Currency Exchange International, Corp. (OTCPK:CURN) Q4 2023 Earnings Conference Call January 25, 2024 8:30 AM ET
Company Participants
Bill Mitoulas – Investor Relations Manager
Randolph Pinna – President & Chief Executive Officer
Katie Davis – Group Treasurer Interim Chief Financial Officer, Exchange Bank of Canada
Gerhard Barnard – Group Chief Financial Officer
Conference Call Participants
Robin Cornwell – Catalyst Research
Jim Byrne – Acumen Capital
Jason Senensky – Chapter Twelve Capital
Adam Wilk – Greystone Capital Management
Operator
Good morning, afternoon, ladies and gentlemen, and welcome to the Currency Exchange International 2023 Q4 and Fiscal Year End Financial Results Conference Call. At this time, please note that all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] Also note that the call is being recorded.
And I would now like to turn the conference over to Bill Mitoulas, Investor Relations Manager. Please go ahead.
Bill Mitoulas
Thank you, Sylvie. Good morning everyone. Welcome to the Currency Exchange International conference call to discuss the financial results for the fourth quarter and fiscal year end 2023. Thanks for joining us.
With us today are President and CEO, Randolph Pinna; Group Chief Financial Officer, Gerhard Barnard; and Group Treasurer and recently appointed interim CFO of Exchange Bank of Canada, Katie Davis.
Gerhard will provide us with an overview of CXI’s financial results and performance, followed by his latest perspective of the company’s operations. And then Randolph will then provide his commentary on CXI’s strategic initiatives, sales efforts, and business activities, after which we’ll open it up for your questions.
Today’s conference call is open to shareholders, prospective shareholders, members of the investment community, including the media. 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 the assumptions that we have made.
With that, I’ll turn the call over to Randolph to begin the meeting. Randolph, please go ahead.
Randolph Pinna
Thank you, Bill and good morning everybody, especially those out West getting up quite early to hear us. Gerhard and I are actually calling you from London, England, which is cloudy and about to rain as we here on some work for the business.
I would first want to introduce Katie Davis. Katie and I worked together for a good long while now, and she’s our Treasurer, and I’ll let her introduce herself, but I’m very happy to have her not only do her full-time job as Treasurer, she has accepted the role of Interim Chief Financial Officer for Exchange Bank of Canada, while we search for the permanent Chief Financial Officer going forward.
Over to you, Katie.
Katie Davis
Okay. Thank you, Randolph, for the introduction, and good morning. As Randolph has indicated, my name is Katie Davis. I have been with the group for almost six years, currently in the Treasurer role for the group, where I manage a multidisciplinary team overseeing FX risk management and balance sheet hedging, liquidity management, cash flow forecasting, and the FX trading function. These functions collectively manage the financial risks across the group and adherence to policy metrics and internal controls that mitigate exposure to risk.
I also oversee the group’s key banking relationships, where I prioritized nurturing our partnerships with our primary lenders and banking partners as well as the onboarding efforts of new banking partners across the group, including the application to the Bank of Canada for a limited purpose account to support EBC’s Canadian dollar [indiscernible] volume in addition to efforts to establish a custodial account for EBC that will lift one barrier to the expansion of the CIBC program by mitigating counterparty credit exposure for prospects.
I am very familiar with the unique business model of EBC and the bank notes and payments businesses across the Group. And as the Treasurer of the group and the Interim CFO for EBC, I’m uniquely positioned to execute on growth opportunities as my priorities align and offset with the group’s strategic initiatives and I roll up my sleeves to achieve results.
Thank you again for the introduction, and it’s my pleasure to support the bank as the Interim CFO. And I will now turn the call over to Gerhard.
Gerhard Barnard
Well, thank you, Katie, and thank you very much for everybody joining us on today’s call. I will present an overview of the results of the consolidated CXI Group for the fourth quarter ending October 31, 2023. These results are presented in US dollars and my overview will also incorporate the results of Exchange Bank of Canada.
The fourth quarter of 2023 demonstrated strong year-over-year growth as the Group continues to see increased demand for international travel and we return to more traditional seasonality in travel patterns. The Group continued to focus on executing against its strategic plan, in which significant investments are being made in our people, CXI and EBC combined our 409 full-time and part-time employees as at October 31, 2023, a growth from 344 for the prior year.
We also continue with our infrastructure. And during the year, we added an additional 22 airport agent locations. We now have 45 in total and 74 non-airport agent locations for a total of 235. Our total year-to-date transaction location is around 22,600.
Technology platforms remains a strategic focus, our NetSuite went live on May 1, 2023 and significantly enhanced the Group’s capability to further leverage its financial information. It was the Group’s first year in NetSuite and as with many major ERP implementations. This allowed us to really do a deep dive into our accounting structuring to benefit further reporting and management operational decision-making.
Kyriba, the new treasury management system has completed Phase 1 and Phase 2 is scheduled to be implemented in stages in 2024. Alessa’s AML compliance software is making good implementation progress across CXI and EBC. Our IT team is continuing to explore ways we can leverage the power of the cloud to enhance integration capabilities, improve scalability performance and resilience. All of these initiatives and investment supports the more efficient future growth of the Group.
