DeFi Technologies - Earnings Call - Q1 2025

Transcript

Curtis Schlaufman (VP of Marketing and Communications)

Q1 2025, DeFi Technologies, financials. Today we're going to discuss our progress through the quarter, touch on a little bit about what we accomplished last year and what we're looking forward to over the course of this year and the next couple of years. My name is Curtis Schlaufman, VP of Marketing and Communications, joined by our CEO, Olivier Roussy Newton, co-founder Johan Wattenstrom, our CFO, Paul Bozoki, Capital Markets head guy, Russell Starr, and our corporate secretary, Kenny Choi. First, I'm going to read forward-looking statements, and then we'll jump into this. Risk and forward-looking statements, 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, followed by, or including words such as target, believe, assume, expect, commit, aim, intend, may, anticipate, foresee, see, estimate, plan, project, will, is to, focus, can, have, likely, should, would, could, continue. In other words, or terms of similar meaning or negative thereof. Others can be identified from the context in which these statements are made. Forward-looking statements give the company's current expectations and views of the future developments in light of its 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. These forward-looking statements are not guarantees of future developments and results mentioned therein.

Forward-looking statements involve known and unknown risks and uncertainties and other factors such as, but not limited to, general economic and industry conditions, which are in some cases beyond the company's control, which may cause actual results to materially differ from those expressed in such statements. The statements are made as of the date of the presentation and this 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. Also forgot to mention, we're also joined by Andrew Forson, President of DeFi Technologies and Chief Growth Officer of Valour. Welcome, Andrew. This is your first call. All right, let's get into it. Ollie, I'll hand it off to you.

Olivier Roussy Newton (CEO)

Thank you, Curtis, and thanks to everyone who's joining us on this call. We are, you know, delighted to give our first presentation as a Nasdaq-listed company and also encapsulate another record quarter for the company. We own and operate several subsidiaries, our own venture portfolio, trading desk, treasury strategy, and several industry partnerships, which allow us to seamlessly tap into the extensive $3 trillion sector in a regulated manner, which we've, you know, done so since inception of the war and also DeFi as a public company. You know, high-level numbers, EBITDA for Q1, Curtis, if you go back.

Curtis Schlaufman (VP of Marketing and Communications)

Right.

Olivier Roussy Newton (CEO)

numbers, we are CAD 44 million, just under CAD 45 million, translates to $31.2 million USD, Q1 2025, EBITDA, market cap of CAD 1.9 billion, equivalent to $1.3 billion U.S., We have 65 listed exchange-traded products across a number of different jurisdictions. I think it is almost six or seven now, six highly scalable business lines. We are going to get more into how we plan on, you know, growing all of this in the coming quarters and years. This is our Q1 2025 key financial and business metrics. Book value CAD 79.7 million, equivalent to $55.5 million USD. Q1 2025 net revenue CAD 62.7 million, or $443.1 million USD. Q1 2024 earnings per share is CAD 0.13, equivalent to $0.09 USD, covered the market capitalization. Assets under management just under CAD 1 billion, translates to $640 million USD, AUM as of 31st 2025.

We've obviously seen a somewhat, a somewhat of a slump, I would say, over the last kind of four to five months in, in digital assets, associated with macro environments that we're seeing a nice, rebound in. We've covered, Q1 2025 EBITDA $44.8 million. And, as of now, our, as of today, our, our cash digital asset treasury and venture portfolio stands at CAD 117 million, equivalent to $81.5 million USD. We've updated our revenue guidance, which we can get into in, in further detail in the call, from, I believe it was, $130 million USD up to $201 million USD, CAD 285.6 million equivalent. So a big jump based on, how we're forecasting digital assets, towards, how they've picked up dramatically, in the last quarter, and, and into the year end.

If anyone's kind of new to DeFi Technologies, this is kind of an overall infographic on all of the specific subsidiaries and business operations that we own and operate. We have our, I'll start from left to right. We have our own research unit called Reflexivity Research that we acquired from Anthony Pompliano and Will Clemente about a year ago. It's been highly complementary to our Valour business unit, where we can provide cutting-edge, pragmatic research for the holders and prospective investors looking for exposure across our 65-plus exchange-traded products. We complement that with high-level research. We've recently closed the acquisition of Stillman Digital, which is a leading market-making liquidity service provisioning, custody, and OTC desk that is growing extremely rapidly, and has, you know, enabled us to expand our internal DeFi Alpha profitability and trading execution capabilities.

