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

Okay. Hello, everybody, and thank you for joining us today. My name is Jamie Frawley. I'm the Vice President at irlabs, and I'm pleased to moderate this webinar on behalf of DeFi Technologies. We are privileged to have with us today: Olivier Rouse Newton, CEO and Director; Russell Starr, Head of Capital Markets; Johan Wattenstrom; Co-Founder and Director of Valour Cayman; and Ryan Ptolemy, Chief Financial Officer. They will be providing a review of our Q2 financials in just a moment. Throughout the presentation, you are welcome to submit your questions via the Q&A function. We'll address them after the presentation concludes. But before we begin, I'd like to remind everybody that certain statements made during today's presentation may contain forward-looking information as defined under applicable securities laws. These statements could include estimates, projections, goals, forecasts or assumptions based on current expectations and are not reflective of historical facts. It's important to note that such forward-looking statements represent the company's beliefs regarding future events, plans or objectives. These are inherently uncertain and subject to various risks and uncertainties that could cause actual results or performance to differ materially. Okay. With that, I will now turn it over to Olivier to kick us off. Over to you, Oli.

Thanks, Jamie, and thanks to everyone in attendance. Glad to have everyone on board in terms of what the company's best-ever quarter reported is our Q2 2024. So I'll start with a quick overview of our corporate structure. So DeFi technologies, essentially, we've tried and executed over several years to create a diversified exposure to emerging trends, core businesses, venture infrastructure, all to basically give people exposure to what I consider the most disruptive asset class globally, the cryptographic asset, digital asset space. And I think we are very unique in terms of being publicly listed and allowing a diversified exposure to a bunch of subsidiaries, investments and incubated arms under DeFi Technology. So go through from left to right. Obviously, we've recently acquired Reflexivity Research, which has been leading the charge in cutting-edge research on digital assets, specific protocols. They've, for instance, partnered with CoinMarketCap recently. I think one of the most, if not, the highest visited website in the digital asset space. And their research business complements our main and largest operating subsidiary, Valour, which is specialized in exchange-traded products, which I cofounded with Johan, who's on the call, sometime in 2018 and originated kind of the ideation behind it in 2017. And basically, give people some background, Johan created the world's first ETP, basically the European word for ETF, called XBT Provider a few years before then. And I was kind of, at the time, running HIVE and was intrigued by what Johan had done in terms of structured product creation. So we decided to join forces and create Valour to uniquely position innovative protocols and have them easily accessible through your brokerage account. And yes, since 2017, the ideation process, we went live with our first products in 2020, subsequently got acquired by DeFi Technologies and very, very enthused with the progress that's going on in Valour, which we'll cover lately. We've also -- have a partially on stake in AMINA Bank, which was the first licensed crypto bank globally, based in Switzerland under FINMA regulation. So we're excited about their developments. They recently got licensed in Hong Kong and looking at several other jurisdictions to provide innovative banking services. I believe it was a few months ago, we announced the launch of kind of a wholly owned unit under DeFi Technologies called DeFi Alpha. So DeFi Alpha's can -- sole focus is identifying low-risk arbitrage opportunities within the ecosystem, which kind of, as most people have seen, generated just over $133 million this quarter. And we're kind of just getting started with that business. So -- and I'll let kind of Johan later touch on specific trading techniques, strategies that we're employing there. But we're quite excited about using kind of our capital base, our knowledge in the space, our connections with foundations and protocols to create basically exponential returns, which will basically streamline into a more robust business overall. We also have our venture portfolio, which kind of was valued at 44 -- just over CAD 44 million. So we continue to invest in innovative companies. We primarily look for investments that complement our Valour business. So we would look to invest in protocols that -- at an early stage that will complement, and we can be the first to market in terms of bringing them over to an ETP format. So it's kind of a complementary ecosystem under DeFi Technologies. Then we have our infrastructure. So we're running Solana, Pyth, CORE, CORE nodes, which drive significant amounts of profit for us. Again, I think it was in December, we acquired intellectual property that allows us to drive higher staking returns off of Solana. We've been building within the Solana ecosystem a lot, so hopefully, be also kind of announcing kind of products and innovations within the Solana ecosystem in short order. Pyth is also built on Solana, which is kind of an Oracle system data provider, that we're extremely excited about that ecosystem's growth. The CORE team, so we were -- we launched this quarter, I believe, was the world's first ETP that generates yield, so just under 6% yield. So you can hold the world's largest digital asset without -- with getting just under 6%, which we think is a complete game changer. And then above, we have various joint ventures with companies such as Bitcoin Suisse, Neuronomics, where we primarily are partnering with some of these companies to abstract either their platforms, their technology know-how, in the case of Neuronomics. They're focused on algorithmic artificial intelligence indexing. So we're essentially working with them to wrap those into exchange-traded products, actively managed certificates and other fund formats for people to get easier exposure to cryptographic asset classes managed by artificial intelligence. Bitcoin Suisse, the oldest Swiss crypto company, has a large global reach, and we've partnered with several innovative indexes, launched with them focused on the German market. I think we can go to the next slide. So kind of -- as I just kind of touched on, we have a diverse, highly scalable business line with, I think as we've kind of exemplified in news releases we've put out, clear path for aggressive and exponential growth. So Valour, as I mentioned, is our largest operating entity under DeFi Technologies. We provide ETPs in various marketplaces. Our largest market is the Nordic market at present. As of July 31, we had just under $900 million or $837 million in AUM, which has been growing kind of month-over-month as the digital asset market kind of becomes kind of more robust. And we continue to launch and scale new products under there. I think we've kind of touched on all these differentiated business models. And yes, one thing I would like to highlight is we're updating all of our corporate websites and branding, which are going live. A new website for Valour is now live, and also DeFi Technologies website is rolling out over the course of the next few weeks to basically give shareholders and potential investors more information about all of our different subsidiaries that we're launching and will continue to launch, such as DeFi Alpha, which is very new but has made a foundational impact on where we're headed as a business, and I think we're just scratching the surface. So just to go over kind of in more detail the financial highlights of Q2 2024. The company reported a cash balance as of June 30, 2024, of $19.5 million compared to $6.7 million as of December 31. The company also held -- is also holding $54.5 million in USDT. For those who don't know, that is Tether, which is a stable coin, so basically a peg to the U.S. dollar that is in cryptocurrency and 110 Bitcoin as we continue to ramp up kind of our treasury strategy for the company, which was -- totals $9.2 million at the end of June 2024. As I mentioned and alluded to earlier, the company's venture portfolio and investments was valued at $41 million as of June 30. Our AUM in Valour grew 43.7% from CAD 508 million as of December 31 to approximately CAD 730 million as of June 30. And I think as of today, we're kind of north of CAD 800-something million. Total revenues for this quarter were $133 million, $0.2 million for Q2 2024, a significant -- obviously, a significant improvement from the total revenues of $7.4 million for the same period in 2023. And I think, Ryan, correct me if I'm wrong, that equates to about $0.31 and some change per share.

