CURRENC Group Q4 2024 Earnings Call Transcript

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April 16, 2025

There are 4 speakers on the call.

Operator

Hello, and welcome to Currency Group Inc. Fiscal Year twenty twenty four Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you.

Operator

Now I would like to turn the call over to Liz, company's IR counsel. Liz, please go ahead.

Speaker 1

Thank you, operator. Hello, everyone, and welcome to Currency's Full Year twenty twenty four Earnings Conference Call. The company's results were issued earlier today and are posted online. Joining me on the call today is Mr. Ronnie Hoy, Currencies' Chief Executive Officer.

Speaker 1

Mr. Hoy will provide an overview of the company's business and financial highlights, followed by a discussion of its business transformation and AI initiatives. Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make forward looking statements. Also, note that this call includes discussions of certain non GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non GAAP measures to the most comparable GAAP measures.

Speaker 1

Finally, please note that unless otherwise stated, all figures mentioned during this call are in U. S. Dollars. I will now turn the call over to CurrentC CEO, Mr. Ronnie Hoy.

Speaker 1

Ronnie, please go ahead.

Speaker 2

Thank you, Liz. Hello, everyone. Thank you for joining us on the on our first earnings call as a publicly listed company. It's truly an important milestone for currency and privilege to address our new and long standing shareholders as we embarked on this new chapter. We greatly appreciate your support and look forward to maintaining transparent, consistent communication with the investment community.

Speaker 2

Now for those who are not well familiar with the currency, Now we are a fintech pioneer empowering financial institution, which provide AI solutions worldwide. We've got our start in cross border digital remittance and airtime transfer, and now we are trying to build a global platform providing both individuals and financial institutions with safe cost effective ways to move money across the border for over 50 countries. Now we are undergoing a a very important business transformation to extend our AI powered offerings while we still remain the grounding in our broad mission of serving the financial institution and advancing the financial inclusivity, going forward, we will be focusing on creating more AI driven solutions that can reduce cost and boost the operating efficiency and enhance the customer experiences. Now let's review our existing core business line first. Today, I mean, in the year 2024, our main bulk of businesses is the digital digital remittance business.

Speaker 2

It's conduct through our subsidiary, Triangle, which we provide a b to b and b to c cross border transfers through a powerful unified API that can integrate over 5,000 banks and 35 new orders, which cover 50 countries. Now in 2024, Triangle process 11,400,000 remittance transactions, and the total processing value of the TPV reached 5,140,000,000.00 US dollar. Now we close out 2024 on a high note in terms of remittance and strong growth and solid growth momentum. Both the transition volume and the TPV total processing value increased in 2024, which reflect the strong core strong demands in key corridors such as UK, Hong Kong, Singapore, Korea, and as well as some new markets throughout the Southeast Asia. Now we have harnessed the most attractive growth opportunities in cross border payments, and we have built new partnerships growing our active user base despite the intense competition in the market.

Speaker 2

We also have improved our technological infrastructure during the year, which position us to deliver sustainable sustainable growth and more shareholder value in the years ahead. We also have global airtime transfer business for the moment, which also is provided by Triangle. And through another subsidiary, Watercool, we provide local airtime in Indonesia. Waterproof serve around 28,000 customers as of the end of twenty twenty four and distributing airtime with a total value of 14,500,000.0 for the full year of 2024. Despite that the airtime segment has historically served as a key means of revenue diversification, going forward, we strategically believe that we should deemphasize this business so as to focus more resources on the digital remittance business as well as the new AI solutions business, and which we believe will deliver more stronger long term growth opportunities and profitability.

Speaker 2

Now some highlights for the full year of 2024. Firstly, the DG remittance business, meaning those processed through triangle, the total processing value was 5,140,000,000.00, which compared to twenty twenty three, four point five four billion was a 13.2% year on year growth. Total number of transactions increased to 11,400,000 transactions for year 2024. Now there may be a lot of confusion if you read the financial statement because the 2024 financial statement include other subsidiaries like GAMG Asia and GA, which were already carved out before the completion of this grant. So I would like to draw your attention to those really meaningful figures for us, I.