We're extremely happy about having that integrated finally. It was kind of a regulatory hurdle of transitioning their Bermuda-based licenses into our overall corporate structure. We own a 5% stake in the first licensed FINMA-licensed Swiss bank, which has been growing along with the cryptocurrency industry trend, which is nice to see. We also have a fairly new business unit called DeFi Alpha. We identify low-risk arbitrage opportunities that present themselves and generated just under $100 million in 2024, equivalent to CAD 133 million. We recently announced a trade, I believe it was a week and a half ago, of $30 million. We continue to assess opportunistically, amidst the volatility of the cryptocurrency landscape, risk-free arbitrage opportunities, opportunities that we see opportunistically picking up.

We have a venture portfolio that is really kind of used to take stakes, early, early stage stakes in companies that we believe have promising potential for the securitization and creation of exchange-traded products, which we continue to do. Also very excited about, I think I believe it was a month ago, we closed the majority stake, 52.5%, of a pioneering company called Neuronomics that has been devising equity-related artificial intelligence strategies for close to a decade and for the last four or five years has refocused their efforts in the cryptocurrency space. We look forward to utilizing our Valour infrastructure and new fund infrastructures that we are working on to encompass artificial intelligence strategies overlaid with digital assets.

All right. Thanks, Ollie. Paul, let's, let's turn it to you and go a little deeper into the financials from Q1.

Paul, you're on mute.

Paul Bozoki (CFO)

Sorry about that. Thank you, Curtis. Thank you, Ollie. I'll start with a balance sheet review. While Q1 saw significant volatility in crypto prices, with declines from December 31 to March 31, it is also reflected in our total assets declining from CAD 1.3 billion to just over CAD 1 billion at March 31. I'd like to point out that our average Q1 AUM was CAD 1.13 billion, or 2.7% higher than our Q4 2024 average AUM of CAD 1.1 billion. It just shows that we are also susceptible to very volatile crypto prices, but over time we have actually had a stronger AUM in Q1 than we did in Q4.

Similarly, on the back of that, while our AUM did decline, at March 31 at a point in time, the quarter we had a net positive inflow of $72.4 million into our ETP products, reflecting continued investor interest despite the volatility. The company launched four new products in March 2025, bringing its total ETPs to over 65, and we continue to target over 100 by the end of the year. Our focus remains on maintaining a conservative balance sheet with cash of CAD 20 million at March 31, crypto treasury holdings of CAD 43.4 million, and the venture portfolio investments of CAD 53.9 million. At March 31, 2025, we have shareholders' equity of CAD 79.7 million.

Our loans at March 31, 2025 total CAD 12.6 million, which represents, which constitutes a CAD 2.4 million margin loan at one of our crypto exchanges that we use to facilitate trade clearances, and the CAD 10.2 million loan payable to Genesis that's in receivership. The Genesis loan is fully collateralized by 359 Bitcoin at March 31st, which have, which have been fully impaired and thus offset the loan. It just represents a gross up of our balance sheet. As a P&L review, the company staked 66% of its cryptocurrency and earned CAD 14 million of staking income in the first quarter for an effective yield on the entire AUM of 5%. On the staked-only portion, the yield is 7.6%. The 5% effective yield is up from 4.7% in 2024. Our staking policies would allow for higher staking.

We, of course, manage it in our risk management as well, considering in terms of how much we stake. Management fee income for Q1 of 2025 was CAD 3.6 million, representing an effective yield of 1.3% on our entire AUM. I, investors are aware that most of our funds have a 1.9% management fee, but there are Bitcoin and Ethereum funds with zero, so the average is 1.3%. This is unchanged from 2024. The net investment result of our unrealized and realized changes in our digital assets, equity investments in digital assets, and ETPs in Q1 was CAD 42.4 million positive in the quarter. This contributed to the company earning IFRS net income of CAD 43 million. A large part of the result was driven by a CAD 45 million reversal of our CAD 124.5 million DLOM provision at December 31, 2024.

The DLOM is the discount for lack of marketability on some of our tokens that are locked up. The remaining DLOM at March 31, 2025 is CAD 79.5 million, which will also fully reverse back into income over time as the coins are unlocked. The DLOM provision in Q1 came down with the reduction in Solana and Avalanche prices in the quarter, hence the reversal. In the non-IFRS adjustment section of the MD&A, we have detailed this adjustment along with a smaller adjustment related to our Genesis loan Bitcoin. The company did receive back six Bitcoin from the receiver related to our Genesis loan, which is a positive in our income. Stillman Digital recorded trading commissions of CAD 2.9 million in Q1 2025, consistent with Q4 2024. Stillman contributed CAD 1 million to our bottom line in Q1.