However, these investments will impact in the short-term, the operating leverage of the group due to high setup consulting and reputation costs that are mostly not capitalized. The fourth quarter continued the successful transition to our new organizational structure that took effect at the beginning of the financial year, November 1, 2022, and I’m confident that we have the right team and systems to achieve our vision of being the preferred provider of foreign exchange solutions.
Now let’s look at the consolidated performance for the three months ended 31 October, 2023 compared to the previous three months ending October 31, 2022. Quarterly revenue of $22.8 million increased 15% from $19.8 million. There has been a continued progressive improvement in the demand for international travel between North America and Europe, the Caribbean and certain Central American destinations. Generally, South American and Asian currencies have shown steady demand compared to last year, while there was a notable increase related to certain exotic foreign currencies, which has continued to see an increase in volume.
The revenue increase reflects new customer growth in both Banknotes and payments product lines. Trade with foreign financial institutions by Exchange Bank of Canada declined due to a decline in the demand for U.S. volumes — U.S. dollar volumes when compared to last year. Compared to the three-month period ended July 31, 2023, revenue increased about 600% or 2%, as demand for foreign currency slightly decreased, which is consistent with the seasonality associated with the group’s operations.
The top five currencies by revenue where the U.S. dollar, euro, Canadian dollar, Mexican peso and British pound sterling. The nearly $3 million, or 15% quarter-over-quarter growth in the group’s revenue was primarily driven by the direct-to-consumer or retail market in the U.S. region, which grew by $2.5 million, or close to 50% compared to the same three-month period in 2022.
Wholesale Banknotes grew by 3% and payments grew by 4%. Revenue in the United States region increased by $4 million, or a total of 28%, of which wholesale banknotes grew by close to $1 million, or 12% and payments grew by $600,000, or 38%, and that’s the United States region.
Revenues in the Canadian region declined by $1.1 million, or 21% with wholesale banknotes since revenue decreasing by 19% and payments by about 24%. Corresponding with the group’s revenue growth, operating expenses increased by $2.6 million, or 18%, primarily attributable to an increase in salaries and benefits to support revenue growth through continued investment in people and infrastructure as well as some non-recurring items.
The group recorded net operating income of $5.8 million in the three-month period ended October 31, 2023, which is 8% higher than the same period in the prior year. Overall, the growth in revenue surpassed the increase in operating expenses as the group generated $2.3 million in net income, during the three-month period ended October 31, 2023. $21 million, or 4% lower than the same period last year.
The group recorded an income tax expense of $2.6 million in the fourth quarter in comparison to an income tax benefit of about $200,000 [ph] in the prior period, as the group recognized certain tax benefits related to EBC in the prior period, which reduced income tax expense compared to the current period.
The group continued its progression and long its three-year strategic plan in the fourth quarter that included continued growth in the group’s international payment product line. EBC initiated trades with 63 new corporate clients, representing an active trading client base of 761 during the same period.
In the United States, the group increased new client growth in the financial institution sector, with an addition of 126 new clients, representing 177 transacting locations.
Continued growth in the direct-to-consumer Banknotes market with the addition of 22 new non-airport locations and the addition of its latest company-owned branch at Orlando International Airport, which opened in August 2023. As long as well as adding the state of Ohio, making this the 40th state in which the Group operates its services through its online FX platform.
The Group’s capital base grew to $80 million with a return on capital employed, ROCE of about 19% and an EBITDA margin of 23%. Both were slightly lower than last year. On November 29, 2023, the Group announced its notice of intention to make a normal course issuer bid NCIB or share buyback and to purchase for cancellation, a maximum amount of 322,169 common shares, representing 5% of the company’s issued and outstanding common shares. CXI is well positioned to support its strategic initiatives that include both organic and inorganic acquisition of new clients in both the Banknotes and payments product lines.
Now let’s discuss the Group’s fourth quarter revenue and expenses in a bit more detail. The revenues in the Banknote product line, which includes direct-to-consumer as well as the wholesale Banknotes increased by 17% to $19.2 million. This growth is attributable to two main drivers. Firstly, consumer demand for foreign currencies have significantly improved as restrictions on international travel have substantially eased over the past year between August 2023 and October 2023, and approximately 220 million travelers passed through TSA checkpoints in the United States Airports. Approximately 104% of pre-pandemic levels. Now this is an 11% increase from the same time last year.
Secondly, the group was successful at increasing its market share, as indicated by the increase in new wholesale clients as developing its direct-to-consumer footprint through new locations, including agents, and its FX online platform. Relative to the three-month period ended July 31, 2023, Banknotes revenue decreased by $0.3 million or 2%, which coincides with the typical seasonality in the reduction in tourism in North America as demand for foreign currencies declined with the school years commencing.
Relative to the most comparable period prior to the pandemic, the three months ended October 31, 2019, Banknotes revenue has increased by 78% reflecting the impact of increased market penetration and expansion of international trade. Revenue in the payments product line increased by 4% to $3.6 million in the three months period, ended October 31, 2023, compared to the same period in 2022 due to the acquiring of new client relationships. The Group processed about 35,500 payment transactions, representing $3.2 billion in volume, an increase in transactions with stable volumes compared to the previous year.