Correct.

DeFi Alpha, our specialized arbitrage trading desk, generated over $111.5 million in Q2 2024. We were also kind of excited about paying down $40.4 million in outstanding loans, which exponentially increases our digital asset collateral for revenue generation. So a lot of our loans were tied up with digital assets as collateral when we paid those loans back with a significant premium to the actual amount of the loan, the collateralization ratio. So as we kind of receive those digital assets back, we put them into the most effective means for yield generation and staking returns. The net income of $90.4 million for the quarter and $72.3 million for the 6 months ended June 30, 2024, reflects our financial strength, the drop from 20 -- from $90.4 million in net income for Q2 to $72.3 million for the 6 months is primarily as a result of the downward adjustment in the value of BTC collateral to the carrying value of the outstanding loan payable held by Genesis Global Capital due to the filing for bankruptcy. We -- I think it was just last week, correct me if I'm wrong, Ryan, we have received our initial distribution of 95 BTC and -- from the Genesis estate and anticipate further distributions as the liquidation process runs its course. So we're materially happy as well to come to a conclusion that it's been a long process out of this kind of crypto bear market and be receiving those coins in a positive outcome from the Genesis bankruptcy. Our subsidiary, Reflexivity, has done an amazing job of continuing momentum on signing new paid research engagements. We are planning a bunch of new events that will be coming up in the near future, similar to Bitcoin Investor Day, which we held, I think, to a sold-out audience. Russ and Johan were there. I unfortunately missed that one, but to a sold-out audience. So we're looking to kind of do more innovative events, significant progress on key strategic initiatives that will achieve projection. So yes, the company is on track to hit their annualized revenue targets of USD 2.4 million in its second year of operations. As I kind of mentioned, yes, previously, there was also a great deal that was struck by Reflexivity on -- with CoinMarketCap, I would say, #1 traffic website in all of crypto. And yes, so this slide shows our AUM in net sales from our largest marketplace, which is the Nordic growth market, where most of our instruments are traded. And I believe we have the most kind of traded instruments on that exchange in total. We have about 30 products, I believe, as of now listed on the exchange. And as you can see, we continue to see net new inflows. We have a very kind of sticky mix of retail and institutions that love to trade our products daily and, I think, are firm believers in the future of cryptocurrency. And yes, I think one thing to also kind of elaborate on is Valour makes money, whether crypto digital assets are growing up or down. Volatility is our friend. And our internal market-making desk has done a phenomenal job in capturing returns daily in diverse market conditions.

And Oli, maybe remark, too, on our expectations or our hopeful expectations for the Middle East, obviously, and Africa because I really don't think anybody is looking at this net inflow chart and understanding what the potential upside is to our AUM.

Yes. So I mean, we obviously have battle-tested, proven technology infrastructure platform and, I would say, regulatory wrapper associated with providing best-in-class servicing for exposure to new asset classes in the digital asset category. We're in talks with a number of new emerging markets to replicate the success that we've had in the Nordic market and basically go through a process, which is called passporting our prospectus base into new markets. So we are aggressively pursuing those in the Middle East, in several different markets in the Middle East, along with Africa, which we're extremely excited about to be the first kind of ETP, ETF provider providing digital asset exposure to Africa. One might think, why Africa? But good governments there, like governments all over the world, for instance, El Salvador, Argentina and all of these countries that -- I hadn't really thought of El Salvador or kind of heard of the country before they started amassing hundreds of millions of dollars in Bitcoin. So we're in talks with very interesting parties down there for the likes of banks, sovereign institutions, governments to be able to safely access cryptocurrencies through our battle-tested track record of providing uptime deliverable and ease-of-use security to these new asset classes.

