DeFi Technologies Inc (DEFT) 2024 Q3 法說會逐字稿

Hi, everybody. Welcome to the Q3 DeFi Technologies Financials Investor Call. I'm going to start out by reading the forward-looking statement, just to get things started. The presentation given and certain statements made within this earnings call, which are not historical facts, such as expectations, anticipations, beliefs and estimates are forward-looking statements.

These statements may include, without limitation, any statements preceded by or followed by or including words such as target, believe, assume, expect, commit, aim, intend, may, anticipate, foresee, see, I'd estimate, plan, project, will, is, focus, can, have, likely, should, would, could, continue and other words in terms of similar meaning or the negative thereof. Others can be identified from the context in which the statements are made.

Forward-looking statements give the company's current expectations and views of future developments in light of the current experience and perception of historical trends based on numerous assumptions regarding the company's present and future business strategies and the environment in which it will operate in the future. Although the company deems such forward-looking statements to be reasonable, no assurance can be given that they will be proven correct. The forward-looking statements are not guarantees of the future developments and results mentioned therein.

Forward-looking statements involve known and unknown risks and certainties and other factors such as, but not limited to, general economic and industry conditions, which are, in the same cases, beyond the company's control, which may cause actual results to materially differ from the expressed in such statement. The statements are made as per the date of the presentation and the earnings call, and the company does not assume any obligation to review, update or confirm any forward-looking statements contained herein, except to the extent legally required.

With that, I'll hand it off to our CEO, Olivier Roussy Newton.

Thanks, everyone, for joining us on this Q3 webinar. Excited to have you all here and very, very excited for the -- presenting what we've been up to as a company in this very fast-moving, fast-paced world, political world and macro asset costs that were associated with in the form of digital assets. Curtis, can we go to the next slide here?

So yes, this should be kind of self-explanatory. But we are DeFi Technologies, and we are situated connecting the traditional capital markets with rapidly evolving, high-growth world of decentralized finance and Web3 through our wholly owned subsidiaries, venture portfolio, trading desk, treasury strategy and industry partnerships. We enable traditional investors to seamlessly tap into the extensive and fast-growing $3 trillion sector in a regulated manner.

DeFi, as a public company, has been operating for four years. Valour, our main subsidiary, Johan and myself have been working on for just around eight years. To date, we have 28 exchange-traded products and adding to those very quickly, four integrated business units within DeFi technologies. Our 2024 year-to-date net income is CAD97.2 million. Our market cap is hovering around $90 million.

We have a founder-led team, as I explained, Johan and myself have been at our CORE subsidiary, Valour, for just around eight years and at DeFi, the public company, for about four years with a lot of the people on this phone call. We have a diverse business line, but very cross-complementary in the form of ETPs, trading, infrastructure, research and more. Our diversified revenue model provides broad exposure to the wave of blockchain-based assets, services and applications.

And I think, as a business, we have a very clear path forward, a strong balance sheet as of now and looking forward to taking a lot of our business units into international expansion. And we continue to look at strategic acquisitions to expand and propel further growth. Curtis, I think we can flip to the next slide here.

So here's a kind of quick snapshot and visual representation of our key financial and business metrics. Our book value as of now is CAD139.2 million. And as I mentioned in the last slide, year-to-date net income, CAD97.2 million. Earnings per share is, as of September 30, CAD0.33 a share. Assets under management as of a day ago is CAD1.1 billion.

Our year-to-date net revenue is CAD152.4 million, and we've revised our guidance on forecasted revenue for 2024 to sit just under at $200 million at CAD198.6 million. And these -- there's a little asterisk there, but projection is based on current asset prices and does not account for additional gains in DeFi Alpha and our other business units.

So to give everyone a bit of an explanation in terms of a visual representation of where DeFi Technology sits on its wholly owned business units, I'll start off with our joint ventures. Bitcoin Suisse. I think, one of the largest and oldest Swiss digital asset companies. We've partnered with them on a number of exchange-traded products. And Neuronomics, a very interesting and long-standing history developing artificial intelligence technologies applied to asset management and specifically digital assets.

HIVE, the company I founded in 2017. We have a partnership with them, and we executed a share swap, I believe, in 2022 for cross-exposure and collaboration. Zero Computing, a company we recently signed a partnership with to explore and develop new technologies that benefit our trading stack that I can go into in a bit later in more detail. And Professional Capital Management, a business set up by Anthony Pompliano to explore our products, technology offerings in the fast changing regulatory environment in the United States.

Our wholly owned subsidiaries include Reflexivity Research, which has been a great addition to our offerings, where we basically kind of correspond our product offerings at Valour with industry-leading research and also gives us, as a firm, a lot of insight into trends, potential trading opportunities in the form of DeFi Alpha. So we're very fortunate to have that part of -- it's a fast-growing research firm, kind of a great kind of cornerstone company that gives us a lot of data to make actionable decisions across our other subsidiaries.

We're fortunate to have finalized recently our full acquisition of Stillman Digital, which is a very fast-growing team led by some formidable younger savants in the market-making space, have carved out a very unique proposition, led by their expertise in technological trading in a very competitive marketplace. But we are enthusiastic that that transaction closed. Took a bit of time with the various regulatory licenses to be essentially amalgamated within our parent company, but we're excited that's done.

Valour, of course, our largest subsidiary and operating asset, continues to expand and lead the charge in innovative exchange-traded products, which we'll obviously touch on a bit later. Our partially owned stake in AMINA Bank, which seen rapid growth of their assets under management and continually are seeking and getting approvals globally for operating banking services and -- in the Middle East, Hong Kong and Singapore.

