Currency Exchange International - Earnings Call - Q2 2025

Transcript

Operator (participant)

Morning ladies and gentlemen and welcome to the Currency Exchange International Q2 2025 financial results conference call. At this time, note that all participants are in the listen only mode. Following the presentation, we will conduct a question and answer session and if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on June 12, 2025 and I would like to turn the conference over to Bill Mitoulas, Investor Relations. Please go ahead sir.

Bill Mitoulas (Head of Investor Relations)

Thank you, Sylvie. Good morning everyone.Welcome to the Currency Exchange International conference call to discuss the financial results for the second quarter of the 2025 fiscal year. Thanks for joining us. With us today are President and CEO Randolph Pinna and Group CFO Gerhard Barnard.

Gerhard will provide an overview of CXI's financial results and his latest perspective on the company's operations. 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 Gerhard. Gerhard, please go ahead.

Gerhard Barnard (Group CFO)

Thank you, Bill, and thank you, everyone, for joining today's call. These results are presented in US Dollars, and my overview of the company, CXI, will also incorporate the results of the discontinued operations of Currency Exchange International. As a reminder, on February 18th, 2025, the group announced its decision to cease the operations of its wholly owned subsidiary, Exchange Bank of Canada. The plan aims for the bank to cease all customer activity by August 2025 in preparation for administrative and financial statement audits required and an application to the Minister of Finance in Canada to discontinue Exchange Bank of Canada from the Bank Act. This voluntary discontinued continuance is expected to be completed in the fourth quarter of 2025, subject to the receipt of all necessary regulatory approval.

Financial information on the Bank's discontinuity is based on our current monthly updated information available as well as certain projected information based on various assumptions regarding revenue, expenses, currency movements, and client behavior, to name a few. Any projected financial information as well as any information on the continued and discontinued operations mentioned in this call, as well as forward-looking information, involves known and unknown risks, uncertainties, and other factors that may cause the Company's actual results, performance, or achievement to be materially different from any of its future information. As a result of the Board's decision to discontinue EBC's operations, the company assessed the requirements of IFRS 5 non-current assets held for sale and discontinued operations and concluded that the Canadian business component related to EBC should be presented as discontinued operations starting this quarter. That's the second quarter.

According to IFRS 5, the company presented the associated assets and liabilities within a disposal group on the Consolidated Interim Financial Statement as at April 30th, 2025. Also, the results of Discontinued Operations are presented as a separate line item in the Condensed Income, Consolidated Statement of Income and Comprehensive Income Net of Tax. This classification resulted in presenting the company's results of operations for continuing and discontinued operations separately. Now it is important to note that all results of continuing operations have been revised to exclude EBC's results and all associated intercompany transactions as per IFRS filings. The impact of EBC's results of operations is briefly discussed separately under Discontinued Operations as a segment in the Interim Financial Statement. Accordingly, the United States operations represent continuing operations of the company and the Canadian operations present discontinued operations of the company.

In the second quarter we reported $2.7 million of net income from continuing operations and a net loss of $0.7 million from Exchange Bank of Canada, our discontinued operations. These results include restructuring charges related to discontinued operations in Canada representing legal and advisory fees of about $200,000 pre tax and certain one-time charges of roughly $100,000 pre tax. Now, excluding these items, the Group's adjusted net income increased by 18% to $2.3 million compared to $2 million in the prior year. Adjusted diluted earnings per share of $0.36 was 24% higher than the prior year. Management anticipates that certain operating expenses and personnel costs that are currently shared with EBC will be 100% borne by CXI subsequent to the exit of EBC from Canada and that the current annualized estimated cost is approximately $3 million after tax. This estimate is subject to change throughout EBC discontinuance process.

Now let's look at the consolidated performance for the three months ended April 30th, 2025 compared to the prior year. Before I go into details, I'd like to note that the company measures and evaluates its performance using a number of financial metrics and measures, some of which do not have standardized means under Generally Accepted Accounting Principles or GAAP and may not be comparable to other companies. Now we call these measures non-GAAP financial measures and or adjusted results. The company's management believes that these measures are more reflective of its operating results and provides a better understanding of management's perspective on the performance. These measures enhance the comparability of our financial performance for the current period with the corresponding period in 2024.

