Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Galaxy Digital Holdings Ltd (BRPHF, Financial) reported a significant increase in counterparty trading revenue, generating approximately $90 million year-to-date, marking an 80% increase compared to the first half of 2023.
- The company has successfully onboarded over 1,200 Global Markets counterparties and increased its lending book by 5% quarter-over-quarter, indicating a gain in market share.
- GalaxyOne, the company's unified technology platform, has shown tangible growth with over 100 clients and $1.1 billion of fair market value assets being serviced.
- The Digital Infrastructure Solutions business reported exceptional growth, with assets under stake reaching $2.1 billion, a 340% increase quarter-over-quarter.
- Galaxy Digital Holdings Ltd (BRPHF) has made strategic acquisitions, such as the crypto manufacturer, enhancing its position as a leading technical partner in the digital asset ecosystem.
Negative Points
- The company reported a net loss of $177 million for the second quarter, primarily due to reduced value of digital assets.
- Trading volumes and revenues decreased quarter-over-quarter, in line with the broader crypto market decline.
- Asset Management business saw a 42% decrease in AUM quarter-over-quarter, driven by the monetization of FTX Estates digital asset holdings.
- The Bitcoin halving event in April reduced block rewards by 50%, impacting the company's mining operations.
- Operating expenses increased by approximately 16% quarter-over-quarter, partly due to accounting measures related to staking rewards.
Q & A Highlights
Q: Can you provide insights into the metrics indicating market share gains in the trading business, given the increase in your loan book despite declining volumes?
A: Christopher Ferraro, President and CIO, highlighted that the loan book's growth is a key metric, reflecting the firm's ability to generate good risk-adjusted returns. The focus is on integrating lending with trading opportunities, akin to a prime brokerage model, which is expected to scale the business further. Additionally, the derivatives volume has grown significantly, indicating market share gains despite a declining market.
Q: With the Helios asset's expansion potential, what are the plans for monetizing the additional electrical capacity?
A: Christopher Ferraro explained that the current 200 megawatts of capacity will be expanded to 500 megawatts by next year, with potential to reach 800 megawatts by 2027. The company is exploring various models, including partnerships for AI and HPC data centers, retrofitting existing capacity, and joint ventures, to best utilize this capacity.
Q: How would regulatory clarity impact Galaxy's business, especially in light of recent political developments?
A: Michael Novogratz, CEO, emphasized that regulatory clarity would reduce uncertainty, lower legal and accounting costs, and encourage asset managers to hold digital assets. This clarity is expected to unleash investment in the industry and improve confidence among market participants.
Q: Can you discuss Galaxy's strategy to manage digital asset price volatility and leverage during the quarter?
A: Michael Novogratz noted that while the firm's franchise businesses remained profitable, the balance sheet was impacted by the decline in crypto prices. The strategy involves maintaining a long bias on core assets while trading around others, with a focus on building recurring revenue streams to mitigate price volatility impacts.
Q: What is the outlook for Bitcoin mining economics, and how does it compare to potential HPC opportunities?
A: Christopher Ferraro stated that while hash rates are expected to increase, Galaxy's power management strategy provides a competitive advantage. The potential for higher value per megawatt in HPC applications could influence future hash rate dynamics, presenting opportunities for both Bitcoin mining and HPC ventures.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