Payments represented a 16% share of revenue in the current three months period, consistent with the same period in 2022. During this three months period ended October 31, 2023, operating expenses increased 18% compared to the same period last year. The ratio of total operating expenses to total revenue for the three-month period ended October 31, 2023, was 74% compared to 73% for the three-month period ended October 31, 2022.
Now postage and shipping remained flat despite a 17% revenue growth in Banknotes. The group continues to implement very successful client strategies to compensate for the higher shipping cost levied and are focused on containing these costs.
Losses and shortages increased mainly due to non-recurring losses associated with sale dated items, an allowance for doubtful accounts and have provisioned for settlement losses on exotic currencies and costs related to lost shipments.
The group has strengthened certain procedures within its control environment that aim at improving operational control effectiveness. Information technology expenses include non-capital expenditure on software and related services contracts that do not meet the capitalization criteria.
Now the majority of these increased costs during the period was associated with the group’s increased reliance on third-party technology service providers to deliver its products, including accounting and treasury management systems, in addition to the continuous improvement of its proprietary CFX software, the group’s proprietary system and other technology-related costs that the group incurs in a normal course of business.
Rent expense increased due to the expansion in branches in which the group operates retail business. The current period reflects two new locations that were opened during the year, in addition to certain increases resulting from rent agreements renewed at slightly higher prices.
Foreign exchange losses include the revaluation of outstanding foreign currency balances to market value, together with the net gain or loss from foreign currency forward and option contracts used to offset the revaluation of foreign currency exposures.
Interest expense declined as the average outstanding borrowings by the group for the three-month period ended October 31, 2023, was $6.9 million compared to $21.1 million for the three-month period ended October 31, 2022. Non-outstanding are higher interest rate on borrowings of 8.6% versus 5.2%.
The group recorded an income tax expense amount of $2.6 million in the three-month period ended October 31, 2023, in comparison with an income tax benefit of $0.2 million in the prior period. The benefit in the prior period was due to EBC’s recognition of certain tax benefits related to periods prior to the three-month period ended October 31, 2022, which reduced income tax expense at the end of the prior period.
Management did a reclassification from operating expenses to revenue of certain line items as part of the new chart of accounts following the NetSuite implementation in the audited financial statements. For more accurate quarterly analysis, this year end reclassification was not included in this quarterly analysis.
Let’s take a high-level look at October 31 consolidated performance for the year ended October 31 compared to the previous 12 months. The group generated a 21% increase in revenue to nearly $82 million compared to $67.5 million, with net operating income remaining consistent at $18.75 million.
Revenue in the payments product line increased by 15% to $14.3 million from $12.5 million, with the US region growing by 22% to $7.8 million and the Canadian region growing by 7% to $6.5 million. The group’s consolidated revenue in the banknote product line increased by 23% to $67.6 million from $55 million. This banknotes product line consists of direct-to-consumer in the US region and the group’s wholesale banknotes product line in both the US and Canada.
The US region’s DTC product line, direct-to-consumer product line, grew 28% to $27.5 million from $21.4 million, with also banknotes in the US region grew 31% to $29.3 million and had a slight decline in the Canadian region of 3% to $10.9 million from $11.3 million.
The group’s operating expenses increased 30% to $63.2 million from the prior years, $48.8 million, primarily due to increases in salaries and wages due to the volume growth and inflation as well as higher shipping costs earlier in the financial year prior to management’s price increase strategy.
Postage and shipping, and this is for the year, increased from the same period last year due to higher volumes of shipment associated with the banknotes product line. The balance is due primarily to the product mix between domestic and international banknotes, as the international banknote trade involves air freight and third-party processing fees.
The group recovered some of these costs from its customers. During the year, CXI applied certain price adjustments to account for the impact of inflation and anticipates the impact of these pricing strategies to be fully implemented in 2024. Foreign exchange gains are primarily attributable to the strengthening of a broad range of currencies against the US dollar throughout the year, whereas in the same period last year, the US dollar strengthened considerably against these currencies.
The group recorded an income tax expense of $4.3 million in comparison to an income tax expense of $2.4 million last year, an effective tax rate of nearly 30% in the current year versus 17% in last year. This variance is attributable to certain permanent differences related to stock options, certain R&D tax credit recognized in the United States, further tax paid in Canada for the purpose of offsetting certain guilty taxes in the United States.
The current year’s income tax expense is higher compared to prior year, since the prior year’s income tax expense was reduced by the application of previously unrecognized non-capital losses from periods prior to 2022 in Canada. The group’s net income decreased by 13% to $10.2 million from $11.8 million, primarily due to the inclusion of EBC’s net loss for the year of $1.7 million.
Let us now review the year’s balance sheet performance for the year ended 31st of October 2023. As mentioned in the disruption, the group’s capital base has grown to $80 million with a return on capital of roughly 19%. In addition to the growth in its credit facility with its primary lender to $40 million from $20 million, Working capital has grown to roughly $70 million from about $60.5 million. The group had available unused lines of credit of $35.5 million compared to $55.5 million as of October 31, 2022. Given the unpredictable nature of demand and a significant increase in volumes, the group held higher inventory balances of certain currencies to mitigate the risk of not being able to service our customers. The group supports EBC through its revolving line of credit and as at October 31, 2023, the intercompany loan balance payable was $10.6 million, an increase from $2.5 million. The intercompany loan is eliminated upon consolidation.