Management, a full reconciliation of the key performance and non-GAAP measures is in the MD&A. When we refer to reported results, we refer to the results as reported in the financial statement based on IFRS, International Financial Reporting Standards. When we refer to adjusted results such as adjusted net income, we refer to performance non-GAAP measures. The company generated revenue from continuing operations of roughly $16 million for the three-month period ended April 30th, 2025, a 3% decrease from the prior CRS quarter. The revenue decrease was driven by a decline in the banknotes product line despite a 5% growth in the payments product line. The decline in banknotes revenue was due to the decline in demand of foreign currency as travel activity tapered during the current quarter.

Between February 2025 and April 25, approximately 214 million travelers passed through TSA checkpoints in the United States compared to roughly 216 million in the same period last year. Operating expenses decreased $1.2 million or 10%. The company reported operating income of up to $5.1 million in the current quarter, 16% higher than the $4.4 million reported last year despite the decline in revenues now. This is primarily due to the favorable impact of a weaker U.S. Dollar on the revaluation of foreign currency banknote holdings, which resulted in a $780,000 foreign currency exchange gain in the current quarter compared to a foreign currency exchange loss of roughly $513,000 in the prior quarter. The Group's net income, including the results from Discontinued Operations, which is Exchange Bank of Canada, amounted to $2 million in the current quarter compared to net income of $506,000 in the prior period quarter.

As last year's results were negatively impacted by a deferred tax charge of $1.4 million that was reported in EBC which has been classified as Discontinued Operations. Adjusted EBITDA for the current quarter was $5.1 million, an increase of 15% compared to the prior quarter's $4.5 million. The following is a highlight of revenue by product line from continuing operations for the three months ended April 30th, 2025 compared to the previous three months ending April 30th, 2024. Now banknote revenue had a 5% decline in combined wholesale and direct to consumer in the second quarter compared to the prior period due to a decrease in consumer demand for foreign currencies. As the quarter started slower followed by a gradual improvement. Towards the end of the quarter, the Company experienced growth in domestic financial institution customers while there was a decline in money services businesses.

The business trading volume on the wholesale banknotes revenue was $653 million for the current three month period compared to roughly $714 million in the prior period. Overall, wholesale banknotes accounted for 41% of total revenue compared to 42% in the prior period. Directly, consumer banknotes revenue decreased roughly $380,000 to 6% despite the slight growth achieved through the online FX platform driven by travel currency's revenue generated via the other two delivery channels favored slightly during the quarter. During the current quarter, the company added the state of Mississippi to its network and the online FX platform can now service 46 states including the District of Columbia, four additional states compared to the same period last year. Business trading volume on total direct to consumer banknotes revenue was about $90 million for the current three month period compared to $94 million for the prior period.

Direct to consumer revenue represents 42% in the current and prior quarter. Payment revenue in the payments product line increased $135,000 or 5% in the three month period compared to the prior period, supported by a 13% increase in trading volume activity from existing financial institution customers and the onboarding of new customers. Business trading volumes on payment revenue were $1.4 billion for the current quarter compared to $1.27 billion in the prior period, and payments make up roughly 16%-17% of our total revenue in the group. Now, the following is a highlight of the operating expenses for continuing operations for the three months April 2025 compared to the previous three months of last year. As stated above and throughout this document, all results of continuing operations have been revised to exclude EBC's results and all associated intercompany transactions.

During the three month period ended April 30th, 2025, the Company's operating expenses decreased by $1.2 million or 10% compared to the same three month period in the plan. The ratio comparing total operating expenses to total revenue for the three month period improved to 68% compared to 73% for the three month period in 2024, primarily due to the large foreign exchange gains realized during the current quarter. Valuation benefit expenses increased when compared to the prior period quarter mostly driven by growth in Mid-Cal in our new vault in Louisville and the Company owned branch locations in addition to general inflationary increases in salaries and benefits. Marketing and publicity costs got increased over 100% primarily due to the Company's expanded focus on marketing initiatives, campaigns, retail investment and establishing customer loyalty programs that support corporate goals with a focus on the direct to consumer business growth.

