DeFi Technologies Inc. (DEFI) Earnings Call Transcript & Summary

Welcome everyone. Thank you for joining us today. May name Jamie Frawley, Vice President at irlabs and it's my please to moderate this webinar for the DeFi Technologies. We're fortunate to have Olivier Roussy Newton, CEO and Director and Russell Starr, Head of Capital Markets, on the panel today, and I'll turn it over to them shortly to present an overview of the Q4 financials. [Operator Instructions] Now just before I turn it over to Olivier and Russell, I'd like to remind everybody that certain statements made during today's presentation may contain forward-looking information with the meaning of applicable securities laws. Such statements may include estimates, projections, goals, forecasts or assumptions that are based on current expectations and are not representative of historical facts or information. We want to be clear that such forward looking statements represents the company's beliefs and future events -- about future events, plans or objectives, which are inherently uncertain and are subject to numerous risks and uncertainties that may cause the actual results or performance to differ materially from such statements. Okay. With that, I will now turn it over to Oli and Russ to kick us off. Over to you guys.

Well, thank you for that, Jamie, and thanks for everyone who's joining our webinar. Just to start off on the financial highlights of '23, the company reported cash balance of $6.7 million compared to $4.9 million in December of 2022. Revenues were $10.4 million compared to $14.2 million for fiscal 2022. The company's venture portfolio investments were valued at $44.1 million by the end of the year. Our AUM growth from our subsidiary -- fully owned subsidiary, Valour, grew just under 500%, reaching just over CAD 0.5 billion. Current AUM stands just under CAD 900 million at CAD 880 million. We've seen significant revenue growth in Q4, especially in December, as digital asset prices started to spike, and yes, we've taken corporate governance and operating costs down considerably to $10 million from just under $15 million in 2023. Our total expenses for fiscal 2023 stood at $13.5 million, a decrease from 41% year-over-year, and is broken down into our operating G&A at $10 million, share-based comp of $3 million, amortization of $2 million, interest costs on debt $.2 million, transaction on ETP assurance and digital asset trading fees is $1 million and mark-to-market FX loss, $10 million.

Trying to move this forward for you, Oli.

Thank you.

There we go.

So our highlights for '23, as stated, $6.7 million compared to $4.9 million at end of 2022, revenues were $10.4 million compared to $14.2 million.

Yes, this is -- sorry this not advancing.

Yes. It's not advancing.

Try that.

Sure. I think Might need to put it full screen. Yes.

There we go.

