Currency Exchange International's Q2 Surge: Restructuring and Volatility Fuel a Bullish Outlook

Currency Exchange International, Corp. (TSX: CXI) has delivered a stunning 291% year-over-year surge in net income to $1.98 million for Q2 2025, marking a pivotal inflection point in its transformation. This extraordinary growth is underpinned by strategic restructuring, a weaker U.S. Dollar (USD), and a laser-focused shift toward its high-margin U.S. payments business. For investors, this is a story of operational discipline meeting macro tailwinds—creating a compelling case for a buy rating with significant upside potential.

The Catalysts Behind the Surge

The 291% net income leap is not merely a one-time event but the culmination of deliberate moves to streamline operations and capitalize on currency volatility. Key drivers include:

1. Strategic Restructuring:
   The discontinuation of its Canadian subsidiary, Exchange Bank of Canada (EBC), has been a masterstroke. While the closure incurred a $0.7 million loss in Q2, it eliminated an annualized $3 million in post-tax costs. This move has freed resources to fuel growth in the U.S., where the company now focuses 77% of its revenue. The decision aligns with CXI's “Fortress Balance Sheet” strategy, which prioritizes liquidity and profitability.

2. Currency Volatility as an Ally:
   A weaker USD in Q2 boosted the revaluation of foreign currency banknote holdings, a critical revenue lever. This dynamic underscores CXI's unique exposure to global currency fluctuations—a tailwind that could intensify if geopolitical instability (e.g., trade wars, energy crises) drives further USD depreciation.

3. Diversified Revenue Streams:

4. U.S. Payments Business: Transaction volumes rose 21% to 45,788, with 124 new financial institution clients added in Q2.
5. OnlineFX Expansion: Now operating in 45 U.S. states, the platform's geographic reach continues to grow, reducing reliance on traditional banknote sales.

Robust Liquidity and Financial Fortitude

CXI's financial health is a cornerstone of its resilience:
- Net Working Capital: $60.4 million as of April 30, 2025.
- Total Equity: $81.2 million, reflecting strong capital preservation.
- Adjusted EBITDA: Increased 15% year-over-year to $5.1 million, excluding restructuring costs.

These metrics are critical as the company navigates the final phase of EBC's closure, expected by Q4 2025. The liquidity buffer ensures CXI can invest in growth without diluting shareholders.

Why a Buy Rating?

1. Underappreciated Operational Turnaround:
   While the 291% net income jump is headline-grabbing, the adjusted net income growth of 18% (to $2.29 million) signals sustainable progress. Analysts may have overlooked the fact that CXI's core U.S. business now operates with 9% revenue growth and higher margins, despite a 3% dip in total revenue due to weaker travel demand.

2. Geopolitical Upside:
   In an era of rising trade barriers and currency fluctuations, CXI's direct exposure to currency volatility becomes a multiplier. A further decline in USD valuation—or instability in emerging markets—could supercharge its foreign exchange revenue.

3. Undervalued Compared to Peers:
   At a current valuation of 12x trailing adjusted EBITDA, CXI trades at a discount to fintech peers. Its focus on low-cost digital payments and geographic diversification positions it to outperform in a fragmented industry.

Risks to Consider

• Execution Risks: Finalizing EBC's closure by Q4 hinges on regulatory approvals, which could delay cost savings.
• Revenue Volatility: A prolonged slowdown in travel or a stronger USD could pressure banknote sales.

Conclusion: A Strategic Buy

Currency Exchange International's Q2 results are a testament to its ability to pivot strategically while leveraging macroeconomic forces. The 291% net income surge is not an anomaly but the beginning of a new growth trajectory, fueled by cost discipline, geographic focus, and exposure to currency volatility. With a fortress balance sheet and a $124.4M market cap that underprices its potential, CXI is primed to reward investors as it capitalizes on both structural shifts and cyclical opportunities.

Rating: Buy
Target Price: $3.50–$4.00 (based on 15–18x 2025E adjusted EBITDA).

Investors should act now: CXI's stock is poised to reflect its true value as the restructuring dividend flows through and the world's currencies continue to dance to the tune of geopolitical uncertainty.