Stillman is guiding for revenues of CAD 12 -CAD 16 million in 2025 while maintaining margins. Reflexivity recorded revenue of CAD 262,000, compared to CAD 507,000 in Q1 of 2024. Reflexivity earns most of its revenue in the second half of the year when it hosts various events that support its core research business. The company is upgrading its revenue guidance from CAD 227.2 million to CAD 285.6 million for 2025 on the back of a positive Q1. Thank you.

Curtis Schlaufman (VP of Marketing and Communications)

Thanks, Paul. Now let's turn it back to Ollie, Johan, and Andrew to talk about some additional highlights, particularly about Valour's product pipeline, our AUM, and net inflows, and explain that business a bit deeper as it is our most important business or subsidiary under the DeFi Technologies umbrella.

Johan Wattenstrom (Co-founder)

All right, maybe I should jump in here and take that. Sure. What we see here is the AUM in different products, how we, the development over time. As you can see, we have launched a lot of new products the last few quarters, and a lot of the new inflow is also in the new products, which actually is over our expectations as a lot of these are the smaller cryptocurrencies. I'm not sure. Could you go back? Okay. I think, yes, hold on this slide for a little bit. Obviously, if we could see the crypto prices here, you could obviously see that our AUM is very much correlated to the market markets, obviously, but the inflow has been constant since inception of the company.

What we have seen is that we have an investor base that are very loyal and seem to invest in all the new products to some extent. We can see that the same brokers, the same type of flows go in directly on the first day of listing. We have over 65 products now. I think we will probably have over 85 within two months. What you can see in white here is the inflow into these smaller coins. Obviously, still Solana is a big chunk of the AUM. An important point here is that this also reflects the improvement in product mix over time. We started out early on with the Bitcoin and Ethereum zero, which had zero management fees. The more products we put out there, we have higher margins on those.

There's more staking rewards, possibility to lend for higher rates, and we have higher management fees. Most of them are 1.9%. We have some higher for some more complex products. We're also listing now the leverage products in Scandinavia. I think within a few days, we have more basket products, active management certificates, and so on, where the management fees will be a bigger portion. For the active management products, we'll also have a two plus 20 type structure similar to what hedge funds use. We will see other types of revenue occurring from those products as well, hopefully within quarter, the third quarter.

I'm not sure if someone wanted to add anything here, but obviously important point that Paul noticed here that we had actually the average AUM in Q1 was higher than Q3 last year, even though we saw a large dip in the crypto in the markets. Yeah, with the recent bounce of over 20% for Bitcoin, more on average for our portfolio, we're in great shape for Q2 here, which is kind of linear to the AUM, the income from this. Yeah, I don't know if there's anything important I forgot here.

Olivier Roussy Newton (CEO)

I think that, you know, covers the kind of ebbs and flows specifically of the, you know, obviously the AUM is highly correlated with the prices of crypto. We definitely see retention amongst retail and institutional users and customers of Valour. They're definitely kind of, I would say, hodling coins over the long term. We do not see extreme amounts of outflows. You know, there have been volatile periods, but I think, you know, within the coming months, we will have, out of any issuer of digital assets, structured products, the largest portfolio out of anyone in terms of selection for altcoins, newer coins, indexes, as Johan mentioned, warrants, so different types of certificates.

We've also been working behind the scenes on, you know, the creation of an index calculation agent that will enable us to mix digital assets with equities. You know, obviously there's kind of a large trend in the capital markets of equities that are taking on new strategies in the form of accumulating coins and people, you know, trading, you know, certificates and/or structured products around those to have more effective exposure. That will enable us to kind of offer this new plethora of, I would say, emerging structured products in the form of equities in digestible exchange-traded products to our clienteles in existing European markets and markets that we're expanding into aggressively.

Johan Wattenstrom (Co-founder)

Yeah, maybe I also should emphasize this, the short we have up right now. I think a lot of people, investors have heard it before, but it's worth reiterating that the AUM represents where it's sticking money. We have no month within this period or historically, since inception with net outflows. We have separate days without net outflows, but not on a weekly or monthly basis. I have also data from this from 10 years back from starting XBT in 2015, and on a daily series, we see the same thing that investors should, tend to be long-term, very few swing traders or short-term traders. This, and it's used in the long-term savings and represents where sticking money. We see this pattern continue and even strengthen when looking at daily data.

Curtis Schlaufman (VP of Marketing and Communications)

All right. Let's, let's move into some of Valour's global expansion and strategic market development efforts. Johan and Andrew, if you guys want to tackle those.