So in our in our wholly owned subsidiary, Valour, our Asset Management business that runs our ETP business, we've seen some tremendous growth in our underlying AUM, 476% increase from the end of fiscal 2022, which ended $106 million in AUM. As I mentioned earlier, we're just under CAD 900 million in AUM. The company's management fees increased in Q4 2023 driven by increase in the company's exchange traded products, net asset values with October, November, December 2023, management fee revenue being $114,400, $240,000 and $402,000, respectively. So you can see here in the graph, I think if we can go back, just this is our basically inflows on specific products, our various products listed in jurisdictions in the Nordics and around Europe. Important thing to note is as we've, I think only on 2 days since inception, seen net outflows of our products, so our buyers of our certificates and other products continue to average into these products and are bullish on long-term growth prospects of the digital asset class. So for our 2024 outlook, we continued and excited about the underlying digital asset class and especially its institutionalization that has come into effect with the approvals of Bitcoin EPS and hopefully, more asset classes to the largest capital market in the world being the U.S. So our -- as of March '24, our AUM stood at CAD 880 million with robust daily trading volumes exceeding over $20 million. So we're seeing lots of trading activity and volumes across all of our products, continued revenue growth with an annualized forecast of approximately CAD 63.3 million on the basis of our current AUM, our growth in AUM is expected to lead to a proportional increases in revenue accordingly. The ETP business aims to maximize AUM through increased ETP launches and geographical expansions that we're planning. So plan to launch around 15 ETPs in 2024. We have a lot more slated -- double that in 2025. And we have various joint ventures and partnerships that we're announcing in various geographies such as the Middle East and Asia, to match our growth prospects of what we've been carrying out successfully in Europe, specifically in the Nordics to match essentially niche markets and geographies where crypto regulation is friendly. Specifically the Middle East, where regulators are very forthcoming to digital assets as an asset class, and we will see similar regulatory frameworks, enabling our products to succeed in new geographies. So this is our overview of our product road map. So we have lots of new digital asset classes in the pipeline that we're excited about. We're exploring other source of products, given we have a very sticky customer base in the markets that we operate. So we're exploring other thematic baskets and products across emerging technology trends in AI and things of that nature. We've also announced a partnership with Neuronomics that we're hopefully launching very shortly, an the AI leading digital asset product to the market, and we will continue to explore kind of derivatives associated with digital assets primarily. We will be coming quite shortly with kind of market-first products to give people more efficient exposure to the myriad of digital assets coming on stream. So this is an overview of our corporate structure. So I'll start from the left. We recently acquired a research business, led by a friend, Anthony Pompliano, who's been spearheading and initiating coverage on leading blockchain verticals. So we're aiming to basically combine forces with Reflexivity and cover more extensively the protocols and foundations that we're partnering with on our ETPs and the tokens that we launched into markets with cutting-edge research, on these projects and also bringing institutional and retail awareness to the space in general. Reflexivity just held their first institutional Bitcoin day in New York, that was extremely well attended, sold out and hosted a number of thought leaders from the space. We also hold just over 5% of AMINA Bank, formerly SEBA bank, which has seen a large growth in underlying AUM to the few -- and multibillion dollars of AUM as digital asset classes continue to rise, and they were one of the first to license bank in Switzerland. So we continue to hold that. We continue to explore strategic investments in our venture portfolio, which was set up to take stakes in leading companies in the digital asset space with the primary objective of helping our subsidiary Valour, come across and streamline new ETPs that can be market first products. So we've seen tremendous growth in Solana as recently, we're listening to what our customers want in terms of accessing new digital asset classes. So we'll continue to push the frontier on developing cutting-edge and innovative blockchains in our ETP formats across different geographies to give our clientele exposure to new blockchain assets as they come to fruition in the market. So we're seeing that there's a lot more education and research culminating from the digital asset space and our investors and certificate holders are very knowledgeable in the space and want access to cutting-edge blockchain asset classes, and we will hopefully continue to spearhead and innovate, and launch new products for them. We also have our infrastructure arm, which we've been working very, very actively on over the last year. We acquired a portfolio of Solana intellectual property that helps us maintain Solana nodes, validators to optimize our revenue generation from our AUM. We were also one of the initial node providers for Pyth Network, which has recently surpassed a multibillion dollar valuation, which is an Oracle data aggregation, Oracle and authentication provider for the Solana network. And we've also formally set up infrastructure with Bison Trails, which was acquired by Coinbase. On the joint ventures, we have Neuronomics, a very -- a Swiss-based AI company that has been deploying artificial intelligence to digital asset products, which we're working with Valour to wrap into our ETP structures. And we recently, I believe, a few weeks ago, rang bell in Frankfurt on our joint venture with Bitcoin Suisse, where we came out with an innovative basket approach and we'll be doing more collaborative efforts and product launches for Bitcoin Suisse in the European market landscape.

And just to add to that a little bit, everyone and Oli, when we gave our guidance off of the $650 million that we basically currently sit at and guided to $46.8 million in revenue for this year, that was exclusive of what you see in AMINA venture portfolio and infrastructure. When we made our investment in AMINA Bank, at which, at the time was SEBA bank, I think they had close to $1 billion in AUM, and they're now sitting with almost $3 billion. And just by virtue of the way our regulators approach crypto and just so everyone is aware, it's not in a friendly fashion. It's a very, very difficult process filing your financials and audits. But we are effectively marking AMINA bank at cost and similarly with our venture portfolio. But as you guys can all imagine everybody who's listening as Bitcoin goes, so generally, does this sector, call it the high-tide that's floating all the boats. So really, please appreciate that, that $46.8 million is, in our opinion, a very conservative estimate because we fully anticipate Bitcoin going into the having continuing to appreciate. Obviously, no one has a crystal ball and can tell, but effectively, that's a valuation guidance based off of a fixed amount of assets, not including very important parts of our valuation.

Yes, that's a good point. And I think we will -- Reflexivity is generating strong cash flow. We'll see AUM growth come out of Bitcoin Suisse joint venture and hopefully have some new numbers shortly with our Q1 out in -- I believe, within a month.

And everyone -- that's basically the end of the presentation. It's a simple presentation. Everybody has access to the press release and our deck. One point that one of our listeners caught that was quite correct, 2023 was a gain of CAD 10.4 million, 2022 was a loss of CAD 14.1 million. Oli and I, sometimes we make little mistakes but that was a loss.

Oli, a question from the crowd is, how do we see our margins continuing to scale as well as expenses and operating leverage. We can both...