Bank services charges represent bank charges associated with payments and banknotes transactions but primarily driven by the payments product. It is important to note that CXI processes certain payments through EBC's correspondent bank and get the chargeback allocated to their ETA. Company stock-based compensation includes a non-cash amortization expense related to the vesting of the Company's equity-based stock option in addition to cash-based rewards of RSUs and DSUs. The liability from DSUs and RSU rewards is adjusted to reflect the closing price at the end of each quarter. During the current quarter there was a net expense of roughly $65,000 related to outstanding DSUs and RSUs due to the impact of the decline in the stock line. This compares to expense of $285,000 for DSUs and RSUs in the prior quarter.

Losses and shortages typically represent shipment loss in transit that the Company self insures in addition to several other losses incurred in the normal course of business. In the current quarter, the Company has managed losses in shipments better in addition to some insurance recovery announced related to shipment loss, so our losses and shortages are constantly decreasing. Foreign exchange gains or losses represent the net result of foreign currency exchange transactions. After considering hedging and risk management strategies designed to reduce the inherent risk in the Company's exposure to foreign exchange, thereby minimizing volatility in earnings. Net foreign exchange gains for the current quarter of $780,000 were primarily attributed to the impact of a weaker U.S. dollar against the Company's foreign currency banknote holdings compared to the prior year's quarter where the Company had a $513,000 loss on foreign currency losses.

The Company's hedging strategy is designed to mitigate downside risk while allowing the potential gains to when foreign currency strengthened against the U.S. Dollar. The Euro was the last largest contributor to the net foreign currency gains for the three month period index. The April 2025 and the prior period was impacted by losses realized primarily on the Company's banknote holdings in Mexican pesos and exotic currencies. Interest on lease liabilities reflects additional interest incurred for the corporate headquarters as well as the legal vault that opened in the second half of last year. Interest expense decreased as a result of a decline in average borrowing. The Company used the majority of its borrowing to fund EBC's operations which started to take review in the current period.

The average outstanding borrowings by the Company amounted to close to $580,000 during the second quarter compared to $1.3 million during the prior quarters with the average interest rate on borrowing being 6.7% compared to about 7.7% in the prior year. Now, income tax expense in the current quarter is related to continuing operations in the United States. It primarily reflects an average and effective tax rate of 31% where the majority of the increased expenses above the statute rate was related to stock based compensation that was impacted by a decline in the share price as mentioned before. Summary of the results of continuing operations for that six month period now as stated above in the document, all earnings from continuing operations have been advised to exclude EBC's results as well as associated intercompany transactions.

Revenue for the six month period increased $816,000 or 3% from the prior period last year. The revenue increase over the comparable period was driven by growth in both product lines in the United States during the first quarter of the year and was primarily due to the addition of new customers and an increased demand for exotic currencies. The 3% growth in revenue was primarily driven by the payments product line which had $550,000 or 11% growth followed by a 1% growth in our banknotes and this is for the six months so year-to-date. Wholesale and direct to consumer banknotes businesses include $185,000 and $82,000 while operating expenses decreased $445,000 or 2%.

The company reported net operating income of $8.95 million during the current six month period which is 16% higher than the $7.7 million reported last year primarily due to the growth in revenue and foreign currency gains realized in the current six month period compared to the prior year six months where the company had foreign exchange gains of $500,000 and comparing that to the prior period foreign exchange loss of $185,000. The company reported the net income from continuing operations of $4.4 million for the current six months compared to $4.8 million for the same period last year. The group's net income including the results from discontinued operation amounted to $2.8 million for the current six month period compared to $1.36 million for the same period last year.

As last year's results were negatively impacted by a deferred tax charge of $1.4 million that was reported in EBC as I mentioned, which is now being classified as discontinued operations. Based on adjusted results, the net income grew $583,000 or 21% compared to the same period last year to $3.37 million in the current six month period compared to $2.8 million in the prior period. Really, that's 21% growth in the year-to-date.