DeFi Alpha, our rather new business unit compromising around trading activities, which has been off to a great start. And I know we get a lot of questions about guidance and how often, how frequently we see the perpetual or nature of our trading occur, which we'll touch on a little bit later within the presentation.

But we are -- it's important to note that we don't take any risk at DeFi Alpha. So there's never losses and things of that nature. But we are kind of algorithmically, and with human intervention, always assessing trades and hope to have a few more under our belt to be able to provide, I would say, the -- our shareholders a better glimpse at what that looks like kind of going into the future.

We have our DeFi Ventures portfolio that has been active. I would say our primary mandate of our venture portfolio is to take stakes in innovative companies that we either directly see a financial return on, or that we can basically foster into a relationship and be the first to bring them to the market in the form factor of exchange-traded products and/or other institutional wrapper offering through Valour. So it cross-pollinates across our subsidiaries, and I think you'll find all of them do.

And then we have one of our oldest DeFi, basically, business units, which is infrastructure. And we've been running nodes for Solana, Pyth, CORE and assessing others as we go into these markets. But it's a profitable business unit and also gives us a bunch of proprietary understanding of how these blockchain operates and growth perspectives and how to position ourselves within those ecosystems. Curtis, I think we can go to the next slide here.

So our specific business lines, to give a bit more clarity in numeric form factors. So yes, obviously, we have a diverse range of scalable businesses. Our Valour business unit, which I think, we're kind of reiterating numbers, but as of the day before yesterday, just over $1 billion in assets under management. We've seen that growing very, very quickly this year. Not just because of price increases, but like aggressive inflows into a number of products into an ever-expanding portfolio of products that our client base seems to be very geared towards.

New products, investing, diversifying outside of, I would say, the blue chip Bitcoins, Ethereums, top 10 coins, people who constantly want new products, and we're working tirelessly to get as many new product offerings to the market. There's been a lot of, I would say, somewhat complex infrastructure that we're building out at Valour in the form of our exchange offerings that we can go into more detail as of later. But it is definitely, I would say, extremely fundamental importance of Valour for new exchange relationships that we've accrued in the last few weeks and months to expedite us being a market leader of bringing ETPs to the market.

Our DeFi Ventures portfolio, as we've seen a kind of robust move in digital assets, continues to grow. And we'll hopefully see these stakes in whether it's AMINA and other protocols rerate, as we hopefully see digital asset prices rebound. DeFi Alpha, our arbitrage trading desk, has seen kind of great growth and a great start. We continue to work tirelessly on assessing trading opportunities, and we can go into the specifics of how that looks and specifically around how we assess and execute those trades a bit later.

Our revenue, yes, as I mentioned previously, is CAD132 million to date. And yes, I think we've touched on -- so DeFi's infrastructure, Reflexivity and Stillman mean to the company. But I think a great way to think of all these various business units is they all coexist and cross-pollinate in a very conducive manner to the overall growth of DeFi Technologies. Curtis, if we can flip to the next slide.

So yes, one company that's growing really quickly in our venture portfolio is previously called SEBA, now called the AMINA Bank. But I think we let their Series C investment in late '21 when the AUM was about $1 billion. So that's kind of close to triple as of now. And that bank is, as I mentioned, getting a bunch of new licenses globally to operate as a digital-native, crypto-first bank.

A topical conversation and a large focus of ours is to seek an uplisting onto a major US exchange. In mid-September, we filed our Form 40-F registration statement. This is primarily to basically reach a lot of US institutional and retail investors, global investors that aren't able to, for different reasons, participate in the Canadian market, enhance liquidity and valuation metrics.

I'm sure existing shareholders and potentially prospective shareholders, they're aware we trade at a very low multiple, even very low compared to kind of a normal S&P 500 trading multiple.

And obviously, within the US capital markets, there is a bunch of increasing demand, and we've definitely had an inundation of calls and interest from US institutions looking to support us as we cross the chasm from the Canadian marketplace into the US marketplace. And what I can comment on this is we're -- it is definitely a top priority for the company.

And given the recent election results, pro crypto stance, I believe Gary Gensler resigned in the last 24 hours, which is a gentleman who definitely didn't make our lives easy for the last few years. So we are very, I would say, optimistic about our prospects and definitely, hopefully, these get fast-tracked with the political change in the wind south of the border for those in Canada.

So to give a detailed rundown of our financial highlights of Q3, the company reported cash and USDT, which stands for Tether, 1:1 stable coin balance of approximately CAD25.4 million, up from CAD6.1 million on December 31, 2023. The company's holdings also included 204 Bitcoin; 81 Ethereum; 246,000 ADA, which is the ticker for Cardano; 86,616 DOT, which is Polkadot; 5,745 Solana; 491, UNI, which is a Uniswap token; 433,000 Avalanche tokens and just under 3 million or 2,755,000 CORE tokens, totaling approximately to CAD36 million in digital asset treasury positions as of September 30, 2024, which I would assume have greatly increased in value with the bull run.

Oli, do you mind if I just interrupt just quickly there? Everyone who's on the call, everyone needs to understand that the minute we convert our cash into crypto and carry it as crypto assets on our balance sheet, it disappears from our cash flow statement.

And there's a lot of commentary that we are not making any money and that our cash flow statement is negative. The reason why that is occurring is that the minute we move anything into a crypto asset, our regulator considers that not as cash and not as a liquid asset despite the fact that we could sell it in a millisecond and have that exact cash balance on our balance sheet and on our cash flow statement.