I think as we saw in 2021 in the general assets space, we saw kind of an implosion of centralized exchanges and actors materially dissolving to our company name, DeFi, which stands for Decentralized Finance. We have been kind of spearheading the decentralization of our technology infrastructure to create more meaningful returns from our AUM -- our exponential AUM growth but bringing all of that technology in-house and leveraging the best of blockchain technology essentially helps us continually bring our margins of operating higher without relying on centralized parties. So we'll continue to innovate that. We've made great hires on development and engineering side where we essentially don't need to rely on centralized third parties for a lot of our in-house technical revenue generation, which attributes to stronger balance sheet and net revenue performance. So that's, I think, would be the largest attributable factor to our growth as a company and obviously, to our thesis of why we created this.

Yes. And just a little bit of thought on my and the most exciting part of this company is in our Ethereum and Bitcoin products. A reason why Pomp, who, as everyone probably knows, wrote us up today but also took equity is because the leverage of this company to the altcoin or call it the DeFi coin space is substantial. And what's important about that is all of those altcoins generate substantially higher yields or lending rates than Bitcoin and Ethereum. And so from a margin perspective, as everyone knows, based off of conversations and whatnot, our operating expenses are basically flat. I mean debt servicing and operations are effectively USD 12 million a year, and those shouldn't change. They could go down a little bit, they might go up a little bit but ostensibly, they're going to stay right around that level. And so as our AUM goes up, our revenues go up but with fixed costs, that means that your margins increase as your business growth, which is counterintuitive to many other business but it's fantastic for us and investors because it basically means increasing margins with increasing revenues and hence more profitability. And so yes, launching our products is not expensive, what is it all about $50,000 assert and may...

And it's coming down even less, right?

Yes. So this is a cheap business to run with massive scaling potential. And again, going back to sort of that $650 million number and the guidance, I mean if Bitcoin goes to $100,000, we're without even launching new products, we're at $1.2 billion by my math in AUM. So this is early days. This stock has tremendous potential. And as long as we focus on continuing to build out our product suite and expand into those jurisdictions people should be very, very excited about the prospects for not just revenues but profits.

I think one thing to notice, when we launched Valour, we were basically scanning the digital asset class for attractive crypto products to launch to our end users and buyers of our products. I think in the last 3 -- or 3 or 4 months, we have announced 2 direct basically deals with and ICP and Hedera, which is traded under the ticker HBAR. So 2 of the largest cryptocurrencies that we have basically done deals with directly with the foundations to bring those products to market. And that's something we'll continue to spearhead and do. So searching for the next Salonas that people want exposure to that bring different efficiencies. So for example, ICP has been focusing on bringing decentralized artificial intelligence to the market through their blockchain. So as these kind of new themes emerge for what blockchain can be used for, we intend to partner directly with these leading foundations and bringing their products to the market.

So next question was how is our partnership with SEBA Bank, now AMINA Bank evolving? You want me to -- go for it Oli, that is an easy one to answer.

We have spent the better part of our last year, focused primarily on our strategy at Valour. To Joseph's question, they did receive a license in Hong Kong, which is a jurisdiction that we're looking at. There are different jurisdictions around the world that are a lot more friendly for digital assets than the U.S. and are actually looking at them as a growth catalyst for the economy. So as the Hong Kong Stock Exchange and other jurisdictions in Asia and the Middle East, also Europe, for instance, the London Stock Exchange recently approved our certificates for Bitcoin and Ethereum, as these new kind of geographies open up, we'll continue to explore how we essentially -- a process that's passporting our prospectuses. So the prospectuses that are regulated in European Union, we can work with other regulators around the world, and basically replicate our prospectus and issuance and subsequent offerings of our products in these new geographies. So I think with AMINA kind of spearheading regulatory environments in these different geographies we're seeing regulators open up. So effective there but we have really been focused on our internal growth strategy [ forward. ]

Yes. And just a little more color. The AMINA Bank relationship has largely now become an investment versus a partnership. Is that fair to say, Oli?

Yes. I think when we had planned a new vision for AMINA, we see kind of better resources spent growing our own kind of proprietary brands, which -- it's a financial decision to grow our own ETP markets, which attribute more bottom line to DeFi as a company.

And then the next question is with $1 billion coming up, what's the marketing plan? And I've got my thoughts. You've got your thoughts, but go for it, Oli.

