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

Rhea-AI Summary

Freedom Holding Corp. reports $419 million in revenue for the third quarter of fiscal 2024, with net income of $96 million. Total revenue for the nine months ending December 31, 2023, was approximately $1.2 billion, showing a significant increase. The company's operating expenses also rose, but net income saw a substantial growth. Total assets and brokerage customer count have notably increased, reflecting a strong performance. CEO Timur Turlov emphasizes the growth in Central Asia and Eastern Europe, highlighting revenue diversification and strategic expansion.

Positive

• Strong revenue growth of $419 million in the third quarter of fiscal 2024.
• Net income of $96 million, with basic and diluted earnings per share of $1.65 and $1.63 respectively.
• Operating expenses of $307 million, showing an 88% increase over the same period last year.
• Total revenue for the nine months ending December 31, 2023, amounted to approximately $1.2 billion, showcasing a significant rise.
• Net income of $279 million for the first nine months of fiscal 2024, with basic and diluted earnings per share of $4.79 and $4.73 respectively.
• Total assets increased to $7.5 billion, reflecting substantial growth.
• Brokerage customer count rose to approximately 458,000 at December 31, 2023, indicating a strong customer base expansion.
• CEO Timur Turlov highlights the growth in Central Asia and Eastern Europe, emphasizing revenue diversification and strategic expansion.

Negative

• None.

Insights

Financial Analyst

The reported revenue of $419 million and net income of $96 million indicate a strong financial performance for Freedom Holding Corp. The year-over-year revenue increase of 96% and net income growth of 54% in the third quarter are significant, demonstrating the company's ability to grow its top and bottom lines. The expansion into new European markets could signal a strategic move to diversify geographically and reduce reliance on Central Asian markets, potentially mitigating regional risks.

However, the 89% increase in operating expenses raises questions regarding the sustainability of the current profit margins. Investors should monitor the company's expense management closely, especially since such a sharp rise could affect future profitability if revenue growth does not continue at a similar pace. The increase in insurance underwriting premiums by 177%, while indicative of growth in that sector, should be analyzed in the context of the associated risk exposure and claims ratio to assess its impact on the company's financial health.

Market Research Analyst

Freedom Holding Corp.'s significant revenue contribution from Central Asia, accounting for approximately 86% of quarterly revenue, underscores the importance of this region to the company's overall performance. The 137% increase in revenue from this region reflects strong market penetration and possibly successful cross-selling strategies. The digital fintech ecosystem approach mentioned by the CEO suggests a focus on technological innovation and customer experience, which could be a key differentiator in emerging markets.

The customer base growth to 458,000, with 56% carrying positive balances, is a positive indicator of customer trust and engagement. The expansion of branch offices into Italy, The Netherlands, Austria and Bulgaria represents a strategic move to capture market share in Europe, although the competitive landscape in these new markets will be a factor to watch. The company's strategy to diversify revenue streams appears to be paying off, but it remains to be seen whether this can be sustained in the long term, especially in light of global economic uncertainties.

Economist

The reported increase in interest income by 182% is a clear reflection of the company's successful expansion of its securities portfolio and lending activities. This growth, however, may also reflect the broader interest rate environment, which can be a double-edged sword; higher interest rates can lead to increased income from lending but can also result in higher interest expenses and potential challenges in securities trading, as evidenced by the reported net loss from securities trading.

The company's balance sheet shows a healthy increase in net working capital, which suggests a strong liquidity position and the ability to meet short-term obligations. However, the reported increase in short-term financing through repurchase agreements and client deposits could indicate a reliance on short-term debt, which may expose the company to refinancing risk in a volatile interest rate environment. The overall financial health of the company appears robust, but careful attention should be paid to the balance between leveraging for growth and maintaining financial stability.

With $419 Million in Reported Revenue, Company Remains on Pace for a Record Year

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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240212551579/en/

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

Source: Freedom Holding Corp.

FAQ

What was Freedom Holding Corp.'s revenue for the third quarter of fiscal 2024?

Freedom Holding Corp. reported approximately $419 million in revenue for the third quarter of fiscal 2024.

What was the net income for the third quarter of fiscal 2024?

The net income for the third quarter of fiscal 2024 was approximately $96 million.

How did the operating expenses compare in the third quarter of fiscal 2024 to the same period last year?

Operating expenses in the third quarter of fiscal 2024 were approximately $307 million, showing an 88% increase over the same period last year.

What was the total revenue for the nine months ending December 31, 2023?

The total revenue for the nine months ending December 31, 2023, was approximately $1.2 billion.

What was the net income for the first nine months of fiscal 2024?

The net income for the first nine months of fiscal 2024 was approximately $279 million.

What were the total assets on December 31, 2023?

Total assets were $7.5 billion on December 31, 2023.

How many brokerage customers did Freedom Holding Corp. have at December 31, 2023?

Freedom Holding Corp. had approximately 458,000 brokerage customers at December 31, 2023.

Which regions contributed significantly to the revenue growth in the third quarter of fiscal 2024?

Central Asia and Eastern Europe, including Kazakhstan, Uzbekistan, and Kyrgyzstan, accounted for approximately 86% of the revenue growth in the third quarter of fiscal 2024.

What was the percentage increase in insurance underwriting premiums in the third quarter of fiscal 2024?

There was a 177% increase in insurance underwriting premiums to approximately $79 million in the third quarter of fiscal 2024.

What factors contributed to the rise in fee and commission income in the third quarter of fiscal 2024?

The rise in fee and commission income was due to the general growth of the Company's operations and the migration of clients from the Belize affiliate to brokerage accounts within the company.