Ether Capital Corporation Reports 2023 Q3 and YTD Financial Results
TORONTO, November 13, 2023--(BUSINESS WIRE)--Ether Capital Corporation ("Ether Capital" or the "Company") (NEO: ETHC) announces the reporting of its unaudited interim consolidated financial results for the three-month and nine-month periods ended September 30, 2023.
In June 2023, the Company announced its commitment to a more efficient operating model marked by three key strategies:
Significantly reducing operating expenses, particularly through streamlining employee numbers and focusing on essential business functions.
Focused efforts to maximize returns from its Ether treasury by allocating approximately 98% of its holdings to yield-generating staking activities and by transitioning these activities from third-party vendors to the company’s own in-house proprietary infrastructure at a lower cost and with great intellectual property retention, and;
The initiation of a Normal Course Issuer Bid (NCIB) to use the company's balance sheet to buy back shares, delivering immediate value to shareholders.
By way of update, during the quarter ended September 30, 2023, the Company:
Announced an increase in Staked Ether from 36,000 to 39,520 Ether units.
Began to stake its Ether on its proprietary in-house infrastructure. The amount of Ether staked on its in-house infrastructure during Q3 was 3,520 Ether or 8.9% of all units of Ether staked.
Earned year to date staking rewards of 1,372.5 Ether equal to $3.2 million.
Implemented a reduction in employee-related overhead expenses of $0.8 million on an annualized basis.
Repurchased 318,600 shares under its NCIB at a weighted average share price of $1.84 per share, for a total cash consideration of $587,646. Total shares repurchased represent a reduction of 1.4% of the public float of issued and outstanding shares from the time the NCIB program was commenced in June 2023.
As at November 10, 2023, the Company:
Had a treasury of 46,393 Ether (staked and non-staked), valued at approximately $133.7 million.
Allocated an additional 5,920 Ether to staking, for a total of 45,440 Ether staked.
Begun transitioning from its third-party provider’s staking infrastructure to its internal infrastructure, with 22% of the Company’s staked Ether staked on its internal infrastructure.
Repurchased 553,600 shares under its NCIB, for a total cash consideration of $1,011,658.
Management Commentary
"The execution of our strategy has had a positive impact on our financial results. We believe these actions will help position the Company for continued positive net income after tax and to generate positive cashflow (or cash equivalent, specifically digital assets) provided by operating activities," said Jillian Friedman, COO and interim CFO.
Highlights of our financial results include:
Total revenue was $1.2 million ($0.7 million in Q3 2022) an increase of 68%, and $3.8 million ($3.0 million in 2022) for the three- and nine-month periods ended September 30, 2023.
The Company incurred Operating Expenses of $0.76 million versus $1 million in Q3 2022, a 26% decrease, and for the nine-month period ended September 30, 2023 operating expenses were $2.9 million versus $3 million, a 3% decrease.
The Company was cash-flow positive, with Revenue less Operating Expenses before Impairment and Revaluation Expenses of $0.4 million, and $1 million respectively for the three- and nine-month periods ended September 30, 2023 (versus ($0.3) million, and $7 thousand for the same periods in 2022).
The total value of digital assets held by the Company was $105 million as at September 30, 2023 versus $73 million on December 31, 2022, a 44% increase over the nine month period.
The shareholders’ equity as at September 30, 2023 was $104.5 million compared to $75.6 (December 31, 2022), an increase of 38%. The shareholders’ equity per share also increased from $2.24 per share to $3.08 per share during this nine-month period.
Staking Developments
Over the last quarter the Company staked an additional 3,520 Ether, representing 9% of its treasury, bringing its total staking ether exposure to 39,520. In-house infrastructure was deployed for all new ether staked from its treasury over the quarter and subsequent to the quarter end. The Company invested approximately $22,000 in equipment for its staking infrastructure during the quarter and continues to build intellectual property by retaining its technical team. The Company incurred staking provider fees during the quarter of $44,231.
Restructuring
In June 2023, the Company announced a restructuring intended to manage the Company’s operating expenses in response to the ongoing market conditions impacting the digital asset economy in order to optimize the net profitability of the Company. The intention was to reduce annual cash operating expenses materially by an estimated reduction of more than 45% over projected cash operating expenses for the current fiscal year, largely achieved through reductions of staff and anticipated new development expenses. The full effects of the new operating cost structure are expected to be in effect by the first quarter of fiscal year 2024.
Over the quarters ended June 30 and September 30, the Company completed the staff reduction component of the restructuring, resulting in a reduction in employee-related expenses of $0.8 million on an annualized basis.
The Company does not expect to incur any additional charges in connection with the 2023 Restructuring and the cash payments of approximately $130,000 associated with this restructuring were completed during the third quarter of 2023.
NCIB
On June 15, 2023, the Company announced that it had received approval to implement a Normal Course Issuer Bid (the "NCIB") with the NEO Exchange for the purchase of up to 7.5% of its Common Shares. During Q3 2023, 318,600 shares were purchased and cancelled for a cost of $587,647 including commissions.