So at the end of this quarter, we actually had about CAD61 million worth of crypto assets. Obviously, since then, crypto has catapulted higher. I don't have the exact number, but you could look at all of the assets we have, and you'll quickly see that it's probably somewhere closer to CAD70 million or CAD80 million that we now have as crypto assets that we can liquidate and could become cash and sit on our cash flow statement.

But it's extremely erroneous for people to make any comments that this is a company that has -- is not making money and has negative cash flow earnings. It is solely because the regulator views crypto not as cash. I just wanted to throw that in there because it's a consistent theme that I continue to hear. And I think it's just as a result of people not understanding the regulatory environment in Canada. Sorry to interrupt, Oli, and thank you, everyone, for listening.

Yes. No worries. I'll go on with our venture portfolio, I think, which we covered, but investments were valued at CAD45.1 million as of September 30, 2024. Total value of cash, treasury and venture portfolio is sitting at CAD106.8 million as of September 30. Total revenues were CAD24.2 million for the three months ended September 30, 2024, and CAD152.4 million for the nine months ended September 30, 2024, a significant improvement from the total revenues of CAD6 million and CAD2 million, respectively, for the same periods in 2023.

Net income was CAD24.9 million for the three months ending September 30, 2024, and CAD97.2 million for the nine months ending September 30, 2024, reflecting robust operational performance. EBITDA was CAD26.2 million for the three months ended September 30, 2024, and CAD102.3 million for the nine months ended September 30, 2024.

On to Valour. Valour generated staking/lending income of CAD8.8 million and management fees of CAD2 million. Our AUM grew 51.6% from CAD508.1 million as of December 31, 2023, to approximately CAD77.5 million as of September 30, 2020, and a record high as of a day ago, to CAD1.1 billion in the last day.

Moving on to DeFi Alpha, which is our specialized arbitrage trading desk. It generated CAD20.6 million, with zero losses to date after reporting CAD111.5 million in Q2 2024 and totaling CAD132.1 million for the nine months ended September 30, 2024. Reflexivity Research in Q3 generated CAD261,000 for the three months ended September 30, 2024, and CAD1.1 million for the nine months ended September 30, 2024.

So this is an important visual representation of our AUM in net sales, which is obviously kind of increasing, and great robustness for our total business. Johan, I'm not sure if you wanted to comment on this slide in more detail or what it means from kind of an analytical perspective in terms of the growth of Valour's business?

Yes. I think maybe the main takeaway from this chart is that if you see the yellow line here, aggregated net sale in dollars, which represent our inflow. So obviously, AUM fluctuates with both the market levels, the AUM in our respective products, because of the market -- as a function of the market level. But the yellow line here is actually the net inflow over time aggregated into our products. So I think the important observation here is that throughout our whole history since 2020, we have had almost zero week-on-week outflows.

So as you can see, it's -- we have inflows even during the crypto winter, during the crash from when Bitcoin went from $69,000, $70,000 down to $16,000, $17,000. There has been obviously a consolidation phase with smaller inflows during this time. And we can see, obviously, unusually improved inflows on a daily basis now in the bull market. But as soon as there's more volatility or a better or a stronger market, we obviously see this shifting aggressively upwards. But even during in the crypto winter and crashes in the market, we see accumulated inflows in the products.

So basically, the AUM is consisted of -- it's very sticky money, similar to what many funds can see. So it's -- we are quite -- and everything we've seen this year, including the last month here are the conviction harder that this will -- in the bond market, we see exactly the same patterns, and it's in earlier bull markets that the inflows will be massive in relation to in these sideways markets. And obviously, on top of this, I have daily data from 2015 from our earlier venture as well, which shows exactly the same pattern. So sticky money and the constant inflow, no matter the market regime, I would say, is the main takeaway here.

Johan, one question maybe that the readers would or listeners would be really interested in, how many new products do you think we'll be launching by the end of this year? And maybe where do you think we'll get to next year? Just because, obviously, in a big crypto market, as you're increasing products, leverage and scale are massive. And of course, that's assuming nothing changes in terms of a Middle East or an African launch, just sort of what we'd have in Europe?

Yes, for sure. And one important point here is where we see the most aggressive inflow at inception is products where we are -- have the only product in the world. We're first movers. And we are planning to launch at least 23 products before the end of the year within three weeks. I would say that none of these has an ETPs anywhere else in the world.

So we would have the first-mover advantage of all of these 23 new underlines that we were listed. And we are sitting in a unique position globally to list new products that are -- that most of our -- that our competitors do not have the infrastructure or the exchange partnerships that's needed to both supply the market making or the access to these exchanges.

So I think we are extremely hopeful that these handpicked 23 tokens that are also both firsts in the world, but also projects that we think are really strong and a high hope for a lot of these who we also have a partnership with and hope to be able to do a lot of trades on the back -- within the DeFi opportunistic portfolio. So I think we'll see a lot of these new rollouts within the next two or three weeks.

For the next year, we're also looking at the next generation of products, including actively managed certificates, including leveraged products, warrants and so forth, not mentioning the geographical expansion into Africa, into the Middle East and so on. That now is very tangible and very close in the future.

And everyone, I'm sort of the one speaking to retail and funds on a more regular basis. But if we do our job as -- and all we have done, with Johan and Oli, is do our job. But if we can get another 20 products launched, that's 48 products that we'll be transporting to the Middle East and to Africa. And if we can do as little as $20 million in each of those products, you're looking at an additional almost $1 billion in AUM in both of those jurisdictions off of as little as $20 million in each of those products.

