GLXY Galaxy Digital Holdings Ltd

Equity capital was $2.1 billion as of June 30, 2024

Net loss of $177 million for the second quarter, driven primarily by net losses on digital assets and investments as a result of a decline in digital asset markets

Net income of $245 million for the six months ended June 30, 2024, driven by strong operating performance and positive digital asset markets

Assets Under Stake of $3.3 billion as of July 18, 2024, up from $486 million at the end of March 2024

NEW YORK, Aug. 1, 2024 /CNW/ - Galaxy Digital Holdings Ltd. (TSX: GLXY) (the "Company" or "GDH Ltd.") today released financial results for the three months and six months ended June 30, 2024, for both itself and Galaxy Digital Holdings LP (the "Partnership" or "GDH LP"). In this press release, a reference to "Galaxy", "we", "our" and similar words refer to GDH Ltd., its subsidiaries and affiliates including GDH LP, or any one of them, as the context requires.

Corporate Updates

US Listing and Reorganization: Galaxy continues to work on completing its proposed reorganization and domestication to become a Delaware-incorporated company and subsequently list on the Nasdaq, upon completion of ongoing SEC review and subject to stock exchange, shareholder and applicable regulatory approvals of such transactions. On July 26, 2024, Galaxy filed an amendment to its registration statement responding to SEC comments, which is under review.

CryptoManufaktur Acquisition: On July 19, 2024, Galaxy announced that it acquired the assets of CryptoManufaktur ("CMF"), a blockchain node operator that provides trusted, secure services to decentralized protocols across the digital asset ecosystem. The addition of CMF brings approximately $1 billion in Ether assets under stake ("AUS"), raising the Company's total AUS to $3.3 billion as of July 18, 2024. As part of the transaction, CMF's seasoned three-person engineering team, led by founder Thorsten Behrens, joined Galaxy's Blockchain Infrastructure team, which provides staking and validator services to investors, protocols, and digital asset platforms.

Galaxy Global Markets

Galaxy Global Markets ("GGM") offers institutional-grade expertise and access to a broad range of digital asset products, including digital asset spot and derivatives trading, financing, capital markets and M&A advisory services to a diversified client base. GGM operates in two discrete business units – Trading and Investment Banking.

Trading

Trading reported counterparty trading revenue of $24 million in the second quarter. The decrease was primarily driven by lower trading volumes, which decreased by 19% quarter-over-quarter ("QoQ"), and unfavorable asset price movements. Despite the QoQ decrease, our counterparty trading business generated approximately $90 million in revenue year-to-date through June, a nearly 80% increase relative to the first half of 2023. Galaxy's average loan book size expanded to $699 million, driven by increased borrowing demand from both new and existing counterparties. Galaxy continues to onboard new counterparties, including large traditional institutions, and ended the second quarter with 1,212 total trading counterparties.

Investment Banking

Investment Banking successfully closed two deals in the second quarter, serving as the exclusive financial advisor to Toposware in its sale to Polygon and to another client on its strategic financing. In the quarter, Galaxy also served as the exclusive financial advisor to Bitstamp in its pending sale to Robinhood, which is expected to close in the first half of 2025 at which time Galaxy expects to recognize the revenue associated with this deal. Galaxy is executing against a pipeline of mandates representing $2.1 billion in potential deal value.

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KEY TERMS

Counterparty Trading Revenue: revenue from counterparty-facing activities from our Derivatives, Credit, Over-the-Counter Trading, and Quantitative Trading businesses, net of associated funding charges.

Loan Book Size (Average): average market value of all open loans, un-funded arrangements to finance delayed trading/settlement (for example over weekends), and uncommitted credit facilities in the period.

Active Trading Counterparties: counterparties with whom we have traded within the past 12 months and who are still onboarded with Galaxy's trading business.

Pipeline: the number of open engagements and transactions the Investment Banking team has in market.

Deal Value of Pipeline: the theoretical aggregate deal value associated with the Investment Banking pipeline. 

Galaxy Asset Management

Galaxy Asset Management ("GAM") provides investors access to the digital asset ecosystem via a diverse suite of institutional-grade investment vehicles that span passive, active, and venture strategies. 

GAM reported assets under management ("AUM") of approximately $4.6 billion and management and performance fees of $14.5 million in the second quarter, down 42% and 19% QoQ respectively, primarily driven by the continued successful liquidation of assets associated with an ongoing opportunistic mandate to unwind portfolios on behalf of the FTX estate and market depreciation. In the quarter, GAM announced a collaboration with State Street Global Advisors to develop a suite of manager-directed digital asset ETFs that will offer investors exposure to companies in the digital asset space, going beyond crypto and bitcoin. Subsequent to quarter-end, GAM, in partnership with Invesco, announced the launch of the Invesco Galaxy Ethereum ETF (ticker: QETH). GAM conducted a $113 million initial close for Galaxy Ventures Fund I LP at the end of June, a venture capital fund focused on investing in early-stage companies across crypto protocols, software infrastructure, and financialized applications.  