The only one thing maybe I'd remark on top of there, everyone is -- we're not like -- we have 25 products now. If we finish the year with 30 products and, let's say, we launch 30 products in Africa and we only get $20 million in each of those 30 products, that's $600 million additional AUM for Johan and his team to stake. Similarly, in the Middle East, if we only get $20 million in every product, that's another $600 million. And that's not assuming that we're going to launch, hopefully, another 30 products next year. And so while the share performance today is quite impressive, obviously, given just a fantastic quarter and kudos to everyone on the team, the reality is that no one seems to really be factoring in what is likely to be pretty exponential AUM growth into what is looking like a big Bitcoin market in these 2 jurisdictions. And Oli and the team aren't stopping there. Obviously, we're looking at Asia, Eventually, we will be looking at Latin America. So we kind of are stuck, I guess, so to speak, in people looking at this as a static business model rather than one that is growing exponentially and getting some sort of a growth multiple. And I just wanted to throw that in there because it's not hard math, and it's been -- I personally don't think it's going to be difficult to get $20 million in each of these products in these new jurisdictions. I just -- we had a problem with the slide. I just have to switch back to the deck here guys. Let's do this. All right, here we go.

Thanks, Russ. So our 2024 outlook. So let's touch on our AUM growth first. Valour's AUM stood at approximately $730.1 million as of June 30, 2024, and $837 million as of July 31, 2024. Nearly 700% increase in AUM for market lows in late 2022. The company is taking lending income, changes in gains and losses on digital assets and ETP payables as well as management fees are closely correlated with capital inflow for Valour's ETPs and the price of assets underlying Valour's ETPs, which has continued to grow since the end of 2023. Furthermore, revenue from arbitrage and liquidity provision is highly linked to overall market activity and turnover in Valour's listed ETPs. We have to go to our DeFi Alpha, which is kind of our recently incubated and launched new subsidiary unit under DeFi Technologies. And so our annualized revenue in DeFi Alpha, the company formed in Q2 2024, which I previously mentioned, generated $111.5 million. Given the foregoing factors, the company's annualized revenue is forecasted to be approximately $179 million for 2024. We are obviously assessing further arbitrage opportunities that may lead to great in, obviously, Valour's AUM from the launches of new products, new jurisdictions and be proportional to increases in revenue. And of course, what we're very excited about is evaluating additional DeFi Alpha trading opportunities. We announced one. I think we announced it a few weeks ago, if not a month ago, where we executed our first trade of Q3, which generated, I think, just under $20 million, Ryan, if that was right.

USD 15 million -- USD 14 million, I think it was.

USD 14 million, just under CAD 20 or CAD 19 in terms of millions of dollars. So we continue to evaluate opportunities, obviously, not taking any risk, but we think this will obviously substantially grow our revenues and net income. So to retouch on our digital asset treasury, the specific assets that we're holding as of August 14. The digital asset treasury positions had increased to include 204.23 BTC, 12,775 Solana and 1,400,000-something and some change in CORE, which is our partner on our BTC yield product. We also launched the world's first CORE ETP, and we're extremely bullish on the CORE ecosystem in general, so totaling just under CAD 22 million -- at CAD 21.2 million. As indicated earlier, Genesis BTC recovery is underway. We've received an initial 95 BTC in August and anticipate further distributions as the liquidation process runs its course. And obviously, our legal team and Ryan and our compliance team are doing everything to kind of put a pin in that and move on. And obviously, as we get these BTC added to our treasury and stake it using CORE technology, which gives us exponential returns on our Bitcoin.

Sorry, just as these tweak my head, one of the major concerns that people have had with our PR today was that they're making the incorrect assumption that we're not going to make any more DeFi Alpha trades. Maybe you or Johan can elaborate on the fact that we -- the reason we didn't give guidance on DeFi Alpha further wasn't because we're -- we don't think we're going to continue to make money on DeFi Alpha. It was because we just want to get another quarter or 2 of decent returns under our belt so that we can guide appropriately, not what the market's incorrectly assuming, which is that we don't expect any more.

Yes. Well, I mean, we've -- I think we're less than 100 days, 90 days into basically setting up this whole new business unit. Just in terms of comparables, it took Johan and myself 3 years to get Valour up and running with regulatory approvals to even launch our first product, if not more, maybe 4 years in total. So as we -- we're building internal tools. We have our internal technology platform that evaluates these opportunities for us. As we look to establish reoccurring revenue, it'll make it easier for us to basically provide more solidified projections, similar to what we do with Valour, right, which has been a company operating now close to 5 years with ETPs on the market. So we have data points on that. We have real-time information that we can accrue. We can look at projected prices and look at price discovery of digital assets where we think the market's moving and come up with a fair estimation of that business. But as DeFi Alpha's in its infancy, as we kind of further execute trades, see how often those trades occur frequently, we can then further provide additional shareholder information as we kind of accrue and execute on those -- accrue revenue and execute on those trades.

Thanks. Sorry to interrupt. Just thought it was meaningful.

