Galaxy Digital Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Listing as U.S. company: Excitement about accessing U.S. capital markets, retail platforms, and market indices; now eligible for inclusion in S&P, Russell, MSCI.
• Business resegmentation: Transitioned to 2 operating segments (Digital Assets, Data Centers) and Treasury & Corporate. Digital Assets combines crypto-related operations; Data Center segment in development with expenses capitalized.
• Q1 results: Net loss $295 million, operating expenses $188 million (down ~$143 million QoQ). Equity capital strong at $1.9 billion.
• Q2 preliminary performance: Improved digital asset prices, quarter-to-date operating income between positive $160 million and $170 million. Total equity capital ~$2.2 billion as of May 12.
• Data center progress: CoreWeave exercised Phase 2 option for 260 MW at Helios; pursuing project-level debt financing for Phase 1 and 2, with plans to deliver critical IT load by H1 2027.

Segment Performance

• Digital Asset segment: Generated approximately $65 million in adjusted gross profit and $3.5 million in operating income in Q1. Trading business had client demand in Jan but slowed in Feb; lending business had healthy activity, with average loan book growing to roughly $870 million in Q1 and net interest revenue of ~$23 million (up 25% QoQ). Investment banking served as co-manager on CoreWeave IPO.
• Asset Management and Infrastructure Solutions: Combined assets under management and stake were ~$7 billion (down 29% QoQ). Adjusted gross profit (fee-based) was ~$22 million (down 8% QoQ). Venture franchise raised over $160 million. Launched Solana ETF with staking, and staking business integrated with new platforms.
• Data Center segment: No material revenue yet, incurred expenses, with a modest operating loss of $3 million in Q1. Plans for Phase 2 at Helios with CoreWeave, targeting delivery by H1 2027.
• Treasury and Corporate segment: Reported a loss of $392 million due to digital asset price decline and mining operations wind down. Equity capital remained strong at $1.9 billion as of March 31.

Guidance

• Q2 preliminary: Positive due to improved crypto prices, with quarter-to-date operating income between $160M-$170M.
• Data center: Expect to generate over $13 billion in revenue over 15 years from Helios projects, uncorrelated from digital asset prices.
• Equity capital: ~$2.2 billion as of May 12, including one-time increase from reorganization related to domestication.

Risks

• Regulatory gridlock: Uncertainty in crypto regulations in D.C. impacting business operations.
• Market volatility: Impact on digital asset prices and related financial performance.
• Project execution risks: Potential delays or issues in data center construction, financing, and regulatory approvals for additional power capacity at Helios.

Q: Talk a little bit about the data center opportunity.

A: Christopher Ferraro discussed data center plans, including CoreWeave exercising Phase 2 option for 260 MW at Helios, plans for Phase 2 delivery by H1 2027, and pursuit of project-level debt financing.

Q: How does NASDAQ listing help the business?

A: Michael Novogratz talked about access to U.S. capital markets, retail platforms, and market indices, enhancing visibility and accessibility.

Q: Thoughts on the loan business?

A: Michael Novogratz discussed credit focus, growth potential, and the loan book's healthy performance in Q1 despite down crypto quarter.

Q: Update on 1.7 GW power study at Helios?

A: Michael Novogratz talked about ERCOT studying the 1.7 GW power capacity, potential diversification of tenant base, and focus on geographically diversified portfolio.

Q: Competition in crypto space?

A: Michael Novogratz discussed build vs acquire strategy, staffing business development team to participate in M&A opportunities.

Q: TradFi entering digital assets?

A: Michael Novogratz talked about tokenization, R&D, partnerships, and Galaxy's role in providing custodial tech and tokenization capabilities.

Q: Bitcoin decoupling from equities?

A: Michael Novogratz discussed adoption, macro outlook, and how Bitcoin price drives liquidity and energy in the crypto space.

Q: Project financing for data centers?

A: Michael Novogratz talked about financing options, cap rates, and the importance of tenant diversification for balanced earnings.

Q: Tokenization and Galaxy's role?

A: Michael Novogratz discussed custodial tech, tokenization capabilities, advisory services, and Galaxy's pieces of the tokenization puzzle.

Q: Crypto regulations?

A: Michael Novogratz discussed regulatory challenges, chances of legislation in D.C., and Galaxy's participation in European stablecoin initiatives.