Yes. So I think when, I think it was around 2016, I took a company called HIVE Public that is a large shareholder of DeFi. And since then, I think there hasn't been much disruption to the public equity landscape of digital asset companies. You have a bunch of miners that are listed that have very differentiated business models to a company like DeFi. You have MicroStrategy coin based, but -- Galaxy as well, but that's really it. So I think in terms of us amplifying our visibility for people looking at the digital asset class and publicly traded securities, we're in a very unique position, specifically to what Russ was alluding to, our fixed cost basis and our upside on our AUM, makes it very attractive for us to be a very efficient proxy to Web3 and blockchain protocols as we capture the revenue of the upside from these new products in a form factor that I think is very palatable for institutional and retail investors looking for a proxy without having to play within all of these different coins and the security risks associated with interacting with all of these exchanges. So I think we've built a very robust business in the form of Valour to capture the upside of what we think will be a very substantial crypto bull run and an extremely profitable business that all gets kind of encapsulated in a public equity. So I think as kind of we continue to grow our business, I think that you'll be seeing more marketing efforts and visibility on our underlying business, how unique it is and how well positioned we are in the space. And I think a lot of the big names, the BlackRocks, the Fidelitys who are coming out with these ETFs in the U.S., they are marketing our business case for us because -- I cofounded Valour with Johan Wattenstrom who essentially invented the Bitcoin ETF in the form of an ETP form factor in 2014 with a product called XPT provider. So in terms of business models, and every day, you're seeing records of Bitcoin ETFs in terms of AUM growth and you'll -- I assume, start seeing revenue attributable to these large behemoth companies like BlackRock but we're operating a very similar business model. The differentiator is that we're working in more regulatory-friendly environments that are conducive to new product offerings, innovation on those product offerings and -- which will allow us to capture the growth of the crypto upside. Obviously, Bitcoin and Ethereum are prime to have large and substantiated growth but I think a large portion of our clientele are very attracted to the alternative cryptocurrency space. And that's what we want to encapsulate within our product strategy, which is bringing the newest and greatest protocols directly to our end users and capitalizing on the underlying revenue of our business model.

And only a tiny bit to add to that. Everybody needs to appreciate that we were in survival mode in the downturn in the market, and we're finally, well, legitimately printing money right now. And so everything we've seen thus far is largely word of mouth, and absolutely, we'll be marketing more. We are -- we will actively look to uplist to a senior U.S. exchange. Our share price should get to that level on its own organically just by virtue of our guidance we provided. Everybody needs to appreciate just even with the move today just how cheap the stock is on a revenue or a profit perspective. And uplisting to the NASDAQ or one of the senior U.S. exchanges will also give us a lot more visibility amongst the masses without necessarily having to spend a ton of money on marketing but we're obviously prepared to do that in a sensible fashion. Regarding the product road map, most are not out yet? Yes, that's correct. We only have 17 ETPs, and like you heard Oli mentioned, we're planning on launching another 45 in the next 2 years. And we can do ETPs and anything. Sorry, Oli, I just stole that one because it was a pretty easy one to answer. Right now, our focus is Web 3.0 and crypto but we have the ability to do anything that's really cool. Neuronomics, AI, Oli, anything to add?

Yes. I think I'm seeing one question here from Boris in terms of, unfortunately, the ETPs launched are not currently driving crypto narrative e.g., AI, new meme coins, how long for time to market for new ETPs? So I think what I touched on, I think ICP is in the top 20 coins. They've been working on AI integration within their blockchain for several years now. In terms of new meme coins and themes that are popular within crypto natives, we're constantly evaluating these things. One thing we need to also be cognizant of is these meme coins are usually launched by anonymous people. They're extremely volatile, so we have to also be sensitive in terms of our regulatory framework and guidance of not bringing, for lack of better words, dog s*** to the markets. So as these kind of larger meme coins that have only been around for weeks or months, stabilize, and we feel confident that they will be able to be approved and corresponding with our regulatory environment. We will definitely address and our goal is to bring what's trending and how in the crypto market to our customer base.

Next question, do you own a position Solana and enable node management? Everyone should know, we have the third biggest Solana ETP, ETF in the world. Oli, maybe you want to comment on the node management and whatnot. We hired an individual early on, specifically to leverage Solana at its utmost. So go for it.

Yes. So we're operating around Solana validator that gives us more efficient revenue dynamics on their underlying product and we're continually working and operating within the Solana technical ecosystem. To experiment with new technologies, you might see some interesting kind of product launches outside of our ETP business, in that sense. There's just so much growth that's happening in the Solana ecosystem that we're exploring different opportunities there. But our primary focus is using the open source Solana technologies to contribute to our underlying revenue growth.

