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Freedom Holding Corp. Reports Third Quarter Fiscal Year 2024 Financial Results
[February 12, 2024]

Freedom Holding Corp. Reports Third Quarter Fiscal Year 2024 Financial Results


Freedom Holding Corp. (NASDAQ: FRHC) (the "Company"), a diversified financial services holding company with operations in the Central Asia and Eastern Europe, Europe Excluding Eastern Europe, the United States, and the Middle East/Causaus, today announced the financial results for their third quarter and nine months ended December 31, 2023, of fiscal 2024. Highlights include the following:

  • $419 million in revenue
  • Net income of $96 million, or $1.63 earnings per share, diluted
  • Operating expenses of $307 million
  • 177% increase in insurance underwriting premiums to approximately $79 million
  • New branch offices now include Italy, The Netherlands, Austria, and Bulgaria

Third Quarter Financial Highlights:

The Company recognized revenue of approximately $419 million for the third quarter of fiscal 2024, compared to $214 million in the third quarter of fiscal 2023, a 96% increase. The Company's operating expense was approximately $307 million in the third quarter of fiscal 2024 compared to $163 million for the same period last year, an increase of approximately 89%.

Net income was approximately $96 million for the third quarter of fiscal 2024 compared to $62.4 million for the same period in fiscal 2023, a 54% increase, providing for basic and diluted earnings per share of $1.65 and $1.63, respectively. This compares to $1.06 and $1.05 for the same period last year. Weighted average common shares outstanding used to compute diluted earnings per share for the three-month periods ended December 31, 2023, and 2022 were 59.3 million basic and 59.5 million, respectively.

Nine Months Year to Date Financial Highlights:

For the nine months ending December 31, 2023, the Company's revenue totaled approximately $1.2 billion compared to $567 million for the prior year period, an increase of 107%. The Company's operating expense was $840 million for the period as compared to $401 million in the prior year period.

Net income was approximately $279 million for the first nine months of fiscal 2024, compared to $149 million for the same period in 2023, providing for basic and diluted earnings per share of $4.79 and $4.73, respectively. This compares to $2.54 and $2.50 for the same period last fiscal year. Weighted average common shares outstanding used to compute diluted earnings per share for the nine-month periods ended December 31, 2023, and 2022 were 59.3 million and 59.5 million, respectively.

Balance Sheet Highlights:

Total assets were $7.5 billion on December 31, 2023, as compared to $5.1 billion on the March 31, 2023, fiscal year-end. Net working capital increased to $1.0 billion for the period ended December 31, 2023, up from $771 million on March 31, 2023.

Brokerage Customer Information:

Total brokerage customer count for the Company increased to approximately 458,000 at December 31, 2023, as compared to approximately 370,000 customers at the fiscal year ended March 31, 2023. Approximately 56% of these customers carried positive cash or asset account balances.

"Our Central Asia and Eastern European business lead the way for growth…"

Commenting on the quarterly results, Timur Turlov, the Company's founder and chief executive officer, stated, "Our fiscal year 2024 has been excellent thus far, highlighted by the planned diversification of our revenue streams and the healthy expansion of almost all business lines in each of our regions. Central Asian operations (Kazakhstan, Uzbekistan, and Kyrgyzstan) accounted for approximately 86% of our revenue for the quarter, totaling $361 million, a 137% increase over the same period last year."

"Our Central Asia and Eastern European business lead the way for growth for our enterprise, which includes our Freedom Finance Bank, Freedom Finance Global, Freedom Finance JSC, and our insurance divisions: Freedom Life and Freedom Insurance," Turlov remarked, "contributing approximately $361 million in total revenue from these divisions." He further highlighted that, "Our Europe, Excluding Eastern Europe business line reported $39.5 million in revenue during the reporting period, and we are pleased to have announced the opening of a number of branch offices including Italy, Netherlands, Austria and Bulgaria."