The combination of a solid capital base and debt capacity provides sufficient liquidity to the group to continue to meet its financial obligations and support its strategic initiatives that include organic and inorganic acquisition of new clients in both the bank notes and payment product lines. The group continues its focus on capital allocation and the normal course issuer bid NCIB or share buyback confirms both management and the Board’s belief that the underlying value of Currency Exchange International may not be reflected in the market price of its common shares from time-to-time. And at that, at appropriate times, repurchasing its shares through an NCIB or share buyback may present a good use of the group’s financial resources.
I would like to conclude my discussion reiterating the group’s continued focus on executing against its strategy, with a particular focus in making significant investments in our people, infrastructure and technology platforms to be in a position to create an even brighter future for all our stakeholders.
At this time, I would like to turn it over to Randolph Pinna, our CEO and President to provide his perspective.
Randolph Pinna
Thank you, Gerhard, for the detailed explanation. Good morning again, everybody. I’d like to start with CXI. If you noticed from Gerhard’s comments that the CXI unit is continuing to show significant growth in all three categories. First, the OPOP, what we — Nick named, is the nickname for our One Platform One Provider initiative where we are integrating with existing customers or potential new customers, core operating systems to tap into the existing flow of payments.
International payments, as you heard, was up 22% for the year. And we see even a bigger pipeline coming ahead. We have enhanced this with our new wire hub focus of being able to process not only foreign wires, but also domestic wires, allowing fee income and removing us from the seasonality of some of the international transactions.
The banknote business continues to be the core of our group, as you know. And CXI has both a consumer unit, as well as our wholesale unit. The direct-to-consumer unit has shown significant growth in all categories, which is stores that we own, our agent locations and our online store. We continue — we will continue to invest into new locations.
I’m proud to announce in about a month, March 1, we should be opening our newest store in Buckhead, Atlanta, our first location in the state of Atlanta. Our online store has expanded with — with additional licenses, the biggest being Ohio, which allowed us to take on additional agent locations and outlook in that state as well as to deliver to all homes or businesses in the state of Ohio.
This agent business remains a very top focus for the group for CXI especially because of its profile of a revenue share eliminating the need for rent and payroll since the local operator utilizing the CXI brand inventory and software benefits from the partnership that is created through an agent relationship. We will continue to see growth in this category for sure, all while we continue to add new states for online delivery and selectively expanding our retail locations that we own and operate.
The leading of the pack has always been the wholesale banknote unit, where we will continue to be adding on financial institutions across the United States. Our pipeline in this category is continuing to be full and with — combined with our focus on cost containment and reducing and controlling the shipping costs, we see that this business will continue to be a major contributor to the net revenue for net profit for the year of 2024 and beyond.
Now moving over to Exchange Bank of Canada, we have three primary focuses of Exchange Bank. I’ll first start with the international banknotes. The international banknote business continues to have great demand, although it has slowed down since the failure of US banks tightening the credit limit of the trading. So when in international banknote trading, it’s usually large $20 million, $30 million trades and the bank is very small, which these trade sizes can actually exceed the size of the entire bank. And therefore, there has been a tightening of credit, reducing our capable volume.
As Katie has pointed out, she is near the finish line of getting a trust relationship with a multibillion-dollar trust company that will solve this problem. And the three perspective banks that want to do more business have so far been very receptive to it, and we are in the final stages of agreement, allowing for these three-way trading relationship between the trust company, the Federal Reserve and Exchange Bank of Canada. We’re confident this will be solved very soon. And therefore, you will see returned growth of — from existing customers as well as the pipeline is very full as Exchange Bank of Canada is respected just as the country of Canada is respected as a solid banking solution globally.
The other focus at Exchange Bank is our own domestic market. While we do have some very priced unique exclusive relationships with some financial institutions, we are continuing to see our ability to prove to the other financial institutions, including a top five financial institution in Canada where they want to utilize us, primarily as first as a backup vendor to their current vendor, but we see opportunity because of our Federal Reserve relationship to become the primary US dollar supplier to some more large banks in Canada.
This domestic focus is not just restricted on banknotes. It moves into what we’ve now nicknamed the OPOP Canada, the one platform, one provider that has been very successful at CXI is now being implemented in Canada. We do have an existing financial institutions, been a long-standing customer using our software already for doing foreign cash and foreign checks. And it’s as simple as turning on the wire tab, turning on which users have what authorities to either prepare or prove or release in the dollar values. So it’s a quick turn on. But we will be tapping into an existing flow of international transactions.
Additionally, this bank likes our wire hub and allowing us to do both domestic Canadian dollar from Toronto to Vancouver type of payments, as well as from Toronto to London, England, for example.
So this new source of payments will continue to allow Exchange Bank of Canada to grow its business. We have very recently just signed an agreement with a software company that is a domestic processor that has automated invoicing and automated accounts receivable. And it’s a software service that allows for domestic transactions billing from small to medium-sized businesses to their — to the customers and the customer can click and pay that bill on a domestic transaction.
That customer base of this software company has quite a few clients that do need to do the same to their US for their European client base. They’ve teamed up with Exchange Bank of Canada. Again, through this integration allowing Exchange Bank and those customers now to connect utilizing this advanced software and Exchange Bank of Canada continues to process those payments.
