on the direct-to-consumer offering, which is super exciting, is our agent location expansion. So an agent is an extension of our company. So an agent falls under our license, an agent's activities fall under our reporting. And so it's very similar to our own company stores. However, especially during times like a pandemic, it's very nice that you don't have a rent obligation to the landlord, and you don't have the payroll obligation to keep the stores open. And so we will see expansion in this in a big way in the next years because of the opportunities that have presented themselves. And because this is about 2020, I won't get too forward-looking here, but I'm excited about the opportunities that we have in front of us under those 4 pillars. So next slide. Here's our stock, and you've seen we've been on a ride. The cost of the bank, even pre-pandemic, were pushing pressure on us since our earnings were not as good as we had hoped them to be because of costs around ensuring our organization is structured, and the bank is well-structured to grow. We've hit, I feel a bottom here. And we continue to remain as a tight company. They're -- one shareholder told me there's -- it's hard liquidity and all of that, but there's 6,414,000 shares outstanding. We have a strong cash position. Management owns a good chunk, obviously, I being a big piece of that, but not just me. We have a lot of our directors and share -- employees, our shareholders, and we do have some retail, and then, of course, the institutions that own us. And the last slide, I wanted to end on is just a reminder, if you've been in this business for some time -- Brian? You may wonder, say, is this a time to buy CXI, hold CXI or sell CXI? And again, I feel this is a good time. Why? We are a very well-capitalized organization. We have a strong competitive advantage. We've built technology. We have a bank at the core of our organization that enables us to grow globally, enables us to establish central bank relationships. And we feel the mix of a non-bank with a bank is a real strong competitive advantage against the big banks or the specialty boutique MSVs, we feel we're the best of both worlds. We feel we're very well positioned for the rebound in tourism in the U.S., especially. We hope Canada will open its borders soon, but we really feel we're in a good position. And most importantly, I believe our customers can speak loudly for us. We have a great reputation with our customers and even our regulators as being a very well-run organization. We have a lot of growth ahead of us. The direct to the consumer, as I was already telling you, international, this is super exciting for us, and we're going to continue to grow our marketplace, market share in the U.S. and Canada. So with that being said, I'm ready to answer your questions. I have Stephen standing by. I have James Devenish. We have several directors, if not, most of them, I know I was talking to some earlier. They're here. So you are able to open the floor. Unfortunately, this year, if you recall, we've done this, where we had a board room full of shareholders and the directors, and we were able to have a great meeting. I miss those days. But right now, we're in the virtual edition of that. So while you can't see everybody, we are -- there's a lot of people on this call. And I welcome any questions. And thank you, again, for your support of CXI.

[Operator Instructions] And Ryan, you're I think managing the digital side. Are -- any questions have popped up?

I'm actually doing that Randolph. It's Stephen. There aren't any questions right now.

Okay. And the follow-up...

There are no questions on the phone. No questions on the phone.

No questions on the phone. Wow, okay. Well, I have nothing further add. I think our presentation covered it. Our first quarter meeting yesterday, if you didn't get it, is supposed to be uploaded any day now to our website. So you can hear -- that will cover the first quarter of this fiscal year, and we're anxiously awaiting the opening of the borders and looking forward to spring break being as busy elsewhere as it is here in Florida. And thank you again.

Randolph?

Yes.

I do have a question here now.

Okay. Good.

So I'll read it to you. So the first question is how much pre-COVID revenue is lost because of the closed retail branches? What minimum cost base do we see as sustainable? And do we foresee growing operating expenses in the short-term to pre-COVID levels? So that's the first question. Do you want me to try and answer that?

I will do it at a high level. Then if you have any more detailed color, you can. What decided are -- on the retail part of the question, was what decided our -- what stores would stay and what stores would go. I believe it was usually the roughly 80/20 rule. That 80% of our business was represented by 20% of our stores. It wasn't obviously that because we didn't cut 20% down. But the fact is that the majority of our revenues remain with the stores that are there. And hence, the 12 stores that we closed represented x, which I am not sure if Stephen has that answer off the cuff. But it was not a huge -- it wasn't million of dollars, I don't believe, because that was part of our consideration was where and how much does it make? And how quickly does that area we think are going to rebound, like a New York will come back and be the 24-hour city it used to be. We feel sooner than some of the -- like a Portland, Oregon, where we closed Portland because we just felt that, that wasn't core. So that's how I've answered the retail question. Do you have anything to add to that, Stephen?

