TORONTO--(BUSINESS WIRE)--Ether Capital Corporation ("Ether Capital" or the "Company") (CBOE CA: ETHC) announces the reporting of its unaudited interim financial results for the three-month period ended March 31, 2024.
The first quarter of 2024 saw a continuation of the operational strategy adopted in 2023 of focusing on staking a material portion of the Company's Ether to generate yield, with approximately 64% on internal proprietary staking infrastructure. During the quarter, the Company was heavily engaged in its strategic review which involved the analysis of various strategic options for the Company, and ultimately resulted in the Company entering into a framework agreement (the "Framework Agreement") with Purpose Unlimited Inc. and Purpose Investments Inc. (together, "Purpose"), pursuant to which (i) the Company would convert into an exchange-traded fund (the "Fund") structured as a mutual fund corporation that would be managed by Purpose Investments Inc. and (ii) in furtherance of the ETF conversion, Purpose would purchase certain non-Ether assets of the Company (the "Transaction") (for more details see the May 2nd Press Release).
Highlights for the first quarter of 2024 include:
- Total treasury was 46,274 Ether units, of which 45,408 or 98% of the Company's Ether was staked.
- Total value of digital assets held was $227.4 million as at March 31, 2024, a 62.0% increase from the value at December 31, 2023 ($140.3 million) and a 115% increase from the value at March 31, 2023 ($105.5 million). This increase was primarily the result of the increase in the value of Ethereum of 62.5% in the first quarter of fiscal 2024 to $4,912 ($3,022 as at December 31, 2023) and a 99% increase in the Ether price year over year ($2,471 at March 31, 2023).
- Total revenue was $1.8 million versus $1.2 million in the comparable quarter of 2023; an increase of 52.5%.
- Staked Ether Rewards (yield) of 413 Ether Units or $1.6 million, compared to 430 Ether units or $0.9 million in the comparable quarter in 2023. During the current quarter, the gross yield was 3.63% p.a. (5.5% for Q1 2023).
- Operating Expenses before Impairment and Revaluation Expenses ("Operating Expenses") of $1.0 million, a 21.7% decrease from the same quarter in 2023 ($1.3 million).
- Repurchase of 442,900 shares under the normal course issuer bid program ("NCIB") at a weighted average share price of $3.52 per share, for a total cash consideration of $1.5 million. Total shares repurchased since the inception of the NCIB were 1,169,300 representing a reduction of 3.4% of the public float of issued and outstanding shares.
- Operating Profit of $0.8 million, compared favourably to the Operating Loss in Q1 of 2023 of $0.1 million. This improvement was attributable to (i) higher Staked Ether Rewards associated with the higher price of Ether and the staking strategy outlined above, and (ii) lower Operating Expenses resulting from the cost reduction initiatives implemented in fiscal 2023. See "Non-IFRS Measures".
- Shareholders' Equity as at March 31, 2024 was $209.6 million, compared to $134.6 million at the end of 2023; an increase of 55.8%. On a per share basis, this increase was $2.33 per share ($6.35 versus $4.02 per share) and was primarily attributable to the increase in the value of the digital assets noted above.
As at May 13, 2024, the Company had:
- a treasury of 46,352 Ether (staked and unstaked), valued at approximately $187 million.
- 33,034,320 shares issued and outstanding.
Management Commentary
"In the first quarter of 2024, we achieved a notable revenue increase to $1.8 million, primarily through staking rewards, while maintaining a robust balance sheet. Our operational efficiency was key as we progressed with our strategic review and finalizing the terms of our transaction with Purpose. These accomplishments have set a solid foundation for the next phase and the upcoming Shareholder vote and Transaction. We are extremely pleased with this trajectory," stated Jillian Friedman, Interim Chief Financial Officer and Chief Operating Officer.
Staking Operations
At the end of the first quarter of 2024, 45,408 Ether units were Staked, representing 98% of the Company's Ether; slightly higher than its target staking percentage of 95% and in line with the percentage at December 31, 2023. Additionally, at the end of the current quarter, 29,120 Ether units, or 64% of its Staked treasury was staked on its internal, lower cost proprietary infrastructure. The Company had intended to further increase the level being staked on its internal infrastructure in the first and second quarter of fiscal 2024 but the strategic review required that this activity be delayed.