Yes. No, of course. I mean, as soon as we -- as a company, as a unit under DeFi have established further executed trades, we will -- everyone on this call and all of our shareholders will be the first to have further guidance on what we think that business unit will do, which we think is going to be a tremendous and robust opportunity for DeFi technologies.

Thank you.

And yes, I think we were on the Valour expansion side, which we touched on, on our kind of AUM charts. The ETP business aims to maximize AUM growth through ETP launches and geographical expansion. I think it's important for us as a business -- we've identified that we excel and are able to execute in niche markets globally that are opening up to digital assets, and we'll continue to do so. I firmly believe and our thesis for Valour is that there were always and potentially always and have -- and always be an expanding demographic of people who want the simplicity of buying digital assets through the brokerage accounts. I don't think that is going to change, whether it be institutions or retails. People want to access new asset classes through platforms and relationships that they're used to. I, also having been in crypto since 2012, get exposures, for instance, to CORE, Solana through our own ETPs, just because it makes it more simple from a tax perspective and ease of use. As mentioned, we have expansion into Africa, Middle East and Asia. And also, as we recently launched a MOU with the Nairobi Securities Exchange, which I think you will see mirrored in a bunch of new emerging markets that I think we love to be the first and ideally kind of dominates these market opportunities as we're the first to market. And yes, our internal product team at Valour continues to execute. It's great that we have amazing relationships with foundations directly. So we work with them on creating and innovating, ideating on new products. So for instance, hashgraph, the HBAR, ETP, ICP, Core Foundation, which also kind of the ideation around the CORE ETP led to our launch of the world's first Bitcoin asset. You can buy -- a Bitcoin exposure product you can buy with a yield, which I think is a game changer. And we'll continue to innovate so you can continue to see new products, world firsts from us in existing markets and in new markets that we will look to go into. And yes, I mean what we're extremely excited about is partnerships and pending acquisitions that we've announced, that we're working diligently on closing. So we announced a acquisition and LOI to acquire Stillman Digital, which is a leading OTC desk and digital asset liquidity provider with over $15 billion in trade volumes since 2021, with USD 14 billion that occurred in Q4 -- Q1 2024 alone. The company provides products and services and OTC, ons, off-ramp, trade flow, electronic and trade execution, OTC block trading and market making. Stillman is profitable, cash flow positive and poised for aggressive growth. The acquisition enhances DeFi Technologies' trading capabilities, diversifies its client base and stabilizes revenue streams by integrating Stillman's expertise and market presence. So we're very excited about this new business unit that will fall under DeFi Technologies, pending the close of the acquisition. And I think this will -- obviously, the skills and the team, which is about 15 people at Stillman -- behind Stillman, have done a great job of competing and carving out a niche market for themselves and probably one of the most competitive marketplaces in the entire digital asset landscape. Great trading mines. And we also think that they can provide a lot of know-how ideas to support our DeFi Alpha business unit.

And just one quick point, Oli, maybe remark on their -- the 55% net margins and how they were kind of hamstrung by their capital base, which weakened...

Our process and thought process on -- obviously, we want to make acquisitions and are looking at other acquisition targets that make sense for us as a company from a strategic perspective. Stillman was a young company and lost -- potentially lost out on a lot of business without having a robust balance sheet, which we can now provide. So I think we can -- we are getting -- we'll get extremely aggressive with them and use our balance sheet to help them win over businesses, provide more liquidity, robust liquidity to their existing business streams. And I think we can multiply their existing cash flow, which is tremendous, to multiples of that going forward. And yes, we also announced a partnership with Zero Computing, which is building critical infrastructure for the zero-knowledge space, which kind of bringing me back to my kind of experiences in crypto mining, really see kind of exponential opportunities in the infrastructure around zero-knowledge proving. And we are looking to partner with them specifically, from a DeFi Alpha perspective, in terms of, basically, capabilities and arbitrage capabilities around maximal extractable value, which is a way to kind of accrue arbitrage opportunities with proof production, which occurred similarly when Ethereum was mineable and turned into kind of a multibillion-dollar business overnight. So we're extremely excited about that. Yes. Zero Computing is working across multichain environments: Ethereum, Solana and others. So we're extremely excited to partner with them and have DeFi Alpha kind of work on enhancing a whole new marketplace of what I think -- I think Paradigm put out a research report in what was maybe '23, suggesting that the zero-knowledge proving market could be just as big as the proof-of-work market, which is obviously kind of north of $20 million, even more, maybe $30 billion annualized. So these are all of the single-asset ETPs that we have currently trading. We continue to launch new world first in our markets, such as Telegram, very popular messaging app, has their own cryptocurrency, which we recently launched and continue to innovate on that front. We've also -- in terms of -- I think everyone kind of on this call realizes the volatility uniquely associated with digital assets. So we have also kind of seen a lot of robust interest in our Valour short Bitcoin product, and we'll continue to roll out akin products to that as we kind of accelerate and ramp up our product creation into the end of the year and into 2025. So these are a list of our kind of very unique joint venture-related ETPs: we launched the world's first carbon-neutral Bitcoin product, we have our Valour indexing digital asset basket that rebalances, physically staked Ethereum products partnership on a Blue Chip, 1Valour STOXX Bitcoin Suisse Digital Asset index. And obviously, I mentioned very excited about our Valour Bitcoin Staking product and CORE ETP with the Core Foundation, which is a great team with great innovators who've come out with the first self way to custody and stake Bitcoin securely in a noncustodial setting, which we're extremely bullish about and obviously have also added into our treasury assets, as alluded to prior. And yes, in terms of where we're going in the future with Valour, we've obviously accrued a very large sticky retention of clientele. So we will also look to diversify into thematic products, various types of investment vehicles, actively managed certificates and a bunch of different types of products. And Johan, I'm not sure if you wanted to kind of talk about some of the things that are exciting you in terms of new products and ideas around there. But we're diversifying as a company. We have a very kind of large client base. And we see that digital assets is obviously a great starting point. But why not -- the world's constantly changing and seems to be -- everything seems to be trading like digital assets these days. So why not kind of offer a broader exposure of products to a loyal clientele base?

