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Goldmoney (TSX:XAU) posting strong results in tough market

Tony Zerucha

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Goldmoney Inc. (TSX:XAU), a precious metal financial service and technology company, today announced financial results for the first quarter ending June 30. All amounts are expressed in Canadian dollars unless otherwise noted.

Financial Highlights

  • Consolidated revenue of $119.8 million;
  • Gross profit of $4 million, a new quarterly record;
  • IFRS net income of $300,000;
  • Non-IFRS adjusted profit of $1.64 million;
  • Tangible common equity grew to $113.1 million from $111.5 million in Q4, with strong cash position consisting of $42 million in cash, $25.3 million in GICs, and $19.8 million in loans receivable;
  • Precious metal gross margin grew to 1.44 per cent from 1.32 per cent compared to Q4 2018, despite a global, industry-wide slowdown in the precious metal sector;
  • Cryptocurrency business revenue of $17 million, compared to $31 million in Q4 2018, driven by sector volumes slowdown and a nine per cent decrease in Bitcoin price quarter-over-quarter;
  • Currency loans totaling $19.8 million of balance sheet capital extended to users against their pledged precious metals earning interest rates ranging from 2.75 per cent to four per cent.
  • Corporate precious metal position of $24.9 million at June 30, reflecting the Goldmoney’s stated commitment to grow long-term precious metal ownership per share from surplus returns on capital; and
  • Client assets under custody stable at $1.8 billion as of June 30.

Expect stronger numbers as the year progresses, CEO Roy Sebag predicted.

“Fiscal Q1 is seasonally our weakest quarter and this year was no different than others. With that said, our operational and capital management, as well as strategic discipline yielded a gain in both non-IFRS adjusted profit and, more importantly, tangible common equity.”

Mr. Sebag said the results are especially encouraging given  the ongoing growth capex and operational losses associated with Goldmoney’s jewelry startup Menē Inc. Remove those numbers and other what he referred to as “extraordinary items” and the company sees nearly $4 million of gross profit and an additional $1.4 million of gain on sale of investments.

Hedging activities protected the nearly $24.9 million of metal on Goldmoney’s balance sheet and yielded a return, Mr. Sebag added. He said he is not at all concerned about the quarter-over-quarter or year-over-year revenue decline, as he attributes that to a normalization of the cryptocurrency business and seasonal cyclicality of Goldmoney’s precious metal business.”

Mr. Sebag mentioned fees related to the Menē spinoff, listings, BlockVault investments associated with legal and start-up costs, and a special project fee in Jersey associated with a regulatory undertaking should normalize back to acceptable levels in the coming quarters.

Menē Inc.’s largely generic sales growth is encouraging,Mr. Sebag concluded.

“This revenue was generated entirely through online direct-to-consumer sales to nearly 8,000 customers residing in 20 countries. Between Trustpilot and our internal product review system on mene.com, we have registered 1,300 positive reviews. The company has seen most of its top designs consistently sold out and revenues have been systematically setting new records with nearly $700,000 (unaudited) recorded in July 2018.”

Production capacity will be increased to help reduce a waiting list for $1 million worth of merchandise, Mr. Sebag said.

Tony Zerucha

Tony Zerucha is an alternative finance journalist with more than seven years experience in the space. The author of more than 1,000 articles, Tony was named LendIt's 2018 Journalist of the Year.

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