Edward Engel

Edward Engel asked about potential tax reform in Japan related to crypto transaction gains and how the leadership transition might impact Coincheck Group's M&A strategy.

Answer

Pascal St-Jean, Chief Growth Officer, indicated a convergence in Japan towards tax clarity and crypto as a financial instrument, noting institutional readiness similar to North America's 2025 unlock. Oki Matsumoto, Executive Chairperson, clarified that tax reform primarily targets retail investors, while institutional interest is growing independently. Regarding M&A, Pascal St-Jean stated the immediate focus is on integrating current acquisitions (Coincheck, Next Finance Tech, 3iQ, Aplo) to realize synergies, while remaining opportunistic for future strategic acquisitions.

Edward Engel asked for an update on potential crypto tax reform in Japan, particularly concerning gains on crypto transactions, and inquired if the leadership transition would impact Coincheck Group's appetite for M&A.

Answer

Pascal St-Jean (Chief Growth Officer, Incoming CEO) indicated that the environment in Japan is converging for clarity on crypto tax and its status as a financial instrument, noting a similar institutional readiness to North America in 2025. Oki Matsumoto (Executive Chairperson) clarified that tax reform primarily affects retail investors, while institutional interest is growing independently. Regarding M&A, Pascal St-Jean stated the immediate focus is on integrating the four acquired companies (Coincheck, Next Finance Tech, 3iQ, Aplo) to realize synergies, while remaining opportunistic for future acquisitions.

Edward Engel asked about localized features offered in non-U.S. markets, such as tax wrappers, savings accounts, and local banking connectivity, and the roadmap for these. He also inquired about how Webull users are performing amidst recent volatility in U.S. equity markets.

Answer

Group President and U.S. CEO, Anthony Denier, explained Webull's 'global vision, local execution' strategy, with local teams in each of its 14 broker-dealers. He noted that new products like tax wrappers are added upon regulatory approval, and most non-U.S. entities trade both local and U.S. securities, with the majority of transactions in U.S. products. Denier highlighted the 'exportation of the U.S. retail trading experience' as a major growth factor, citing increased adoption of ETFs and options trading internationally. Regarding market volatility, Denier stated that Webull is uniquely positioned for a rising VIX, as its sophisticated and experienced customers tend to trade more during volatile periods, leading to explosive volume in recent weeks.

Edward Engel inquired about how Webull's users are holding up through recent volatility in the U.S. equity markets.

Answer

Anthony Denier (Group President and U.S. CEO, Webull) stated that Webull is uniquely well-positioned for a rising VIX, as its sophisticated and experienced customers trade more during volatility. He noted explosive volume in recent weeks due to volatility and believes Webull accelerates into short-term volatile markets better than peers, while acknowledging long-term volatility is not ideal for cyclical businesses.

Edward Engel of Compass Point Research & Trading asked about changes in customer demand for ASICs since May and whether market sentiment has rebounded to Q1 levels.

Answer

CEO Nanjing Zhang confirmed seeing positive changes in market demand since July, with North American institutional customers adapting to the new tariff environment. He highlighted that strong demand in Asia and other regions during Q2 offset the temporary weakness in the U.S. market. Zhang also noted that tariffs created an unusual market situation where machines intended for the U.S. were sold at discounts elsewhere.

Edward Engel from Compass Point Research & Trading, LLC asked if Galaxy's PIPE deal investments in treasury companies are meaningful for its balance sheet and if the ERCOT approval timeline for new capacity differs from the existing pipeline.

Answer

President & CIO Christopher Ferraro explained that these investments are relatively small, as the primary focus is on partnering with companies that value Galaxy's franchise and services. He also clarified that the new 1 GW interconnect request is on a similar timeline to the existing 1.7 GW in the backlog, with both now totaling 2.7 GW under study with ERCOT.

Edward Engel of Compass Point Research & Trading LLC asked if Robinhood's mindset has changed on applying for a banking license, given recent industry trends and their own banking product rollouts.

Answer

CEO Vlad Tenev stated that while they previously applied for a charter in 2019, the partnership model has proven more effective for delivering superior products like high-yield cash sweep with multiplicative FDIC protection. He confirmed that they have found all necessary capabilities through partnerships so far, but remain nimble and could reevaluate if the balance shifts, especially regarding future lending products.

Edward Engel from Compass Point asked about the cost base for the recently acquired TradePMR, inquiring about the core run rate beyond 2025 and any opportunities for savings.

Answer

CFO Jason Warnick clarified that the guided $85 million in costs for the year includes deal-related expenses. He stated there is an opportunity to reduce that number, particularly by the next quarter, as the integration progresses.

Edward Engel asked about the drivers behind the increase in G&A expenses, noting moving parts like event costs and stock-based compensation, and sought guidance on a normalized quarterly run rate for G&A moving forward.

Answer

CFO James Gernetzke confirmed the drivers included one-time events like the NYSE American bell ringing, M&A due diligence costs, revenue share tied to XO Swap volume, and political contributions. He indicated that while some costs like the bell ringing are non-recurring, expenses related to M&A activity, revenue share, and industry advocacy are likely to continue. He advised that these variable components make a precise normalized run rate difficult but highlighted them as the key areas to watch.

Edward Engel of Alliance Global Partners inquired about the impact of recent major industry hacks on demand for self-custodial products like Exodus, any noticeable changes in user onboarding, the disclosure of Q4 gross margins or G&A expenses, one-time costs from the NYSE uplisting, and the implications of a recent change to the swap pricing structure.

Answer

Executive J. Richardson confirmed that major exchange hacks reinforce the value proposition of self-custody and lead to customer influx, though specific numbers were not disclosed. Executive James Gernetzke addressed the financial questions, stating that details on margins, G&A, and one-time uplisting costs would be available in the upcoming 10-K filing. Gernetzke also clarified that the pricing structure change was related to Solana fees, aimed at improving the user experience without altering the company's overall margin structure.

Edward Engel from ROTH Capital Partners asked for an update on the company's monthly cash burn rate and whether the target for achieving positive EBITDA by the end of the calendar year remained feasible. He also inquired about the current cash balance and if a tighter capital position could hinder customer acquisition efforts in the U.S. and Europe.

Answer

CFO Dan Marks stated that the monthly cash burn is now approximately $1.3 million, up from the previously discussed $1 million, and that the timeline for reaching breakeven has been pushed out to the first calendar quarter of 2023. Chairman and CEO Grant Johnson acknowledged that a difficult market restricts access to capital and can slow marketing, but noted that several of the company's assets are cash-flow positive. Marks added that the company is utilizing its ATM facility prudently and is in discussions for longer-term strategic financing, leveraging its position as a public company.

Edward Engel from ROTH Capital Partners asked about the company's balance sheet strategy, the rationale for raising capital via convertible preferred stock instead of the ATM or shelf, the expected quarterly revenue cadence for the fiscal year, and the go-to-market strategy for customer acquisition in New Jersey once approved.

Answer

CEO Grant Johnson explained the convertible preferred stock was chosen to avoid downward pressure on the share price, while the shelf and ATM remain available. CFO Dan Marks confirmed revenue is expected to be weighted towards the second half, with a roughly 65/35 split between H2 and H1, driven by cross-selling initiatives. Johnson outlined the New Jersey go-to-market plan, which includes advertising in their Helix center, PR, media outreach, and leveraging influencer and pro-team partnerships.