For sure, let me do a few comments here. So first of all, in terms of different types of exposures, we obviously now mostly have passive strategies or returns that we offer to different vehicles. I think the next step would be to also have leverage in other types of features in these products to provide more value-added, which we started to do with a short product. We also want to provide more actively managed strategies for sure, as well as the thematic one, as Olivier mentioned. On top of that, obviously, the different types of products we want to offer would further -- greatly increase the number of investors and the investor pools we can reach. For now, we have asset-backed ETNs, certificates and ETNs. We're going to do actively managed certificates now. It's the next step, for sure, Warrants, as is mentioned, but also providing a new fund type of vehicle for investors who only invest in funds. We're doing -- we're looking at usage compliant for the EU market, where there's a lot of pension funds and so on that only can invest in these type of liquid vehicles. And also in the form of token. So basically, we want to be able to offer all the strategies, passive, active, with or without leveraging other [indiscernible] through both the EPT-type vehicles, but also ETFs, funds, warrants, managed accounts, asset-backed tokens and so forth. So I think that's the short version of it.

Thanks for time, Johan. Jamie, I think we're done and ready for questions, if you want to read them out or if we just want to go through them independently.

Yes. I'm happy to kick things off. Yes. The first one is from Rob. When does DeFi plan to uplist? Obviously, we've seen a very differentiated U.S. market with the acceptance of ETFs, and we're actively in discussions with legal counsel about our options there. And Russ, I'm not sure if you want to add anything to that.

Look, everyone should be aware that there's a dramatic change that's occurring globally in terms of the North American view on crypto. And the single biggest stumbling block is obviously, everyone should be aware, was the SEC and kind of a singular disdain or distress or dislike from the SEC, starting with Gensler and probably at the behest of the U.S. government, to try to interrupt or stop growth in the crypto space. But what you're seeing now is both a Democrat and Republican, it's bipartisan push to actually make the U.S. a center of growth for the crypto universe, which, quite frankly, I think is the right way to look at things. You're also looking at both governments contemplating a treasury strategy for crypto, which if you look at it from just a bid perspective, that should theoretically put a big bid in crypto in general and, quite frankly, almost ensure an uplist. Obviously, we still work under the purview of a negative and distrustful SEC, but it's only -- I think we're 3 months away from an election where that changes. So everybody should expect, as we do, some sort of an uplist here in the near term. And Obviously, one of the immediate goals is to just get the stock trading at USD 2 or higher, which fundamentally, obviously, beats this quarter supports and then some $0.31 a share. If you were to poll Oli, Johan, me and any of the analysts that are actually on this call, I think they would all probably agree that minimum 10x would be a sensible level for this type of a company. And quite frankly, with the growth, it's probably closer to 20 or 30x. 20x is $6, $6.60. 30x is obviously 3 times 3.31 or 30 times 0.31, which is $9, obviously, and change, so expect an aggressive effort to get there, and obviously, a real focus on uplisting by this company.

Ryan, do you want to take the next one, more technically, and I think we covered that were -- so yes, anonymous attendee, can you explain how the Genesis bankruptcy affects DeFi Technologies.

Thanks, Oli. So as Oli mentioned, we did receive the first installment of the coins that were held at Genesis of 95 Bitcoin. We do expect more in the future as the estate starts processing their distributions to the creditors. We do expect to receive more in the future. How does it affect DeFi? Right now, we do still expect to receive those coins that we've reported or we've recorded for accounting purposes or IFRS purposes. We have to record those coins down at the carrying value of the loan. So when we receive these coins, we can rewrite them back up to the going rate of Bitcoin.

And guys, just to add to Ryan there, that should be an incremental gain in Q3 and Q4 as we continue to receive more coins because we've already taken what one could argue as the full, if not larger loss, just for prudency. Is that fair, Ryan?

Yes. And just how the account policies are regulated on this matter as well.

Thanks, Ryan Next question is from Michael Kim. I appreciate the updated guidance revenue, but any change in thinking on the forward outlook for expenses and, particularly, as it relates to accruing for DeFi Alpha trading bonuses. So Michael, happy to address that. When DeFi Technologies acquired Valour on exponential trading returns, there was a 30% bonus policy associated with that. The company -- I believe we paid out our accrued bonus policy of, Ryan, correct me if wrong, it's just under 23% or 24%.