Andrew Forson (President)

Sure. Maybe I'll speak up here. Obviously, strategically, we are very strong in Europe and the Nordics. As we continue to reinforce our marketing and communications and market access processes in these regions, we're also looking strategically in the regions where our technology, our vertical integration, and the fact that we are very effective at providing regulated access to crypto and digital assets is something that is actually in high demand in a lot of regions that are looking to expand the access to crypto and digital assets. Some of those regions being the Middle East, we have been having ongoing discussions in the UAE, in Qatar, in Bahrain, and other jurisdictions. We have been having very advanced discussions with East Africa, which is probably one of the primary hubs of expansion and use of digital assets globally.

We have the agreement that has been announced with the Nairobi Securities Exchange, which is a traditional securities exchange, which is seeking to adopt and expand into the digital asset space. There in particular, we are also working on building a digital assets exchange to be known as a Kenya Digital Exchange in partnership. We have significant outreach into the LATAM region and in particular also Southeast Asia, specifically Singapore. People have to understand that a lot of what we're doing is completely groundbreaking. It actually involves interaction with regulators, local legal support, and in some instances actually contributing to regulatory frameworks with regards to virtual assets. It is oftentimes slow. It is frequently unpredictable, but we advance inexorably towards listing our products in different markets.

Olivier Roussy Newton (CEO)

I think one important thing to also note, specifically in terms of, you know, moving into these markets, whether it be Singapore, Africa, the five or six jurisdictions we're targeting in the UAE, five or six others in Asia, Southeast Asia, is that we're market first entrants. You know, we are working, handholding the regulators on how to structure, basically, these offerings. It helps, you know, thanks to Johan that we have, you know, the longest track record of operating digital assets on regulated stock exchanges. You know, a lot of these countries, I think specific to, you know, for instance, take Nairobi, for example, you know, there's been sovereign nations that are adopting or putting in place legislation to acquire cryptocurrencies.

For pension funds, sovereign wealth funds, government funds in these developing nations, they do not want to get left out. They want baskets of cryptocurrencies, but they do not want to buy it on a foreign cryptocurrency exchange. They want to buy it through their regulated stock exchange. That gives us kind of an unparalleled advantage in going into these jurisdictions where, you know, we want to be the first and will be the first to operate within these jurisdictions and dominate the market.

Curtis Schlaufman (VP of Marketing and Communications)

We'll move on from there. Let's discuss that. Let's move into, touch a little bit on Stillman Digital and DeFi Alpha.

Olivier Roussy Newton (CEO)

Yeah, I mean, I can take this, I think, and Paul chime in, in respect to the Stillman financial outlook, but I know the, you know, the Q1 2025 forecast was small due to the timing of the acquisition. Is that correct?

Paul Bozoki (CFO)

We acquired them in October of 2024. It just, they ramp up more in the second half of the year.

Olivier Roussy Newton (CEO)

Yeah, it's a very robust business. Lean and Mean continues to exceed our expectations. I think, you know, over the coming quarters, we'll be a significant contributor to our bottom line, along with the enablement of trading technology to be utilized, specifically within operations such as DeFi Alpha and Valour. On that, sorry, go ahead.

Andrew Forson (President)

Oh, I just wanted to add that with regards to Stillman Digital too, with this explosion in growth and stablecoin adoption globally, what we're finding is companies are actually coming to us, any brokerages, digital asset platforms, any platforms that are looking to provide merchant access to stablecoins or crypto to enable payment via stablecoin or crypto. They're coming to us. They're looking at the Stillman platform. Indeed, the Stillman team is incredibly responsive. I've been pleasantly surprised by the degree of interest in what they have to offer and the size of counterparties that are interested in engaging with Stillman and using their services.

Curtis Schlaufman (VP of Marketing and Communications)

Great. Thanks, Andrew. Johan, could you touch on some of the progress for DeFi Alpha and how that's shaping out for the rest of the year?

Johan Wattenstrom (Co-founder)

Yeah, for sure. Maybe for context for new listeners, I should also reiterate a little bit what we do in DeFi Alpha. So it's basically, we're on our balance sheet. We hold quite a lot of different digital assets and fiat assets, obviously. We're, as a part of starting with a treasury function, to optimize the earnings and the monetization of our full balance sheet. We last year started DeFi Alpha as a more focused effort to do trades that are not typically within our treasury or optimization strategies that are typically more stat arbit type of basis trading, arbitrage, lending, staking, and so forth.

