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Galaxy Digital Announces First Quarter 2022 Financial Results

05/09/2022

Net comprehensive loss of $111.7 million against large digital asset price declines within quarter
Partners' Capital increased 50% versus first quarter 2021 to $2.5 billion
Record Contributions from Operating Business Lines of Investment Banking and Mining in quarter
The Company surpassed 800 institutional trading counterparties onboarded

NEW YORK, May 9, 2022 /CNW/ - Galaxy Digital Holdings Ltd. (TSX: GLXY) ("Galaxy Digital" the "Company" or "GDH Ltd.") today released financial results for the three months ended March 31, 2022 for both itself and Galaxy Digital Holdings LP (the "Partnership" or "GDH LP").

"Galaxy demonstrated yet another strong quarter against the backdrop of digital asset price declines, and I am proud to see the durability and sustained profitability of our operational business lines, including record contributions from our Investment Banking and Mining segments," said Michael Novogratz, Founder and CEO of Galaxy Digital.

"We continue to invest in our people, platforms, and technology as we build the pre-eminent technology-driven financial services and investment management firm."

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

Select Financial Highlights for the First Quarter 2022

  • Net comprehensive loss was $111.7 million, compared to an $858.2 million gain in the prior year period.
    • The decrease was primarily related to unrealized losses on digital assets and on investments in our Trading and Principal Investment businesses, partially offset by profitability in our Investment Banking and Mining businesses and lower operating expenses.  
    • Within the quarter, The Company's operating business lines of Asset Management, Investment Banking and Mining were profitable in aggregate, contributing $0.6 million to net comprehensive income in the quarter.
    • Investment Banking and Mining segments both demonstrated record revenue and net comprehensive income in the quarter. Net comprehensive income in Investment Banking grew 775% and in Mining grew 433% compared to the same period last year.
  • Partners' Capital was $2.5 billion at the end of the quarter, up 50% from $1.7 billion in the prior year period.
    • During the quarter, Partners' Capital decreased 3% to $2.5 billion, from $2.6 billion, due to losses on our net long digital asset positions.
      • This decrease was against the backdrop of a total cryptocurrency market capitalization decrease of approximately 7% during the quarter.[1]
      • Total value locked in decentralized finance (or "DeFi") for the sector has decreased approximately 18% quarter-over-quarter to $80 billion during the first quarter 2022.[2]
    • As of March 31, 2022, the Partnership's material net holdings, excluding non-controlling interests, included a net digital asset[3] position of $910.5 million, compared to $1.3 billion at the end of the same period last year. The decrease in net digital asset3 position was primarily driven by a decrease in digital asset prices. As a reminder, we actively manage our net long digital asset holdings, including our material net holdings, to participate in the upside from favorable asset price changes, and mitigate the impacts of adverse movements.
    • Investments stood at $1.0 billion as of March 31, 2022, a decrease of $64 million from December 31, 2021. The reduction was primarily driven by partially exiting highly appreciated investments during this quarter, with realizations that were greater than the value of new investments made during this period, as well as lower marks on certain investments, due to lower market prices.

 

________________________________

1 Represents coinmarketcap.com total cryptocurrency market capitalization quoted price. 
2 Represents total value locked in DeFi according to defipulse.com
3 Net digital assets includes all digital assets categorized as assets, less all digital assets categorized as liabilities on the statement of financial position, less noncontrolling interests liabilities.

 