Numbers on the adjusted result. Now the following is a highlight of the revenue by product line for continuing operations for the last six months. Banknote revenue in banknotes grew in both the wholesale and direct to consumer and increased by $267,000 or 1% in the current six-month period compared to the prior period due to stronger consumer demand for foreign currencies in the first quarter of the year, which tapered a bit during the second quarter. Also, banknote revenue by $185,000 or 1% as business trading volumes on also banknote revenue were $1.2 billion for the current three-month period compared to $1.3 billion in the prior period. While the company had growth in domestic financial institution customers, there was a decline in money services businesses as I mentioned. Overall, our banknotes accounted to roughly 41% of the total revenue.

Direct to consumer banknotes revenue maintains levels with an 82% or 1% increase in the current six month period compared to the prior period as the company maintains its market share through its diversified delivery channels including online FX platform, company owned branches and agent relationships. Payments revenue product line increased roughly $550,000 or 11% during the six month period compared to the prior period supported by a 25% increase in trading volume activity from existing financial institution customers and the additional onboarding of new customers. Now the operating expenses during the six months decreased $445,000 or 2% compared to the same period last year. The ratio comparing total operating expenses to total revenue improved to 71% compared to 75% in the previous period.

As we mentioned, stock-based compensation during the current period, there was an expense reversal in the amount of $110,000 related to the outstanding DSU and RSU awards as a result of a decline in the stock price. This compares to an expense of $846,000 for DSUs and RSU awards during the same period last year. Now let's briefly look at discontinued operation of current Exchange Bank of Canada. They had a net loss of $692,000 in the second quarter compared to a net loss of $2.2 million for the same period in the prior year. For the six months ending April 25, discontinued operations had a net loss of $1.6 million compared to the net loss of $3.4 million for the same period in the prior year.

Diluted Adjusted loss per share from discontinued operations was a loss of $0.09 for the second quarter and a loss of $0.18 for the six months ending April 2025. Reviewing the balance sheet as at April 2025, management views return on equity as a useful measure of return on capital invested due to the seasonality involved in the Company's business. The company uses its trailing 12 month net income to calculate ROE which has been consistent at around 12% over the last 12 months. On April 2025 the company had a strong financial position with net working capital of $60 million and total equity of $81 million and a 100% available unused line of credit amounting to $40 million.

On November 28th, 2024, the TSX accepted the Company's Notice of intention to make another NCIB or share buyback and automated securities purchase plan ASPP to purchase for cancellation a maximum amount of 316,646 common shares of the Company representing 5% of the Company's issued and outstanding common shares. Purchases under this NCIB or share buyback commenced on 2nd December , 2024, and will terminate on December 1st, 2025, or such earlier date in the event that the maximum number of shares sold in the NCIB has been reached. Now during the six-month period ended April 2025, the Company purchased for cancellation 80,500 common shares at market prices trading on the TSX for a total of $1.2 million. These shares were immediately cancelled and then moved to prompt raising. At this time I would like to hand the call over to Randolph Pinna, CEO, for you.

Randolph Pinna (President and CEO)

Thank you. Gerhard. Good morning everybody. I will try to keep this quick and give you an update from the CEO's desk here. As you know, a big focus is made on our exit from Canada by discontinuing Exchange Bank of Canada. I'm proud to report that our discontinuance plan is on schedule. We have been operating favorable to budget. We have successfully reached favorable terms with all employees so that they either have jobs or have been comfortable with our discontinuance and so we're very proud that all relationships with the employees are continuing to be strong. We are very focused on off boarding all of our customers. The majority of our customers have staff stock as of May 30th.

We do have a handful of domestic clients that due to our service obligations will continue to transact with Exchange Bank of Canada until August 30th, at which time all operations of Exchange Bank of Canada will cease and the last few months of our fiscal year will be focused on the formal discontinuance that we expect hope to receive from the Finance Minister's office. Of course, with this in mind, my focus as CEO is not only to ensure the proper discontinuance and exit from Canada, but more importantly is the focus on CXI's overall strategy and the organizational structure of CXI to ensure significant growth, profitable growth for the years ahead.