While DeFi Alpha looks at more, in beginning opportunistically at large trades, distressed ones, and other trades with foundations, with funds, and with other counterparties within the ecosystem, where we have a unique position, given our platform, our vertical integration through our businesses, and the assets on our balance sheet where we actually, without market risk, are pursuing these trades where we did over $100 million last year. We have just recently announced, as we said earlier, the first $22 million revenue generating trade for the year.

During the last year from our last call, our pipeline has strengthened significantly, especially now with the market coming back up. We are even more optimistic than on the last call regarding the next few trades in the near future, but also for the pipeline for the rest of the year. It has been an optimistic part of treasury. It is a self-driving business at this point where we build infrastructure to institutionalize these earnings as well. We found a great way to actually go out and offer our services and trades and balance sheet to counterparties where we can do these trades. It has been a much more optimistic start of the year than I actually thought at the last call here.

Yeah, I'm not sure really if there's anything more here to, is on the full, for the full year forecast. We haven't really, a big part of the increase in the full year forecast is the higher market now, which actually organically gives our base, cash flow, because much stronger. That's a big part of that. A little part of that is also the DeFi Alpha that we have actually added, quite a few, very concrete deals to our pipeline here in, in DeFi Alpha. Yeah, I think that's the essence.

Curtis Schlaufman (VP of Marketing and Communications)

Okay.

Olivier Roussy Newton (CEO)

Yeah, no, I was just going to touch on DeFi Alpha because we often, you know, get asked how to project out the specific, you know, revenue numbers and logistics. I think it took us, you know, three years to feel comfortable or even more so, four years, to start projecting a financial forecast for Valour as we gathered specific information on inflows, outflows, specific product launches. There was a bunch of technicalities around there. I think we're, you know, nine or ten months in, if that, with DeFi Alpha. And I feel confident that, you know, within the coming months, we will be able to, you know, project with, you know, a high level of certainty what we're expecting, as we've seen and sequenced trading data patterns associated with some of the trading strategies kind of employed.

Kind of going forward, you know, investors, shareholders will be able to, kind of, as we adequately predict, hopefully also forecast, specific numbers that we're projecting for the Alpha business unit.

Curtis Schlaufman (VP of Marketing and Communications)

Great. Moving on, Ole, could you quickly touch on how we plan to utilize and integrate Neuronomics through the rest of the year and sort of touch on product pipeline and integrating that into our IP infrastructure?

Olivier Roussy Newton (CEO)

Yeah, I mean, I touched on it, touched on it specifically, you know, DeFi had acquired an initial stake in Neuronomics a few years ago. We've built a relationship with the team, world-class team of artificial intelligence engineers, that have really, you know, spent the better part of the last decade looking at artificial intelligence kind of, you know, before it was cool, to figure out how to manage and optimize equities, due to the nature of data points available within the digital asset sector. They thought it would, much more market-ready approach for them. One of the, you know, the key components of this acquisition is a FINMA license, which allows us to distribute funds and products within Switzerland and within fund frameworks that are comfortable with the Swiss fund regulatory landscape, which is one of the largest in the world.

We are extremely excited to kind of target these AI-specific digital asset products and funds to Swiss-based and Swiss, you know, funds that invest in Swiss structures, which is one of the, you know, largest fund markets in the world. We are extremely excited about that. I think as institutional investors develop cryptocurrency portfolios, you know, similar, kind of akin to, you know, some five, six years ago, every fund had to have some sort of ESG mandate of, you know, 5%, 5-10% of their assets into ESG assets. I think, you know, fund managers will be scared not to have artificial intelligence-enabled products capturing returns for them.

We are in the process of updating the Neuronomics website with, you know, the performance of their funds to date, which are extremely well performing.

Johan Wattenstrom (Co-founder)

Yeah, I could add also that they have a number of AI-driven strategies where we can engineer the risk profiles that our clients are asking for. We will launch a few pure Alpha type strategies, but also some long-plus overlay portfolios and also some overlay portfolios for investors who are already long crypto. These will be driven out of the signals and the AI, IP we have here. We will distribute it through actively managed certificates, hedge funds and mutual funds, also probably through UCITS funds within Europe, depending on how we skew them a bit. This is all, first step is all crypto, but these also show extremely well good results in actual trading for equity markets.

We see a continuation long term within other asset classes and also maybe also trend following multi-asset class type products.

Curtis Schlaufman (VP of Marketing and Communications)

Finally, Ole, could you speak on progress regarding SoFi Tech and CoreFi?