Operating Highlights for the First Quarter 2022

  • Galaxy Digital Trading ("GDT") reported continued growth in client count and revenue from our counterparty loan and yield portfolio, against decreased counterparty trading volumes and digital asset price declines within the quarter.
    • For the quarter ended March 31, 2022, cumulative client-facing trading and lending, which consists of electronic and derivatives liquidity provisioning, our quantitative execution strategies, and our counterparty lending, continued to contribute positively to total GDT net revenues (consisting of net realized gains, net unrealized gains, and net interest income), offsetting approximately one-third of the comprehensive loss within GDT for the quarter.
    • Within the quarter, GDT onboarded over 50 new counterparties to our trading platform, bringing our total trading counterparties to over 800, and continues to provide liquidity in over 100 cryptocurrencies.
    • Counterparty trading volumes decreased by 30% from the quarter ended December 31, 2021, but increased over 50% year over year.
    • GDT's counterparty loan and yield portfolio grew 20% sequentially quarter over quarter and 100% year over year to approximately $910 million, and the Company grew cumulative gross counterparty loan originations year over year to approximately $915 million.
  • Galaxy Digital Asset Management ("GDAM") reported preliminary assets under management ("AUM")[4] of $2.7 billion as of March 31, 2022, a 5% decrease from the quarter ended December 31, 2021. AUM consisted of $2 billion in GDAM's Galaxy Fund Management products, and $735 million in the Galaxy Interactive venture franchise.[5]
    • GDAM continues to successfully fundraise within both our Galaxy Interactive venture franchise, and our Galaxy Vision Hill Fund of Funds business.
    • Within the quarter, the Galaxy Interactive venture franchise grew AUM to $735 million.
    • Galaxy Vision Hill Asset Management, an investment manager under Galaxy Fund Management, is expected to grow to over $200 million in AUM with the first close of the GVH Venture FOF II LP, a diversified, multi-manager fund of funds investing in the disruptive potential of blockchain technology and the next iteration of the internet across Web3, DeFi, and digital ownership. 
    • Additional new product launches within the quarter included the CI Galaxy Multi-Crypto ETF in February 2022, in continuation of our partnership with CI Global Asset Management.
  • Galaxy Digital Investment Banking ("GDIB") advised on the successful close of four transactions during the quarter, in addition to the announcement of one business combination involving one special purpose acquisition company ("SPAC"). The team is actively executing on several mandates for leading companies in the blockchain and cryptocurrency ecosystem.
    • GDIB demonstrated record revenue of $8.0 million and net comprehensive income of $5.8 million in the quarter.
    • Within the first quarter 2022, GDIB completed the following transactions:
      • Served on two fundraisings: Qredo's $80 million Series A financing, where we were the exclusive financial advisor and sole placement agent, and Compute North's $80 million Series C financing, where we served as sole placement agent to Compute North on the $85 million equity component.
      • As a continuation of GDIB's relationship with Blockdaemon, a leading blockchain infrastructure company for node management and staking, our team acted as exclusive financial advisor on Blockdaemon's acquisition of Gem in March 2022.
      • In addition, GDIB advised a leading blockchain protocol on the acquisition of an entertainment company. The transaction was successfully closed but has not yet been publicly announced.
      • GDIB also served as financial advisor to Thunder Bridge Capital Partners IV, Inc., a SPAC, on its business combination agreement with Coincheck, a multi-cryptocurrency marketplace and digital asset exchange.
  • Galaxy Digital Mining ("GDM") continued to expand both its proprietary bitcoin mining operation and mining finance ("MiFi") offerings to support the full breadth of the bitcoin mining ecosystem, while maintaining an over 80% sustainable energy mix for all proprietary mining operations as of March 31, 2022.
    • GDM demonstrated record revenue of $9.8 million and net comprehensive income of $5.0 million in the quarter.
    • Proprietary mining operations continued to mine bitcoin at a marginal cost significantly lower than fair market value.
    • GDM remains on track to achieve over 2,500 Petahash per second (PH/s) of mining capacity for both proprietary and miner-finance operations, from monthly deliveries by the end of 2022.
  • Principal Investments ("GDPI"): The Company now holds 132 investments across 93 portfolio companies as of March 31, 2022. Within the first quarter 2022, GDPI made investments in a number of companies including Gensyn and Encode, and follow-on investments for existing portfolio companies like Certora.

 

__________________________________

4 AUM is an internal estimate inclusive of a sub-advised fund, committed capital in a closed-end vehicle, and seed investments by affiliates. Changes in AUM are generally the result of performance, contributions, and withdrawals.
5 Represents $722 million committed capital in Galaxy Interactive funds.  

 

Earnings Conference Call

An investor conference call will be held today, May 9, 2022 at 8:30 AM Eastern Time. A live webcast with the ability to ask questions will be available at: https://www.galaxydigital.io/investor-relations. The conference call can also be accessed by investors in the United States or Canada by dialing 1-877-300-8521, or 1-412-317-6026 (outside the U.S. and Canada). 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 May 30, 2022 the recording will also be available by dialing 1-844-512-2921, or 1-412-317-6671 (outside the U.S. and Canada) passcode: 10166425.