Correct. Yes.

Then for the team, that has been with us since the start. We've hired external counsel as well as compensation, engaging compensation consultancies to basically create a future PSU plan, similar to what Galaxy has in place. Obviously, we're a different kind of trading firm than Galaxy, but to essentially tie or figure out milestones so we can further incentivize our trading team to create and deliver on the next exponential DeFi Alpha trading opportunity. Whether it be $10 million, $20 million, $50 million, $100 million, $200 million, we want to make sure the team is incentivized there that have been working hard through bull and bear markets in -- over a very long time.

And maybe just -- I'll add just quickly, Mike. Mike is, by the way, the analyst at Zacks. Just so everyone knows. Mike, the objective also is with a consultant, both on the legal and the consultancy side, this will be fair, reasonable, market standard. It's not something where we're not taking it seriously and mucking at this. From a prudent perspective, it'll be backed very, very clearly by market standards and these independent individuals. And on the flip side, with Johan sitting here, I think everybody needs to understands we're all like -- what everybody is forgetting here, and I'm getting a lot of this today from people, it's like, well, you didn't guide higher on your trading desk, so you don't think you're going to make any more on trades. That's not at all what we did. What we decided to do was guide on basically AUM growth, which even that is ridiculously low. Like we're on track for USD 50 million, USD 60 million, just off of our AUM. And obviously, with Africa, Middle East and all these other jurisdictions, that could be substantially higher. We fully believe that Johan and his team will continue to execute. We just don't know what that quantum will be. But if you look at it from just a large lens versus, oh, wow, look at their SG&A, that's not the way to look at this. These guys have hit it out of the park, and we want them to feel comfortable in their seats continuing to do so, which will benefit all shareholders. Johan, I don't think -- I think that's a very fair way of looking at it. You can't have people do what these guys have done and not take into consideration nothing short of world-class returns.

Yes. No, absolutely. So I think that addresses that. And this'll definitely be kind of a one-off and things will kind of move into a PSU format. In terms of -- so point 2 from Michael. In terms of capital management, is your recent shift to a Bitcoin strategy impact your thinking on returning excess capital to shareholders via share repurchase and your dividends? We continue to buy back shares. One, I really typically think if you look at our company, we're a growth-oriented company. So we need to be aggressively using our capital balance on hand to optimistically look at driving that AUM higher. And I think this is our first quarter -- I mean, Ryan, correct me if I'm wrong, I think last quarter was -- what, is negative $0.06 per share. We're now at $0.31 a share. So as we kind of mature, grow, hopefully uplist, we will definitely, as a Board, consider dividends, further share repurchases as we're trading at an insanely low multiple to our reported revenue, even of -- just this quarter. So I don't think -- I think Bitcoin, our Bitcoin treasury and other digital asset treasury purchases really just kind of aligns our company with what we think is just kind of scratching the surface of a very robust digital asset opportunity. And we want to make sure that the assets that we have, specific knowledge and know-how about, we have exposure to directly as a company, and our shareholders as well have access to them. And obviously, we have unique capabilities to drive further yield and staking enhancements from those assets. So we're -- we see it as a complementary. Number three, as it relates to recent acquisition of Stillman Digital, any perspectives on potential synergies with your existing trading capabilities, including DeFi Alpha? And then any thoughts on revenue opportunity going forward? As I mentioned, when we were covering kind of the Stillman slide in the deck, we only make and consider extremely strategic acquisitions, Stillman being one of them. Johan, I'm not sure if you wanted to kind of further elaborate on what you see the synergies of the Stillman trading desk being in. Obviously, most of our trading desks as of now are in the Middle East, in the UAE and Switzerland. So this will add North America as a time zone, not that we don't cover North America, but give us kind of a robust team of traders over there with lots of fresh ideas to generate growth for DeFi Alpha. And that's what I have to say about that. And as I kind of alluded to prior, our balance sheet, industry connections to get these guys' business, I think, is unparalleled. And so we will maximize and drive their business any way we can. And Johan, I'm not sure if you had any other...

Yes. I think that's about right. And one further comment, obviously, geographically, I think one market we don't really have covered before that they have coverage in is Latin America, where there's a lot of super interesting opportunities within this area, for sure. So -- but as he said, this will align really well with the rest of activities we have and increase our bandwidth substantially.

Yes.

And maybe, Mike, one last parting thought. Any thoughts on the revenue going forward? look, we already crushed another one in Q3 that no one's factoring in. Like literally, if you actually excludes that PSU pool and look at what DeFi Alpha just did already in Q3, we're already at about $115 million in EBITDA, higher than the $0.31 per share that Ryan included in Q2. And on an AUM basis, we crushed it, Johan and his team as well. Like people aren't even talking about the fact that we made $15 million, $16 million off of our AUM, which I find a little bit shocking. I get it. The trading desk is crushing it, but the AUM business is also generating fantastic yield. So thoughts going forward? Well, Q3 is already $15 million. I mean, it's not unreasonable to look at that in Q4. And if Stillman's going, they do 55% net margins, and we have a much stronger capital base. What will that turn out to be? I get it, like prove it, prove it, prove it. Why? These are all questions that I keep on getting over and over and over. But the reality is we are proving it, and you're witnessing it. So in a certain sort of -- I don't want it to be flipping, very respectful way, it is time that DeFi starts getting some serious respect for what the trading desk has done and what the AUM business is doing because these multiples remain really ridiculously low. And obviously, that's just off of traditional fundamental analysis. Like most companies that do $0.31 per share -- look, I'll give you an example. TeraWulf lost $60 million, and they're trading at a $1.5 billion market cap in the U.S. Alamos Gold made less than we did in net income in this quarter, and they have a $9 billion market cap. That's just food for thought for people on this call.

