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HK

Horizon Kinetics Holding Corp (HKHC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue grew 81.8% year over year to $19.2M, driven by higher AUM and market appreciation in key exposures (TPL +25% in Q4/+111% for 2024; GBTC +47% in Q4/+114% for 2024). Net income attributable to HKHC was $75.8M ($4.07 per share), aided by substantial investment gains within consolidated investment products (CIPs). AUM ended the quarter at $9.8B (+18% QoQ, +52% YoY) .
  • Operating income remained negative in Q4 (-$14.7M) as higher commissions, distribution, M&A and legal/professional costs offset revenue growth; however, total “other income” from CIPs and investments more than offset operating loss in the quarter .
  • The Board declared a $0.107 per share dividend (paid Mar 28, 2025); management explained a temporarily smaller dividend relative to performance fees due to cash tax timing and potential liquidity needs when performance fees crystallize, with intent to normalize payout in the next quarter consistent with policy (portion of quarterly operating income) .
  • Street estimates (S&P Global) for Q4/FY 2024 EPS and revenue were not available; as such, no beat/miss vs consensus can be determined. Key forward catalysts include: potential direct listing of Consensus Mining, a new Japan ETF launch, and expected state/local tax apportionment benefits in 2025 (market-based sourcing) .

What Went Well and What Went Wrong

What Went Well

  • Record quarter/year with strong AUM growth to $9.8B (+18% QoQ, +52% YoY) and Q4 revenue +81.8% YoY to $19.2M, reflecting market appreciation in TPL and GBTC exposures across funds and accounts .
  • Significant incentive fees ($51.7M in 2024, largely in Q4) and substantial investment gains within CIPs amplified net income to $75.8M in Q4; management highlighted that high-margin performance fees are recognized below operating income due to consolidation accounting .
  • Strategic pipeline progress: management discussed a prospective direct listing of Consensus Mining (crypto mining) and a new Japan ETF launch near term; both broaden product set and potential fee streams .

What Went Wrong

  • Operating income remained negative in Q4 (-$14.7M) as commissions, distribution/marketing, and G&A were elevated (M&A/professional/legal), leaving operating loss despite the revenue ramp .
  • Dividend sizing disappointed some investors; management noted large performance fees crystallize at year-end while taxes are due before fees are collected, temporarily stressing cash, thus leading to a smaller-than-expected Q4 dividend; they expect normalization next quarter .
  • Tax complexity/noise: conversion from LLC to C‑Corp in 2024 created a $59.7M non-cash deferred tax expense and large reported tax expense ($104.3M for 2024) vs ~$11M cash taxes paid, complicating optical earnings quality and cash flow interpretation .

Financial Results

Consolidated results vs prior year and prior quarter

MetricQ4 2023Q3 2024Q4 2024
Revenue ($M)$10.565 $15.368 $19.204
Operating Income ($M)$(1.592) $1.350 $(14.703)
Net Income Attributable to HKHC ($M)$2.429 $(38.167) $75.760
Diluted EPS ($)$0.14 $(2.07) $4.07
AUM (period end, $B)–$8.3 (9/30/24) $9.8 (12/31/24)
Dividend per Share ($)–$0.053 (declared for Q3) $0.107 (declared Mar 3, 2025)

Notes:

  • Q4 2024 revenue +81.8% YoY as disclosed in the press release highlights .
  • Q4 2024 net income reflects large “other income” from CIPs and investments that sits below operating income due to consolidation rules .

FY context and non-GAAP “without consolidation” view (for transparency)

MetricFY 2023FY 2024 (Consolidated)FY 2024 (Without CIPs)
Total Revenue ($M)$47.263 $57.181 $113.176
Operating Income ($M)$(1.782) $(15.529) $42.678
Equity in Earnings of Proprietary Funds ($M)$(2.448) $6.037 $106.603
Net Income Attributable to HKHC ($M)$(4.492) $92.472 $92.472
Diluted EPS ($)$(0.25) $5.07 $5.07

KPI Drivers (selected):

  • Performance/incentive fees: $51.7M in 2024 (predominantly Q4) .
  • Unearned performance revenue at 9/30/24: $23.3M (illustrative of year-end crystallization dynamic) .
  • Market drivers: TPL +25% in Q4/+111% in 2024; GBTC +47% in Q4/+114% in 2024 (key contributors to AUM/returns) .
  • Digital assets: Unrealized gains of $4.2M in Q4/$7.0M for 2024 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent UpdateChange
Dividend policyOngoingPolicy set to pay a portion of quarterly operating income after taxes Q4 dividend of $0.107 was smaller due to cash tax-timing/preparedness for potential large crystallizations; management expects next quarter’s dividend to reflect historical proportion of income Maintained policy; temporary sizing constraint
Income taxes (state/local apportionment)FY 2025N/AExpect benefit as taxes move to market-based sourcing (where services are consumed), likely reducing state/local tax burden vs New York sourcing Favorable change expected
Performance fee recognitionOngoingPerformance fees disclosed intra-year as unearned; recognized at year-end when contingencies resolve Continues; recognition heavily 4Q-weighted; large variability acknowledged Maintained approach
Product pipeline2025EN/AJapan ETF targeted in “a month or two”; pursuing direct listing for Consensus Mining (timing contingent on process), no capital raise expected New product flow/catalysts