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

Galaxy Digital (TSX: GLXY) is a technology-driven financial services and investment management firm that provides institutions and direct clients with a full suite of financial solutions spanning the digital assets ecosystem. Galaxy Digital operates in the following businesses: Trading, Asset Management, Investment Banking, Mining and Principal Investments. Galaxy Digital's CEO and Founder is Mike Novogratz. The Company is headquartered in New York City, with offices in Chicago, Jersey City, London, Amsterdam, Tokyo, Hong Kong, and the Cayman Islands (registered office).

Additional information about the Company's businesses and products is available on www.galaxydigital.io.

This press release should be read in conjunction with (i) GDH LP's Management Discussion and Analysis and Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2022 and (ii) GDH Ltd.'s Management Discussion and Analysis and Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2022 (together, the "Consolidated Financial Statements" and "MD&As"), which have been filed on SEDAR at www.sedar.com.

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 Digital.

The information contained herein is provided for informational purposes only, is not complete, and does not contain certain material information about any fund, including important disclosures and risk factors associated with an investment in a fund, and is subject to change without notice. This information is not intended to be, nor should it be construed or used as an offer to sell, or a solicitation of any offer to buy, shares or limited partnership interests in a fund. Investing in a fund and digital assets involves a substantial degree of risk. There can be no assurance that the investment objectives of a fund will be achieved. Any investment in a fund may result in a loss of the entire amount invested. Fund of funds subjects a fund to additional risks and expenses of the underlying funds.

No Offer or Solicitation

In connection with the proposed reorganization and combination with BitGo, the Company has filed a registration statement, including a management information circular/prospectus and a consent solicitation statement/prospectus, with the SEC, which has not yet become effective. GALAXY AND BITGO 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 the consent solicitation statement/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 Digital's investor relations website: https://investor.galaxydigital.io

The proposed reorganization and domestication is subject to approval by shareholders of the Company and applicable regulatory authorities, including the Toronto Stock Exchange. 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.sedar.com

This release shall not constitute a solicitation of a proxy, consent or authorization with respect to any securities or in respect of any of the proposed transactions. This release 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 release 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 (the "Exchange Act") 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, including with respect to mining capacity. Statements that are not historical facts, including statements about the pending acquisition, 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. Forward-looking statements in this release may include, for example, statements about: our ability to complete the transactions within a particular timeframe. The forward-looking statements contained in this release 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 reorganization transactions or combination with BitGo, due to the failure to obtain shareholder, regulatory and stock exchange approvals, the failure to satisfy any other conditions to closing, 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 or satisfying any other conditions to closing; (3) the outcome of any legal proceedings that may be instituted following the transactions and any definitive agreements with respect thereto; (4) the ability to meet and maintain listing standards following the consummation of the transactions; (5) the risk that the transactions disrupt current plans and operations; (6) costs related to the transactions; (7) changes in applicable laws or regulations; (8) the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; (9) changes or events that impact the cryptocurrency industry, including potential regulation, that are out of our control; (10) the risk that our business will not grow in line with our expectations or continue on its current trajectory; (11) the possibility that our addressable market is smaller than we have anticipated and/or that we may not gain share of it; (12) the Company's ordinary shares may experience price and trading volume volatility, (13) those other risks contained in the Annual Information Form for the year ended December 31, 2021 available on the Company's profile at www.sedar.com and (14) other risks and uncertainties to be indicated from time to time in filings made with the SEC. 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.

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

(in thousands)

