Banxa Holdings Inc

XTSX:BNXA

Earnings Call Transcript 2024-Q2

[Holger Arians, executive]

Okay. Welcome, everyone. Thank you for joining Banxa's webinar today. My name is Holger Arians, I'm the Co-Founder, CEO and Chairman of Banxa. And I'm pleased to present our quarter 2 unaudited financial results to you today. The webinar today contains forward-looking statements. There's no guarantee for future performance and there are always risks involved. We are recording this webinar so that everyone can review this with more time or anyone who missed it today can still look into the webinar.

Presenting with me today, Zafer if you can control the slide, please. Presenting with me today are Zafer Qureshi, our shareholder, Executive Director and Head of Corporate Affairs; Patrick Maguire, our newly appointed Chief Financial Officer; and Tom Chalmers, our Chief Product Officer.

What we're talking about today is I'll start with a few opening remarks followed by a business update. And then Patrick is going to dive into our financial results. And Tom is going to talk about our focus for 2024 and beyond from a product point of view and Zafer is going to finish with how we are driving shareholder value this year. If you have any questions, like Zafer said, please add them into our chat window here and we can respond to those at the very end. Respond to those.

Thanks very much. Let's jump into a couple of remarks. I think everyone knows that we've had a very difficult time over the last 2 years as a whole industry, a bear market, which followed a very big hard cycle in 2021, 2022 and 2023 were tough markets. But what we've done, we've done a full turnaround under new leadership with Zafer coming on Board, and supporting me in the change that was very much needed for a long time. We've refreshed the Board. We've put our money your mouth is.

Together, we've invested more than $1 million in the recent capital raise, so we really showed that we're confident in this business. It just needed a proper change. We've also bought shares on the market and will continue to do so at those discounted prices that we're seeing currently. And we're very aligned on driving the shareholder value. We've also implemented new ways of working and operating. It's much more focus and discipline, substance and sustainability in the business.

And what that means is we have optimized our cost base a few months ago. The full effect will only be realized in January, and you'll see that in the results. We've also focused much more on driving the core performance of the product to have a really strong foundation to scale this business because we know that the market is going to bounce back very soon. Internally, we're driving a culture of high performance and accountability, and we've put in controls to be very, very disciplined about cost management and maximizing the scalability while keeping the costs where they are.

And what's really important, we've invested in the finance function. And it's been great to have Patrick and Sean has done a great job in getting those audits finally done. But we are now very, very proactive here. We've implemented systems and processes and to have that timely and transparent reporting for everyone. So we made great steps here. And then on the product and positioning front, we've really strengthened our mode, which much -- with many more licenses that we have acquired in the market and there's only more regulation coming in.

So Banxa is really a pioneer here and we've always played the long game. So you don't -- might not see the results immediately, but this underlying infrastructure that we're building is super important. And we are nearing profitability and have reduced our cost of capital, and we'll certainly speak more about that in the next part. Overall, I'm really proud that the business is in a much stronger position than it was ever before. It's demonstrated by the Q2 results.

For me, I always remember November 2021 when we had a total transaction volume of $250 million in that month than we were still loss making. If we had this, again, in one month's time, we would now make over a $5 million profit in that month. And that is because we've changed so many things internally. So we are strong believers in crypto. I personally have done it for 10 years in this business. We know that the markets are very cyclical. Very well set up for any sort of market that's going to come. You're going to see that in our numbers and how we've performed during the bear market, how we've diversified and how we keep winning. And overall, I'm just super excited about what lies ahead with this team and this business. And as the market is warming up, we really be able to capitalize on that.

Going to the next slide, please, Zafer. A couple of updates on the business. If we look at this chart here on the left, the total transaction volume over the last few years in the blue line, you see that FY '22, which ended in June '22, we processed over $1.4 billion total transaction volume.

That has come down significantly in FY '23, which was a bear market. There was a lot of hype and then there were many bad actors, obviously, and things just heated up too quickly. So the trading volumes have come down significantly. But then if you look at the half year of FY '24, so the December '23, which ends December '23, the half year. We have already made great progress by adding much more TTV again. And in fact, as of today, we're surpassing the entire FY '23 result in terms of our total transaction volume.

So we're definitely seeing a great trend and have worked very hard on turning things around. What then is much more important is that our net take rate has also almost doubled from back then, and that's why we're now able to make a really good margin. And you see that how we're trending with our gross profit. We are expecting a much better result for the full year FY '24.

And then on the right side, the chart which shows the adjusted EBITDA. We've made great progress over those years. We're squeezing out the burn and the adjusted EBITDA margin has significantly improved. So we're very proud of this progress, and we think that the revenue has diversified very much by looking into other segments and away from the centralized exchanges that we've been servicing mostly back in 2022, 2023. We've diversified into wallets, which are a big revenue driver these days. But there are many other segments in crypto like Web3 gaming and NFT all that is going to grow as well in parallel. And we've invested very much into the core performance of the product.

Tom is going to speak more about that. But we are able to process many more transactions in a very efficient manner. And we're getting more transactions through our pipeline. So I think that's been a really great development and then overall, our systems and processes are just better to control our costs and set this business up for the future success.