Speaker 2

E, the total revenues excluding PNG Asia and GA. Now for the total revenues excluding PNG Asia and GA, for the year 2024, it was $42,000,000 which represent to 2023 was a mild decline of 3.4%. And, actually, the decline was mostly due to a quite big decline of 23.8 in global airtime revenue. And I would also like to remind everyone that as P And G Asia and GA, we're already diverse in the year of 2024. So in the fourth q and going forward, the revenues the revenues will not be count, and we should look at the revenue contributed by triangle remittance business, by triangle and vertical airtime business, as well as the new AI solutions driven revenue.

Speaker 2

Now as the main part of our business was still the digital remittance. So let's focus on the digital remittance revenues and take a look at how it would how it fare in the year of 2024. Now the total remittance revenues excluding TNG Asia and GA, that is the revenues contribute mostly by digital remittance of Triangle, was 18,200,000.0 for the full year of 2024, which compared to 2023 was an increase of 6.4%. Despite that, the TPV process the total processing value processed by triangle was an increase of 13.2%. During the period, the overall tick rate of triangle declined from zero point four three percent of 2023 down to 0.37% in 2024.

Speaker 2

And that the decline was mainly due to intense competition in the market that we want to be more and more price competitive. We want to launch more price concessions so as to capture more and more market. And in other words, we are kind of sacrificing the take rate in order to get a higher and higher business volume. And also for the full year of 2024, the on demand equity of RippleNet represent only 4.5% of total TPV. So Ripple transaction is not a very significant segment of the company.

Speaker 2

Traditionally, Ripple's pro carries a lower take rate. So with lower and lower ripples ODL pros, we expect that the the overall take rate should should be bottom out, and we're expecting a bottom out or or declining trend of the take rate will come to a halt. Now let's go to the another business, the global airtime business. This is actually this this was the the the segment that sustained a significant decline in the year of 2024, and that contribute to a decrease in the total revenue as well as the profitability. For the global airtime transfer revenue for the year of 2024, it was 9,300,000.0, which represent a 23.8% decline as compared to, like, year 2023.

Speaker 2

Now the reason was that the market has changed quite a lot in the past three to four years, especially before and after the COVID. The there was a increasing growing availability of free Wi Fi in Southeast Asian countries, especially the Malaysian and and Indonesia. And, therefore, this led to a declining demand for the Malaysian, Indonesian airtime transfers. And therefore, that led to a decline in Trunko's global airtime business in 2024. Now we expect that decline will be kind of continuing given the market has changed.

Speaker 2

And we expect that as more new market like Africa or other countries, we might be possible possibly explore or expand new markets there on the global airtime transfer business. However, we don't want to place too much emphasis on the airtime transfer business because of two reasons. One is that they carry a lower gross margin result. And the second is that they have a account receivable issue, meaning that we have to provide working capital for that. So we believe that it would be more useful for the company to make use of the capital and allocate in re in expanding its digital remittance business as well as in expanding its new AI businesses.

Speaker 2

Now on the other hand, if you look at the total direct cost for revenue, which exclude TNGA and GA, was 28,900,000.0 for the year of 2024, which represent a decline of 8% as compared to 2023. This was in line with the decline in the global airtime business, but also it reflects that we have successfully control the directly our result for our digital remittance business. So if you look at the direct payout rate for Trunko's remittance business, in the year 2023, we paid 0.2 15% to our payout agents for the digital remittance business. And twenty ten four, the payout ratio declined it to 0.12%, meaning that we can get a high margin despite that our overall degree was also declining. So if you look at the the gross profit margin for the remittance business, which excluding TNG Asia and GA, for the year of 2024, it was 62%, which compared to 58% of 2023.

Speaker 2

So we can see that our gross profit margin for the digital returns business actually improved because we have successfully control the payout ratio. As for the overall gross profit margin for the full year of 2024, it was 31%, which compared to 28% of 2023. It was also a showing an increase. Now another key ticket that I like to draw your attention is the total operating expenses. Because if you look at the total operating expenses, it was a massive 42,000,000 for the year 2024, which compared to 24,000,000 for year 2023.

Speaker 2

Now the substantial increase was mainly due to a a noncash item, which is 20,900,000.0. In recognition of the incentive shares granted to employees because the scheme was granted only when there was a completion on the dispatch. So that's why we have to book the incentive share scheme, the noncash item in the in the year of 2024. And, also, there was a 1,000,000 shares expenses, again, noncash funded to Roth because we have engaged them as our capital market adviser. Now as I stated before, since currency divest change each year and and GA in August and July.