March 31, 2022


December 31, 2021

Assets




Current assets




Cash

$                         848,205


$                         811,129

Digital assets

2,265,442


2,420,777

Receivable for digital asset trades

10,219


8,332

Digital assets loans receivable

172,849


192,684

Digital assets receivables

50,355


52,998

Assets posted as collateral

131,623


71,400

Receivables

120,925


26,665

Due from broker

85,972


29,647

Derivative assets

45,744


45,669

Prepaid expenses and other assets

101,609


66,793

Loans receivable

303,534


190,087

Due from related party

6,619


25,023

Total current assets

4,143,096


3,941,204





Digital assets receivables

35,737


18,659

Investments

1,006,187


1,069,776

Right of use asset

11,300


11,746

Property and equipment

33,191


17,162

Deferred tax asset

13,325


10,259

Intangible asset

2,777


3,087

Goodwill

24,645


24,645

Total non-current assets

1,127,162


1,155,334

Total assets

$                     5,270,258


$                     5,096,538





Total assets








Liabilities and equity




Current liabilities




Investments sold short

25,403


11,600

Derivative liabilities

31,654


25,567

Warrant liability

17,802


20,488

Accounts payable and accrued liabilities

89,442


146,243

Payable to customers

138,119


142,441

Taxes payable

43,977


42,341

Payable for digital asset trades

20,771


13,216

Digital assets loans payable

864,525


905,013

Loans payable

129,236


33,289

Collateral payable

755,315


480,088

Lease liability

2,381


2,164

Non-controlling interest liability

147,760


161,536

Total current liabilities

2,266,385


1,983,986





Notes payable

472,361


475,330

Deferred tax liability

8,512


25,608

Lease liability

12,631


13,233

Total non-current liabilities

493,504


514,171

Total liabilities

2,759,889


2,498,157





Equity




Partners' capital

2,510,369


2,598,351

Total equity

2,510,369


2,598,351





Total liabilities and equity

$                     5,270,258


$                     5,096,508

 

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

(in thousands)

Three Months Ended
March 31, 2022

Three Months Ended
March 31, 2021

Income



Advisory and management fees

$                           11,873

$                             1,913

Net realized gain (loss) on digital assets

354,981

730,712

Net realized gain (loss) on investments

69,438

151,138

Interest income

14,635

8,533

Net derivative gain (loss)

81,977

(45,185)

Net income from digital asset mining

6,738

923

Leasing income from mining equipment

3,071

506

Other income

847

1,187


543,560

849,727




Operating expenses



Compensation and compensation related

40,548

94,952

Equity based compensation

22,762

7,099

General and administrative

17,255

5,341

Professional fees

9,591

4,566

Profit share arrangement expense

4,134

Interest

12,807

13,792

Notes interest expense

7,274

Insurance

498

150

Director fees

195

208


(110,930)

(130,242)




Net unrealized gain (loss) on digital assets

(500,271)

362,909

Net unrealized gain (loss) on investments

(74,128)

58,282

Net gain (loss) on notes payable - derivative

6,493

Net gain (loss) on warrant liability

2,521

(36,817)

Foreign currency gain (loss)

2,017

2,718

(Gain) loss attributable to non-controlling interests liability

13,411

(248,619)


(549,957)

138,473




Income (loss) before income taxes

(117,327)

857,958

Income taxes

(6,119)

Net income (loss) for the period

$                       (111,208)

$                         857,958




Other comprehensive income (loss)



Foreign currency translation adjustment

$                               (468)

$                                 284




Net comprehensive income (loss) for the period

$                       (111,676)

$                         858,242

 


Three Months Ended
March 31, 2022

Three Months Ended
March 31, 2021

Net income (loss) per unit:



Basic

(0.34)

2.74

Diluted

(0.34)

2.51

Weighted average units:



Basic

328,623,310

313,764,142

Diluted

328,623,310

342,182,536

 

Reportable segments (unaudited)

Income and expenses by each reportable segment of GDH LP for the three months ended March 31, 2022 are as follows (in thousands):

(in thousands)

Trading

Principal Investments

Asset Management

Investment Banking

Mining

Corporate and Other

Totals

Income (loss)








Advisory and management fees

$                  —

$                  —

$             3,862

$             8,011

$                  —

$                  —

$           11,873

Net realized gain (loss) on digital assets

356,689

(2,856)

1,148

354,981

Net realized gain (loss) on investments

(4,023)

73,461

69,438

Interest income

14,615

20

14,635

Net derivative gain

81,977

81,977

Net income from digital asset mining

6,738

6,738

Leasing income from mining equipment

3,071

3,071

Other income

122

725

847


449,380

71,350

5,010

8,011

9,809

543,560









Operating expenses

42,073

2,731

13,350

2,179

5,278

45,319

110,930









Net unrealized gain (loss) on digital assets

(474,716)

(11,369)

(14,650)

464

(500,271)

Net unrealized gain (loss) on investments

345

(73,835)

(638)

(74,128)

Net gain on notes payable - derivative

6,493

6,493

Net gain on warrant liability

2,521

2,521

Foreign currency gain

2,017

2,017

Loss attributable to non-controlling interests liability

13,411

13,411


(472,354)

(85,204)

(1,877)

464

9,014

(549,957)









Income tax expense

6,119

6,119

Net income (loss) for the period

$          (65,047)

$          (16,585)

$          (10,217)

$             5,832

$             4,995

$          (30,186)

$        (111,208)

Foreign currency translation adjustment

(468)

(468)

Comprehensive income (loss) for the period

$          (65,047)

$          (16,585)

$          (10,217)