On the next slide, we're just seeing how diversified our volumes are across the globe. The U.S. and Europe, still our biggest market and we're just seeing a lot of volume from individual market. But if you look at the Netherlands, for example, itself a small market with a relatively small population is contributing 12% of the volume. And that is because we hold the licenses here locally. We have the local payment method, the alternative payment methods, which gives us access to every user that is doing e-commerce through a bank transfer.

So we're really localizing the experience you can only do that if you're on the ground for a long time. It took us a year to get the license. And that's really the important piece why we are. It sometimes looks like we're moving slow. But once we are there, we're there forever, and we're able to make great volumes in that market and really become a leader. And through our partner integrations, today, we have around 300 compared to 2021, 2022 when we had less than 100, we're able to reach hundreds of millions of users. And I think that it's just setting ourselves up for the Next Bull Run, we're able to capitalize on that.

Next slide, please, Zafer. We've also been able to add new partners, very large crypto platforms like Trust Wallet or SUI or Backpack exchange. Trust Wallet is the biggest wallet in the market. SUI is one of the top 10 blockchains and Backpack has just launched. It's a large exchange on Solana. We continue adding more partners, extending our reach. And these partners really rely on our enterprise-grade on-ramp technology and the infrastructure we're providing to them.

And again, Tom is going to speak much more about how this relationship with these partners is going to evolve over time. However, we are going much deeper into the infrastructure play and how we can collaborate much more with these partners and make ourselves more indispensable and exclusive. And all that, again, is backed by our licenses. So if we have the licenses, it's a very scalable business model for our partners to get those licenses themselves, the payments, the bank accounts, the localized experience that's really hard it's not scalable.

That's why Banxa is doing that over and over again. And I think I hope everyone's seen the recent announcement about our license on the crypto asset business registration with The Financial Conduct Authority in the U.K. that's only a 7% approval rights for crypto businesses. Banxa was the first one this year to get it and we've worked really hard on it, and we're really excited about what that can do for us and our partners in the future.

So we continue down that track. I'm very excited about what we've achieved in this turnaround. I'd like to thank the entire team for helping me doing that, especially Zafer, who really came to the rescue and did a lot of heavy lifting with me internally and externally so that we could get that much needed change happening. And hopefully, our shareholders and investors can see this trend that we intend to continue.

With that, I'd love to hand over to Patrick, our CFO, to take a deeper look at our financials.

[Patrick Maguire, executive]

Good morning. Sorry, good evening from -- good morning here, and good evening to everybody else. Just very excited to be joining Banxa, at this time in their journey. As Holger said, it's been from a finance perspective, I suppose, the finance function has gone through quite a year of audits and kind of, I suppose, the team that's gone through that is kind of seasoned 2 audits in a year. They came in pretty fresh, and I'd like to complement the team and Sean on the leadership to get the business through the year that they've had and really get the business back on track towards kind of transparent and timely reporting going forward.

This is, I suppose, the first quarter where we're committing to be back on track. Piling our reports on time, and we look to be making sure that we don't go back to those challenges we had last year going forward. Personal, I suppose this business has been very supportive of the way I convinced the business. So obviously, we've spent a lot of time making sure that we made sure all of the historic stuff has been right. And on my side now going forward look to be taking a lot more kind of leadership going forward in the business and supporting the business around the finance function, catching up and providing information.

So what I'll do is jump into the slides here. What we've talked about first is the TTV growth. The business, as Holger has mentioned, spent a lot of time focused on core profitability, making sure that basically the existing product and the existing partner network is actually maximized, okay? On the revenue, what we've seen here is a fairly significant shift year-on-year with the principal versus agency. So that was a big part of the adjustments that went through in the audit and the business is focused on actually providing more principal-based transactions, which for our customer provides a better experience and operationally gives us better margins going forward.

Okay. Gross profit effectively is up 39%. And this is a big testament to the way the business operates. TTV is basically a daily report that goes around the business and the product and operation teams are constantly focused on maximizing that number. And this is the result of actually flowing through here. The net -- sorry, I'll move on to the operating expenses. I'll just talk a little bit about FY '20, it's like '23. So that quarter was a challenging quarter for the business. So it's actually an artificially low number.

The business has come back off that, invested very prudently in kind of increasing the team were required to support the TTV growth as well as actually dealing with the compliance and other issues that the business had to face at the time. What you'll see again, the operating loss going from quarter 2 last year to quarter 3, significant efforts around to TTV and the gross margin percentage as well as actually maintaining the overheads has seen a great flow-through rate of actually incremental gross profit. So the business is taking about 2/3 of the gross profit through to its operating results at this point.

Okay. On the net loss, effectively, the business has done a lot of work on the refinancing. So what you see there is basically taking down the cost of capital. The refinancing of the lien note has come through and contributed positively. We're seeing the first quarter now where these benefits are actually coming through because this was done in the partially coming through this quarter. But going forward, we should see more benefits coming through on the financing expenses.

