ALMATY, Kazakhstan--(BUSINESS WIRE)--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 | ||||
Contacts
Ramina Fakhrutdinova (KZ)
Public Relations
Freedom Finance JSC
+7 777 377 8868
pr@ffin.kz
Al Palombo (US)
Global Communications Chief
Freedom US Markets
+1 212-980-4400, Ext. 1013
apalombo@freedomusmkts.com