No. I don't have the exact number, but it was about -- if you think of the 80/20 rule, it was roughly 20% of the revenue. Where we stayed were -- is markets that have been core and have been profitable for us. And then the second part of -- yes, go ahead.

And then the second...

Yes, go ahead.

Go ahead. Well I was just...

Second part of the question...

Go ahead.

No, you go ahead. Sorry, this has been awkward. Go ahead.

No, no, no. I'm sorry, I was going to say, I think I understood the second part of the question to say, is the -- what's the minimum cost structure to ensure you're ready to run your business, is that correct, Stephen?

Yes. That's a good paraphrase.

Okay. So thank you. And so again, I don't have the numbers per se. But I would like to say that our current operating cost structure you saw in the first quarter, the cost of that are roughly correct for the rest of the year. While you'll see as the rebound hopefully bounces back in the spring break and summer, you'll see shipping going up. So you'll see some return of the variable cost but we are not looking to hire another Chief Operating Officer of Exchange Bank of Canada in this foreseeable year. Because we feel that the 2 executives running both businesses will be able to continue to do that. So as I mentioned, and I want to remind everyone, we could have cut deeper. However, to cut in areas like risk to cut in areas like compliance, to cut in areas like IT and cybersecurity would be moronic for us to overcut. And so our cost structure is roughly where it needs to be for the next year or so. And then, of course, as part of our 2022 budgeting process, we will have much more confidence in our revenue that -- revenues that are already here and coming that we -- you will see starting to build back the bank where he may have an executive there. You may see us bring a product owner of payments to add into that strategic capabilities of really expanding payments and ensuring we're on the digital edge of that and so forth. So Stephen, that's how I answered. I don't know if you have anything more to that?

No, no. I would answer the same way. The final part of the question around operating expenses was do we foresee them growing to pre-COVID levels in the short term, which you've essentially answered. And we don't see them going back to pre-COVID levels until revenues are beyond pre-COVID levels. So there's -- as Randolph said, we're structured right now for where we think we'll be in the coming period. Second question from the same person.

Wait, wait, wait. Before you get to that question, I just wanted to answer a question that I felt mentally came to my head, which was how can you get past pre-COVID revenue levels without increasing your core cost. And I want to point to the automation and the process improvement roles that we have been doing, straight-through processing, Wade Bracy prior to taking -- leading the payments business was our VP of payment process improvement. We have promoted someone that was -- is an extremely strong individual [ Collin, ] who is now leading our process improvement management, and he shadowed, and we've done a lot around automation, and ensuring that as volumes come back, we don't need to keep adding bodies back that we can have a more efficient way. I really believe this pandemic, one good thing that's come out of it is it really made us focus and improved our core company so that we can take more revenues without having the dollar-for-dollar add back. So that's -- I just want to close on that. That's how we'll do that.

Okay. So this is from the same -- the next couple of questions are still from the same person. So the second question is or next question. Could you please provide an update on EBCs progress? When do you think you will be able to source FX directly from the central banks? And could you please give an indication of the benefits from that?

Yes. That's been something that's a career-long goal of mine buying was to -- of ours was to get direct central bank relationships. To do that, you have to be a bank and be in good standing, which we are, and that's happening. We are in the very, very final stages. Due to privacy or privacy considerations, I will just try to address it as best as I can. I can say we're in the very, very final stages. It does need to go to their Board of Directors for final approval. But we have -- the check list has all been checked. And so it is in that process. It's in that stage where it's in the final steps. And we are optimistic that, that will happen. Again, it is a major government, the one that I'm speaking of and reduces our sourcing cost for U.S. currency down to 0 basis points. And the effect of that, even in this current COVID, is roughly 10 basis points on a volume of roughly $1 billion, which means there's savings of $1 million in-sourcing costs that currently are being paid since both EBC and CXI have to source from their domestic banks. This central bank relationship does not affect CXI. So CXI will continue to deal with its main banks that it deals with. But EBC, who does have a much higher volume of U.S. needs because of the U.S.-Canadian -- you in Canada know how that is. And so it is a big savings. What's more exciting about this is it opens up. We are officially a distributor on behalf of the central government to banks that haven't gone through the process we went through to be approved to deal directly. And so they can come to us, and we can distribute on behalf -- mint notes in their crates in bulk to select banks that our company approves. We do -- the Board has a clear country risk assessment and rating process. And we are being very cautious and expanding in select areas like Switzerland, like Paris, initially, those are called FATF countries. We are receiving demand from low-risk non-FATF countries. But at this stage, we are very focused on enjoying the benefits of lowering sourcing costs and taking advantage of the opportunity of getting new revenues internationally. Hopefully, that answered that question.