And as Johan said, we're not looking to compete with 15 new Bitcoin products. We're looking at DeFi protocols that are one of a kind. For example, Sui, which has been one of our best performers, CORE, which has been one of our best performers, that no one else has even contemplated launching.

And so when you look at that type of expansion just in Europe, but also then transporting all of those products to the Middle East, all of those products to Africa, and of course, we're going to look at Asia, of course, we're going to look at Latin America.

And quite frankly, in the right economic and regulatory environment in the US, Johan, is it farfetched as an idea that we might transport a Sui product to the US? Some of these products, BlackRock, Vanguard, Fidelity, they're not even going to care to compete with us on. Is that a fair statement?

Yes, for sure. We're already in discussions on structure for that purpose. And I think on the back of our European operation, we are very well placed to be first movers on a lot of these assets, for sure, and do unique products for that marketplace rather than competing with everyone else on Bitcoin for extremely low monetization rates.

Yes. No, thank you. I just wanted to make sure that was clear for our listeners. Appreciate that.

I think one of the biggest infrastructure-related decisions we made that came from Johan was moving all of our products in the Nordics over to an exchange called the Spotlight Exchange, where we have very good alignment with the majority of the shareholders and founding team. Before, our products were listed on the Nordic growth market, which, I would say, was not as aligned with us in terms of our goals and potential outlook on digital assets.

So this allowed us to -- this allows for us to essentially kind of promulgate our product initiatives extremely quicker to save costs and also have market-first products on an internationally recognized exchange, which allows us to have competitive advantages to kind of passport our prospectuses, which is the technical terminology for taking our Euroclear, European Union-approved products and bringing them into the Middle East, Asia and other jurisdictions that we're looking to. And I think that's a huge competitive edge for Valour and our new products going forward.

So yes, this is an overview of our increasing range of products that we continue to expand into. I think just to give people an idea of what people are after from probably around 200,000 or a little bit less than 200,000 clients of Valour, we received a lot of product requests and things of that nature.

But we try to offer what will be, I think, by the end of the year, the largest diversified regulated exchange-traded product portfolio in the world and continue putting out innovative new products into the marketplace. And obviously, these are a few other ones. And anyone looking for further information, overviews on these products, can find them on valour.com.

So let's get into our growth outlook for Q4. Valour's ETPs have witnessed over a 900% increase in AUM. From the market lows in late 2022, alongside growth in trading volumes, Valour's AUM stood at record high of CAD1.1 billion as of November 13, 2024. Annualized revenue and DeFi Alpha and the company's staking and lending income, changes in gains and losses on digital assets and ETP payables, as well as management fees are closely correlated capital inflow for Valour's ETPs and the price of digital assets underlying Valour's ETPs, which has continued to grow since the end of 2023. Furthermore, revenue from arbitrage and liquidity provision is highly linked to overall market activity and turnover in Valour's listed ETPs.

The company formed DeFi Alpha in Q2 2024, which generated approximately CAD132.1 million as of September 30, 2024. Given these factors, the company's annualized revenue is forecasted to be approximately CAD198.6 million for 2024. Further arbitrage opportunities and growth in Valour AUM may lead to proportional increases in revenue. We continue to evaluate additional DeFi Alpha trading, as I mentioned previously, which if executed, will drive revenues and net income higher.

Valour, our real main focus is obviously, as we alluded to earlier, new products and innovation, but also kind of bringing those past -- bringing those products through this passporting prospectuses to new geographies. So our ETP lineup to meet growing global demand, targeting 40 ETPs by the end of 2024 and 100 by 2025, alongside product growth. We're seeking regulatory approvals to enter markets in North Africa, Asia, the Middle East and other emerging regions, providing secured digital access to new investors.

Our newly acquired business unit, Stillman Digital, plans to expand into custody, foreign exchange and proprietary trading, with projected 2024 revenue at USD6.7 million or CAD9.3 million at a 50% average net margin, reflecting 127% average annual growth over the past two years. Major technology upgrades set for Q1 2025 will enhance competitiveness and enable further growth through DeFi Technologies' distribution network and strategic partnerships.

On to balance sheet-related matters. Elimination of debt as of October 16, 2024, Valour has successfully eliminated all outstanding debt. The achievements culminated with the final repayment of CAD5.5 million on October 16, bringing a total debt reduction of USD36.5 million, which is well over CAD50-something million. So we're quite glad to have done that as a company without substantial dilution to our shareholders and internalized that through our revenue-producing business lines.

While Valour is now debt-free, DeFi Technology retains the remaining loan balance of CAD8.1 million with Genesis Global Capital. The balance is expected to be resolved upon the completion of Genesis' bankruptcy proceedings. And to touch on that, we've already received a chunk of that and are hopeful, as things perceived through the courts in an expedited fashion, we will be kind of remunerated promptly here.

And Ryan, I'm not sure if you wanted to touch on that process specifically or give any further clarity than what's stated.

Yes. No, I can. Yes...

How that process is working.

We originally had a collateralized loan with 475 Bitcoin there. In Q3, we did receive 95 Bitcoin back, reducing the collateral down to 380. It continues to run through the process as they state for Genesis, pays out its liabilities and settle its claim. Our legal team in the US is constantly in touch with us to let us know the developments.

And as Oli mentioned, we're hoping to receive the -- more recovery in Q4 as -- Q4 and in the future as the state settles up everything.