Our strategy session was quite robust this year knowing that we no longer have our Federal Reserve relationship, our bank subsidiary, and no longer have the intercompany trading, transfer, pricing and all of the complications of running a multinational organization. Now that CXI and its continuing operations is 100% focused on its businesses that it has in the U.S. and its relationships, we have an updated strategic plan that is being presented to the Board of Directors this month for feedback and final approval in September. As usually done, our strategy has not changed in the sense that payments and banknotes are our core focuses of the business. The payments business being the much smaller part of the business is still a high growth area.

We see we are focused on continuing to add new customers and that is through just raw new addition of customers as well as the integrations with trading systems wire platform allowing for new customers to have the one provider one platform relationship that we seek to establish with many financial institutions in the U.S. I'm happy to see that continuing to grow and we have a full pipeline in our payments category for additional payment revenues. Additionally, we're very proud to announce that we do have three clients already on our domestic payment platform utilizing the Federal Reserve Direct program. The Fed Direct allows us to provide the software connecting the smaller bank to their Federal Reserve relationship in an automated fashion so that CXI receives software as a service income while not processing physical domestic payments.

Now that our pilot is concluded, we are focused on selectively growing our payments business both with international payments as a core focus as well as the domestic opportunity. Should financial institutions utilize us for both? The largest part of our business is our banknote business and that is continuing to remain as a top focus of CXI. The expansion in Louisville has been very successful and the Managing Director Wade Gracey has done an excellent job with automation and preparation for the potential significant growth that could be ahead for CXI and Banknotes. The Louisville facility is strategically located near one of our primary shipping vendors, which has allowed us to expand our cutoff time due to them accepting packages up until 9:00 P.M. as opposed to previously.

Our cutoff time was 4:00 P.M. and therefore this advantage is quite helpful especially with customers on the West Coast or Hawaii, allowing for better processing, better customer service to the clients. Not only has this facility allowed for better processing times, it has utilized recycling machines which accept currency and process and reallow it to go out through the ATM machine. This efficiency has been very noticeable and therefore will allow us to continue to add business without having to add as many humans as we grow. The pipeline for the banknote product is still quite full. We do have additional new client opportunities in front of us, both in the wholesale banknote business as well as the direct to consumer business. The direct to consumer business, as you know, has three elements to it.

The online store, as Gerhard mentioned, continues to allow us to reach more of the population, 46 states representing over 92% of the whole U.S. population. The online FX program allows us to have a home delivery service to their home or office should they choose that instead. The direct-to-consumer business also has the agent program. We do see opportunity for significant growth through the agent program through online and physical stores, and this is a great way to grow as we do not have the cost of rent, payroll, build-outs, and all of those that go along with physical stores. Even still, the physical stores do allow for full revenues as opposed to the agent program, which is a shared revenue model.

We are selectively continuing to grow our retail network with key markets which are Florida, California, Hawaii, and New York as well as select other states based on the dynamics of those cities that we intend to enter. You will see us continuing to selectively add a couple stores a year in our physical growth. Between the wholesale business and the direct to consumer business, we do feel that we can continue to grow our banknote business in spite of the decline that we're seeing on inbound travel due to the political tariffs and other noise in the market. Lastly, the executive team and I are always reviewing opportunities for mergers and acquisitions. We do not have anything to announce now, but I do confirm that that remains a priority for Gerhard and I both in the banknotes and payments space.

Again, nothing to announce, but we continue to have interest in strategic opportunities. That concludes my update and I would like to turn it over to you to ask questions. Since we spent quite a time on our little update to you, we do ask that you just have your one question, maybe a little tag on to it, but no more than two. If you could requeue, that would be great if you have more questions. Thank you very much and I'll open up the lines. Operator.

