Galaxy Digital Inc. (GLXY) Earnings Call Transcript & Summary

Good morning, and welcome to Galaxy Digital's First Quarter 2023 Earnings Call. Today's call is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Elsa Ballard, Head of Investor Relations. Please go ahead.

Good morning, and welcome to Galaxy's first quarter earnings call. Before we begin, please note that our remarks today may include forward-looking statements. Actual results may differ materially from those indicated or implied by our forward-looking statements as a result of various factors, including those identified in our filings with the Canadian securities regulatory authority on SEDAR, and available on our website or in future filings we make with other securities regulators. Forward-looking statements speak only as of today and will not be updated. In addition, none of the information on this call constitutes a recommendation, solicitation or offered by Galaxy or its affiliates to buy or sell any securities, including Galaxy Securities. With that, I'll turn it over to Mike Michael Novogratz, Founder and CEO of Galaxy.

Guys, good morning. if you're not in New York, it's a beautiful study morning here. And listen, it's nice to show up with a good first quarter earnings. I'm going to let Chris Ferraro and Alex spend most of their time, taking that victory lap and really going into how each business is doing. And I'm going to give more of a high-level view, which is going to be more nuanced the good, the bad and what we're -- how I'm thinking about this whole business. Listen, at the beginning of the year, I said to the firm, and I said to you guys in the last conference call that 2023 would be a year where we had to chase down loose balls where we would need to be scrappy where we would need to hustle our way to a decent year while the entire time we were building and building for what we think is a really exciting future. And that view hasn't changed a bit. There have been some good developments in crypto, right? Bitcoin was the single best-performing asset on a risk-adjusted basis in the world in the first quarter, right, 65%, 70% up. That came from a lot of different reasons. The market had been too pessimistic, perception that the Fed was getting close to the end of the hiking cycle, a banking crises in the United States, all reinforcing why people cared about crypto. And so that's the good. And I think you're going to continue to see macro developments around hard assets like Bitcoin be a positive. And so when I think about my confidence in the future of Bitcoin and the future of crypto, it hasn't waned. I think about stable coins last year's $7 trillion of settlements on stable claims. That's bigger than Visa and Mastercard. We don't use a lot of stable points here in the United States, but travel abroad when you look at places that are unbanked, stable coins are a very important part of their ecosystems. And we do think both in Europe with the recent regulations and at one point in the United States, stable claims are going to be more and more important. Think about it in a really simple way. If you get to a point where you have a stable claim that pays interest and you give everyone just a crypto wallet, you really have solved the unbanked crises, right, that everybody has banking. And that's a future that's so intuitive, it's going to happen. Is it going to happen next week? No. But we're building to that future before '25 and '26. And when I think of that, I'm really optimistic. When I look at the short term, we still have a regulatory headache in the United States. I don't see that breaking anytime soon. And that we still have a hangover as well from the lack of trust or the denting of trust that FTX and other bad actors in the space created. And so allocator adoption is slower than we'd like, right? We're not seeing the big institutions come in writing big checks into crypto. They're all still doing their homework. They're all still following it. But that is slower, and I expect it to continue to be slower. But what I'll call infrastructure adoption is picking up, right? Chris is going to talk about the partnership we just launched with DWS. DWS is a $1 trillion asset manager in Europe. Their CEO is really geared up to making crypto part of their offering. And for us, that's wildly exciting. And so in some ways, it's this tale of 2 cities. It's great news on a medium-term basis. But it's going to be tough sledding in the short run. What does that mean for us? It means coming to work early, stay in late, hustling and mostly, I think our earnings this year are going to be driven by our trading business. All our businesses are doing well and building. But in a year where we're mostly investing in our Galaxy Prime offering, that's not going to show revenue till the end of this year at the beginning of next year. And so it's going to be the trading business that most likely carries us this year. We've just brought in a new group of traders in Hong Kong. We're really excited about that. We do think this is a global business, and our intention is to continue to grow outside of the U.S. at a much quicker pace than we were growing in the United States. Some of that -- most of that is regulatory, but a lot of it is also opportunity, right? The Asian markets take the crypto. There's quick adoption there. And now we're seeing more and more in the Middle East and Europe. And so I frame it together, like I said, we're driving ourselves to a 2024, 2025 build, and we're investing for that future. We have been good enough, lucky enough to have a balance sheet that allows us to invest. When I look at Galaxy's headcount, we have more people today than we did a year from now, a year ago. And so we're significantly bigger than we were where most crypto companies and most of our peers are a lot smaller. We've certainly tightened our belt and cut costs. And so we've got a bigger footprint with a very similar or even lower cash burn or cash expense. That's being funded by positive operations and good trading. We still have $1.6 billion worth of partner's equity. And so -- and a good liquidity position. And so we feel like we can grow with our own balance sheet and with our own profits. And that's pretty much how this is going to be. I wish I could come and bang the table and say, there's this giant tailwind that's going to lift all crypto boats. I think we're pretty sober in our outlook in the short run, but we're pretty optimistic in the long run. And with that, I'm going to turn it to Chris to talk about the first quarter. I said he's got the fun job because we really feel like we had a great first quarter. And the firm all worked hard, and the results show for that.