So as alluded to earlier, geographical expansion is hand-in-hand with product innovation as probably our number one priority as a company and specifically under Valour, our largest operating subsidiary. We had a milestone launch in London in October on the LSE, London Stock Exchange, and we are actively working on other products there.

In the US, we announced a joint venture with Anthony Pompliano's firm, Professional Capital Management. Not to leave out my home country, Canada, but we are actively working on initiatives there and market-first products, which we will keep people aware of.

To think of this road map, we're actively pursuing opportunities with digital. Now that the US is obviously kind of more digital asset friendly, and we see that going into the future, lots of places in the Middle East are as well, Asia. Hong Kong, Singapore, Korea, Japan, recently approved legislation on digital asset products on the Nikkei Stock Exchange, and we've seen kind of a lot of interest in localities like Africa.

So as we continue to export our products globally, and as I explained earlier, our partnership with the Spotlight Exchange in Sweden is very important for this to achieve market-first product listings in all of these new geographies that are enabled through the recognition of this leading Euroclear, European Union-regulated stock exchange. And I think it's important to note also, Johan first listed XBT Provider in 2015 on a Swedish stock exchange.

So as we have discussions with new counterparties and exchanges, whether it be in Brazil, Middle East, Bahrain, UAE, Singapore, all of -- we have a great track record that expands on a decade plus now of operating history or will be a decade at the conclusion of this fiscal year. So we can confidently say that we have the largest skill sets and team that has successfully managed the first exchange-traded digital asset product and continues to innovate -- market new products as we expand into these geographies.

So our product road map. As I've mentioned in previous presentations, we have a large growing, and as Johan pointed out, very sticky customer base at Valour. So we are, outside of digital assets, also exploring other thematic multi-assets, investment vehicles of various constructs to accommodate various sorts of institutions. And there's a bunch of types of exposures that we're also exploring, and actively manage strategies through our AMC program.

And Johan, I'm not sure if you wanted to kind of touch on what you're seeing in the fast-growing fund management space, but obviously, our main business in the form of these ETP form factors is growing exponentially, and we've been working quite diligently on regulatory prospectuses to encompass new product offerings. So maybe you wanted to touch on that and what you've been up to.

Yes, for sure. So we've seen a great demand from a lot of fund of funds and asset managers to allocate into alpha-type returns into other types of return distributions and products. So on the base of this, obviously, we're going to launch the actively managed certificates as one means of distributing these type of strategies. Both -- some of these are obviously from in-house. Others are in collaboration with partners and other asset managers we are looking to partner up more deeply or acquire or also as a spin-off of some of the strategies we work within DeFi Alpha, particularly those that are scalable to a huge scale, for sure.

And we're looking not only at ACM, but also at funds and all types of vehicles that make it possible for all types of institutions to invest. Obviously, most can invest in ETPs, but quite a lot of these larger ticket type of institutions wants to invest in funds, ETFs or actively managed certificates, managed accounts or other vehicles, which also includes tokens, which might be based on actively managed strategies. So these are a few of those we're looking into launching in the near future.

Thanks, Johan. Yes. As of that, this week, we've recently launched two initiatives: SolFi Technologies, along with CoreFi Strategy Corp. I really think the genesis behind these two new initiatives culminate from, obviously, our very close exposure to the Solana ecosystem. So I'll start with SolFi Technologies.

So we've seen, obviously, MicroStrategy develop a compelling business model of leveraging capital markets to essentially and efficiently acquire large amounts of Bitcoin, which they are extremely bullish on. As a company that has Solana validator nodes, proprietary trading technologies. We've seen the opportunity to partner with institutions essentially to set up our own initiatives that will be essentially spun out of DeFi Technologies as a company.

We will be definitely elaborating on structures and then what that means to shareholders. But I think kind of an analogy, given we're listed in Canada, is typically a gold mining company potentially kind of comes across a silver asset on their mining field or block of commodities and spins that out into a new company. We're extremely proud at DeFi Technologies of being differentiated in the form of not having a large CapEx running business, the ability to return a lot of money to our shareholders.

And so as we are approached by institutions, foundations, you can kind of think of this as a similar business line to what we do with Valour, where we work specifically with foundations to develop, incubate and launch compelling products in ETP form factors. We see a lot of opportunity to introduce new capital market opportunities in the form factors of novel companies that we have insight and exposure to also reward shareholders in innovative ways through these offerings.

So to keep the efficiency and dynamics of our profit engine at DeFi Technologies, we are assessing the most efficient ways to essentially kind of spin off these specific companies that will be financed in their underlying currencies. So with SolFi, a large balance sheet, intended large balance sheets of Solana, and with CoreFi, specifically large amounts of CORE, we're obviously very bullish on both of these asset classes. And this has been something that we've internally been working on this framework for a little over -- or a little under a year now.

I think just really reflecting on where we are in the digital asset space and what's moving, I would say, kind of on-chain, there is a lack of innovation happening in the capital markets, potentially partly due to regulatory constraints. But since kind of, I would say, my experience, at least, in the capital markets, launching HIVE in 2017. We've seen a number of -- I'm not sure exactly what the number is, but 30, 50, potentially more publicly listed mining companies focusing on blockchain infrastructure, which has been great to see that CapEx-intensive business receive institutional investors to, I think, secure what is now potentially 40% to 50% of all Bitcoin hash power globally and now powering AI infrastructure, which is critically needed.