Revenue Highlights
The Company’s Revenue increased 68% in Q3 2023 compared to Q3 2022, $1.2 million versus $0.7 million in Q3 2022. For the nine-month period ended September 30, 2023, the Company’s revenue was 29% higher than the comparable period in 2023, $3.8 million ($3.0 million in 2022).
Total Staked Ether Rewards Revenue was $1.1 million in Q3 2023 vs. $0.5 million in Q3 2022, a 130% increase. For the nine-month period ended September 30, 2023, the Staked Ether Rewards Revenue was $3.2 million compared to $1.9 million in 2022, an increase of 72%.
The amount of Staked Ether, which was generating a yield, was much higher at the end of Q3 2023 (39,520 ETH) compared to the end of Q3 2022 (20,512 ETH). This is a major factor contributing to the increase in revenue in the three- and nine-month periods ending September 30, 2023.
The staking yield for the Company was 4.94% for the three-month period ended September 30, 2023 (4.72% in Q3 2022) and 5.3% for the nine-month period ended September 30, 2023 (4.8% in Q3 2022). The Staked Ether generated Execution Layer Rewards from September 15, 2022 onwards and this increased the overall Staking Rewards yield in the 2023 period compared to the 2022 period.
Staking Yield
Q3 2023 | Q3 2022 | YTD Sep 2023 | YTD Sep 2022 | ||
Consensus Layer Rewards | 346.3 | 242.0 | 946.5 | 674.5 | |
Execution Layer Rewards | 109.6 | 0 | 426.0 | 0 | |
Total Staked Ether Rewards | 455.9 | 242.0 | 1,372.5 | 674.5 | |
Average Staked Ether | 36,939 | 20,512 | 34,694 | 18,899 | |
Yield | 4.94% | 4.72% | 5.29% | 4.78% | |
Revenue in $ | $1,088,768 | $473,879 | $3,242,236 | $1,882,965 |
Additionally, the Company earned Consulting Fees for the three-month period ended September 30, 2023 of $0.09 million (2022 Q3 - $0.2 million). Consulting Fee revenue is based on an agreement with Purpose Investments Inc. ("Purpose"), a related party. The Consulting Fees varied materially on a quarterly basis due to the volatility of prices for Bitcoin and Ether and by net sales/redemption activity in the ETFs. This quarter was also affected by the new terms of consulting agreement with Purpose Investments. The fee reduction is different for each ETF and the blended reduction is estimated between 75% and 80%. In general, net sales of the ETFs are positive during periods when digital assets are in favour and have price momentum. The table below includes the revenue by quarter and the average daily AUM within the family of crypto currency ETFs at Purpose each quarter.
Q3 2022 | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | |
Consulting Fees | $218,226 | $183,531 | $222,143 | $211,443 | $86,404 |
Average AUM | $923 MM | $767 MM | $924 MM | $1,027 MM | $1,209 MM |
Operating Expenses
Operating Expenses decreased 26% in the quarter in Q3 2023 to $0.8 million primarily due to reduced salaries, benefits and share-based compensation expenses relative to the comparable period in 2022 ($1.0 million) as a result of the previously discussed cost optimization efforts. Ether Capital was assessing the launch of new products and business lines during Q1 and Q2 2023. In June 2023, the Company reoriented towards a lean and efficient operating model focused on maximizing staking exposure. As at September 30, 2023, there were 4 full time employees and 2 part time contractors compared to 8 full time employees and 1 full time contractor, and 2 part time contractors on June 30, 2023.
The full effects of the employee reduction on operating expenses are expected to be visible in the next quarter and on a go forward basis.
Q3 2023 | Q3 2022 | Change | |
Revenue | $1,188,247 | $706,179 | 68% |
Operating Expenses | $761,394 | $1,027,141 | (26%) |
Revenue less Operating Expenses before Impairment and Revaluation Expenses | $426,853 | ($320,962) | 233% |
For the nine-month period ended September 30, 2023, Revenue less Operating Expenses before Impairment and Revaluation expenses was $1.0 million ($0.007 million in 2022).
YTD Sep 30, 2023 | YTD Sep 30, 2022 | Change | |
Revenue | $3,831,033 | $2,960,131 | 29% |
Operating Expenses | $2,867,198 | $2,953,544 | (3%) |
Revenue less Operating Expenses before Impairment and Revaluation expenses | $963,835 | $6,587 | 14532% |
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.
The content of this document is for informational purposes only and is not being provided in the context of an offering of any securities described herein, nor is it a recommendation or solicitation to buy, hold or sell any security. The information is not investment advice, nor is it tailored to the needs or circumstances of any investor. Information contained in this document is not, and under no circumstances is it to be construed as, an offering memorandum, prospectus, advertisement, or public offering of securities. No securities commission or similar regulatory authority has reviewed this document and any representation to the contrary is an offence. Information in this press release is current only as of the date provided and Ether Capital is under no obligation to update this information, other than in accordance with applicable securities laws.
Non-IFRS Measures
The Company’s condensed consolidated 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. 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 March 31, 2023, the Risk Factors section in its most recently filed Management Discussion and Analysis and its 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.
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Contacts
Brian Mosoff
Chief Executive Officer
brian@ethcap.co
Jillian Friedman
Interim Chief Financial Officer & Chief Operating Officer
jillian@ethcap.co