Operator (participant)

Thank you sir. Ladies and gentlemen, if you do have any questions, please press star followed by one. On your touch tone phone, you will receive a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If using a speakerphone, you will need to lift the handset first before pressing any keys. As stated, we do ask that you please limit yourself to one question, one follow up in consideration for the callers on the line. Thank you. Your first question will be from Robin Cornwell at Catalyst Research. Please go ahead. Robin.

Robin Cornwell (Founder and Principal Shareholder)

Thank you and good morning. I guess my first question is really on the $3 million expenses that you discussed. Is that going forward and obviously you probably expect that $3 million to be finished by the end of this fiscal year. Can you just expand on that?

Gerhard Barnard (Group CFO)

Yes, Robin, thank you for the question. So that $3 million after tax is expenses that we anticipate to continue after exiting Canada. They will remain with CXI. That would typically be personnel costs. That would be bank charges. That would be certain shared costs between us and Exchange Bank of Canada. Okay.

Robin Cornwell (Founder and Principal Shareholder)

That is like a permanent expense going forward.

Gerhard Barnard (Group CFO)

That is a permanent expense and you know, not to that value. That is currently just our current approximation of what we see that lies ahead. Management is aggressively working to reduce those expenses. They are in personnel, they are in licensing and in software expenses. Robin, I can see important point to mention here as well is there is no continuation of EBC losses in the group results going forward either.

Robin Cornwell (Founder and Principal Shareholder)

Right. The expenses will be pretty much going to. They're already in your numbers for the. First half, is that correct?

Gerhard Barnard (Group CFO)

On an annualized consolidated basis, those expenses are obviously consolidated into the group net results. When you look at continued and discontinued operations because intercompany transactions are excluded, they are not viewed for part of continuing operations or discontinued operations. Each one of these entities get their own expenses for this quarter. We highlighted the fact that there is transfer pricing that will now be canceled. If we had a person in CXI that worked 40% for EBC and we keep that person in CXI, we have to now pick up that additional 40%.

Robin Cornwell (Founder and Principal Shareholder)

Okay.

Gerhard Barnard (Group CFO)

Because it will no longer be there.

Robin Cornwell (Founder and Principal Shareholder)

All right. Thank you for that. I appreciate it. My next question is for Randolph. Randolph, you mentioned the inbound traffic slowing down, tariff impact, et cetera. What about the outbound traffic? Have you seen or, and you're coming into your seemingly stronger period, do you sense or see outbound traffic stronger or weaker?

Randolph Pinna (President and CEO)

We have not. While it is noticeable that there are countries like Canada and select countries in Europe that seem to be what I'll call protesting with their feet by not by choosing to go to a different country instead of America. This year, the outbound continues to be a strong business and we have not seen much change. It is as you see in the numbers, it's relatively flat, it's a little. Up.

Due to the dollar has weakened partly, but mostly has been these recession fears and so forth. The outbound business is still strong business and we do see growth in that business. Our online FX store continues to show growth and with our heightened investment in marketing for the online product and our overall cash product, we do feel that the outbound business will continue to be a strong area of revenue. We feel the inbound is a temporary hiatus as a lot of people are still coming in spite of their willing, their want to not come, but a lot of people are. We do not feel that the banknote business is going to be, you know, so difficult, but we did see a softening in that. The outbound is still pretty steady.

Robin Cornwell (Founder and Principal Shareholder)

Okay, great. Thank you. I'll break you.

Randolph Pinna (President and CEO)

Thank you.

Operator (participant)

Thank you. Once again, ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone phone. Next we will hear from Jason Senensky at Chapter 12 Capital. Please go ahead. Jason.

Jason Senensky (Analyst)

Good morning, Jason.

Gerhard Barnard (Group CFO)

Hello, Jason.

Operator (participant)

Please unmute your line. Jason.

Jason Senensky (Analyst)

Oh, sorry about that.

I got it. Good morning. Just wanted to clarify on the $3 million. Hurrah. With that are you saying that there will be $3 million of incremental costs to go against the continuing operations or are you saying that there's $3 million of costs, some of which are currently being absorbed by CXI, but the portion that was being absorbed by EBC will now have to be fully absorbed by CXI? If you understand the distinction I'm making.