$             5,832

$             4,995

$          (30,654)

$        (111,676)

 

Income and expenses by each reportable segment of GDH LP for the three months ended March 31, 2021 are as follows (in thousands):

(in thousands)

Trading

Principal Investments

Asset Management

Investment Banking

Mining

Corporate and Other

Totals

Income (loss)








Advisory and management fees

$                  95

$                  —

$             1,818

$                  —

$                  —

$                  —

$             1,913

Net realized gain on digital assets

544,400

45,515

140,797

$         730,712

Net realized gain on investments

151,138

$         151,138

Interest income

8,511

22

$             8,533

Net derivative loss

(45,185)

$          (45,185)

Net income from digital asset mining

923

$                923

Leasing income from mining equipment

506

$                506

Other income

866

321

$             1,187


508,687

196,996

142,615

1,429

849,727









Operating expenses

73,811

10,349

4,236

864

715

40,267

130,242









Net unrealized gain on digital assets

158,617

94,818

109,251

223

362,909

Net unrealized gain on investments

58,282

58,282

Net gain (loss) on warrant liability

(36,817)

(36,817)

Foreign currency gain

2,718

2,718

(Gain) attributable to non-controlling interests liability

(248,619)

(248,619)


161,335

153,100

(139,368)

223

(36,817)

138,473









Net income (loss) for the period

$         596,211

$         339,747

$               (989)

$               (864)

$                937

$          (77,084)

$         857,958

Foreign currency translation adjustment

284

284

Net comprehensive income (loss) for the period

$         596,211

$         339,747

$               (989)

$               (864)

$                937

$          (76,800)

$         858,242

 

Assets and liabilities by reportable segment of GDH LP as of March 31, 2022 are as follows (in thousands):

(in thousands)

Trading

 Principal
Investments

Asset
Management

Investment
Banking

Mining

Corporate and
Other

Totals

Total assets

$        3,102,693

$        1,339,486

$           138,666

$             20,591

$           301,825

$           366,997

$        5,270,258

Total liabilities

$        1,991,017

$                  442

$           159,148

$               2,132

$               4,175

$           602,975

$        2,759,889

 

Assets and liabilities by reportable segment of GDH LP as of December 31, 2021 are as follows (in thousands):

(in thousands)

Trading

 Principal
Investments

Asset
Management

Investment
Banking

Mining

Corporate and
Other

Totals

Total assets

$       2,971,090

$       1,277,707

$          193,436

$            10,727

$          292,942

$          350,636

$        5,096,538

Total liabilities

$       1,666,488

$                 174

$          171,784

$                 122

$              3,202

$          656,417

$        2,498,187

Select statement of financial position information

The fair value of each asset class by reporting segment of GDH LP as of March 31, 2022 is as follows (in thousands):

(in thousands)

Trading

Principal Investments

Asset Management

Investment Banking

Mining

Corporate and Other

Totals

Digital assets

$       1,990,625

$          109,997

$           146,983

$                 —

$      17,837

$                —

$       2,265,442

Digital assets receivables

86,092

86,092

Digital assets posted as collateral

131,623

131,623

Investments:








Pre-Launch Network

5,938

5,938

Convertible Notes

5,358

4,788

10,146

Preferred Stock

393,013

393,013

Common Stock

32,998

238,906

271,904

LP/LLC Interests

316,907

316,907

Warrants/Trust Units/Trust Shares

8,279

8,279


$       2,160,604

$       1,163,920

$           146,983

$                 —

$      17,837

$                —

$       3,489,344

 

The fair value of each asset class by reporting segment of GDH LP as of December 31, 2021 is as follows (in thousands):

(in thousands)

Trading

Principal Investments

Asset Management

Investment Banking

Mining

Corporate and Other

Totals

Digital assets

$     2,121,772

$        123,210

$        165,300

$                 —

$          10,495

$                 —

$     2,420,777

Digital assets receivables

71,657

71,657

Digital assets posted as collateral

71,400

71,400

Investments:








Pre-Launch Network

6,393

6,393

Convertible Notes

9,768

9,768

Preferred Stock

382,182

382,182

Common Stock

34,991

236,303

271,294

LP/LLC Interests

383,279

383,279

Warrants/Trust Units

7,963

8,897

16,860


$    2,236,126

$    1,221,689

$       165,300

$                —

$        10,495

$                —

$    3,633,610

 

SOURCE Galaxy Digital Holdings Ltd.

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