Revenue Highlights
The Company's Revenue increased 52.5% in Q1 2024 compared to Q1 2023, $1.8 million versus $1.2 million in Q1 2023. Total Staked Ether Rewards Revenue was $1.6 million in Q1 2024 versus $0.9 million in Q1 2023, a 74% increase. The staking yield for the Company was 3.63% for the three-month period ended March 31, 2024 (5.51% in Q1 2023).
Additionally, the Company earned Consulting Fees for the three-month period ended March 31, 2024, of $0.184 million (2023 Q1 - $0.22 million). Consulting Fee revenue is based on an agreement with Purpose Investments Inc., a related party. The Consulting Agreement was terminated by Purpose as of April 1, 2024 in the context of the Transaction entered into between Purpose and the Company.
Operating Expenses
Operating Expenses decreased 21.7% in the quarter in Q1 2024 to $0.990 million primarily due to reduced salaries, benefits and share-based compensation expenses relative to the comparable period in 2023 ($1.2 million) as a result of the previously announced cost optimization efforts which went into effect June 2023.
Q1 2024 | Q1 2023 | Increase
| |
Revenue | $1,806,623 | $1,184,946 | 52.5% |
Operating Expenses | $990,060 | $1,263,648 | (21.7%) |
Revenue less Operating Expenses | $816,563 | ($78,702) | - |
Transaction and Operational Updates
The Company has called an annual and special meeting of shareholders to be held on June 10, 2024 where shareholders will be asked to approve the Transaction. If Shareholder approval is obtained and all other closing conditions are satisfied or waived, the Transaction is expected to close on or around June 17, 2024.
The Company does not intend to purchase more shares under its NCIB program and this program will be terminated.
About Ether Capital Corporation
The Company's mission is to be the premier access point in the public markets for investment in Ethereum's native token, Ether. The Company generates yield on its Ether treasury through staking, a process that allows Ether holders to participate in securing the Ethereum network and earn rewards in the form of additional Ether tokens.
The Company's strategy is to hold and stake Ether, build intellectual property related to staking and Ethereum infrastructure in general, and supplement staking income with consulting and sub-advisory mandates in the digital asset sector. For more information, please visit http://ethcap.co.
Non-IFRS Measures
The Company's condensed financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). The Company refers to Revenue less Operating Expenses before Impairment and Revaluation Expenses, which is a non-IFRS financial measure. This non-IFRS measure is not defined by IFRS, does not have a standardized meaning and may not be comparable with similar measures presented by other issuers. The Company believes that this non-IFRS financial measure provides information that is useful to investors in understanding the Company's performance and facilitates comparison of quarterly and year to date results from period to period. Non-IFRS measures should not be considered as alternatives to the information set out in the Company's financial statements. A reconciliation to the nearest IFRS measure, being Revenue is included above in a table within this press release.
Forward-Looking Information
This press release contains "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking information includes statements regarding the Transaction, including the expected timing of closing the Transaction. The Company cautions the reader not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. Generally, but not always, forward-looking information can be identified by the use of forward-looking terminology such as "plans," "expects" or "does not expect," "is expected," "budget," "scheduled," "estimates," "forecasts," "intends," "on pace," "anticipates," or "does not anticipate," "believes," "will help position" and similar expressions or state that certain actions, events or results "may," "could," "would," "should," "might," or "will" be taken, occur or be achieved.
Forward-looking statements are based on information available to management at the time they are made, management's current plans, estimates, assumptions, judgments and expectations. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to the risk factors discussed in the Company's Annual Information Form dated April 2, 2024, the Risk Factors section in its most recently filed Management Discussion and Analysis, the risk factors described in the management information circular to be filed in respect of the Transaction, and the Company's other filings available online at www.sedarplus.com. Although the forward-looking information contained in this press release is based on assumptions that the Company believes to be reasonable at the date such statements are made, there can be no assurance that the forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such forward-looking information. In addition, the Company cautions the reader that information provided in this press release is provided to give context to the nature of some of the Company's future plans and may not be appropriate for other purposes. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update or revise any forward-looking information, except in accordance with applicable securities laws.
Contacts
Jillian Friedman
Interim Chief Financial Officer & Chief Operating Officer
jillian@ethcap.co