Yes. And everybody should be aware that Solana has been a major part of our growth this year. And no one knows what the next protocol will be but DeFi, unlike any other company out there gives you the ability to not have to do that. We launched another 15 products this year, another 30 the next, you cover a lot of new opportunities in the crypto space. Any potential on listing in the United States? Oli, do you want me to do that or You want to -- I mean do it.

Yes, I think we had NASDAQ approval in '21. It's something that is definitely topical and something we discuss as a Board and the company, the Canadian Exchange that was previously called NEO, now Cboe Canada was acquired by the Cboe U.S. So they've permitted for basically kind of a, I would call it, a fast track or an amicable way to uplift their listed companies to the main board of the Cboe as well. The one kind of factor that has been a prohibitor to us entering has been the SEC. So we're constantly evaluating kind of our entry approach to larger capital markets around the world and not just the U.S., but it's definitely something that we're constantly working with counsel on figuring out when the time is right from a regulatory perspective.

Yes. And just -- I mean, very little to add to that, everyone. It's clearly a strategy that we will embrace, the only thing stopping us right now is our share price. And as I commented, trading at 3x, even with today moves, 3x earnings or 4x profits, those are multiples you never see in the capital markets. The stock has a long way to run before it's trading at fair value. And once we get to the minimum hurdle price for a U.S. senior listing, we'll obviously look and embark upon that. But as Oli mentioned, while the U.S. is amazing and the largest capital market in the world, the rest of the world is a really big [ waster ] that we can clearly leverage and have a huge first-mover or second-mover advantage against '21 shares moving forward. There's -- well, I was just going to say -- next question is sort of on our thoughts of Middle East or -- and I would presume the next one would be Asian expansion?

Yes. I mean, like as I said previously on the call, specific geographies in Asia as well as the Middle East, so they are very conducive digital assets. They're very hospitable to companies like ours. So we've been in touch with multiple regulators across these jurisdictions to see how we can pioneer our business model in new and emerging markets, that see digital assets and companies like ours as growth opportunities for their economies. So we'll continue to explore those, and we should have news on those topics shortly. But we have a great regulatory framework. You can refer to it as a template, which we can essentially copy and paste with other regulatory bodies around the world. And just given that Johan and myself when we started setting up floor in 2017, he was operating ETPs in 2014. You could argue we have the most experienced team in the world when it comes to digital asset securities that are listed on traditional stock exchanges. So we've had very positive discussions with multiple regulatory bodies on leading the charge of pioneering their markets. I'm just seeing a question here from Michael Donovan. What sort of mix are you seeing between retail versus institutional interest in Europe? What are your thoughts on MiCA's impact when it comes to onboarding institutional clients? Are you providing ETP strategies in addition to passive ETP products? You mentioned interest in Solana, are you seeing interest in specific tokens within the Solana ecosystem? So I'll just take these one by one. So we are seeing, our products as of now are primarily, I would say, kind of driven by retail interest. I would say there's kind of maybe a 60-40 makeup but we're definitely seeing, and you can notice by kind of how the bids and the products are kind of being recognized by our trading desk that there's definitely more institutional activity occurring that we definitely saw in the Solana products. In terms of kind of MiCA's Impact, it's fairly kind of straightforward and friendly for institutions to be onboarded. I would say that's one of the differentiators of our products for institutional investors is that they don't have to pass through any new groups that they would, say, as a fund in Europe and you want to buy through a cryptocurrency exchange, that's where you're going to run into cost and trouble, reengineering regulatory measures to basically take into account other currencies in the form factors of digital assets. That's where you're going to run to issues where any fund can buy our products just like the stock and it doesn't impact the regulatory structures whatsoever. We are looking at various different strategies, actively managed passive asset -- ETP products that you hopefully should see on the shelf relatively shortly. In terms of growth within the Solana ecosystem, you're seeing hundreds of millions, and I think over this year, billions of dollars that are going to be forward into venture capital that -- and decentralized Solana tokens and protocols. One, which I mentioned, which is in our infrastructure call them Pyth, which we were one of the first node operators on recently surpassed $1 billion market cap. We have a good relationship there with the team. They're doing very, very innovative things. People might be familiar with Chainlink but they've essentially come up with their own kind of Oracle provisioning system on the Solana blockchain. So there's definitely huge [ amount of growth ] in the Solana ecosystem, and we'll definitely -- we have an internal process that we're managing and tracking these projects. And when they reach a certain level of robustness stability, that's when we look to either directly partner with these -- the foundations behind these tokens or take them to market on our own.

You want to do the next 2 from Ed or you want me to?