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Performance fees and consolidation accountingQ3: Unearned performance revenue disclosed; consolidation change flagged and 10-Q/A filed to reflect new basis Emphasis that performance fees (high-margin) appear below operating line; CIPs generate large “other income”; economic impact to HKHC realized via lower allocation to redeemable NCI Increasing clarity/transparency
Dividend frameworkQ3: Board set policy—portion of quarterly operating income after tax; $0.053 declared Q4 dividend smaller than some expected due to tax-timing cash constraint; intent to normalize next quarter consistent with policy Policy consistent; sizing to normalize
AUM drivers and exposures (TPL/GBTC)Q3: TPL +21% QoQ/+69% YTD drove AUM; AUM $8.3B Q4: TPL +25% QoQ/+111% YoY; GBTC +47% QoQ/+114% YoY; AUM $9.8B (+18% QoQ, +52% YoY) Positive momentum
Product roadmap (ETFs/crypto)–Japan ETF planned; Consensus Mining direct listing targeted; HKHC manages crypto activities for Consensus Expanding offerings
Taxes and structureQ3: Deferred tax liability recognized with C‑Corp conversion Expect 2025 benefit from market-based sourcing; 2024 cash taxes ~$11M vs booked $104.3M (deferred) Potential tailwind in 2025
Macro/tariffs–Portfolio relatively insulated from tariff risk (focus away from multinationals/importers/exporters) Neutral to positive

Note: No Q2 2024 HKHC earnings filing was found; Q3 2024 is used as the prior-quarter reference –.

Management Commentary

  • “Our earnings for…2024 were a record… The revenue number is a little over $57 million… Internally… revenue… is over $113 million [without consolidation]. The difference is the performance fees… embedded in investment gains [below operating income]” .
  • “Performance fees… were so large… we almost didn’t have the money to pay our own taxes” due to fees crystallizing at year-end while taxes were due earlier .
  • “Our taxes… in 2025 will be computed based on where the service is consumed… we’ll actually get… tax advantages” (market-based sourcing) .
  • Product pipeline: “We’re launching yet one more ETF… a Japan ETF… [in] a month or two… Consensus Mining… on the verge of being a listed company… direct listing… no capital [raise]” .
  • Cost structure: senior management compensation set conservatively; variable comp tied to success (commissions/bonuses), allowing flexibility if conditions weaken .

Q&A Highlights

  • AUM growth/product launches: Focused expansion via ETFs (Japan ETF), high-net-worth channels, selective private equity (AI/high-order computation), and crypto-related management (Consensus Mining) without diluting investment edge .
  • Dividend sizing: Q4 dividend smaller than some expected due to cash tax-timing vs crystallization of performance fees; management preparing for scenarios where large taxes are due before monetization; expects next-quarter dividend to align with historical proportion .
  • Operating leverage/costs: Largest expense is employee commissions tied to fee generation; fixed costs relatively stable; bonuses paid in strong years; returns on HKHC capital provide additional leverage .
  • Corporate relationships/structure: Clarified roles of Horizon Common (~44% owner), FRMO, Winland, and the plan for Consensus Mining; highlighted potential future simplification via public listings and strategic evolution .
  • TPL thesis & infrastructure optionality: Royalty model avoids capex; land/water assets could benefit from data center power build-out (thermal power needs abundant water); extensive long-term case for TPL and related holdings .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 and FY 2024 EPS and revenue were not available for HKHC; thus no beat/miss vs Street can be assessed. Coverage also lacked target price and recommendation aggregates [GetEstimates returned no data].
  • Implication: Sell-side models may need to reflect (i) performance-fee recognition mechanics (year-end crystallization), (ii) consolidation effects on operating vs “other income,” (iii) 2025 state/local tax apportionment benefit, and (iv) product/catalyst path (Consensus/Japan ETF) .

Key Takeaways for Investors

  • Mechanics matter: Performance fees are recognized below operating income due to consolidation, causing optical operating losses despite economic profitability; focus on year-end performance fee crystallization and “without consolidation” schedules for operating performance .
  • AUM momentum and exposures: AUM rose to $9.8B on strong TPL/GBTC performance; these drivers remain central to revenue trajectory via fees/incentives .
  • Dividend cadence: Expect payouts to better align with operating income next quarter as tax/liquidity timing normalizes; Q4’s smaller dividend reflected prudent cash management ahead of potential large year-end crystallizations .
  • 2025 tax tailwind: Market-based sourcing should reduce state/local tax burden vs historical New York sourcing, improving after-tax economics if sustained .
  • Pipeline catalysts: Potential Consensus Mining listing (no capital raise) and Japan ETF launch expand product shelf and fee opportunities; monitor timing updates .
  • Risk lens: Operating expenses (commissions/marketing, M&A/professional) and variable performance fees introduce quarterly volatility; 4Q seasonality likely persists given fee crystallization .
  • Strategic posture: Management prioritizes performance and capacity discipline over asset gathering; cost structure and capital co-investment aim to preserve return potential .

Appendix: Additional Data (from filings and press materials)

  • Q4 2024 consolidated “other income (expense), net” totaled $424.5M, reflecting CIPs’ investment results and unrealized gains (investments/digital assets) .
  • 2024 deferred tax expense of $59.7M arose from the August 1, 2024 conversion to C‑Corp; full-year income tax expense was $104.3M vs ~$11M cash taxes paid (deferred) .
  • Dividend declared: $0.107 per share (record date Mar 17, 2025; payment Mar 28, 2025) .
  • Q3 reference points: Revenue $15.4M (+20.6% YoY); AUM $8.3B; unearned performance revenue $23.3M; Q3 dividend $0.053 .