Olivier Roussy Newton (CEO)

Yeah, for sure. You know, as we, you know, went through, I mean, what was a four-year trajectory with the SEC at DeFi, you know, and coming out of it at the end, we've been actively kind of working with lawyers to optimize the trajectory and launch of, you know, but both companies, CoreFi and obviously the Solana ecosystem are both growing and maturing very well. We will have, you know, updated guidance on those go-to market strategies that are definitely more efficient, given the new stance of digital assets that the SEC has embraced and is just kind of, you know, coming to light.

As opposed to, you know, when these strategies were launched, you know, some six months ago, taking approaches that would have, you know, potentially hindered the success and ability for them to reach, you know, their kind of pinnacle market capitalizations and exposure to international capital markets, we now have adequate plans to launch these vehicles.

Curtis Schlaufman (VP of Marketing and Communications)

Thanks, Ole. We'll now go into questions from analysts. I have a list of questions prepared. First from Mike Randall at Northland. I think this is for Johan. Can you detail what areas of business drove your 2025 guidance higher?

Johan Wattenstrom (Co-founder)

Yeah, for sure. Thanks for the question. It's yes, two components basically. There's two main drivers of the base cash flow from our ETPs. That's a major part, maybe half of our revenues last year. That's totally dependent on, obviously, the levels of the market and our in and outflows. It's just the market coming up back over 20%, obviously compared with Q1 and especially end of Q1, markets are and our AUM is now at a significantly higher place. We basically just every day earn more than, I would say, 25% more on all the staking revenue, lending revenue, management fees, and so forth.

That's just informed us to conservatively upshift our monthly forecast for the year for the market, which is basically a big part of our income, like for a brokerage firm where they take a percentage in commission. That's a big part of this. The other part, where we have seen a small upward shift in the forecast, was on the DeFi Alpha. That's just because the one trade we actually did execute now was not even in our pipeline before. We've seen quite a few other trades becoming very, very close in time, hopefully. We have much more insight in when and how much, to what value we can do these trades than we had a month ago.

So, that's a major shift for DeFi Alpha. I will say, that's one part, DeFi Alpha, that's one part. The other big part is the higher AUM. If obviously the market goes down here, the base inflow from our monetization of our balance sheet will go down with it. Our forecast for the year has shifted up with the market since the end of year, where it obviously was much lower, not only for Bitcoin, but for all our assets. On average, I think for our portfolio, it was a much higher shift upwards in our AUM, with market prices, and which is actually what half of our revenue stems from. Yeah, that's the simple answer.

Curtis Schlaufman (VP of Marketing and Communications)

Andrew, could you talk about new geographies for ETPs, and any rough timing as it relates to any of the specific regions?

Andrew Forson (President)

Yeah, thank you very much for the question. I would say that the ones that are most mature in the process are East Africa, because we've been able to work at the highest levels of government at the regulatory framework. The wonderful team in Valour has been very effective in assigning, determining the plumbing that is needed to get this done. Close in that race for listings, you also have Southeast Asia. We're in continued discussions in Singapore, continued discussions in some of the Gulf Coast countries. Increasingly we're looking at LATAM. Now, I have to, I've been trained as a financial risk manager, so I have to caveat all of this with everything we're doing, as Ole, our CEO, mentioned, is basically tip of the spear market access.

That means we are at the intersection of regulatory approval and the actual products that we have and know have been well accepted throughout Europe. At any one time, it is not exclusively the domain of Valour to determine the timing of the entry into a particular market, but sometimes it depends on when a capital market authority decides to have their sitting to review instruments. What I can personally attest to is that we do not deal at the government bureaucracy level. We are dealing at the highest level, director general level, ministry level, in order to ensure that they have a clear understanding of what we want to do, that our objective is to get listed and to get listed in a timely manner so that their populations will have access to our instruments and we can grow shareholder value.

Curtis Schlaufman (VP of Marketing and Communications)

I also think it's important to touch on the time it takes us to establish and list these products in these specific regions is by nature a moat in itself. Time is acting as a moat once we have Valour's instruments listed there.

Andrew Forson (President)

You're absolutely correct. This requires a significant investment in personal relationships, regulatory relationships, and as you've accurately mentioned, Curtis, just time. We are nurturing these in a number of jurisdictions. I would expect that we will start to see significant progress, obviously through this fiscal year, but then we're also going to see somewhat of a cascading effect because every time we hit a new market, we get better, we get more efficient, we know who to speak to, and we're more accurate in our offering.

Curtis Schlaufman (VP of Marketing and Communications)

Thank you, Andrew. Question from Mark Palmer at Benchmark. What do you see as the tangible benefits of DeFi Technologies uplisting to the NASDAQ in terms of cost of capital and other metrics? I think Ole can answer that one.