Yes. So is there an opportunity to monetize JV minority investments, given DeFi's valuations are reflective? Yes, as I indicated, our venture portfolio was set up, obviously, to kind of reap the rewards of having deal flow access and being early in these protocols but also being early in these protocols to cultivate relationships and ultimately be the first to market in terms of bringing them into our main cash flow business, generating business, which is Valour. So we'll definitely continue to spear out these initiatives and potentially what you might not see directly on the balance sheet from our venture portfolio if we're cutting checks directly into these tokens developing relationships and bringing them first to the market in the form factor of Valour products, you will see that benefit in our underlying revenue, being first to market with innovative products and next game changer protocols that are constantly emerging.

And then I think you answered the next one just by...

Yes, another one from Ed. So I'll repeat it, how the AUM inflows has been consistently positive throughout year-to-date? So yes. Like I said, since inception, I think we've had 1 or 2 days of outflows. We're -- I'm enthusiastically surprised when I look at our trading data that I think -- and this goes back to how much information is out there and how much historical data people are correlating their trading activities with the growth of the crypto ecosystem. So I think people definitely look at habiting cycles, dare understanding that bear markets are when there's time for accumulation. So our customer base is extremely bullish long term on digital assets, which helps us with the stickiness and retention of our AUM, and as you see kind of catapults our AUM substantially higher in terms of percentage gains in the hundreds of percents when we have these aggressive moves that digital asset class is obviously famous for.

And I'll crush this next one easy. Next is, someone's asking, what is a mark-to-market FX loss? Why is it so high and why is it equal to your operating G&A? Everyone, all of those operating expenses that totaled $30 million, basically $28 million -- or sorry, $18 million of those are all mark-to-market. And what that means is when we started this business, there's an average cost associated with the price of Bitcoin that we were buying. While Bitcoin was lower than that average cost, you take a mark-to-market loss, which never gets realized because you're ever exiting it. That actually has now flipped to a positive, and you should see a substantial mark-to-market FX gain in Q1 but it's largely irrelevant to modeling out the business because it's basically a fictitious loss and a fictitious gain based on average prices that we either buy Bitcoin, sell Bitcoin or similarly any of our other ETPs. So while it looks large, it's actually nothing. And this is just part of the accounting standards that we have to deal with on a day-to-day basis with the Canadian regulators. Why should someone choose -- sorry, go ahead, Oli.

Yes. I can take this one from [ Sherry ]. So the question is why should one chose DeFi ETP, Valour ETPs over others? The differentiation factor, I think a historical track record, our team has created the digital ETP space. So a track record of not going down on the security of the products, the resiliency of our trading desk and technical jobs that keep our products extremely efficient. And I think that's what people kind of look for and keep on coming back to us for in our products, which I think speaks to our growth in AUM and underlying kind of robustness of our technology frameworks that we've developed over the years.

Also, in some instances, we're the only one who has the product. So like the Uniswap, I'm not sure if there's another Uniswap product out there, I haven't seen it. But for a long period of time, we were and may still be the only company with a Uniswap ETP, right? And one other one is -- yes, our Bitcoin and Ethereum products, everyone in the U.S. is talking about the race to 0 management fees. We already have 0 management fees on our Bitcoin and Ethereum products.

Well, they're actually called Bitcoin Zero and it's zero, we launched them with -- in 2020.

Do you mind if I a grab this one? Just it's addressed to me. Mark's asking, can you expand in greater detail on how $1 billion in AUM might shift our forward-looking 1-year guidance? What might operating incomes look like? And actually, the next question also fits into this [indiscernible] and that is our total expenses in Q1 remain similar to Q4? So at $1 billion in AUM, everyone -- part of the reason why we gave the $650 million AUM and the $46.8 million guidance is so people could actually calculate how much money we're actually making across all of our products, which is about 7.2% yield. You go to USD 1 billion in AUM. That means we're making USD 72 million in revenues, and it's a little bit higher than that because we're not including trading flows. It's probably closer to USD 75 million. And adding in the answer to the next question after that, basically, our costs are now set at a fixed $12 million a year run rate. I mean it might go up a tiny but it might go down a tiny bit. But yes, our expenses will basically not changed really in any material fashion moving forward. While as I mentioned, revenues and therefore, profits will skyrocket as Bitcoin...

I think it's the same -- I think one, to Bobby's question also, having lived through several bear markets teach you as you cut costs wherever you can, whenever you can and are always looking to opportunistically decrease spend. And it's just something you get used to living with when you have these severe bear markets, which are great to create and make extremely efficient and robust revenue-driven business models.