Adjusted EBITDA, what we want to really kind of reflect here is the business has done kind of in the prior year, quite a few transactions effectively that were kind of capital in that nature. And we wanted to find -- you'll see the definition in the MD&A. Our adjusted EBITDA going forward to really focus in on operational metrics and see how the business gross profit is flowing through to kind of profit and cash, okay?

So I'll move on to the next slide. One of the things to business, I suppose when you look at the balance sheet going forward, there's a kind of, I call it cash conversion cycle going through the business. And when you have to kind of look at the cash and the trade receivables balances, really get a reflection on how the business is managing the cash. The timing around the Q2 being December and holidays across the world, led to a fairly significant trade receivable at the end of the December year.

All of that trade receivable has been received in January and brought back into a cash conversion cycle of the business. When you look at it quarter-on-quarter, effectively, the business is actually improved the cash conversion cycle by about $3 million, and that's a reflection of the financing activity that happened in the quarter.

We move on to next slide. And we finished with this because I suppose one of the other things that really in terms of where the erosion of the operating profit to net loss occurs is really on the FX this quarter. Obviously, the top part is really around the operations of the business. So the realized FX has increased this quarter. It's something the business is going to be looking very closely going forward to manage that. That's more of an operational risk. What we do want to highlight is that the unrealized ForEx is primarily driven by balance sheet and intercompany loans. But again, a focus for the business going forward is to continue to look at this metric and how we can optimize that.

Okay. So I'll pass back over to Tom. Tom will take us through the product -- core product performance and how the business is going to continue to grow.

[Tom Chalmers, executive]

Thank you, Patrick, and good evening, everyone. Appreciate you joining the call. So I wanted to take you through a couple of things today, starting with what we've been working on over the previous 3 months and the sort of performance we've been seeing and just how we're thinking about that. And so really, we spent the last 18 months very aggressively targeting centralized exchanges and Web3 wallets and really prioritizing getting those connections into those major platforms across the crypto space.

And we have been successful there. So if you take a look at the top 10 centralized exchange list, the top 10 wallet list, you'll see it is mattered with partners of Banxa, which is great. And as Holger mentioned before, we have access to hundreds of millions of users via these partners. So that's one frame of reference, we're always thinking in that Banxa's 1, 2, 3 clicks away on any given day from hundreds of millions of years which is great.

One of the challenges is we're not alone there. And so by our estimates, we're probably capturing about 20% to 21% of the share of wallet from our major wallet partners in particular which gives us a 5x opportunity beyond that, which we're doing our best to capture. So we really dramatically turned attention to capturing that over temporarily trying to engage with more of the market. We certainly still have very strong growth ambitions, but that 80% is low-hanging fruit for us. And so what we've been doing and focusing on to try and capture that is really 3 things. Starting with competitive pricing. And really, what that means is in most of these wallet platforms is us, but there's also 3, maybe 4 or 5 other providers being quoted 20 user wants to purchase crypto and one of the major and most common ways that those providers are ranked and stacked in the competitor is, in fact, by the pricing.

So that's been a challenge for us as some of our competitors do have very large watchers and treasuries they can subsidize that cost and out rank us there. What we've created is just a very, very sophisticated pricing engine, which can target right down to the order level using intelligence we have on hand, whether it's a new user or a returning user and a range of other things and then really optimize itself to most successfully target getting a user across into us. And we're continuing to do work there, but we're already seeing a really, really positive result from what we've done so far. The second thing there is really reducing that onboarding friction that's by far and away, one of the most common things we hear from users and from our partners that the hardest part of buying and selling crypto is just that first step of onboarding through KYC.

So every click we can reduce out of that. And every second, we can shave off the time it takes someone to get in is a positive for us, and there's a lot we can do there. As Holger mentioned, we are integrated globally. And there's a lot of complexity to servicing customers in different regions. So we've spent a lot of time running through the rules engine and looking where we can most optimized. We've had some great results.

And thirdly is really that core offering, so the payment when the users get to the screen, what proportion of those users do we successfully get through the payment experience just as many, many things that can go right and go wrong in the payment process, particularly inside the card networks. So we've been applying a lot of data science to look at where users do fall off from that payment experience and where potentially orders aren't approved by issuers, what we need to do to increase that number and we have recently implemented a major technology platform into our stack that enables us to really effectively reroute try fallbacks and play a lot of very advanced decisioning to how we attempt to process orders, and we've seen some great results already.

So if we jump to the next slide, what I wanted to show you here was, how is this going for us. And so what we have here is really comparing Banxa to the market. And the chart we look at very often to see how we outperforming or underperforming how the market is doing. And so this green line at the top is Banxa and the blue line is centralized exchanges that deal in fiat. And so we implemented the first batch of many of these changes in early January.

And since then, what we've seen is despite the Bitcoin price going up, trading volumes have been coming down through most of January and they are starting to pick up now. But in that time, Banxa has substantially grew its TTV and in fact, it was the longest stretch we have on record of market outperformance. So we're very, very happy about that. And we do expect that when the market does follow the pricing that we should see some further growth there and we have more in the works. So very excited to continue down this front of core performance and capturing more share of that wallet. And we're very confident over the coming months, we'll be doing even better.