Olivier Roussy Newton (CEO)

Cost of capital, I mean, in terms of, you know, financing, I think, you know, we're still a few days in, but I would assume that, you know, as people recognize the uniqueness of DeFi's business compared to, I would say, kind of leveraged, over-leveraged plays to acquire Bitcoin, we will see kind of a unique, shareholder-based form around our equity as we continue to execute as we have. Obviously, with more enhanced liquidity, visibility, access to larger institutions, you see kind of a more efficient cost of capital to be utilized for, you know, potential acquisitions and/or other strategies that we might have up our sleeves. Did I miss anything in that question, Curtis? Because I'm just typing some.

Curtis Schlaufman (VP of Marketing and Communications)

Yeah, I don't, I don't think so. I think, I think you covered it pretty well. We'll speak to Mark after if he has any clarifying questions. Another question from Mark, and this one is for Paul. What per, just to, I, I know you covered it earlier, but just to refresh, what percentage of the Valour's AUM did the company stake during Q1 2025? And how does that percentage compare with what was staked in Q4 of 2024 and in prior quarters?

Paul Bozoki (CFO)

it's about consistent. We've traditionally staked in this 66-70% range.

Curtis Schlaufman (VP of Marketing and Communications)

Okay. And then Michael, questions from Michael Kim at Zacks. Can you provide an update on your plans to launch ETFs here in the U.S. via the partnership with Professional Capital Management? And could you flesh out the strategy in terms of which products you plan to bring to market and how you plan to position your offerings relative to other players in the market? Ole, can you tackle that one?

Olivier Roussy Newton (CEO)

Sorry, I'm just trying to answer these questions, Curtis. What was the.

Curtis Schlaufman (VP of Marketing and Communications)

This was a, I guess, do a refresher on the plans to launch ETFs here in the U.S. with Professional Capital Management, where that stands or what the thinking behind that is and, progress and timeline.

Olivier Roussy Newton (CEO)

Yeah, I mean, the thinking behind that was, you know, we have a relationship with Professional Capital Management and assessing the potential viability of that entrance into the U.S. is something we're still considering. Obviously, the market dynamics have changed formidably since we've launched that. We've seen a lot of competitors of ours make the mistake of trying to enter the US market. We do not want to compete with BlackRock, Fidelity, VanEck, you know, established US financial institutions who have all the retail and institutional reach for their products. We are still assessing North America, specifically the US as a market.

we're finding, you know, we're just making sure that we do that acutely so that when we do launch things, we have a specific market niche that is not competing against, you know, multi-hundred billion companies and waste a bunch of money, which nearly killed, if not killed, some of the competing ETP markets, which, you know, I can't complain about.

Curtis Schlaufman (VP of Marketing and Communications)

and then another question from Michael. In terms of capital management, can you provide an update on your current thinking around returning excess capital to shareholders via share repurchases, repurchases, and/or potentially instituting a dividend at some point?

Olivier Roussy Newton (CEO)

Yeah, I mean, we have actively utilized our, you know, NCIB. I'm not sure what the U.S. share buyback program, you know, continuously, when we believe our share price is undervalued and we may do so opportunistically with our cash and shares. Obviously our, you know, company has gone, you know, transitioned from, you know, being kind of having, you know, debt on our balance sheet, having, you know, having not raised any institutional capital, clearing that debt, having, you know, a very sizable cash treasury now, extremely profitable. The natural transition of a company of our nature is, you know, once we reach a comfortable, you know, revenue milestone, the board would, you know, consider dividends, if it made sense for a company of our nature.

Keep in mind, we are still a growth company, you know, so we're very early in our kind of trajectory. And when you, you know, typically look at high growth tech companies, you know, they're not paying dividends immediately, but that's not to say that we wouldn't rule it out in the future when we have excess cash flow, and, you know, happy shareholders, and we can redistribute some of that to shareholders. It's something, you know, the board can consider when the time is right.

I think we have, you know, before that, at least a few quarters to grow, and our focus is on making this as an efficient cash engine and really the most profitable, you know, crypto company listed on the public stock exchange, which I think we have a very good opportunity of doing.

Curtis Schlaufman (VP of Marketing and Communications)

I think we see ourselves as a high growth company and we have no problem to profitably deploy funds. Even though we have a really high cash flow and make good money here, we have high returns on our free cash and the cash flow on a balance sheet, both in different trading strategies, but also in things we're building. We're not, we don't invest in long term, very unclear projects. We have some very, we know exactly how to deploy the funds. We earn a very high return on our funds internally.