Speaker 2

So going forward, the operating cost should reflect the the the operating cost of Triangle Water Cool and also the headquarters only. Also, there might be new AI initiatives which would incur also the operating cost. Now, therefore, I would like to draw your attention to the triangle operating costs for the full year 2024, which was 12,900,000.0, representing an increase of 4.9% as compared to 2023. So the the operating expenses of Triangle was actually increased in line with its total processing value. There's no not much surprise on that.

Speaker 2

Now for Watercoo, their total operating cost was even lower, 1,200,000.0 for 2024, which con compared to 1,500,000.0 for 2023. Again, it's because of stringent cost control. Now as for the headquarter, yeah, many expenses which I would come to it later on, but one key expenses is the legal and professional fee. For year 2024 is 1,700,000.0. For 2023 is 4,700,000.0.

Speaker 2

Now almost most of these legal and professional fees were incurred in connection to the the spec, and much of the expenses were used in the extension of the spec before the completion. There's also another item that I need to elaborate a little bit. It's that there is a an item called other income or other loss. Right now, we have booked other loss, 2,200,000.0 for the full year 2024. But out of this 2,200,000.0, there are many big items.

Speaker 2

Number one is do we have a gain on 20,500,000.0 because we divest GA and and and so we have also divest the its debt to to to Ripple. And there are a number of impairment loss on the water cool triangle t t n g a, g a, and the intercompany balance, which I think more or less will clean up most of the intangible assets or good deal so that we could have a fresh start to look at in 2023 five year ahead. Now in order to to see how the company how what is the profitability or true profitability of the company, we'd like to draw attention to the EBITDA analysis. Now if you look at the total EBITDA for the full year 2024, including G and A and G, there was a loss of $256,500,000.0. However, if you isolate the triangle and vertical, there was a EBITDA profit for the 2024 of 2,050,000.00.

Speaker 2

Now there was a loss on TNT Asia and GA combined with the loss, but this will have no impact on the companies from the fourth quarter onward because they were already divest. Now one key element to look at is the headquarter expenses and EBITDA loss of 29,800,000.0, and that was the reason why the company has sustained such a big EBITDA loss. Now out of $259,800,000.0, 20 point 9 being the operating expenses or recognition of the incentive shares, which I've explained. 1,000,000 also for non cash item for recognition of shares given to Roth. And then there's a loss income loss of 3,200,000.0.

Speaker 2

Now in the above, you see that there was a income loss other loss of 2,200,000.0 Because the headquarter actually incurred 3.2, but there was a gain in in the subsidiary level. That's why if you look at the headquarter level, there was a loss of 3,200,000.0. And there was a new expenses, intangible asset amortization, and then and other so the real rental general expense I mean, expenses for the year was only 1,800,000.0. So going forward, we're expecting that 1,800,000.0 will be a quite a regular expenses for the headquarter because the headquarter has no real operations in it. So the the the the actual headquarter expenses will be including the the the and no insurance, the auditing fee, and also the director fee, the chief officer fee, a triple it's a salary, something like that.

Speaker 2

So it should be in the range of 1.8 to 2,000,000. Now for for the year of 2024, if look at the net loss, it was 38,800,000.0. But I think it was contributed mostly by the net loss of 32,000,000 by headquarter and adjustment, which I have explained before. And also, there was a loss of 3.7 contributed by KMG Asia and GEA. Now, again, as both KMTA and GA fully divest, we we are now moving forward.

Speaker 2

We will focus our our strategy, our core competency in the in Trunko's remittance network and also in accelerating our AI new initiatives. So we believe that, number one, we have streamlined all our portfolio so as to enhance our top line growth and profitability. And number two, being a listed company, we can have increased brand recognition and we can can hopefully, can find more strategic partners to work on us work with us. So we believe that the from a macro perspective, the the the demand for digital remittance remain robust. But I think our AI initiatives can also create a whole lot of synergy for the company because we would help those financial institutions, especially in countries like Middle East, like Africa, to set up AI call center, AI HR training platform for them.

Speaker 2

Now during this AI initiative, we recruit new clientele, and this new clientele could also be enrolled to become the clientele for our digital remittance business. So we believe that the new AI business will create a whole lot of synergy for the digital remittance. And right now, we are getting a fresh start, and we hope that we can execute the strategic transformation and and and and capitalize on rising opportunities in AI era. So any question, Chris?

Operator

We will now begin the question and answer session. If you would like to ask a question during at this time, simply press star pound, like the number one on your telephone keypad. If you would like to return your question, press star one again.