Now if we jump to the next slide, what I do want to talk to too is what's beyond this? And where do we see not just 5x, but 10x, 20x,100x. And that's this concept we've been talking about for a little time called embedded crypto. And so we've consistently heard over the last 18 months a common need in the market and a key one. And really, that's coming into play with another force that we're seeing happening, which is growing with the different businesses that do want to embed crypto into their services and do want to offer, buy or sell crypto without doing the technology themselves. And what that overwhelming need for is people want to be able to offer that service inside their own product.

But in a way, it gives them significantly more flexibility and control over that user journey and the price economics of how they manage that then is on offer today. There simply is no product in the market that is doing this for them. So we're tremendously excited by this. And we're not hearing this from 1 or 2 players. We're hearing this consistently all across the market, and we are excited getting into the second half of this year to really move in this direction in a very aggressive way and aim to get a first movers advantage here.

Now if we can just come to the next slide, just as an example of who is asking us for this and who's really pushing and excited to get something into the market. It's an incredible cross-section of players, not just who we're dealing with today. So just as an example, we're engaging on this front with the world's largest Bitcoin wallet, the most reputable stable clean provider in the market. The highest value Web3 company and one of Europe's largest payment process. So this is a common need amongst the cross section of the market. So we are excited, and we're actively doing a lot of discovery in this space to make sure that we can attack it in the best possible way in the most scalable way.

And if we jump to the next slide, just to give a sense of why we think this is an enormous market space. We've seen this sort of dynamic play out before in a few ways. And so traditionally, where there's been a need for businesses to embed a highly complex but high demand product without having to do the technology themselves. What we've seen time and again is platform step into the space and take an underlying service offering or a bundle of them and really provide it in the best developer experience way possible for a range of different players to integrate that service.

So Twilio is a fantastic example who enabled really high-quality communications for a range of technology companies that obviously fundamentally needed communications layered through their products without doing it themselves. Probably a space even more relevant that we've seen is the play out of embedded finance with examples like Uber and other companies that fundamentally needed high-quality payment and finance experiences inside their products, but themselves didn't want to create those products and develop that technology.

We see crypto is exactly the same. It's such a general purpose technology that really can do everything the finance can do. We can do a lot more in deals in concepts like identity authentication and security. These are things that, over time, of course, many companies are going to want to embed into their product and tap the capabilities of. But again, we fundamentally don't believe companies and the vast majority of them are going to want to develop that technology themselves.

So just as a mental model, this is how we're looking at it, and we see a range of verticals and a growing range of verticals over time that are going to want to use a product in the market that enables them to fundamentally do crypto in a way they control. So we're very excited to make a move here and hopefully give some strong updates in the coming quarters about how we're progressing.

With that, I will hand over to Zafer.

[Zafer Qureshi, executive]

Great. Thank you, Tom. Good afternoon, everyone. Really glad to be speaking here with you guys today. So I just wanted to dive in a little bit of how we're essentially driving shareholder value. And before kind of getting into the meat of it, I just wanted to make a comment on how -- since joining the Board, the business was generally heading in a downward trajectory. But I think it was very much -- what the value that I saw was in the team and what we've been able to accomplish to the bear market with volumes coming down and really bringing the volume back up.

I think the team is phenomenal that we've got here and heading into the future. They just needed really to be unburdened. And that was the critical thing that I think in partnership with Holger, what we've been able to accomplish and just set the right focus and just enable them to succeed and deliver on the potential that they have. So it's -- over the last 5 months, there's been a lot of heavy lifting in kind of getting the business to a spot where we're finally realizing the fruits of our efforts with the strong Q2 results that we've been able to share with you today.

So diving into a little bit more specific of what we've been doing internally to drive shareholder value. And that's really been enhancing the way we operate overall when it comes to our culture, our systems and processes. And that's really to set us up so that we are performing optimally. And -- we know that there's a bull market on the horizon so that when that is upon us, we are ready to scale efficiently.

So some of the things that we're doing is really what kind of Holger touched on is putting controls around our expenses so that overhead stays generally flat going forward and that will allow us to really trickle down or flow have the gross profit flow through to the bottom line as we capture more and more of the volume moving forward that comes down to greater discipline across the organization in terms of how we look at cost and better oversight.

And the next thing is really driving that culture of accountability. So a lot of the key projects, the key areas of focus within the business, really creating greater visibility across organizations so that the individual is leading those areas, they know the value that they bring and that they need to kind of deliver on that, which is critical.

And I think we're seeing the fruits of that as kind of what Tom has alluded to, the great work that the product team, the operations team, and generally kind of across the board with our outperformance in the market. And then really just generally how are we looking at cost across the business. Making sure that we're rationalizing every single line item essentially. And any new spend that we are looking to make that there is a strong business case to support that spend.

And then finally, as the business gets in a stronger and healthier financial position, we are having a -- or improved risk profile. So what that allows us to do is essentially drive our cost of capital down. And as you guys have probably seen, we've got some higher cost debt facilities to support our transaction volume. But essentially, over the next weeks and months, we're going to continue to have that come down below 20% and further.