We do continue to add selective clients, corporations directly opening accounts with Exchange Bank. So our traditional model of accepting multinational companies or companies that do business internationally to have accounts with exchange bank. Exchange Bank of Canada is Canada’s foreign exchange bank.
So looking ahead, I’m very pleased while we saw a lot of cost to the year, we saw the payroll grow. It is frustrating, especially when you have theft or items that goes bad and it’s a tricky situation. We’ve tightened the controls on both the shipping all reconciliations and all the processing and so very confident now with our NetSuite, our Kyriba or less all the automation that we spent a lot of money and time on being in place.
We’re fully staffed now. We’ve got a great team with the exception of the CFO, which we are looking to replace actively now with a seasoned CFO there in Toronto, very comfortable with Katie in her role. She knows the business very well. I think one of the best in the Group, as far as the actual intrinsic technology, infrastructure, accounts, everything at Exchange Bank already as the Treasurer. So she is very capable to hold the role of CFO until we get the permanent replacement.
With that exception, though, we have the right people, we have the right organizational structure, having a managing director at the Bank, Managing Director at CXI Wholesale and a Managing Director running the consumer unit. These are all experienced people in their roles.
I’m sitting at the top of the house, ensuring that we execute on our strategic plan, make sure we keep the right people in the right spots and exploring strategic opportunities such as this trip here to London.
We have the cash, we have the people. We have the systems to execute on any unique transaction, as well as just continuing to grow our core business. Our pipeline at both Exchange Bank of Canada and Currency Exchange International is quite full. In fact, our implementation team is busy converting and adding new customers every week. I’m very happy and because of all of that, I’m confident that we will have another strong year here in 2024.
So I thank you again for your time listening to Gerhard, Katie and I, and we open it up for any questions that you may have. Thank you.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] And your first question will be from Robin Cornwell at Catalyst Research. Please go ahead.
Robin Cornwell
Hi. Good morning. And thank you for such a comprehensive review. My question first seems to be focused here on the losses and shortages. You said some of it is non-recurring. Could you give us some numbers attached to it? And then just discuss the operations of procedures that you’re — you’ve been putting in place?
Randolph Pinna
Robin, thank you for that question and we — I can confirm the non-occurring stale-dated items accounted for roughly two-thirds of our losses and shortages.
And our operational procedures now that we’ve got NetSuite in place, we’ve got APIs connecting to the banks. We’ve made significant progress with Kariba [ph] downloading bank statements directly for us. We are able to keep a very close daily eye on all our banks. When you said two-thirds of the losses in charges were attributed to what again?
Robin Cornwell
Non-recurring.
Randolph Pinna
That was there. Yeah. Your question was what’s the dollar value of the non-recurring losses associated with stale-dated items – yeah — and that is roughly two-thirds of the losses and shortages for the year.
Robin Cornwell
Okay. And then those non-recurring were they — it sounds like there were write-offs from what you had said of issues from the past. Is that right?
Gerhard Barnard
That is correct. Yes.
Randolph Pinna
That is correct.
Robin Cornwell
Okay. And the losses for shipping, I know you addressed it that you’re putting controls in place. But do you see those controls limiting the losses, because you’ve got I guess, money traveling all over the place? And how you control the tracking of the money?
Gerhard Barnard
Yeah. So if I could, Robin, the reason we’re seeing already in this year is the fact that armored car are now — so there is a slight increase in the shipping cost.
Believe it or not, it’s not as much as you would think because we’re using local armored cars pickups and centralizing that way has eliminated the losses from — and we identified our high-volume locations, which included some of the new airports, which was a new operating setup for us. We had never been delivering FedEx packages to airports before. And that was part of the problem.
Of course, there was a core group within that organization that I believe has been all terminated. So we’ve just removed the whole process. And now we have set armored car shipments to all these high-volume locations. So — but the losses that were shipping related we’re overnight packages being stolen and not delivered or being delivered empty.
The box would show up, but it had nothing in there. And so we have tightened down our processes, the amount of shipping, the scheduling of shipping. We’ve worked with the financial institutions in some regards, figuring out the best way to ship to certain locations. So we have taken this very aggressively.
Seeing how well we did this year and then knowing we could have had another $1 million is frustrating to have fees like that. But we have tightened this down much better now. And I’m optimistic you won’t see the level of losses we’ve had in the past.
Robin Cornwell
Okay. Thank you. And the two-third of losses was for the year or for the quarter?
Randolph Pinna
That was for the year, Robin, but a lot of that occurred in the last quarter, as you saw with that quarterly – that fourth quarter reporting.
Robin Cornwell
Okay. Thank you. That was important because it was a large number and investors, I’m very curious about that. Now my follow-up is the Randolph, you indicated that you were fully staffed. You increased by about 65 employees, which was a pretty high growth rate in 2023. Is that obviously is going to slow quite a bit. Can you give us an idea of what you’re thinking for 2024?
Randolph Pinna
Correct. That’s with the exception of the bank CFO, but that’s a replacement, we had a bank CFO before, and so it’s not a new role. But there is not any significant hires, I would be wrong to say in the summer where it won’t be hiring two more people in the vault or something like that, but there’s no major heavy hitters anymore.