Yes. Thanks, Russ. [ Tek Irani ].

Thanks for the great results. We'll take that one. You're welcome.

Only concern management and consulting fees are high. I think we covered this on Michael's question. 28s versus 1.2, the numbers reflect those changes, [ Tek ], and we covered that. Next one is from [ Ovid Edwards ]. Is there a plan to graduate to a more stock exchange? If you can share the ideal time line. Is there any exploration of an ADR in the U.S.? I think we've kind of gone into as much detail as we can to that extent. I think some of these questions came in before we went into detail there. [ Michael Bernstein ]. What are projections for income, profit generation for deals struck by Reflexibility with CoinShare? As we kind of mentioned in this presentation, Reflexivity is on track and we'd safely probably bet though -- the lot pace themselves and their projected net income of USD 2.4 million for the year. And as we have kind of the Coin, I believe you mean not CoinShare, but CoinMarketCap deal, as we have more kind of insights on that. Any time we have insights on deals, profit generation, our shareholders are the first to know. [ Bobby Lee ], yes, I think we've covered that already.

[ Tek ] -- well, there's [ Bobby Lee ], we just -- here, I'm going to get rid of them all, wait 2 seconds. Can you discuss margins and cost structure? That's a generic one. I mean I think the -- if I can be so bold here, Oli, and answer it, everyone like -- the cost of running the business is about USD 10 million a year, and the margins obviously grow as our AUM and trading revenues grow. So this is one of those unusual worlds where actually, as our business grows, our profit margins grow substantially. And I just alluded to the fact that if you take a step back and you just look at our operating numbers and you include the recent USD 15 million, so it's close to CAD 20 million from DeFi Alpha, we're into the $120 million, $130 million of EBITDA just for the quarter and the first few weeks of -- or the first month of Q3. So everything is growing. And at some point -- Johan and I had a chat the other day. The reality is we're going to continue to execute. And at some point, all you guys are going to realize we're executing and the share price is going to be a lot higher. That's how we're running this business. Oli, I'll -- do you have any revenues in the Middle East and Asia? No. We're in the midst of trying to build those opportunities. And as Oli mentioned, passport all of our products to those jurisdictions. And I gave you sort of a reasonable way of looking at it. Middle East, we've already talked about. And if we launch all our products in the Middle East and they get $20 million, you're looking at a $500 million increase to our AUM, which is about $50 million to our bottom line. And people are -- no one's factoring that in. And similarly, in Africa, I don't see why we shouldn't expect $20 million per product. That's not a -- I mean, if you want to clip it to $10 million, that's still another $250 million to AUM, which is another $25 million to the bottom line. So we're really not seeing any of that factored into our share price now, which is unfortunate. But I think over time, people will recognize that. And then Oli, I just got an e-mail from an analyst. I'm going to read the question out for you if you guys -- so how does a larger balance sheet impact your DeFi Alpha strategy? Does it enable you to take larger positions?

Yes. I mean -- go for it. No, go for it.

Yes. Yes. Yes. Yes, for sure. Yes, for sure. Yes, for sure. Yes, to put DeFi Alpha in context, obviously, we have now a more structured treasury and balance sheet management function, and part of that is to allocate the resources, balance sheet and liquidity among market-making, liquidity provision treasury model portfolio, the DeFi alpha, both the systematic trading opportunities and the more super-high margin one-off ones that -- I say, one-off, but we have a lot of one-off ones continuously, hopefully, even in the future. So obviously, the -- our growing balance sheet and the increased liquidity allows us now to be part of a lot of different new trading strategies where we couldn't participate before. A lot of these are not really acceptable for a lot of competitors. I don't want to go into too much detail there. But yes, the simple answer is yes. Obviously, our balance sheet and the liquidity allows a lot of other strategies that we haven't really even get into yet but are evaluating, and we'll be able to execute on the back of that. So it's a [indiscernible], for sure.

Okay. And then a corollary to that question for you, Johan, is how do you manage risk with DeFi alpha?

With DeFi, we have decided not to -- except for the treasury model portfolio, where we hold the Bitcoin, Solana, some CORE and so forth, we don't -- we have decided to not take an outright market risk. These strategies are basically everything from basis trading, start arbitrage, option arbitrage, basically a basis -- done in option, distress assets, where we can hedge them. So this is not a -- actually, trading activity where we take outright market risk beside the strategic treasury model portfolio, which we announced. So we're trying to find opportunities without metric payouts, where we don't have to get market exposure and we have a deep knowledge, network to source these opportunities and the -- yes, over 30 years of experience from this field within the firm. So we go for only that type of trades. We don't take market risk-based.