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KEY TERMS

Assets Under Management: all figures are unaudited. AUM is inclusive of sub-advised funds, committed capital closed-end vehicles, seed investments by affiliates, affiliated and unaffiliated separately managed accounts, engagements to unwind portfolios, and fund of fund products. Changes in AUM are generally the result of performance, contributions, withdrawals, liquidations and opportunistic mandate wins.

• AUM for committed capital closed-end vehicles that have completed their investment period is reported as NAV (Net Asset Value) plus unfunded commitment.
• AUM for quarterly close vehicles is reported as of the most recent quarter available for the applicable period.
• AUM for affiliated separately managed accounts is reported as NAV as of the most recently available estimate for the applicable period.

Passive Strategies: single- and multi-asset private funds, as well as a suite of regulated spot digital asset exchange-traded funds offered through partnerships with asset managers globally. 

Active Strategies: Galaxy's Liquid Crypto Fund and the management of certain opportunistic mandates.

Venture Strategies: organized around two investment themes: Interactive Ventures and Crypto Ventures. Galaxy Interactive invests at the intersection of content, technology, and social commerce, managing client capital across three funds. GAM's Crypto Ventures sleeve includes Galaxy's inaugural crypto venture fund, which is focused on investing in early-stage companies across crypto protocols, software infrastructure, and financialized applications, as well as two global, multi-manager venture funds and a subset of Galaxy's balance sheet venture investments. 

Galaxy Digital Infrastructure Solutions 

Galaxy Digital Infrastructure Solutions ("GDIS") consists of proprietary and hosted bitcoin mining services, GK8 self-custody technology solutions, and blockchain infrastructure.

Mining

Mining revenue was $24.0 million for the second quarter, relative to power purchase costs and external hosting expenses, net of curtailment credits, of $10.5 million, resulting in a 56% direct mining profit margin. The QoQ decrease in revenue was primarily driven by the Bitcoin halving in April. Currently, Galaxy has 200 megawatts of energized mining capacity and is bringing on an additional 300 megawatts of high-voltage capacity in the third quarter of 2025. Galaxy has firm capacity approval from both the Electric Reliability Council of Texas and the Wind Energy Transmission of Texas to scale up to 800 megawatts of power from the existing interconnect. In the first quarter, we expanded our campus by purchasing an additional 160 acres adjacent to Helios. We now have a total of 320 acres of contiguous land and have submitted additional load studies and a new interconnection request that are pending approval.

Blockchain Infrastructure and GK8

Blockchain Infrastructure and GK8 continue to build and invest in the technology that powers the digital assets ecosystem. Blockchain Infrastructure expanded its Assets Under Stake by 341% QoQ to $2.1 billion as of June 30th, with Galaxy growing to become one of the largest validators globally on the Solana network. As of July 18, 2024, AUS grew to $3.3 billion with the addition of approximately $1 billion in Ether AUS from the acquisition of CMF. GK8 continues to execute against its pipeline of enterprise clients.

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KEY TERMS

Hashrate Under Management: the total combined hashrate of active proprietary and hosted mining capacity managed by Galaxy.

Proprietary Mining Hashrate: the hashrate attributed to Galaxy owned and operated mining machines.

Hosted Mining Hashrate: the hashrate attributed to third-party machines operated by Galaxy for a client. 

Number of Proprietary BTC Mined: the total amount of bitcoin mined from proprietary mining operations.

Average Marginal Cost to Mine: the average marginal cost of production for each bitcoin generated during the period. The calculation excludes depreciation, mark-to-market on power contracts, and corporate overhead.

Assets Under Stake: all figures are unaudited. AUS reflects the total notional value of assets bonded to Galaxy validators, based on prices as of the end of the specified period. This includes certain Galaxy balance sheet assets, Galaxy affiliate assets, and third party assets.

GK8 Total Client Count: the total number of clients contracted to use GK8's technology solutions.