So super excited about all that. So just diving into our share price, which I know is always kind of the #1 thing that our shareholders and investors are looking at. And I just wanted to highlight a little bit on kind of where Banxa sits amongst its public market comps. And based on, I guess, the comparison to private markets, I think it's clear the private markets, they're a bit opaque, but generally, we're very heavily discounted across the Board.

So if you kind of just look in this chart, some of the traditional big fintech and payment players, they all -- based on the gross profit metric, they're trading at a multiple generally in excess of 6% or 7% and then our comparables a handful of -- or very small select view who have non-minor crypto pure plays that are out there. If you look at them, they're trading even higher, generally kind of 10% plus on a gross profit multiple.

And where does Banxa sit in kind of all of this. We're deeply, deeply discounted. And that's been very much driven by, obviously, the challenges that we've gone through over the last couple of years with the lack of trading or market cap coming down, which tends to have the name kind of drop off the radar of many investors. And I think there's great opportunity in the very short term with all the hard work that we've been doing internally and now starting to see the results of it, that there is an opportunity for us to rerate that truly believe in that.

And I think as more and more investors kind of become aware of our story, I think -- and then with the crypto sentiment improving overall, we should be seeing generally sustained upward movement in our share price. So super, super excited about all that. So I guess one of the concerns with being a small cap company is that you tend to not get very many eyeballs. And it's -- how do you kind of unlock that or solve for that issue? And really, with all the things that we've been doing, I think it's -- it's now time to really just get ourselves back out there and showcase our story, our journey.

Our future is super, super bright. So some of the things that we're really doing is just socializing to the sell-side brokers out there, getting ourselves back on their radar so that when they -- when their clients come to them and they're asking for, hey, what's the kind of the name within the crypto space that I can kind of get some exposure, Banxa as kind of one of the names that they can kind of showcase to their clients. And then with improving results, you tend to get greater interest from analysts that are looking to dive into this space or find some names that they can kind of speak to or start to cover.

And we feel strongly that we can generate some organic sell-side research. And then more importantly, I think it's critical that we just get out there, talk to the right investors, be very focused in our outreach to the buy side and showcase to them that the team that we have here, the leadership that we've proven ourselves. We've got the track record, and we're continuing to trend positively and just generally deliver results and be very substantive -- substance driven moving forward.

As we shared a couple of weeks ago, we've engaged a market maker to just generally help with our liquidity of our share price and provide a bit more balance in our market of our shares. And one thing that we've been constantly on the lookout for is adding a greater strength to our Board. And we'll -- as we kind of come across candidates that kind of are aligned to our journey. We'll kind of have those discussions to look to kind of strengthen the bench strength there and essentially lift our overall profile.

And the other thing is really just more frequent, more proactive and more transparent communication to the market, I think is super critical. And we've been really trying to put as much communication out there that's of substance so that what you guys are essentially seeing coming out of the business where we've got substance or results to kind of back that up. I think that's really critical to not only provide that level of confidence in the business, but obviously, the credibility in our numbers is so critical.

And just lastly, I know that it's very frustrating with our share price that it's generally been kind of subdued over the last few months. But it's important to remember that the share price is not the business. Generally, it does correlate with the results of the business, but it's not always the case. And I firmly believe that's what's happening with our stock right now. Our business is fundamentally in a much better shape than I believe the share price to flex. And as we move forward, continue to deliver strong results, I strongly feel that the share price will generally start to kind of correlate and reflect those results over time. So really super excited about what we've got going on in 2024. And I think there's something to be more and more positive results that I'm really excited to share moving forward.

So with that, I guess, we can start to get into questions.

[Holger Arians, executive]

Yes. Yes. Thanks very much, everyone. Patrick, Tom and Zafer for presenting. We have a number of questions already. But if there are any other questions, please send them here in the chat. I'll start reading out. Kevin is asking Banxa has spoken about achieving profitability early 2024, seems like they have missed those expectations. Can someone speak about the company's current path to profitability.

Maybe I'll start briefly and Zafer if you want to add anything that will be good as well. So yes, we've been on a journey of turning the ship around, which I believe was everything we've done and that you've seen including investing our own money really has helped bringing us on track. We're much more conscious of the costs and have put processes and controls around that.

Overall, the market has been developing in the right direction, but we also believe it's very institution driven at the moment with the ETF approvals. But we are taking advantage of that and Banxa is getting to this profitability point. So we're very confident that we are hitting those results, especially as the market continues to warm-up. We're able to capitalize on that but the business itself was improving the core performance, keeping our costs under control, will get us there.

So for the first time, I would say, in the last few years, we're not dependent on the market, but the market is in our favor as well. So a few things coming together but profitability is in our hands, and that's what we've been working on as a priority. Zafer are there any other comments chime in, please.

[Zafer Qureshi, executive]

Yes, I think out of the optimization of our cost base that we've been doing over the last 10 or 5 years really started -- kick started that in late October. And we've only seen partial effects of that flow through in the Q2 quarter. And this quarter, we expect to see the full effects of that get realized and I'm really keen, I think this quarter, very optimistic that we will be profitable. In fact, any one of these months where we're just actually closing out our January month and from positively January onwards, we expect to be sustainably profitable moving forward. So yes, I think it's a great milestone, I think, overall for the business once we hit that and just create a greater positive results from there on.