But aside from that business segment, you have companies like DeFi, Galaxy, Coinbase, MicroStrategy, and that's basically it in terms of publicly listed companies. So with DeFi Technologies, we essentially want to look at compelling new use cases of technologies and ecosystems that we're close to and use the capital markets for what they're good for on capital-efficient formation and the ability to uniquely create accretive new companies that will benefit our shareholders.

And we will definitely be -- as we go within the finalization of regulatory frameworks that are conducive to these new companies, be showing more information on the specific structures and path forwards for these two unique companies that we're very excited about. Is that the last slide, Curtis? There we go.

Yes. I think we can maybe open it up for questions now. I'll just pick from the Q&A. Let's see.

First question from Mark. Where is the USD14 million in Alpha trading profits in the income statement? I think that's a question for Ryan.

Yes. So that shows up in the digital assets. Or I think the line item is called realized gains or losses on digital assets so it's embedded in that $51 million for the quarter. Sorry, I don't have the -- let me just pull up the income statement.

$51 million in the quarter, and I guess, total is $282 million in the nine-month period.

And then I think -- go ahead.

I was just going to say, hey, Ryan, maybe just quickly while you were talking about that. You and I were texting a bit. Everyone needs to also understand that we have an extremely robust book value with AMINA Bank carried at cost despite the fact that Bitcoin prices have erupted. And obviously, AMINA Bank is worth substantially more than what we paid at cost. Where do you think our book value sits at, Ryan?

Well, book value at the end of the quarter was $139 million. Like you mentioned, AMINA is valued at by market base at this point, using a lot of primarily older data. Again, just the lack of information out there is being -- AMINA being private and not many comparatives. So if it was valued at, say, $100 million or $90 million, you could easily just take the $40 million, subtract the $90 and add that to our book value. So make it..

So it would be closer to $200 million? Closer to $200, okay. Thank you very much.

Another question for Ryan. This quarter had $22 million in exchange gains. What's the source and nature of the occurrence? How repeatable is this? It is backed out this, you would appear? We made no money. Can you explain how this works in the business?

Yes. So we do deal with a lot of foreign currencies, particularly at Valour. Most of the majority of the ETPs are based in SEK. There are -- that currency is -- it fluctuates against our US reporting currency at Valour. We do also maintain a large SEK balance to facilitate activity on buys and sells and redemptions of ETP certificates daily.

So depending on where the currency moves, and it did substantially increase against the US dollar this quarter, it was a positive event for the company in terms of the appreciation of that against either the transactional values of prior periods as well as the carrying -- the actual amount of currency we carried up in the period.

But to be clear, these are mark-to-market, right, Ryan? These aren't -- these are just due to regulatory requirements, and these are actually not losses in revenue or losses in profit. These are mark-to-market adjustments associated with currency fluctuations.

Well, they are revaluations of the currency, yes. If we were to monetize that into US dollars, that would realize it. But again, we do need a certain amount of SEK on our balance sheet to facilitate trading.

Yes.

Next question. Has DeFi made inroads with institutional investors in the last six months? Can you cite general examples? I think this one is more for Russell.

Yes, I can answer that. We absolutely have been penetrating the institutional market. Unfortunately, being on the Canadian market, as many people are aware, shorting and predatory algorithms are allowed. And the regulators, despite the fact that we have ample proof of it occurring and will be taking it forward, the regulators do not care. But yes, when you have three or four institutional research analysts covering you, you always end up with a few entities buying. And I wouldn't be surprised if there's a few buying today.

I'm at the Cantor conference and had several very, very good meetings with some very, very large funds the other day. And it's unfortunate to see your stock down after an incredible quarter, especially when you're talking about book values and $130 million to $200 million level with EBITDA at $100 million. And you look across the ecosystem where miners are losing money, negative earnings per share and trading up substantially.

And our hope is that, with an uplist, which, again, it's a forward-looking statement, and you can never be 100% certain, but without Gensler interfering and having a much more pro crypto SEC, I would surmise that an uplist is a when, not an if. And depending on the timing that Gensler and the SEC change their stance on crypto, we could be uplisting this month, next month or sometime in Q1.

And again, the irony is Galaxy trades up 50% on the news that crypto is likely going to be accepted in the US and, for whatever reason, we don't see that same benefit. But the reality is that this company is making money hand over fist. Oli and Johan are creating incredible products. We're about to expand into jurisdictions where there's absolutely no competition.

Our AUM stands to grow, not just in small increments, but in double and triple and quadruple increments. And this share price is not reflecting any of that currently.

And so we will continue to attend all these conferences. There are more analysts that are looking at launching coverage on us. And like I said, a US NASDAQ uplist, and I can tell you, this just categorically, from a fund meeting I had yesterday. They were like, "We're going to be buying now because we want to be long ahead of the catalyst of the uplist." So big and bright future for this company as soon as we uplist, that's for sure, along with institutional buying.

The next question from Troy. Will future acquisitions be paid with share dilution? Also, with the pace of share payments, will the company's diluted shares continue to grow or will it contract?

I can answer that quickly. We will never use shares to make acquisitions when our valuation is trading this low. The only way we make a share-based acquisition is if we can actually make that acquisition at a lower multiple than our shares are trading at so that from a cost of capital, it's always accretive. So really truly, it depends on what the acquisition is, what the relative valuation is for the acquisition, and where we're trading at, which is, obviously, an extremely low multiple. So those acquisitions, if paid for by shares, like Stillman, have to be trading at an even lower multiple than we are.