"Our operating expenses grew in line with our strategic expansion…"

In the third quarter of fiscal 2024, Freedom Holding Corp. reported $307 million in expenditures, an 88% increase over the same period last year. "Our operating expenses grew in line with our strategic expansion plans for this year, which we fully expected," stated Turlov. "This also coincided with increased interest expenses of approximately $131 million as the amount of short-term financing through repurchase agreements and percentage costs on clients' deposits have grown as well."

"Highlighted by $96 million in net income, this was another great quarter for Freedom overall and despite market challenges, our growth story continues, driven by our strategy to diversify our revenue streams. Our aim of building out a digital fintech ecosystem where our customers can access a broad array of financial and ancillary services in a one-stop-shopping fashion continues to bear fruit, particularly in our Central Asian markets, where our cross-selling capabilities continue to expand," stated Turlov. "Of course, none of this could have happened without the support of our group of highly trained professionals and service partners who work to meet the diversified financial needs of our customer base every day. In doing so together, we continue to build credibility and earn the trust of all stakeholders in the Freedom universe, and we look forward to what the future will bring for our organization," Turlov concluded.

Additional select third quarter fiscal 2024 highlights:

Similar to the preceding quarter ended September 30, 2023, interest income was the key driver of Freedom Holding Corp.'s performance, reaching $226 million, an 182% year-over-year increase, largely due to the expansion of the Company's securities portfolio, an increase in the amount of bonds held as a percentage of total trading securities, an increase in margin loans and an increase in issued retail banking loans.

The Company realized a net loss from securities trading of approximately $5.1 million for the third quarter of fiscal 2024, compared to a gain of $25.5 million in the third quarter of fiscal 2023 due primarily to the decline in the value of Kazakhstan Development Fund bonds. The Company also realized a 177% increase in insurance underwriting income to approximately $79 million during the quarter as compared to $28.6 million for the same period of the previous fiscal year.

Fee and commission income rose by 49% to approximately $120 million as compared to the same quarter last year thanks to the overall general growth of the Company's operations between the comparable quarters and the migration of clients from our Belize affiliate to brokerage accounts at companies within our group. This revenue line was positively impacted by an increase in fee and commission income from payment processing at Paybox and its subsidiaries, which were acquired in the fourth quarter of fiscal 2023.

About Freedom Holding Corp.

Freedom Holding Corp., a Nevada corporation, is a diversified financial services holding company conducting retail securities brokerage, investment research, investment counseling, securities trading, investment banking and underwriting services, mortgages, insurance, and consumer banking through its subsidiaries, operating under the name Freedom Finance in Europe and Central Asia, and Freedom Capital Markets in the United States. Through its subsidiaries, Freedom Holding Corp. employs more than 5,000 people and is a professional participant in the Kazakhstan Stock Exchange, the Astana International Exchange, the Republican Stock Exchange of Tashkent, and the Uzbek Republican Currency Exchange and is a member of the New York Stock Exchange and the Nasdaq Stock Exchange.

Freedom Holding Corp. is headquartered in Almaty, Kazakhstan, and has operations and subsidiaries in 19 countries, including Kazakhstan, the United States, Cyprus, Poland, Spain, Uzbekistan, and Azerbaijan, among others.

Freedom Holding Corp.'s common shares are registered with the United States Securities and Exchange Commission and are traded under the symbol FRHC on the Nasdaq Capital Market, operated by Nasdaq, Inc.

To learn more about Freedom Holding Corp., visit www.freedomholdingcorp.com.

Cautionary Note Regarding Forward-Looking Statements

This release contains "forward-looking" statements, including with respect to Freedom Holding Corp.'s (the "Company") potential for future growth and success. All forward-looking statements are subject to uncertainty and changes in circumstances. In some cases, forward-looking statements can be identified by terminology such as "expect," "new," "plan," "seek," and "will," or the negative of such terms or other comparable terminology used in connection with any discussion of future plans, actions, and events. Forward-looking statements are not guarantees of future results or performance and involve risks, assumptions, and uncertainties that could cause actual events or results to differ materially from the events or results described in, or anticipated by, the forward-looking statements. Factors that could materially affect such forward-looking statements include certain economic, business, and regulatory risks and factors identified in the Company's periodic and current reports filed with the U.S. Securities and Exchange Commission. All forward-looking statements are made only as of the date of this release and the Company assumes no obligation to update forward-looking statements to reflect subsequent events or circumstances. Readers should not place undue reliance on these forward-looking statements.