I think it was pretty...

Was there a second part of it? Yes.

No. There is another -- there are 2 questions that I'll ask. I'll combine them. Given where the share price is today, do we consider share buybacks as an investment for the firm? And coincident with that, how do we think about our capital structure in the long term? For example, would we consider raising more debt?

So the first question, absolutely, the Board considers the best use of its capital and seeing the low price of the stock is obviously quite attractive. Our Board has -- also sees which some of you don't see is a lot of the opportunity that's presenting itself, such as these agent relationships, such as the opportunities in Canada, such as the international expansion. And we feel the best use of our capital is growing our business. We absolutely feel if there was an M&A opportunity, we feel that debt is the best way to handle any liquidity challenges. And so we are currently having good relationships with our lending institutions. We are continuing exploring how we can expand that to finance future growth. And then lastly, because the Canadian business has been taking advantage of the government subsidies allotted to businesses that have been affected so hard by the government's choice to leave the country completely locked down, it also begs a question of eligibility or it could even be just moral that you don't take government subsidy and buy back your stock. So because of all those reasons, at this time, we are not. But it is a review and consideration at every Board meeting because it is the capital and its structure is a consideration always for the Board and management. But Stephen, you may want to add to -- anything to that?

No, I mean, if the growth opportunity is there to justify taking on debt, and then we will. Our balance sheet is not leveraged. So there's plenty of opportunity to use it.

Yes. I agree. Okay. Thank you. Those are good questions.

Okay, I'll move on to -- yes, they are. So I'll move on to the next one. The question is about the value proposition of the CXI payment solution and our strategy for growing the business, which is the OPOP strategy you talked about. So do -- can you address that because the OPOP has been...

Yes, I think, I got it. In other words, why does it make us better? And again, the reason we've nicknamed it OPOP is because we are ready a provider to lots and lots of small to midsized and even some select big banks. Now the big banks will never use us for payments, but the small to medium-size could and one of the key factors why they currently don't use us for international payments is because we have a separate stand-alone wire payment system. By integrating to that bank's core, as I just said about how we're between Fiserv and Jack Henry, I think it's up to 50%, we will -- we can represent 50% of all the banks, either our already existing customers where we're already a vendor, we're already a provider or some of the banks that don't use us, we now can be there one provider for cash, check processing, wires, but still use one platform because of this integration. And that is a critical differentiator because unless you've gone through the cost, and the efforts of actually developing the code and integrating and testing that and bringing that straight-through process solution to market, you're behind us. And so that's why that is a top focus. And we feel selling to our existing customers, utilizing our new technology advantage is a low-hanging fruit that we can capitalize on. And Chris Johnson, who leads our U.S. sales team, he's been with the company since it started. He's been a very strong executive, and I have full faith in him and the team that he has under him, working with the rest of our group that we will execute on this strategic initiative for sure. Did that answer it, Stephen?

I think so. Yes. Thanks very much. So there's one last set of questions here, all from the same person. The payments business did $1.6 million in the last quarter. What are the main products being adopted by clients in payments? What kind of revenue target should investors be looking at per quarter and yearly to expect for the next year? And what kind of growth rate should we expect revenues to grow by? Also, this is a secondary question. What happened with the client that went bankrupt? And where does that situation stand from the last quarter? So the first part is just about the product -- the forward -- I'm sorry, the payments products.

Yes.

And we can't really talk about the...