We’ve got the Howray [ph], we got the MDs in place. We have Treasurer, we have our Head of IT, everything is in place. So we do not anticipate a material growth in our headcount in the 24 year. That’s what I did want to make that comment in 2023, just because of the NetSuite and all of the work being done to get us at this new level, which will allow us to double our business or more, but at a much more efficient rate more of profit falling to the bottom line because of our structure and our systems in place. And so I wanted to make sure everyone knew on this call that we’ve put our foot down on this, and there is not — we don’t forecast a lot of new hiring.
Again, each unit as we add significant volume, we’ll need some people to do some analyst work or some processing work, but it will not be significant. And we will — we should be seeing a much more efficient ratio going forward.
Robin Cornwell
Great. Thank you very much, and that’s all for me.
Randolph Pinna
Thank you, Robin.
Operator
Our next question will be from Jim Byrne at Acumen Capital. Please go ahead.
Jim Byrne
Yes, thanks, guys. Just I guess a question on the spending on your software. I know we’ve talked about this in the past. Just remind us the — how much more do you have to do? When do you expect that kind of rolling off? And maybe give us a kind of a dollar amount of what you think will be coming off the books here through 2024?
Randolph Pinna
Thank you for that question, Jim. We have NetSuite budget and planning, which is nearly ready for its launch of Phase 1 of that. That’s about $150,000 to $200,000 that will be spent in this 2024 financial year. And then Katie and the treasury team has faced two, which is in stages that we’re going to roll out in Kyriba for the rest of this year and that is more or less the same as the NetSuite budget and planning. So I would say, in total, just from a treasury and accounting point of view, about $350,000 to $400,000
Then we’ve kicked off a project to move our SQL database into Snowflake. And Howray and his team has taken that upon themselves to go through this process with some external consultants. We don’t see a material dollar amount there. And Paul and his team is also working on doing the cloud migration and a lot of those services as well as being done in-house by — as Randolph mentioned, by our strengthened team of individuals. So I don’t see north of $500,000 to $700, 000 being spent on those four individual items this year
Jim Byrne
Which is less than the amount of…
Randolph Pinna
Than we spent in 2023 on getting NetSuite in Kyriba and Elissa [ph] up and running.
Gerhard Barnard
We do continue to use project managers. We’ve got two very capable people who assist us with all these projects, so we can keep track of them. We can have constant status update. So we really manage the turnaround and the implementation schedule as aggressively as needed.
Jim Byrne
Okay. That’s great. And then maybe Randolph, just give us an idea on the — the retail and on the agency expansion plans for 2024. Is it going to be more airport focused? Or you mentioned the store in Atlanta is a corporate store, I believe. Just give us an idea on some of those opportunities on the retail side.
Randolph Pinna
Again, with our own company stores, we’re very selective. We don’t like to pay high rent — but we do want to go into a high-volume location. So in Buckhead, Atlanta, that is the largest and busiest mall in the entire state of Atlanta. The previous operator, Travelex operated there 20 years. And we had a travel agency that operated across the street in the parking lot in travel agency building and a little strip mall next to the mall. They both did well. The travel agency during the pandemic went belly up as did the Travelex operator in the mall. We know those people well at Travelex because they are based here in the UK And we did get their data. And it shows that it is a very good mall. So we negotiated a good term with the facility because they do miss having that cash flowing in the mall.
And so that’s an example of it. So you will see one or two more of those this year Matt Schillo, who, as you may remember, was our Chief Operating of all, Chief Operating Officer of all businesses during the pandemic. He was in charge of all bank notes for the bank, the retail as well as the wholesale business. He’s now solely focused on the direct-to-consumer business. And so he is selecting additional locations. So you might see another location this year in Manhattan. But we — until we have a signed contract, we can’t really talk much about that.
The agents we do like I think Pittsburgh — no, sorry, Philadelphia, which is a very busy airport, just opened I believe, this year, as part of our existing agent relationship, adding more airport locations, and they are looking for additional. I do not have a number of how many more airports we will be adding on. We did try our own airport in our home state, our hometown of Orlando under a unique favorable deal and that has been working out okay. It is a different business as we have found out because it is an airport authority, but it is successful. We, as a group, will not be pursuing additional airport locations, Orlando was a unique opportunity, and it is a home base for America’s largest currency exchange. So we felt it was appropriate for us to have our brand in our home town at the airport. But you will see additional expansion such as with the duty-free, we are continuing to work with them to try to get their south border — the Mexico border locations going. And there’s additional opportunities that we have available to the agent business.
And the online store, again, as we add each new state, it allows for agents in that state as well as home delivery in that state and so we’ll continue to grow that. So, the Consumer division has huge potential and that’s without us getting really, really aggressive with it. We are focused now on expanding that business even more. Did that answer your question, Jim?
Jim Byrne
Yes. No, that’s great. Thanks for your time.
Randolph Pinna
Thank you.
Operator
Thank you. [Operator Instructions] Thank you. Next will be Jason Senensky at Chapter Twelve Capital. Please go ahead.
Jason Senensky
Hey guys. Good morning.
Randolph Pinna
Hey Jason.
Jason Senensky
Hey Randolph. Just on the Canada business, EBC, I guess I just wanted to make sure I’m understanding what’s going on there. So, obviously, pretty meaningful revenue declines on both the payment side and the bank note side. It sounds like you’re saying on the banknote side, that was like a FIVX [ph] issue related to a pull forward of US dollar demand earlier in the year on the banking crisis.