Summary of Operating Expenses

Overview of Second Quarter Operating Expenses:

• Compensation and compensation related expenses of $43 million were roughly flat QoQ.
• Equity based compensation decreased by approximately $6 million QoQ, primarily driven by fully vested high-priced equity grants issued in 2021, partially offset by new grants issued in 2022, 2023 and 2024 at lower share prices.
• General and administrative expenses declined by approximately $3 million from the first quarter of 2024, driven by lower mining costs and trading and commission expenses, partially offset by higher depreciation and amortization costs.
  • Mining costs decreased by approximately $5 million QoQ; reflecting our actively managed power strategy, leading to a reduction in electricity costs.
  • Trading commission expenses decreased by approximately $2 million QoQ, on account of lower trading volumes in the quarter.
  • Depreciation and amortization expenses increased by over $2 million QoQ, reflecting the additional depreciation from new mining machines and electrical infrastructure that were energized during the prior quarter.
• Professional fees of $14 million were slightly up QoQ.
• Staking costs was a new line item this quarter, and reflected the staking rewards that Galaxy generates from its AUS, which were paid to the delegators. This amount offsets the staking rewards received, which were included in the Lending and Staking revenue.
• Interest expense of $21 million was up approximately $1 million QoQ, reflecting our ability to source non-dilutive wholesale financing to help fund our Trading and Lending businesses and consistent with our risk management principles of sound Asset and Liability Management and maintaining substantial liquidity buffers.

GDH Ltd.'s Financial Highlights

As the only significant asset of GDH Ltd. is its minority interest in GDH LP, its results are driven by the results of GDH LP. GDH Ltd. accounts for its investment in this associate (GDH LP) using the equity method. The investment, initially recorded at cost, is increased or decreased to recognize GDH Ltd.'s share of the earnings and losses of GDH LP. The net comprehensive income (loss) of GDH Ltd. was $(49.4) million for the three months ended June 30, 2024 and $60.6 million for the six months ended June 30, 2024.

Earnings Conference Call

An investor conference call will be held today, August 1, 2024, at 8:30 AM Eastern Time. A live webcast with the ability to ask questions will be available at: https://investor.galaxy.com/. The conference call can also be accessed by investors in the United States or Canada by dialing 1-800-274-8461, or 1-203-518-9814 (outside the U.S. and Canada) using the Conference ID: GALAXY. A replay of the webcast will be available and can be accessed in the same manner as the live webcast on the Company's Investor Relations website. Through September 1, 2024, the recording will also be available by dialing 1-844-512-2921, or 1-412-317-6671 (outside the U.S. and Canada) and using the passcode: 11156334.

About Galaxy Digital Holdings Ltd. (TSX: GLXY) ("GDH Ltd.") and Galaxy Digital Holdings LP ("GDH LP")

Galaxy (TSX: GLXY) is a digital asset and blockchain leader providing access to the growing digital economy. We serve a diversified client base, including institutions, startups, and qualified individuals. Since 2018, Galaxy has been building a holistic financial platform spanning three complementary operating businesses: Global Markets, Asset Management, and Digital Infrastructure Solutions. Our offerings include, amongst others, trading, lending, strategic advisory services, institutional-grade investment solutions, proprietary bitcoin mining and hosting services, network validator services, and the development of enterprise self-custodial technology. The company is headquartered in New York City, with global offices across North America, Europe, and Asia. Additional information about Galaxy's businesses and products is available on www.galaxy.com. 

This press release should be read in conjunction with (i) GDH LP's Management Discussion and Analysis and Consolidated Financial Statements for the three and six months ended June 30, 2024 and (ii) GDH Ltd.'s Management Discussion and Analysis and Consolidated Financial Statements for the three and six months ended June 30, 2024 (together, the "Consolidated Financial Statements" and "MD&As"), which have been filed on SEDAR at www.sedarplus.ca.

Disclaimers and Additional Information

The TSX has not approved or disapproved of the information contained herein. The Ontario Securities Commission has not passed upon the merits of the disclosure record of Galaxy.

This press release is not an offer to buy or sell, nor is it a solicitation of an offer to buy or sell, interests in the fund or any advisory services or any other security or to participate in any advisory services or trading strategy. If any offer and sale of securities is made, it will be pursuant to the confidential offering memorandum of the fund (the Offering Memorandum or fund prospectus ("Prospectus")). Any decision to make an investment in the fund should be made after reviewing such Offering Memorandum or Prospectus, conducting such investigations as the investor deems necessary and consulting the investor's own investment, legal, accounting and tax advisors in order to make an independent determination of the suitability and consequences of an investment.

No Offer or Solicitation

As previously announced, the Company intends to complete its proposed reorganization and domestication to become a Delaware-based company, and subsequently list on the Nasdaq, upon completion of the SEC's ongoing review and subject to stock exchange approval of such listing. The proposed reorganization and domestication is subject to approval by shareholders the Company and applicable regulatory authorities, including the Toronto Stock Exchange. In connection with the proposed reorganization and domestication, the Company has filed a registration statement, including a management information circular/prospectus, with the SEC, which has not yet become effective. SHAREHOLDERS ARE ADVISED TO READ THE FINAL VERSIONS OF SUCH DOCUMENTS, WHEN AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders may obtain a free copy of the registration statement (including the management information circular/prospectus) and any other relevant documents from the SEC's website at http://www.sec.gov. Copies of the final versions of such documents can also be obtained, when available, without charge, via Galaxy's investor relations website: https://investor.galaxy.com/ The Company anticipates holding a shareholder meeting to seek approval following the effectiveness of the registration statement, and further details will be included in the management information circular to be mailed to shareholders and posted on the Company's SEDAR profile at www.sedarplus.ca. 