[Holger Arians, executive]

Thank you, Zafer. And Kevin is asking, can anyone discuss the progress in the U.S. market and time lines to a full launch?

So we are fully launched today in the U.S. We are working with a partner and that gives us access to the entire U.S. all states. And we've been on the ground for a number of years now. So the U.S. is our biggest market. We have, over the years, acquired our own NPLs. Just to be in control of our own destiny to have that asset because regulation is only going to come in more and more, especially in the U.S., and that's very welcome.

And we want to be in control of our own destiny with the product that we're offering with the infrastructure that we own and can provide them into our partners. So that's been a big process. We're still waiting for a number of NPLs to come through. But as of today, we're able to operate in 45 states. We'll always have that third-party provider to operate in all states. But making the U.S. life is very heavy lifting. We expect it to happen this year. But it's not going to immediately change anything on the volumes that we're already doing there. Going to allow us to have this asset in-house add to our infrastructure, make things much more efficient and offer a wider range of products. So overall, it's all within our time line expected for this year.

Kevin is asking what are some short-term goals for Banxa over the next couple of months?

We're coming back to the whole profitability aspect. That's just not just a point in time, it's constant. So we're working on that on different fronts. I think that's really important at this stage our key priority. The share price is going to be a result of that, hopefully, but also, we're obviously doing a number of things to get the share price up, as Zafer has alluded to.

And then we just want to continue winning in the market with investing in our product and getting that in a way that everyone is going to use it out then, we continue getting to that next level of the embedded crypto strategy. So there are many things we're working on, but I think our focus is right and hopefully, we've shown that with the progress over the last 6 months.

Next question is from Matt. Question regarding the loan debt that's accruing at 25-plus percent interest rate, 4 or 5 separate borrowings. Curious if they're always fully drawn down and accruing interest, or if they are only utilizing periods of higher transaction volumes, such as long weekends, Christmas, bank closures and therefore, only bring interest while being used.

Yes. Great question. Zafer are you happy to take this one?

[Zafer Qureshi, executive]

Yes, yes, definitely. So generally, I guess, a lot of these facilities, they've been short term and have been fully drawn down. But the next phase of our kind of debt stack to fund our transaction volume. We are aiming to bring the cost or the rate down below 20% because I think it's commensurate of our risk profile moving forward. And secondly, have it be more scalable. So more like a revolver so that as our volumes can kind of move overnight, we've got those facilities in place to ensure that we can capture that volume and not be essentially capped because of the lack of liquidity availability from our side.

So that's kind of what we're working towards some of the facilities that we have, they are coming due, but we have some of them getting refinanced at lower rates and then others that will be essentially refinanced with kind of new -- I guess, newer facilities and newer lenders coming in refinancing those?

[Holger Arians, executive]

Thank you, Zafer. Then we have a question from Charles. Actually 2 questions. The first one is considering the increased crypto amount or crypto volume in quarter 2. Do you think quarter 2 TTV is what you were expecting over quarter 1.

I'll respond to that right away. So we were very conscious of how the market has pushed up the Bitcoin price. The volumes have grown as well, but not as much as a Bitcoin price. We believe it's much more institution driven with the ETFs coming in this year.

And much more confidence around the space from larger investors. We're obviously very retail focused with our product. What's also important to know there are many moving parts when we look at transaction volume. The regulation is coming in more and more, the U.S. sorry, the United Kingdom has implemented their regulation where the market is not accessible anymore without this registration.

So since this year, we have our own registration with the FDA, which means we can serve this market again before it was a very big market. But obviously, when restrictions come in, volumes are going to change, but given we have been working in the background for a long time to being able to operate in our key markets and getting those licenses and critical infrastructure on the ground. We are able to leverage this market, which is heating up. So I think the Q2 TTV is in line with our expectations. And Q3 is looking very good as well in line with how the market is moving as well.

Charles, second question is Banxa has loans coming due this year. How would it affect Banxa?

Zafer you've spoken to the loans, anything to answer on this one.

[Zafer Qureshi, executive]

No, I think it's just general those -- a lot of the debt that you're seeing on our balance sheet, it's purely for driving our volumes and yes, they're kind of critical, but the key thing is that we have more flexible loans that were not fully drawn down on when we don't need them because that's just carrying interest cost that we don't need to carry if the volume is not there. So that's kind of the critical objective over the next couple of months that we're hoping to achieve with our debt stack.

[Holger Arians, executive]

Yes, absolutely. Yes. Thank you. And then we have Kevin. Bitcoin ETFs have seen a fee war developed earlier this year, most banks are remaining competitive with fees in its area of the cryptos here.