Website Disclosure

Freedom Holding Corp. intends to use its website, https://ir.freedomholdingcorp.com, as a means for disclosing material non-public information and for complying with U.S. Securities and Exchange Commission Regulation FD and other disclosure obligations.

Financial Tables to Follow





CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

 

December 31, 2023

March 31, 2023

ASSETS

 

 

 

Cash and cash equivalents

561,883

 

 

581,417

 

Restricted cash

384,553

 

 

445,528

 

Trading securities

3,680,453

 

 

2,412,556

 

Available-for-sale securities, at fair value

202,497

 

 

239,053

 

Margin lending, brokerage and other receivables, net

961,392

 

 

376,329

 

Loans issued

1,346,005

 

 

826,258

 

Fixed assets, net

78,099

 

 

54,017

 

Intangible assets, net

46,771

 

 

17,615

 

Goodwill

52,238

 

 

14,192

 

Right-of-use asset

34,180

 

 

30,345

 

Insurance contract assets

12,728

 

 

13,785

 

Other assets, net

88,244

 

 

73,463

 

TOTAL ASSETS

7,449,043

 

 

5,084,558

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

Securities repurchase agreement obligations

2,889,173

 

 

1,517,416

 

Customer liabilities

2,248,042

 

 

1,925,247

 

Margin lending and trade payables

145,804

 

 

122,900

 

Liabilities from insurance activity

242,179

 

 

182,502

 

Current income tax liability

27,711

 

 

4,547

 

Debt securities issued

266,310

 

 

60,025

 

Lease liability

34,614

 

 

30,320

 

Liability arising from continuing involvement

494,513

 

 

440,805

 

Other liabilities

61,447

 

 

30,060

 

TOTAL LIABILITIES

6,409,793

 

 

4,313,822

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

Preferred stock

-

 

 

-

 

Common stock

59

 

 

59

 

Additional paid in capital

167,465

 

 

164,162

 

Retained earnings

903,517

 

 

647,064

 

Accumulated other comprehensive loss

(34,845

)

 

(34,000

)

 

 

 

 

TOTAL FRHC SHAREHOLDERS' EQUITY

1,036,196

 

 

777,285

 

 

 

 

 

Noncontrolling interest

3,054

 

 

(6,549

)

TOTAL SHAREHOLDERS' EQUITY

1,039,250

 

 

770,736

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

7,449,043

 

 

5,084,558

 


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER

COMPREHENSIVE INCOME (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

 

 

Three months ended December 31

Nine months ended December 31

2023

2022

2023

2022

Revenue:

 

 

 

 

Fee and commission income

120,159

 

80,883

 

330,565

 

253,486

 

Net (loss)/gain on financial instruments through profit and loss

(5,089

)

25,456

 

77,498

 

38,894

 

Interest income

226,445

 

80,255

 

588,857

 

187,817

 

Insurance underwriting income

79,017

 

28,557

 

181,882

 

78,998

 

Net gain on foreign exchange operations

38,825

 

20,866

 

54,430

 

30,014

 

Net loss on derivative

(42,568

)

(21,469

)

(71,795

)

(22,523

)

Other income/ (expense)

1,845

 

(570

)

8,988

 

(79

)

 

 

 

 

 

TOTAL REVENUE, NET

418,634

 

213,978

 

1,170,425

 

566,607

 

 

 

 

 

 

Expense:

 

 

 

 

Fee and commission expense

42,818

 

18,314

 

103,116

 

60,068

 

Interest expense

131,223

 

52,037

 

365,650

 