And then one last question from this analyst, who is actually a super guy, specifically to EMEA and APAC. Those seem to be the markets the world -- in the world that you are very interested in with digital assets. What are your go-to-market strategies in those regions? And how large do you view those markets to be relative to the Nordic success to date? So what are your thoughts, Johan and Oli, in terms of what the potential size could be in both Middle East, Africa and then, ultimately, Asia.

Yes. I think there's obviously lots of people in the Nordics, but a lot of these are a lot more robust. But specifically, I think to elaborate on our focuses, recreating what we've done in the Nordics, which we will do in the Middle East, Africa, Asia, in specific markets where we see a competitive advantage. And I think to kind of Russ's point, to kind of look at anywhere from $0.25 billion to $1 billion range in some of these new territories is the right way to think and at least the way we're thinking about these new opportunities. But obviously, some of these markets are exponentially larger than the Nordics, such as Korea, for instance, Singapore, lots of capital, lots of interest in digital assets. And we're excited by those opportunities, but also equally excited about opportunities such as being the first and only company operating in Africa, so.

How much will the Stillman acquisition affect the top and bottom line?

Yes. So I think we touched on those numbers in our initial LOI PR, and we'll probably provide guidance on the gradual closing of that acquisition. Very robust business model, as mentioned, great margins. So when that deal gets finalized -- and again, to reiterate, as soon as we have material information, we share it with shareholders. So as we have updated numbers and that deal closes, you guys will have that information.

How are you differentiated from Galaxy? And can you provide us with a 2024 annualized revenue target and maybe break it down to its various components? Does anybody want to take a stab at that? I mean...

Well, yes. Galaxy's 300-something people. We're around 10, if not. So we're -- I would say we're lean and mean. I can't see us getting over doubling our headcount potentially in the coming years, but we operate as a small lightweight business that's highly profitable. So -- and we've built and innovated market-leading products to provide differentiated returns for shareholders under a public company infrastructure that I think is lightweight but also robust. So obviously, there's similarities. But I think if you look at our trading multiples of our revenue, I think that's how we are differentiated right now, being highly undervalued. And then yes, I think we kind of went through our 2024 annualized revenue targets. But essentially, that compromises of our Valour, DeFi Alpha, our other subsidiaries acquired and yet to be acquired. So I think it's -- [ Brandon ], you say it's a bit difficult to piece together each component, but we've made it very clear in this presentation, which will be available. The Valour business unit that we obviously have been running for close to 5 years now, where we provide guidance quite clearly, as we explained, we will provide further guidance on DeFi Alpha as we have more trades executed under -- and under our belt to be able to provide and have data points to point towards. And all of our other business units, we provide kind of guidance. Like with Reflexivity, they're on track to do USD 2.4 million this year.

I've got a tiny bit to add to this, [ Brandon ]. We actually have something that Galaxy wants. And if you're paying attention to what Galaxy has done, they've entered into a sort of a small tester JV to launch some ETPs in Germany that haven't actually done all that well. We probably now are the market leader in the ETP business, quite frankly, globally. And having something that another multibillion-dollar company wants is never a bad thing. What does scare me though is how cheaply we're trading because -- all you have to do is look what PUMP put out. If you actually take the cash, tokens and privates off of our current market cap and look at our revenues for getting any incremental DeFi Alpha revenue, we're actually trading around 2.5 to 3x earnings. And the likes of Galaxy, Coinbase, any of these other comps, they're all in the 15 to 30 or 40x earnings. And when you have big companies trading at extreme multiple expansion versus a small one who's actually doing better than they are, you become a very, very intriguing and appetizing acquisition target because they can pay 3, 4x your current share price and it's still accretive to them because of their multiple. And that's something everybody should be thinking about, in my opinion. And then in terms of the revenue target, guys, like all you have to do is put in $15 million a quarter moving forward from DeFi Alpha, which was probably very, very reasonable. We've already done it in Q3. And add in another $5 million or $10 million from Stillman once the acquisition is closed, and you quickly get to a much higher multiple -- or sorry, much higher revenue target than what we guided to. And if crypto goes bid, obviously, our AUM revenue generates a higher amount of dollars, and that becomes even more stale. We're just trying to be conservative and reasonable and smart and just execute. So hopefully, that answers your question, [ Brandon ]. And guys, we're already at like an 1.15 hour. How long do we want to go here? Because we've got another 43 questions.

Yes. I've got to jump into a dinner meeting, but I think we can probably index these questions and provide e-mail replies, right, Jamie?

Well, yes, or I'll even do what I do consistently. My e-mail is [email protected] or [email protected]. Please send me your questions, and we'll endeavor to answer every single one of them because they're all meaningful, and hopefully, this just mean a value add to all of you.

Yes, thanks. Thanks to all our shareholders and prospective shareholders on the call today.

That's great, guys. I'll just conclude. This is the end of webinar. Thanks, everybody, who joined us today. We will have a replay of this webinar available shortly. So please keep an eye on our socials for the link. And if you have any follow-up questions, as we just mentioned, feel free to reach out to us any time. We'll get back to you quickly. So thank you very much, everybody. Have a great day ahead. Appreciate your time.

Thanks, everyone. Cheers!

Thanks, everyone. Bye-bye.

Many thanks.