A couple of things. One, Tom has presented the pricing engine, which we've optimized and heavily invested in so that we can capture more of the market. That is evolving very, very well for us. And also we're able to influence the fees depending on which payment methods we have where we are the dominant player in the market, which competitors we are up against. So we have a lot of real-time data that we're looking at every day to adjust our pricing. So as we get the most out for the business as possible, but that we're also very competitive. So the fee war there are certainly -- there is certainly competition, but we're able to play that out very smart with our technology and all the data we're looking at to be able to compare.

And then really leverage the differentiation that we bring to our partners so that we can really outpace the competition.

Then we have a question from anonymous. Can you kindly talk about your international strategy?

We are in the international business. Our core focus is really on the major markets, which is the U.S., Canada, Europe, Australia, we've also -- we're on the ground in Brazil, Turkey, for example.

We continue heavily investing in our core markets as of -- for this year. So that's where we see the most adoption. That's where we see the most volumes and where we have so much more potential than we already have today. That's just going to be the focus for now. And given we are offering crypto purchases through credit cards, Apple Pay, Google Pay, we are pretty much represented in every country. So we have users from every country, but we continue focusing really on those big markets that I mentioned.

Projections for quarter 1. Things are trending well. I'm not going to say too much, but certainly outperforming previous quarters. We're very happy with what we're seeing in the market, but also, as Tom said, the core product performance, it's just getting so much more out for us on the TTV side and on the margin side. So that's really encouraging to see.

And then Kevin Dede. Kevin, you have a question for Tom. Please offer more detail around the embedded crypto business model, what function would Banxa actually provide and how would Banxa be compensated?

[Tom Chalmers, executive]

Thanks, Kevin. So to answer the first part of the question, what function would Banxa actually provide. What we would initially seek to provide is, it's the same underlying product we're offering today, which is the buy/sell crypto functionality. The difference here really is in that delivery model, and that embeddedness. And so to be a little bit more specific what we hear from the market is that they like that they can put Banxa into their product and other providers. But what they don't like is that they need to send the customer over to us and have our brand and our experience, they really interject into that end-to-end customer experience. So what they would like is just a further level of embeddedness and a good mental model is thinking of the movement from companies using PayPal to using something like Stripe, where they can really sort of create their own experience with that capability.

The nuts and bolts of that, what that's likely to look like in terms of what we create is very much likely to be high-quality APIs and potentially SDKs built on top of those that are fundamental building blocks for merchants to create their crypto experiences rather than just the redirect widget we offer today.

Given that that's going to be more behind the scenes and sort of modular, flexible set of capabilities that then gives us a wedge into providing other underlying crypto services, which over time we would like to do. What we do know is the primary ones there would look like things like key management and security and potentially the really crypto to crypto sort of transactions and swaps.

In terms of compensation, again, a model like this opens us up to be able to think about and charge in different ways. The beauty of everything we do with crypto is that the cost of delivery is close to 0. So we do like the pay-as-you-go model we have today because it's very, very low friction. Some of the challenges there that just come with how merchants are able to subsidize shape and control what that is like to their end customers. So that's another need we hear a lot about.

[Holger Arians, executive]

Thank you, Tom. And then Zafer there might be one for you from Henry. Are you looking to raise additional capital.

[Zafer Qureshi, executive]

Yes, I'll take that one. So the only capital that we're looking to raise at the moment really is that capital and that again -- because we're seeing a growth in our transaction volumes. And that's important to have that liquidity. Beyond that, there's no, I guess, discussions or plans currently in place.

[Holger Arians, executive]

Thank you, Zafer. And then Tom, I'll put that one to you, are you looking to connect to additional large wallet networks.

[Tom Chalmers, executive]

Yes. We definitely are. We, again, continue to engage and be very, very actively connected with the next generation of providers. So we are still talking to other major wallets today, and we're reasonably confident that we get some decent ones online over the coming 3 to 6 months.

And then we are engaging with what we see as the next generation of that market, which we call wallet platforms or programmable wallets. And we're talking to the best of the best there and excited to sort of hear what their particular needs are and their go-to-market plans are.

[Holger Arians, executive]

Thank you. And Tom, you might take the next one as well from Kevin. How is Banxa increasing the geographic -- sorry. Things are moving too fast here. How exactly has processing speed improved, what tech was implemented? And how is improvement wanted to flee measured how does that measure reflect on Banxa's financials.

[Tom Chalmers, executive]

Yes. Thank you, Kevin. So specifically, what we have implemented is what we call a payment orchestration platform. And so what that enables us to do is to more intelligently and programmatically attempt payments between different PSPs that we use because we use multiple PSPs. And whereas previously, we had on kind of rigid conditions, said, okay, customer has come. They're attempting a transaction because they're from, say, x country with y payment order send it in this direction.

And some of the times that would succeed once it hits the card network, some of the times it would fail. We've now moved to a model where we have an intelligence layer that actively reroutes and retries between different PSP providers hoping to get a successful one even if it fails on the first attempt. Where we've been rolling that out and what we've been looking at very particularly is what is the impact on new customers. And we use a measure here called card conversion rate, which is the end-to-end experience of a card transaction.

And we've seen that rise for new customers, where we've deployed anywhere from 15% to 20% improvement on those rates. We're very, very happy about that and we think there is more upside to come as we continue to, I guess, tweak the model and apply different logic to how we try to process the transaction.