We haven't seen any better way to invest our money or pay it back, because we serve as a high growth company and we have a great pipeline of highly profitable products and strategies to deploy our funds at. At this, and also I would say that one part of our funds is also the working capital for our trading and liquidity market making business where we earn a lot of money on all the flow in and out of our product, which is still a field that's growing with our growing portfolio and so forth. We have several highly profitable ways of deploying the capital and I think it's, yeah, like Olivier mentioned, it's very early for us to consider probably dividends at this point.

Paul Bozoki (CFO)

Just a quick one from me that we did subsequent to quarter end buy back 505,000 shares at a cost of CAD 2.1 million. So the company returned just over CAD 2 million to its shareholders subsequent to quarter end. It's disclosed in the MDNA.

Curtis Schlaufman (VP of Marketing and Communications)

Paul, Ole and Johan, in addition to this here's a momentum, can you speak to where you see DeFi Technologies in two to three years? What are the key initiatives, markets, or innovations that you believe will shape the company's future trajectory?

Olivier Roussy Newton (CEO)

Yeah, I think, you know, going back, it feels like 10 years ago, but it wasn't so far long ago, when FTX and these kind of occurrences happened, we took the initiative to build our own internal technology, trading engines, custody, fully vertically integrated technology company. We see, you know, I think the first thing I told Johan when I met him was, you know, he had a single product, called XBT Provider, the world's first Bitcoin ETF. And I said, you know, why don't we do this for thousands of products and derivatives and warrants and all types of products?

So I want, you know, DeFi by way of Valour and its other pertinent subsidiaries to be one of the largest operators of products, derivatives in emerging niche markets where we, you know, like the Nordics, entirely dominate the space and have first mover advantage and in doing so, acquire, incubate, and build trading technologies that complement all of our unique businesses. You know, keep in mind, you know, DeFi Alpha came out of an idea, you know, Johan had a few months ago and now it's, you know, making, you know, potentially hundreds of millions of dollars a year. As we are, you know, entrepreneurs at our core, we will, you know, continue to innovate, innovate, strive to innovate, look at, you know, acquisitions and/or acquisitions that complement the robustness of our trading technology.

I think we have a very good opportunity to be the most profitable, specifically kind of vertically integrated, trading technology and asset management company in the digital asset space.

Curtis Schlaufman (VP of Marketing and Communications)

Yeah, I agree 100% on that. Also, what we've seen and really optimized now is how this model works in Europe and not least in Scandinavia. Obviously, also on the marketing PR side, we learned a lot the last two years. I think that blueprint is something we are expanding now geographically, but also in terms of vehicles, because now we have the ETPs, the ETNs, but we also now have the asset management license in Switzerland. We will do other types of vehicles like funds, UCITS funds, hedge funds, and make sure all pools of money can access our asset and strategy. So both trackers, different types of basket and leverage product, but also the alpha type strategies, and make sure we can distribute it even more efficiently across other types of vehicles.

All types of asset managers, from retail to institutional, can invest because not everyone can buy equities, not everyone can buy ETPs. Others can only buy convertible bonds or corporate bonds or hedge funds or mutual funds and so on. The expansion, which is really high pace right now, is not only on the geographical side, it is also on the type of vehicle side where we see huge demand from new types of investors that have not been able to participate, but we will make it possible for them to participate very, very soon in the same geographies where we are successful now. I think to say we have a lot to build still. Thanks, Johan. Final question from Edward Ingle, and this one is for you again, Johan. How do higher crypto prices impact the outlook of DeFi Alpha opportunities?

Do higher valuations create more trading opportunities or can they widen the spread you earn on some of these trades? Yeah, I think it's a bit narrow, narrow answer to that. I would say we don't, maybe we don't get higher margins, but we could probably do larger tickets per trade. Obviously we see, with higher markets, we see more opportunities for sure, because there might be opportunities for us to buy distressed assets or discounted assets from different types of actors in the space. If the market is higher, they are more likely to be willing to sell to us or do another type of structured deal within this framework. I think the higher markets will make the counterparties more trigger happy for sure.

The margin probably remains about the same, but the ticket sizes might be higher, for sure. Yeah, all in all, it's positive that the market goes up, on all fronts. Great. That concludes today's call. If you do have any follow-up questions, please email us, [email protected] or [email protected]. Thank you all again for your support and your participation. There will be a recording of this provided shortly after. It'll be emailed and tweeted out and also on the company's LinkedIn page. Thank you again. Enjoy the rest of your day.

Olivier Roussy Newton (CEO)

Thanks. Thanks.