Great. Next one, you want to track that one down. It's on tokenization?

Yes, we definitely -- I mean, in terms of real-world assets, definitely something that we've been looking at. You've seen definitely a large momentum in real world asset associated tokens as of recent due to the tokenization of BlackRock's first fund on the Ethereum blockchain. So it's definitely a theme that we're looking at. Definitely, some of our technology partners and the Swiss digital asset ecosystem has been pioneering the tokenization of real-world assets. So as of yet, we don't have anything in operation, but we are definitely looking at real-world assets and potentially productization, either in Valour separately of those opportunistically, as of now. But as of yet, we don't have anything in the pipeline.

Do you want to tackle that one or you want me to do it?

I think this is the question, can you speak to your management fees on your products and the revenue of those assets under management? But I think that's been kind of a common thing we've addressed in our conversation. Our -- we are currently innovating to remove centralized form factors from our revenue production and bringing it in-house in a decentralized fashion that will continue, which results in higher yields of our traded revenues and assets under management, and that's something we're perpetually doing going forward. And as we've discussed, we have a fixed cost or hopefully depreciating cost basis that will continue to drive enormous growth to our bottom line.

And Jeff asks, how do you think the new legislation and ETFs affect your business?

Yes. So I mean, when the ETFs got approved and launched, this was a question both myself and Russ, we're kind of inundated with but lots of people reaching out to us and saying, "Oh, it's all of your Bitcoin AUM gone overnight?" The answer is, no. It's actually grown since then with record net inflows. And I think it's definitely great for the space because you're seeing institutional and retail participants now being able to access a regulated instrument in the largest capital market in the U.S., which is great for digital assets as a whole. For our products specifically, it doesn't affect our growth. It actually is a positive to our growth as our focus is niche markets in various geographies around the world where people are not trading in the U.S. market time zone, and they're also trading in their -- in Sweden, they're trading in Swedish kronas and other localized currencies in other European markets. So we really focus on providing the best experience for our customers in those different jurisdictions. So yes, that's my answer to that.

And then next question is, would you ever consider raising a digital asset venture fund with Pomp? I mean that's an easy one. We already have it. You're looking at it, guys. Pomp...

Pomp is, definitely kind of -- but before we made the acquisition, I think he's been an adviser to our company for close to since inception. And as referred to a few names in our venture portfolio, would we explore the opportunities to shape our own venture form and raise outside money definitely potentially was a conversation I had over lunch earlier today. So as the general asset class expands as we see opportunities, we will definitely kind of act on them to the best of our abilities and that's definitely an area of discussion we've had.

Any interest in white labeling our products for large institutions and investment banks?

Yes. So I think this is kind of a double-edged sword that we've looked at in terms of -- one thing you need to factor in is an opportunity cost, the proprietary knowledge that -- what information you're sharing with which counterparties, what their intentions are. We've essentially gone through a very strategic joint venture processes with the likes of Bitcoin Suisse, one of the first -- I think, probably the first digital asset company in Switzerland and in the Swiss ecosystem that has been kind of a champion for Switzerland and regulatory frameworks. So I think you'll see more mutually beneficial joint ventures presented and announced over time as we identify the right counterparties to attribute growth to our bottom line.

Are you looking to launch any ETPs for BRC 20 or other bitcoin chain projects? Yes.

Yes. So given our name DeFi, absolutely. We're very induced by Bitcoin and the whole layer 2 community that's evolving on chain. Obviously, it's the largest the digital asset space. So the innovations that are bringing DeFi on chain are extremely exciting. And we're actively discussing -- I'll leave some things up for mystery but we're actively discussing very novel ETP products that have to do within the DeFi and Bitcoin framework that's emerging within the L2 space. And for anyone listening who hasn't been following kind of the innovation on Bitcoin point and DeFi, Ethereum kind of made this made this all possible several summers ago but the robustness of the liquidity associated with Bitcoin is very interesting in terms of capturing yield off of that asset class, and we're actively exploring ways to conceptually formalize that into an ETP form factor.

Yes. The next one is kind of similar to the last one but it's, Michael Saylor and MicroStrategy is a Bitcoin focused company. Do you see a match made [indiscernible] for DeFi, would that be of interest to your team? And then the last question is also, do you -- due to a huge value proposition, do you foresee a potential acquisition or bid for Valour DeFi?