[Holger Arians, executive]

Thank you, Tom. I only got a couple of minutes left. I'll read out the next question. How's Banxa increasing its geographic breadth, where are new licenses being pursued? What the time to winning them? How do the company balance the expense in building its geographic infrastructure.

Great question. So we're focusing currently on Europe. There's a new regulation coming in. And thankfully, there's a lot of clarity around that in Europe. It's called MiCA, Markets in Crypto-Assets. So we're already on the ground and pursuing that license usually takes anywhere between, well, I'd say, 6 to 12 months, at least.

And we just continue focusing on these core markets so that we have the licenses required to do every business that we need to do. And the investment is really -- it's quite -- in the way we've set up our business. We have our internal legal team and compliance team that is managing those licenses. We have the required of people amount of -- the required amount of people on the ground to get those licenses to maintain those licenses.

So overall, it's quite a scalable model. We don't have to have a full team in every country where we get those licenses. The costs are very much under control and it's scalable. And obviously, we are unlocking a lot of market potential in all these markets which is a great return on investment.

Kevin is asking how have MetaMask and Trust Wallet partnerships benefited Banxa roughly TTV increase as a result of them and how can Banxa have win greater business from them.

Maybe I'll start, and Tom, you can chime in as well. So those are the biggest wallets out there. They have the mouth active users. We've been integrated as an on-ramp. And while other on-ramps are also have been integrated already or have been integrated after us. So it's quite competitive. But because we have those local payment methods, we are popping up much more for their users with that trusted payment method, which is usually bank transfer, a much more convenient way to buy your crypto more trusted less fees, you can push through higher volumes.

And also you can do the off-ramping through those local payment methods. So sending crypto back to converting it back to cash, and selling it to your bank account. So we're performing very well because of these features. And TTV, I'll have to look exactly at the numbers, but over time, our centralized exchange volume has gone back because people have after a number of collapses of the centralized platforms. People went to modern decentralized wallets, and that's where we're getting greater business from. So it has compensated and then outperformed the volume of the centralized exchanges.

Tom, anything else you like.

[Tom Chalmers, executive]

Yes. shortly. So MetaMask and Trust routinely contribute between 30% to 40% of transaction volume. So very, very substantial additions to our business. There are also 2 of the merchants that we're most intensely targeting on this core performance front. So they have quite a few providers, as Holger said, and they rank mostly based on the pricing available, but they're very, very active in measuring conversion improvements. And that's something that they've expressed many times is very important to them. And so we've been big beneficiaries of changes in volumes from MetaMask and Trust Wallet over January, thanks to some of the improvements we've made and we think, again, there are examples of merchants where there's an additional 4x to 5x in volume out there to get, which we're excited to do.

[Holger Arians, executive]

Thank you, Tom. And then Karl is asking, do you plan on doing a share buyback plan later this year and how much. Zafer?

[Zafer Qureshi, executive]

Yes. I mean, we don't, I guess, have an amount in mind, but generally, we'll dictate that if we do a share buyback as if our share price obviously remains depressed as it is right now. And once we're gushing out cash essentially, and I think it makes a lot of sense to do a share buyback at that point.

[Holger Arians, executive]

Thank you. Last question from anonymous. With the embedded crypto growth strategy and volume growth of Banxa how you think about funding the strategy? Is there any thought around the capture rate looking at? I think Zafer I've spoken to the capital raise or not capital raise that we're not planning anything at this stage.

[Zafer Qureshi, executive]

Yes. I'll just add one, I guess, point to it. I guess, yes, generally, where our current share price is, I think a capital raise wouldn't make a whole lot of sense. But obviously, depending on where the share price sits. If it's high enough, it could make sense. But I guess, to drive growth, there's always bouncing up between amount of dilution and potential accretion that you can kind of achieve with the capital that you raised and accelerating any project or growth strategy that we have in front of us. So that's kind of how we're going to be looking at in future potential capital raise.

[Holger Arians, executive]

Thank you. Yes, that's right. And on how we are funding our embedded crypto strategy. With self-funding and we have the engineers, we have the product team, we have the compliance team. So it's just a further development of our platform, our processes and leveraging what we already have. So there is not a massive injection needed to realize this strategy and it's going to come over time. While we're obviously in the market already with our on and off-ramping product, which is generating -- starting to generate profit for us as well.

So that's sort of what we're looking at, at the moment. And we're quite excited about the strategy and how it's going to transform. It's been very much in demand from our partners. So we're cocreated being with them.

There are no more questions here. If there's anything else after the webinar, please reach out to Zafer or myself. I'm very happy to engage with our shareholders, potential investors. And hopefully, we were able to show you how Banxa has transformed and the potential that lies ahead.

And once again, please reach out any time. We're very happy to engage with our team with anyone. And Karl is asking if we are going to MicroCap in Vegas. Not planned at this stage, but we can certainly consider attending conferences.

Okay. With that, thank you, everyone, for attending. Really appreciate your support and look forward to speaking again soon. Goodbye, everyone.

[Zafer Qureshi, executive]

Thank you.