Yes. I mean to touch on that, all of our share-based acquisitions have been, I'd say, discounted price to net profit of the acquiree, basically, just implicitly on the fact that we're so undervalued, they get to bootstrap themselves onto our cash engine. And we will continue to evaluate acquisitions in cash and/or shares at a discounted multiple to net profit.

Next question. How can you guarantee DeFi Alpha will stay profitable as more players enter the game over time? Is there other avenues you see for robust revenue?

Go for it.

Yes. Okay. I can answer that one. So with DeFi Alpha, I will say that the -- this was established in Q2, obviously, to have a distinct focus on the opportunities we see, not only in the growing market, but also with the opportunities on our balance sheet, growing balance sheet and liquidity enhances. And a lot of the areas where we see both systematic earnings and where we improve the monetization of the balance sheet on those areas, we have zero competition.

But also, a lot of the opportunities we opportunistically look at right now are also based on or relation to a lot of the projects where we have had significant partnership with, where we have significant holdings on the back of ETPs.

I would say, a lot of the trades we do are not open for any firm to just jump in and do prop trading. I've been doing -- obviously, prop trading is systematic and opportunistic the last 10 years in crypto. And within these areas, nothing has much changed here. What has changed is our balance sheet, our flows, our liquidity and our opportunity to efficiently go after opportunities that's not where many competitors can actually even execute if they wanted to.

So I think we -- both on the systematic side and the opportunistic side, we see no change in this in the near future, but rather, the growth of the ecosystem, the growth of mainstream adaptation and so on, it just gives us more and more opportunities more than we actually have time almost to look at in spite of our growing bandwidth and focus on this area. So yes, for near-term future, we don't -- I don't see that change anytime soon.

I thought in the 2015, '16 actually that the basis trade would go our way after a few months, but it's still a healthy business, even though it's a commoditized type of trade that most large trading firms engage in. So in other more -- other fields, so we don't see much competition. It will take even much longer than for change offshore.

Thank you, Johan. I'm aggregating a few questions into one, more so reflecting on people's curiosity around our plans to move forward with Professional Capital Management with ETFs in the US. When will be able to list on the Nairobi Exchange and the Middle East, Asia, et cetera? Oli, I think if you want to take this one and clarify a little more. You're muted.

Just quickly before Oli steps in. Just so everyone knows...

Yes, yes. I'm sorry. I muted myself there. But go ahead, Russ.

I was just going to say, Oli, just Gensler is rumored to be resigning. We don't know for sure if he has. I just wanted to correct that, just in case people were wondering.

So yes, obviously, as Russ alluded to, fast-paced changes happening in the US regulatory environments. So we are constantly talking with US counsel about how to strategically and opportunistically approach that marketplace. Again, for all shareholders and prospective shareholders, every time there's something material in terms of agreements, exchange partnerships, we press release them immediately.

So we are actively working around the clock on Africa, Middle East, Asia and other growth prospective opportunities to push our products out as quickly as possible in all of those marketplaces.

And then I think a lot more questions around the mechanics of SolFi and CORE strategy. Just, Oli, if you could clarify how that specifically relates to DeFi shareholders?

Yes. So the idea between -- around these kind of companies is, so in a nutshell, we have developed proprietary systematic technology for both Solana and CORE that allows the maximization of yields and staking returns across those specific asset classes. We're extremely bullish on Solana and CORE.

If you look at kind of our press releases, Solana is on an absolute tear in terms of every sort of metric across the board, as well as CORE in terms of, I think, recently kind of going over 80% of all hash power in the world attributed to their chain. Started the year off with $3 million in total value locked on the protocol. I think as of today, it's well over $800 million or approaching $900 million, potentially even $1 billion.

So we're bullish on these. We've developed proprietary technologies in-house to maximize the potential of holding these. And we are partnered with a lot of institutions and holders of both of these individual currencies that want to see potential arbitrage of maximal value of the underlying spot value of those digital assets. As people have seen within MicroStrategy, there is anywhere from 1.5 to 2.5 multiple on those underlying assets within a public company construct.

So our idea is to retain a large amount of the shareholding of these new vehicles. And again, forward-looking statements, but our idea is to then repatriate that value to our shareholders to -- in crypto they have a term. If you hold a crypto coin and you receive remunerations in the form of what we call an air drop, this could be looked at as a regulated share dividend or air dropped to our DeFi shareholders.

Again, we are working with regulators and exchanges to clarify succinctly that the best course of action forward and efficient structures forward to be able to enable this and also bringing in and integrating advice from US counsel on how to best approach the formation of these entities for them to see expedited day of light in the US markets, which I think, is all culminating in a great time for us with the shift towards a pro crypto White House and us formulating these new entities and having a new regime change for us to essentially structure these entities, remunerate our shareholders in the form of new opportunities as they arise, and ultimately, continue to innovate and potentially assess further opportunities of unique digital asset classes that deserve their own capital market platform.

Thank you, Oli. A question from Allen Klee, one of the analysts that covers us. And this is probably best for Johan to answer. Guidance implies CAD46.2 million in revenue for Q4 2024, over double Q3 '24 results. Can you rank the factors pointing to higher revenue in the fourth quarter?

Yes. There is a big variety of factors. Obviously, part of this is that we were quite conservative for the full year guidance earlier. And obviously, we have a much higher market levels. We have much higher AUM right now.

We have a much better product mix right now, which drives our monetization rates much higher. I think we were at 8.2% or something that's of the AUM in Q3. We see that going higher in Q4, along with the AUM, along with the new products, we have launching, and also along with the DeFi Alpha strategies that we are now scaling up as well.