Speaker 2

I think I can briefly talk about AI transformation, but I I believe the the audience would like to ask more question on the on the earning results. But let let me finish on the AI transformation for the time being. So now the the what we also we have been in financial institution for quite a number of years. We know the pain points. There are a number of things that should be handled more efficiently and effectively.

Speaker 2

And now that the AI is progressing so rapidly, so we believe that the financial services landscape should also change rapidly. And the the the one critical way for these financial institutions to transform and to become competitive to engage in more customer interactions or to improve the operating efficiencies. It's through the use of AI so that we can provide the trading platform for these financial institutions. We can provide call center so that they don't need to recruit a team of call center staff to answer call routine questions from the customers. They can even have a team of AI staff to cross sales to promote their products.

Speaker 2

And, also, they have a team of AI to recruit the the workers and train the workers. Now there's also another angle that we want to focus on recruiting the employers because there there's a huge cost on this HR department. If we we are now launched the AI for hire, which can replace almost a nine point 90 something percent of the functions of of all the HR departments. No matter where they're talking about financial institutions or construction workers, construction developers. And our main target is actually helping those employees who have a lot of migrant workers, like the construction workers, transportation workers who worked in Middle East.

Speaker 2

So imagine that if we can help them to serve the HR function to distribute the series to the staff and also to help the staff to send money back to the homeland. So it's a one off thing that we are trying to achieve. So these are all the all the AI new initiatives that we have we are now trying to to to push ahead. There are something like AI ARDC, the AI data center, which can which can solve the problem of computing power needs. But I think we would come across that later on if we have a more concrete details.

Speaker 2

We you you guys can refer to the announcement we have post. So let's

Speaker 1

Yeah. Thank you. Operator, shall we take Q and A now?

Operator

Absolutely. Sorry for the interruption earlier. We will now begin the question and answer And your first question comes from the line of Andrew Scott with Roth Capital. Andrew, please go ahead.

Speaker 3

Thanks for taking my questions. Hey, how are you, Ronnie? On the strong So my first question here is due around your announcement of your first customer for Seamless.ai. I was kinda wondering what your expectations were there for the for the partnership in in 2025, maybe when can we expect revenues? And then also, if you could just kinda update us on the pipeline of maybe other customers potential customers, you're talking with, for the product and and the the staff or hire.

Speaker 2

No. We have as in the in in the in the announcement, we have cut the deal with, which is the financial institution in the oven. Now we are now entering the the details like the total the the total setup, the deliverables, these and that. And and it's would it's very exciting and encouraging that actually, we met with the mister of Oman, talk about helping the whole country, the all the small and medium enterprises, whether they are they are the financial institutions or not. And we we can help these these companies to to to to provide the service for AI hire and AI staff for them.

Speaker 2

So, yeah, I think as for the timeline, we hope that we can have a clear cut revenue stream in the second half, at least firstly from con con cost. We are expecting others to come, but given the negotiation period and and time, we might be expecting in the by the end of this year or early next year that we can see more more and more revenue stream from the AI services as well as new clients there. And one important issue is we want to not just providing these companies with trading platforms. Because these financial institutions, they have the licenses. They may have the capital, but they do not have the know how.

Speaker 2

They don't know how to run the business, and they have mostly do not have any experience on the so called digital remittance. How to conduct the digital remittance, how to transact, how to to to to to grow it. So one of our objectives actually is helping these financial institution to make use of Triangle's network and grow their remittance business in their locality in their home country. Now there are two ways to do it. One way would be to to provide them with the infrastructure and and and and take up the fee, but we are more interest in co share with them, the the revenue stream as well as the profit stream.

Speaker 2

Meaning that they provide the licenses, they provide the clienteles, and we provide the infrastructure, and we launch digital remittance through these financial institutions, and we take a share of the revenue stream or the profit stream. So these are all we are trying to figure out. I give you an example. The the the retail players, typically typically they charge something like 1.5 to 2.5% take rate. While using triangle as the corridors, they only pay out 0.37%.

Speaker 2

So meaning that they will have enjoy a very high gross profit margin. So one one one strategy is for us to to go with them into the remittance business there while we provide the platforms, we provide all the technology know how, and we share the the the revenue. But we are still in a very intense negotiation. So I I could I could not disclose too much on this one unless we can make an announcement.