I may have missed it. I don’t think you explicitly maybe address what’s happening on the payment side. But I guess can you just talk about going forward for EBC, whether you feel like you have the right strategy in place on both the bank notes and the payment side to grow that business?
And also the CFO change that occurred, I mean was that related to performance at EBC or why did that happen?
Randolph Pinna
So, let me just get the HR topic off the table. It’s a sensitive topic, as you can imagine. And so therefore, we decided — Alan decided to go his own direction and he — previous to us, he was in the winery, he was the CFO of a publicly-traded winery company, and he’s done a good time and a good job and our Board and I thank him for all the work he did during the years he was with us. But it was a friendly separation, he chose to go in a different direction.
And we also see this as an opportunity to get an experienced Chief Financial Officer there in the role to assist the Managing Director and myself to continue to efficiently grow the business.
So, with that aside, the bigger question is why were on the annual basis, your revenue is down for both the international and the payments. And again, yes, I confirm that the tightening up of the credit after the failure of Signature Bank and the other bank in America that banks overseas had to tighten their credit line.
And literally, some went from doing activity to very little or none. It’s not that the relationship was bad. It was around addressing the credit concerns that their credit committees had. We have that mostly solved and we have a good pipeline of volume waiting for this trust account to be opened.
So, to your main question, which is how does it look going forward and do we have the right strategy? Yes, I do believe we do have the right strategy with getting credit comfortable, the foreign financial institutions are keen to do business with Exchange Bank of Canada and our relationship with the Fed, which we hope to enhance with the Bank of Canada relationship as we are seeing a higher demand for Pesos and Canadian dollars and I don’t know if it’s related to this dedollarization. However, we do see some banks that have specifically said, we hold literally US cash in our vault as a diversification and now they’re wanting to hold CAD5 million, CAD10 million small stuff, but it is a trend that other currencies are being sought after internationally, just as part of commerce as opposed to travel money.
The payment business, I believe, in the fourth quarter was up 7%. So there was a blip there that we did see some drop. We had lost one customer to a competitor, a foreign competitor. However, we are very confident with our OPOP Canada integrating into our existing bank customers or credit union customers that in doing international payments will really supercharge the future payment revenue growth, as well as we are still successfully adding four, five new corporations each week that are banking with Exchange Bank for all of their foreign exchange needs. So we do believe our domestic focus, both with our financial institutions combined with our select corporate clients coming on board will — between the international and the two areas of focus on the domestic side, Exchange Bank of Canada does have the right plan for ’24 in the years ahead. Does that answer your questions, Jason?
Jason Senensky
Yes, that’s helpful. I mean, just one kind of a follow-up, it’s kind of a little bit of a different track. But I think the numbers I saw like for the Canadian payment business, I think in the MD&A, it said it was down 20% in the fourth quarter and…
Randolph Pinna
I think that was for the year.
Jason Senensky
Okay.
Randolph Pinna
Sorry, I’ll let that numbers expert…
Gerhard Barnard
Jason, you’re correct. If you think of the fourth quarter, just quarter-over-quarter, we’re in that 20% range. As Randolph mentioned, that’s that one client. But if you think of year-over-year, so for the 12 months, the Canadian payment business is up 7%.
Jason Senensky
Okay.
Randolph Pinna
I said it backwards, sorry.
Jason Senensky
Okay. Can I just because I think part of what’s throwing me is this reclassification. I think I may have missed it in previous quarters. I mean, it looks like it happened previously, but it’s throwing my comparisons a little bit. I think you mentioned that you reclassified certain expense items to revenue due to the NetSuite implementation. Can you just elaborate on what happened there?
Gerhard Barnard
Yes. So what we did in the year-end audit in the last quarter is we made reclassifications on two items and moving them from cost of goods sold to their correct home or better home up in revenue. And that created a movement of about $1.3 million in the fourth quarter. And if you look at the comparatives, this happened at the end of the year where our NetSuite allowed us to basically just track shipping cost recoveries, mark-to-market revenue adjustment, revenue spread, we really got a better handle on those revenue recovery or cost or income items. And we were able to really better reflect our true cost of goods sold as well as our revenue adjustment. And that happened in the fourth quarter.
Jason Senensky
All right. Thanks very much for your time guys.
Randolph Pinna
Thanks, Jason.
Gerhard Barnard
Pleasure, Jason.
Operator
Next question will be from Adam Wilk at Greystone Capital Management. Please go ahead.
Adam Wilk
Hey, good morning. Can you guys hear me?
Randolph Pinna
Hey, Adam. Yes, we can.
Gerhard Barnard
Hello, Adam.
Adam Wilk
Hi. How are you?
Randolph Pinna
Good, Adam.
Adam Wilk
I’m surprised the trust account commentary and progress there has not been talked about a little bit more. Can you maybe just add some color there in terms of what that allows you to do from freeing up your own capital to maybe how that affects that pipeline or backlog I’ll even call it at this point that you’re kind of waiting on?
And then presumably, the idea would be to get some capital freed up from the balance sheet, so you can do things like repurchase stock, maybe even at an accelerated pace. So I kind of have that right? And maybe you can just provide some color? Thank you.