It's obviously hard to guide on any opportunistic trades, one-off trades, so we haven't included those in these numbers. But we are looking very closely on a few opportunities we hope to conclude before the year-end. But this is mainly driven by the growth of AUM. We see the growth in monetization and the systematic activities within DeFi Alpha and the usually improved product mix within our AUM portfolio. Also, there's a few opportunities, we are -- we will enable with the launch of these 23 new products within two to three weeks that will help to drive the revenues in Q4.

And then, Johan, if you can give as much clarity on, I guess, revenue generation for DeFi Alpha moving forward. Or how many opportunities we might expect to come of that?

Yes. Within DeFi Alpha, it's not just these opportunistic deals we're looking at, which are -- it's very hard to say how many per quarter there will be. We will -- we see a few opportunities that we actually will be able to go after once we have more assets on those in the balance sheet, which we think we will have when we launch a new product. That's one part of it that will -- we will see more of that in the next year.

But obviously, we have also the systematic trading and the rationale for forming the DeFi Alpha, but also to much more -- make the monetization on the balance sheet in total, both fiat and crypto assets, much more efficient than drive away the monetization rates. So within that context, obviously, without taking any market exposure, we see a lot of more opportunities now in Q4 in terms of arbitrages and short-term transactions that actually doesn't affect our exposure, but we couldn't do earlier in that low turnover, lower AUM environments.

So both the flow and the increased AUMs and decreased number of assets are driving our opportunities we see and the opportunities we engage in at the moment and going forward throughout Q4. So it's not just going after one-off trades, it's also about building the infrastructure that we've been focusing on a lot since Q2. We have increased the bandwidth quite a lot in the team in regards to both the development of infrastructure, agreements with counterparties and the focus and research into these opportunities.

So it's very hard to be very specific but -- this early on because, obviously, it's something that we -- immense growth in our ability to participate during this quarter and last quarter. And we -- a lot of the fruits of this work will -- probably we'll see more of next year. But it's -- yes, in this market environment, it's -- since the bull market started here and Bitcoin broke up the new all-time highs as well, that has just been immense change for the daily opportunities in the more commoditized type of both model-driven and pure arbitrage opportunities we see as well. Yes, that also paired, obviously, with our stronger balance sheet. But I'm not sure what more specifics I could say in this, but yes.

But everyone needs to understand, if we get Middle East and Africa launched, let's just say within the next week or two, and we generate an incremental $1 billion in AUM within the first quarter or two of next year in each of those jurisdictions, that's an extra USD200 million in revenue. And no one, none of the analysts, no one on this call, no one who's trading the stock is factoring in that potential additional revenue source. And we've been very, very clear that these efforts are happening near term, not long term. So it -- while DeFi Alpha is incredible, you actually may see a world where, next year, the AUM numbers far outpace the DeFi Alpha numbers.

And obviously, from an analyst perspective, analysts like to put higher multiples on reoccurring revenue versus one-offs, like trading desks. But ironically, in our share price currently, none of that is being reflected, neither DeFi Alpha successes nor international growth. Just wanted to throw that out there because, obviously, Africa and Middle East, and quite frankly, Asia and Latin America are massive opportunities for us with basically zero competition.

Yes, so to underline that, obviously, what we -- it's not just DeFi Alpha, we're looking at much higher revenue streams from our CORE business.

Exactly.

One factor is obviously that our AUM has increased, I don't know by how many percent, but I think the average AUM was around USD500 million for Q3. We're far above that level right now. And with this trajectory and the improved monetization rates, we should see a huge improvement in the CORE cash flow from the CORE business. So that's a big part of this as well.

Great. Thanks, Johan. Let's make this our last question as we're running a bit over time. Oli, could you just touch on the JV with Zero Computing? What we're looking at in terms of integration and what the goals are that we want to accomplish along with Zero Computing?

Yes, for sure. We should definitely have some very exciting updates in the coming few weeks. Zero Computing, a very, very kind of cryptographic intense technology, but essentially, for a lot and pertaining to DeFi Alpha and some of our trading operations. We've been working in the last few weeks on a zero knowledge-powered dark pool to essentially make our trading technologies more efficient. There's also this huge issue pertaining to MEV which stands for maximum extractable value, essentially kind of inefficiencies associated with blockchain transactions. So we're -- zero knowledge and Zero Computing is at the forefront of all of these technologies.

And we're codeveloping products and initiatives that will make our -- ideally, our trading revenues more robust and allow for higher systemic cost cutting, along with essentially a technology advantage as we approach trading in new marketplaces like on-chain Solana transactions. Being able to build positions in various assets with the power of zero knowledge essentially enables privacy-related basically competitive advantages, and we'll be happy to share some of those new product innovations and also products we intend on opening up as consumer and institutional platforms as we proceed.

Cool. So that's going to wrap up our call. Thank you all for your questions. Thank you all for your attendance. And of course, we also value you as shareholders.

If you do have any follow-up questions, please e-mail ir@defi.tech, or you can directly e-mail myself or Russell, curtis@defi.tech, rstarr@defi.tech. We're usually the ones answering them anyway.

We try to be as transparent as we're allowed to be. And if you need any clarity at any time, we always encourage you, just simply e-mail us, we'll answer any and all questions we can and provide any clarity if you have any concerns or just are curious about progress in general about things. So thanks again, and have a great weekend, everybody.

Thanks, everyone. Cheers.

Thanks, everyone.

Bye.