Speaker 3

No. Thank you. You provided a lot of great information there, so I appreciate it. Second one for me on the AI transition. The announcement in March regarding the 500 megawatt AI data center looks like construction is planned for maybe the end of twenty twenty six.

Speaker 3

Can you kind of just talk about currency's role in the partnership? Any additional details around that announcement kind of would be greatly appreciated.

Speaker 2

I have to be cautious.

Speaker 3

And if yeah. If you can now, I totally understand, and I can I can move on because we got some questions here on Triangle?

Speaker 2

Yeah. I know. The the issue is like this. We we we are now working closely with a with a ARDC, very renowned operators. I couldn't disclose the name because we have to get their approval first.

Speaker 2

And they have been doing the ARDC for for for quite some time, at least ten years. Now they will provide all the clientel for us. They will provide all the the the the the technological support for us. We will we will be responsible for sourcing the the land, the the government support in Malaysia. And mind you, Alex is a Malaysian.

Speaker 2

He has a very good relationship with Malaysia. And and then once we cut a deal with this with the clients, we'll then work out with the local government with the government to get the land and also to get the bank approval for the financing for such a a project. And the project can be held for for for for for a good return, but it can also be sold out to investment fund. There are we have also lined up with a number of funds who are willing to take up high return AIDC center as a long term investment opportunity. So we we can work in being a a facilitator.

Speaker 2

We can also work like buy and sell kind of thing.

Speaker 3

Perfect. Now the background information there was, was was very helpful. So shifting kinda to the the the core businesses Yeah. Yeah, with Triangle. So my first question, the margins were very strong.

Speaker 3

Take rate was reduced. You mentioned kind of some improvements to the tech stack in the call and some strong you know, cost improvements there. So can you just kinda talk about the the margin trajectory of the business?

Speaker 2

Now the strategy is like this. So the the market competition has been very keen. So that's why the the whole industry, the take rate is declining. But last year or the year before, we've been trying to capture more markets through low price strategy. But in since this year onwards, we have been given the new instruction to the management that they should not sacrifice with the take rate so as to capture more markets.

Speaker 2

We want to we we want to maintain our profitability. We want to maintain our our revenue stream. So this year onward, we are to triangle team is that we want to see the operating rate bottom out, like, at this level. And then secondly is we setting a KPI for the for the for management that we want to grow the remittance revenue at least by 12.5% this year. So the whole team is now working to to increase the re remittance revenue, the TPV without sacrificing the take rate from this year onward.

Speaker 2

As for the payout rate, we've been trying to select more and more payout agents, more and more price competitive please out please out agent. So meaning that on one hand, we are under price pressure from our clients. But on the other hand, we are exerting more and more price pressure on our payout agents. That's why the payout rate actually decreased from 0.15 to 0.12. But as a matter of fact, we believe that there are still room for further compression from the payout agent.

Speaker 2

For instance, if you choose e words, then the payout fee will be even lower. If you choose cash pickup point, then the payout rate will be higher. There's one way to cut the deal is we would find more and more competitively ordered payout agents. And on the other hand, we also will approach more and more banks to get a lower payout agent fee fee from them.

Speaker 3

Thank you. Now that was a great breakdown. And and last for me, if I may, before I jump back in the queue. You're talking about revenue growth in Triangle, and I know a lot of that will hopefully come from traction in new geographies. So can you kind of talk about your progress expanding into new countries?

Speaker 2

Yeah. We have been trying initially, we report that we should try to develop our own retail business in Middle East, in Dubai, in Abu Dhabi, in Saudi so as to contribute more and more corridors, more and more users for Triangle. Now we think that it's even more efficient and cost effective for us to make use of AI solutions so as to reach out to more clients like, small financial institutions in Middle East, in Africa so that they could become the new clients of Triangle's corridor. So in this way, we could, on one hand, Europe AI new businesses. And on the other hand, we are helping Triangle to explore expand its reach to Middle East and in other African countries.

Speaker 3

Great. Well, thanks thanks again for taking my questions, and congrats on the strong results.

Speaker 2

Thank you. Thank you.

Operator

There are no further questions at this time. I will now turn the call over back over to Liz for closing remarks. Liz?

Speaker 1

Thank you again for joining us today. If you have any further questions, please feel free to contact our Investor Relations team. Now that concludes today's call, and the company looks forward to speaking with you again soon. Thank you, and goodbye. Thank you.

Operator

That concludes today's conference call. You may now disconnect.

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