Well, I mean, I can take the last one. I think we have lots of inbound from, I would say, due to the recent launches, the Bitcoin ETFs, you have probably every single financial institution globally looking at how they can bring digital assets to their customer base because they're inundated by requests of. If you're a client of a bank in Hong Kong or Singapore, and you can access the Bitcoin EFT in the U.S. globally, you're asking your banker, your financial adviser, how you can get it on these massive returns that are being produced by the digital asset sector. And so will there be new entrants in this space, definitely. I would say as of now, we have our heads down and our focus on delivering as much kind of shareholder growth is possible through the launch of our road map and optimization of our revenue producing yield associated with our AUM.

The only thing I'd add to that for everyone listening, management has a meaningful stake in this company, well over 100 million shares are controlled by participants on this call and other players in the company. My worry is that we're bought too soon. And I know that sounds a little cheeky but it's not meant to be that way. We have a massive advantage that we're leveraging, having all of these products that the likes of BlackRock, Fidelity and any of these ETF providers, would want to be involved in. And if you look at the way they operate, typically, it tends to be through acquisition. And we're very close to cresting through $1 billion. If things work out in the Middle East or Asia, all of a sudden, our AUM growth is even more substantial. And clearly, that's something we're hyper focused on. And with the tremendous discount that our stock is trading at, we become a very intriguing target. So we're going to have to work diligently to get the share price up, and that's something we're working on aggressively and you can see it unfolding on a day like today. And Dave asks, this just follows on, is our lower share price keeping institutions from participating? Look, Dave, no. I would guess that there's probably entities buying an entity or it could just be a ton of high net worth in retail. But people are starting to realize the value proposition of this company and the Pomp article today is an early step in that. Our press release and our guidance, another step but I have to reiterate that math we're already more profitable than any miner basically out there. We are generating more free cash flow than some of these multibillion-dollar companies. And it's just a matter of getting more eyeballs on our stock and if everybody remembers what happened before, it was kind of $0.60, $0.70, $0.80 and then all of a sudden, we were $2. And I have what's the best predictor of the future. It typically is the past, and I don't see this as being any different this time. Oli, if you want to handle this one, do you want to buy back shares at some point or even issue a dividend if you start getting into that sort of $1 billion plus AUM?

Yes. I think we've had a share buyback program in the past. It's something we fully explore in terms of when we see the opportunity to do that. I think it's a management decision that gets discussed. But right now, we're focusing on getting out as many innovative products as possible. And I think the realization of new financial quarters ahead of us and people seeing the underlying growth being realized, will eventually kind of correlate to the share price or very rapidly as Russ pointed out, we've seen historically within our share price. Last question from Joseph. Ark partnered with 21 shares listed Bitcoin product in the U.S., where you approach your product livings? Would you partner with a giant asset manager like those heavy hitters, to list products? And what are such dynamics in such a decision? So good question, Joseph. We were definitely approached by U.S. market participants with portfolios. We looked at acquisition opportunities and eventually kind of made this decision to focus on what we're good at, which is the markets that we operate in. I think going -- we -- from a technologies perspective, there could be opportunities in terms of productizing our trading engine eventually, when these large institutions have to manage a multitude of cryptocurrencies over time. But we don't -- we think the BlackRocks, the Fidelitys of the world of such a kind of controlling stake of the U.S. financial enterprise that it would be a bit reckless of us to go into a market we know nothing about it and try to compete against behemoths. So that's an executive decision that we made to focus on where we're seeing growth, which is in novel cryptocurrencies that will not be permitted for many years to operate within the United States financial sector. So to elaborate again at Valour, we're seeing the biggest growth in new coins such as Solana, and our main focus is on bringing all of these new coins to the market, and that's something that we just simply can't do in the U.S. under its currently -- current regulatory regime, and we don't see that changing anytime soon.

And everyone, it is 2:00, and we're at our limit. But as always, Oli or I, are amenable to answering e-mails, feel free to reach out, and I suspect from all of us, we want to say thank you. Thank you for joining us and thank you for all of the questions, and thank you for being consistent and supportive shareholders.

That's great, guys. Very informative webinar. Thank you both so much. This does conclude the Q&A session. Thanks to everybody who joined us on the call today. If you do have questions or need more information, like Russ just mentioned, please feel free to reach out any time. My e-mail address is [email protected]. A video replay of today's webinar is going to be available very shortly right after this call. So keep an eye out for our social channels, or contact me directly for the link. If you have any follow-up questions, reach out any time and be sure to add DeFi to your watch list. Thanks, everybody, and have a great day ahead.

Thanks, Jamie. Thanks, everyone, who attended.

Thank you.

Thank you, Russ.