Gerhard Barnard (Group CFO)

That's correct, Jason.

Randolph Pinna (President and CEO)

Like my payroll was spread out between EBC and CXI. Of course the majority was at CXI, but some of it was paid by EBC. Now that EBC will not be in existence, we will not have the revenues and thankfully we will not have any more of their losses. There is this cost roughly of $3 million that the organization was to have, but we anticipate to absorb that relatively quick with the continued growth of the business, as Gerhard mentioned in his comments. If you had someone that was 30% devoted to EBC, that person we have chosen not to let go and hence we have the capacity to continue to grow without adding new people. I would like to think that we will absorb that relatively quickly in the fiscal 2026 year. Go ahead, Gerhard, if you want.

Gerhard Barnard (Group CFO)

To add to that. Jason, did that answer your question? Let me just clarify one more.

Jason Senensky (Analyst)

Time just to make sure. For the first six months of the year you reported about $4.4 million of net income from continuing operations. If I take that, am I to take that $3 million number divided in half and say that, you know, pro forma, instead of reporting $4.4 million of net income from continuing operations, you'll report $2.9 million for the first six months of the year or is the impact less than $1.5 million? You know, sort of the half year.

Gerhard Barnard (Group CFO)

The impact will be less than $1.5 million as we continue to manage those expenses down. If you say continuing operations, which excludes any intercompany transactions or transfers or balancing, you are correct. You have to look at that number, deduct it from continuing operations to get your continuing operations number. However, as we mentioned that on a consolidated group basis right now, when you have continued and discontinued, that $3 million is neutralized or eliminated, if I can call it that, on the 2025 numbers. For 2026, yes, management has been actively managing the costs everywhere. If you look at how we dealt with shipping, bank charges, and we are very focused on getting those costs as low as possible.

Jason Senensky (Analyst)

Okay, thanks for that. I think I've got, I might just follow up offline to confirm. Maybe if I could just throw one. More quick one in the net working capital went down quite a bit or even just the cash went down quite a bit, quarter over quarter. I think that's because of the classification of EBC to discontinued operations. Maybe Gerhard, if you can just elaborate on the decline in net working capital and whether there's any working capital that you expect to recover from EBC as you wind down the operations there.

Gerhard Barnard (Group CFO)

Yeah, I think you're spot on there, Jason. As we mentioned in our quarter one, we are aggressively and actively working on exiting Canada and there is a potential of repatriating some of our capital from EBC over to CXI on discontinuance of Exchange Bank of Canada at the end of the process.

Jason Senensky (Analyst)

Okay. All right, thanks guys.

Gerhard Barnard (Group CFO)

If you just, and Jason, as you said, we can elaborate a bit more. The interesting thing now is looking at everything in continued and discontinued. If you think of that same question you asked for continuing operations, our working capital year-over-year for continuing increased from roughly $35 million-$60 million. The number you see now on the balance sheet is continuing operations or CXI only. I know that for the first quarter this can be a bit more challenging to understand when you look at the balance sheet. The whole EBC is actually now consolidated into three lines on the statement of financial position. EBC is now literally only included in asset held for distribution to shareholders, liabilities directly associated with asset held for distribution to shareholders, and that AOCL.

Every other number in all the financial statements are continuing operations or CXI. That is the beauty of this IFRS 5 continuing discontinuing. You show the reader how the business will continue without the discontinued operation. Happy to take it offline and explain what I can in the financials a bit more, Jason. Thanks for the question.

Jason Senensky (Analyst)

Okay, thanks Gerard.

Operator (participant)

Thank you. At this time, gentlemen, it appears we have no other questions registered. Please proceed.

Randolph Pinna (President and CEO)

Okay, thank you everybody for your time this morning. I know some of you are out west, so it's quite early. Thank you for making the time. As Gerhard has already indicated to someone on the call, we will be happy to have one on one calls to answer what was covered and disclosed in the MD&A and our financials. We welcome any questions or feedback from anyone here. I appreciate your support of CXI and look forward to talking to you again. Thank you.

Operator (participant)

Thank you. 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. Have a good day.