This document shall not constitute a solicitation of a proxy, consent or authorization with respect to any securities or in respect of the domestication or any of the other proposed reorganization transactions. This document does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote of approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction.

CAUTION ABOUT FORWARD-LOOKING STATEMENTS

The information in this document may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended and "forward-looking information" under Canadian securities laws (collectively, "forward-looking statements"). Our forward-looking statements include, but are not limited to, statements regarding our or our management team's expectations, hopes, beliefs, intentions or strategies regarding the future. Statements that are not historical facts, including statements about Galaxy's business pipelines for banking and Gk8, mining goals, focus on self custody and validator solutions and our commitment to the future of decentralized networks and the pending domestication and the related transactions (the "transactions"), and the parties, perspectives and expectations, are forward-looking statements. In addition, any statements that refer to estimates, projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "intend," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained in this document are based on our current expectations and beliefs concerning future developments and their potential effects on us taking into account information currently available to us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks include, but are not limited to: (1) the inability to complete the proposed domestication and reorganization transactions, due to the failure to obtain shareholder and stock exchange approvals, or otherwise; (2) changes to the proposed structure of the transactions that may be required or appropriate as a result of applicable laws or regulations or as a condition to obtaining shareholder or stock exchange approval of the transactions; (3) the ability to meet and maintain listing standards following the consummation of the transactions; (4) the risk that the transactions disrupt current plans and operations; (5) costs related to the transactions, operations and strategy; (6) changes in applicable laws or regulations; (7) the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; (8) changes or events that impact the cryptocurrency industry, including potential regulation, that are out of our control; (9) the risk that our business will not grow in line with our expectations or continue on its current trajectory; (10) the possibility that our addressable market is smaller than we have anticipated and/or that we may not gain share of it; and (11) the possibility that there is a disruption in mining impacting our ability to achieve expected results or change in power dynamics impacting our results, (12) any delay or failure to consummate the business mandates or achieve its pipeline goals in banking and Gk8, (13) liquidity or economic conditions impacting our business (14) regulatory concerns, technological challenges, cyber incidents or exploits on decentralized networks (15) those other risks contained in the Annual Information Form for the year ended December 31, 2023 available on the Company's profile at www.sedarplus.ca and its Management's Discussion and Analysis, filed on August 1, 2024. Factors that could cause actual results to differ materially from those described in such forward-looking statements include, but are not limited to, a decline in the digital asset market or general economic conditions; the possibility that our addressable market is smaller than we have anticipated and/or that we may not gain share of the stated addressable market; the failure or delay in the adoption of digital assets and the blockchain ecosystem; a delay or failure in developing infrastructure for our business or our businesses achieving our banking and Gk8 mandates; delays or other challenges in the mining business related to hosting, power or our mining infrastructure; any challenges faced with respect to decentralized networks, considerations with respect to liquidity and capital planning and changes in applicable law or regulation and adverse regulatory developments. Should one or more of these risks or uncertainties materialize, they could cause our actual results to differ materially from the forward-looking statements. We are not undertaking any obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise. You should not take any statement regarding past trends or activities as a representation that the trends or activities will continue in the future. Accordingly, you should not put undue reliance on these statements.

©Copyright Galaxy Digital 2024. All rights reserved.

Galaxy Digital Holdings LP's Consolidated Statements of Financial Position (unaudited)

Galaxy Digital Holdings LP's Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (unaudited)

Reportable segments (unaudited)

Income and expenses by each reportable segment of GDH LP for the three months ended June 30, 2024 are as follows:

Income and expenses by each reportable segment of GDH LP for the six months ended June 30, 2024 are as follows:

Income and expenses by each reportable segment of GDH LP for the three months ended June 30, 2023 are as follows:

Income and expenses by each reportable segment of GDH LP for the six months ended June 30, 2023 are as follows:

Assets and liabilities by reportable segment of GDH LP as of June 30, 2024 are as follows:

Assets and liabilities by reportable segment of GDH LP as of December 31, 2023 are as follows:

Select statement of financial position information

Select assets by reporting segment of GDH LP as of June 30, 2024 is as follows:

Select assets by reporting segment of GDH LP as of December 31, 2023 is as follows:

Net Digital Assets Position

Net digital assets includes all digital assets categorized as assets, less all digital assets categorized as liabilities on the statement of financial position and is included in the Company's liquidity measure. Net digital assets as of June 30, 2024 and December 31, 2023 is as follows:

 All figures are in U.S. Dollars unless otherwise noted.

SOURCE Galaxy Digital Holdings Ltd.