Yes, so what products are being taken by the corporates at Exchange Bank of Canada, there's a mix between spot and forward. I'm happy to say that the bigger half is spot. Forwards are, especially U.S. Canadian, and that's, I think, by far, the largest forward transaction, especially with the strong Canadian dollar right now. And so -- but to answer your question, it's a mixture between spot and forward transactions. Most forward tenors are not out more than 4, 5 months. They're usually a 2-, 3-month-type forward. And then spot transactions are core wire transactions there. So I think that answered that question. The next one was, give us guidance, which we can't give guidance. And then the last one was the [ BCCE ] initiative, where...

The bankruptcy situation, yes.

Sorry, sorry. And so that is in the hands of the courts. It is -- there's a bankruptcy trustee. We've been dealing through it. This was the worst experience we've had. That business was a money service business. I want to make sure everybody knows that our future payments in all of that business is not with MSB. It is with corporates, well-established either manufacturers or service industry-type corporations that have international business, whereas that one was a money service business. I think we've charged off. Stephen can confirm. I think we've charged off the bulk of the transaction size. So it can only hopefully get better where we actually get some of our money back. The good news is there is some money there. And of course, it's got to be split up with other creditors, but we are one of those creditors, and we're hopeful that we will have a positive return, some return of our money there. And then I'll let you speak to the other question, Stephen, or clarify.

Which one? No, that was the final question. Yes, it was the final one.

Well, no, the one was, can you -- what metrics should they use to gauge us this year and look for next year? And what metric? I think...

No, it was what kind of growth rate and what kind of revenue target should -- which we can't really get into. We can't talk about what our targets are, unfortunately.

Yes. We, unfortunately, can't give any color around that. We are very focused on executing on our 3-year plan. We do budgets each year. As you heard on my call yesterday, we -- well, even though we lost money, we had planned on that because we knew our cost structure was at the level we know it needs to be at, to execute on our plan. We also knew that the lockdown wasn't going to bounce back as quick as we wished it would have. And however, you can assume that we are feeling that spring break and summer -- that with all the vaccinations and all of that, we do feel that revenues will rise. And so that's part of our plan. But what number -- trade and all of that, I can't expand.

No. But what we can say on the payment side is that we have continued to hire. So we've -- we had hired 3 new salespeople in the first quarter. We have hired 3 more in the second quarter. And so we hire them expecting them to generate revenue. So we won't get into specific metrics. But the -- we have the capacity to generate higher payments revenue than we hit in the first quarter.

Yes. And I confirm that not only did we hire 3 people in Canada, Chris Johnson also hired 3 new people in Florida and with the same effort. Again, there, these salespeople are selling our automated solution, first batch to our existing customers. We do other services to, but also with prospective new customers. So our investment continues to be to grow revenues in the payments business because our banknote business is expanding and will recover naturally. And we'll expand naturally. And so we are very focused on this diversified revenue stream. So we have a portfolio of revenue sources, consumer sources, international revenue sources, domestic and Canada revenue sources, payment sources, et cetera. So this is our overall strategic plan. Any other questions come in?

The last question, I think, is in the management information circulars, the last 2 years, indicated that we had internal EBITDA targets of $12.6 million. Is this still attainable once we move beyond COVID? And I mean, the simple answer is, yes, it is attainable. We don't know how fast, but it is attainable.

Absolutely. That's why I smiled because, yes, it is attainable. And we hope Trudeau and Biden get together and open the border. That will help it come much sooner. Any other questions?

No, that was it. That was the last question.

And then how about from the operator? [Operator Instructions] Or can I get confirmation that there are no other questions?

On the phone, we have no questions in queue.

Okay. So I wanted this -- just so before I leave, I wanted this wall to be in vision, but I guess the way that I was going to be too small. But I wanted you to see our mission and vision statement. So our vision here is to be the preferred financial service provider of foreign exchange solutions tailored to our client needs. So this is a very good summary of where we're going. And that's our goal. And I guess, Paul is trying to get it where the other. Our mission make foreign exchange simple -- sorry, I'll -- make foreign exchange simple and secure by both combining technology, our industry experience and highly personal service. That is our vision and mission. We're very focused on it. I thank all of you as our shareholders. I look forward to welcoming you prospective new shareholders and any of our customers that may be shareholders on this call. I thank you as well. And big thanks to the entire employees and the directors that have kept us together and focused going forward. So thanks again. If you have any questions after the call, please reach out to Bill, Stephen, me or anyone else you feel. Thank you.