132,971

 

 

 

 

 

 

Insurance claims incurred, net of reinsurance

40,989

 

17,419

 

96,491

 

51,586

 

Payroll and bonuses

45,083

 

21,610

 

116,711

 

55,252

 

Professional services

6,217

 

5,901

 

24,793

 

14,174

 

Stock compensation expense

1,039

 

2,939

 

3,303

 

6,519

 

Advertising expense

11,066

 

3,730

 

27,805

 

9,479

 

General and administrative expense

32,106

 

16,428

 

86,211

 

40,943

 

(Recovery)/Allowance for expected credit losses

(3,526

)

24,140

 

15,462

 

30,294

 

 

 

 

 

 

TOTAL EXPENSE

307,015

 

162,518

 

839,542

 

401,286

 

 

 

 

 

 

INCOME BEFORE INCOME TAX

111,619

 

51,460

 

330,883

 

165,321

 

 

 

 

 

 

Income tax expense

(15,544

)

(5,069

)

(51,408

)

(26,567

)

 

 

 

 

 

INCOME FROM CONTINUING OPERATIONS

96,075

 

46,391

 

279,475

 

138,754

 

 

 

 

 

 

INCOME BEFORE INCOME TAX EXPENSE OF DISCONTINUED OPERATION

-

 

13,667

 

-

 

14,467

 

 

 

 

 

 

Income tax benefit/(expense) of discontinued operations

-

 

2,342

 

-

 

(4,538

)

 

 

 

 

 

INCOME FROM DISCONTINUED OPERATIONS

-

 

16,009

 

-

 

9,929

 

 

 

 

 

 

NET INCOME

96,075

 

62,400

 

279,475

 

148,683

 

 

 

 

 

 

Less: Net loss attributable to noncontrolling interest in subsidiary

(293

)

(464

)

(842

)

(1,508

)

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

96,368

 

62,864

 

280,317

 

150,191

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME

 

 

 

 

Change in unrealized gain/(loss) on investments available-for-sale, net of tax effect

1,486

 

(54

)

5,893

 

2,309

 

Reclassification adjustment for net realized (loss)/gain on available-for-sale investments disposed of in the period, net of tax effect

(1,881

)

320

 

(3,145

)

197

 

Foreign currency translation adjustments

28,100

 

(5,611

)

(3,593

)

(301

)

OTHER COMPREHENSIVE INCOME/(LOSS)

27,705

 

(5,345

)

(845

)

2,205

 

 

 

 

 

 

COMPREHENSIVE INCOME BEFORE NONCONTROLLING INTERESTS

123,780

 

57,055

 

278,630

 

150,888

 

 

 

 

 

 

Less: Comprehensive loss attributable to noncontrolling interest in subsidiary

(293

)

(464

)

(842

)

(1,508

)

 

 

 

 

 

COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

124,073

 

57,519

 

279,472

 

152,396

 

 

 

 

 

 

EARNINGS PER COMMON SHARE (In U.S. dollars):

 

 

 

 

Earnings from continuing operations per common share - basic (Restated)

1.65

 

0.79

 

4.79

 

2.37

 

Earnings from continuing operations per common share - diluted (Restated)

1.63

 

0.78

 

4.73

 

2.33

 

 

 

 

 

 

Earnings/(loss) from discontinued operations per common share - basic

-

 

0.27

 

-

 

0.17

 

Earnings/(loss) from discontinued operations per common share - diluted

-

 

0.27

 

-

 

0.17

 

 

 

 

 

 

Earnings per common share - basic (Restated)

1.65

 

1.06

 

4.79

 

2.54

 

Earnings per common share - diluted (Restated)

1.63

 

1.05

 

4.73

 

2.50

 

 

 

 

 

 

Weighted average number of shares (basic)

58,578,691

 

58,678,730

 

58,557,577

 

58,642,637

 

Weighted average number of shares (diluted)

59,289,256

 

59,522,701

 

59,287,086

 

59,527,743

 

 


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