Randolph Pinna
Sure, sure. No offense, but no, you don’t have it right in the sense the trust account has nothing to do with CXI and its ability to buy stock. The trust account is for Exchange Bank of Canada so that it can provide the security required by the foreign financial institutions, because we require a prepayment. So if you want to get US$20 million in Mint, let’s say, you want all 50s Mint, which means fresh wrap in the bubble wrap right off the printer, which is what is in demand overseas, 50s and 100s. They need to prepay us $20 million.
When they look at the bank size, banks got $20 million, $30 million in total assets. So it — the credit units of those foreign financial institutions want a guarantee, a corporate guarantee. And so instead of having a standby letter of credit or something like that, which would be very expensive, we have teamed up with a trust company that stands in the middle of this transaction that has the balance sheet that allows for the money, the $20 million to come into that trust account similar to like a trust account and a law firm, they get a segregated account.
And but they hold it, and they make sure the Fed gets the money and that the money leaves the Fed going back to that bank. And so they are assisting us with completing the transaction, thereby eliminating the credit concern of the bank.
So as far as the capital that has nothing to do with capital because, again, we’re requiring a prepayment. So it’s their capital that the bank had always been using pre-pandemic — I mean, pre-failure of the banks in the U.S. They had just went on the reputation of our group as well as the reputation of being a Canadian bank. However, when the failures occur, these credit units got quite risk-averse and said, no, we need some guarantee. And so this is our solution to that.
So moving to your other topic, which is the purchase and freeing up of capital, the trust account has nothing to do it. We have got agreement that of certain future cash flows that we will continue to, or start now, because we’re just starting. But we plan on continuing to actively buy our stock up to the amounts that have been approved by the Board and the OSC. And so we are — we have the capital to do that. And so we’re not — they’re not related in any way. Did that provide you the clarity you needed?
Adam Wilk
Yes, I think the first part may be a misunderstanding on my part. Just to — sorry, clarify one more time, because ECB is a subsidiary of CXI, you don’t need to have a significant amount of excess cash on the balance sheet to spend up transactions via ECB at the…
Randolph Pinna
Yes, EBC. Exchange…
Adam Wilk
Level. Is that correct? EBC….
Randolph Pinna
Correct. Yes, EBC is a wholly-owned subsidiary. So it will not be buying CXI stock is it’s a subsidiary of
Adam Wilk
No, sorry. I’m sorry. May be you misunderstood. I understand there are separate entities. What I’m asking is for banks that we’re willing to transact with EBC? Did they not have to look at the CXI balance sheet and require a certain amount of excess cash, which is now going to be freed up on some level based on the trust account for EBC? Or is that not a correct understanding of it?
Randolph Pinna
They — no, they did not — we did not park CXI. I’ll use the name. CXI did not park extra cash at Exchange Bank to cover those trades. Of course, they probably looked at the group, but the — in the past, maybe that comfort, just by looking at the group provided them the comfort. Now though they wanted a solid — a $1 billion balance sheet because even CXI is small relative to the size of our customers. And so they wanted a $1 billion balance sheet backing their prepayment of transactions.
So the CXI cash, again, we have our capital in the bank and no CXI has not injected an additional $5 million or $10 million to help fatten up the bank. The bank is well-capitalized now. Its well way over the regulatory minimums. We’re not a deposit-taking institution. We don’t have consumer risk the consumer there.
And so the bank has plenty of capital to do its business. But since this international business is high dollar values. It requires some sort of guarantee and the trust account is the solution that is most economical and it actually flows the best utilizing the plan we have in place. And that’s nearly done.
We’ve got — there’s two agreements, one between us and the trust account that’s pretty much done. And then there’s a three-way between the bank, the customer bank, the Exchange Bank and the trust account and that three-way agreement is nearly done. And with that, we actually should see some new customers start in February and some, what you call, backed up business some pent-up demand returning to us and that will get us back on that growth plan that we’ve always had forecasted in our three-year strategic plan.
Randolph Pinna
Okay. Great. Yes. Maybe we can follow-up off-line about that.
Adam Wilk
That last part. But yes, just one quick follow-up. Can you provide any color just on maybe the incremental growth or revenues there when you get the trust account established?
Randolph Pinna
We don’t give guidance, but we could see ourselves clearly getting back to where our levels were and then some. We have two clients that have been clients that will do more once we get that fixed, and we have three already ready to go once we have it. And so there will be good growth. And we have a pipeline of even more. It’s just we have some that are waiting. And then we have a resumption of some of the volume that we used to enjoy that got tightened up.
Adam Wilk
Okay. Thank you. I appreciate it.
Randolph Pinna
Thank you. I know for anyone else on the call, I know we’re out of time. I apologize if we went long, but I appreciate everybody’s support. Was there any other one in the queue? I don’t — maybe do a quick two-minute one? Or is there a
Operator
No other questions at this time, sir.
Randolph Pinna
Perfect. Okay. So thank you again, everybody, for your time this morning. Appreciate it. And as always, if you want, you can reach out to Gerhard, Bill or I, if we’re able to answer your questions, we’ll be happy to.
Operator
Thank you, sir.
Randolph Pinna
Thanks for your time.
Gerhard Barnard
Thank you.
Operator
Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.