Thanks, Mike. And I apologize in advance, I'm going to the weather, so everyone bear with me today. As Mike noted in his remarks, we're relentlessly focused on our 3 strategic priorities to drive growth in the business, building and launching Galaxy One, scaling the asset management business and integrating and scaling our recent acquisitions And we're really excited to share that we made substantial progress in executing on these priorities in Q1. On the last earnings call, we provided an update on the development of Galaxy One and the steps we are taking to establish the product as the leading institutional grade digital asset services platform. We're excited to share that in the first quarter, we made strong progress towards our MPP launch. We've completed over 30 demos with key target institutional customers and feedback has been overwhelmingly positive, with the majority of these prospective clients requesting documentation to onboard. We continue to add new jurisdictions and can now operate Galaxy One in 35 states in the U.S. and 8 key international countries and are actively pursuing additional regulatory licenses as needed. And we are developing our automated margin trading offering, which will supplement our already sizable and active trade financing business that we do today, which we intend to launch in a measured way over time with a keen focus on risk management and proper controls. As we build and prepare for the launch of Galaxy One, client onboarding in our existing trading business continues to trend positively with more than 30 new counterparties having onboard to the desk in the first quarter. More broadly, in our Global Markets business on the back of a record year for our investment banking team, we advised Pantera a leading blockchain asset management firm on the sale of its stake in European Digital Asset Exchange Bitstamp to Ripple Labs in Q1. Executing on a deal of this complexity post FTX reinforces our position as a leading investment bank for digital assets with unparalleled sector knowledge and execution acumen. And the investment banking team's pipeline remains strong with a dozen active mandates being pursued right now by the team. We're excited to continue to update you on the progress here in this business. Galaxy Asset Management. In terms of our asset management business, we've had a very active start to the year. Consistent with Galaxy's business resegmentation, we've also simplified our asset management architecture to orient around three key strategies: passive, active and venture. As we noted on the last earnings call, within our passive sleeve, we are keenly focused on leveraging a regional partnership model to expand our product reach. In line with this commitment, we recently announced a partnership with DWS to develop digital asset management exchange traded products in Europe. DWS is nearly a $1 trillion asset manager, the third largest ETF provider in Europe and has more than 60 years of investment management expertise. Our partnership represents the coming together of 2 leaders in our respective sectors and is a significant step forward in the institutionalization of digital asset markets. Galaxy Asset Management now has a presence in the top 5 crypto exchange traded product markets globally through partnerships with leading trusted regional asset managers that include DWS in Europe, CI Global Asset Management in Canada and Itau and Brazil. And don't forget, we also have a partnership with Invesco in the U.S., the largest non-crypto ETF market in the world, but continue to weigh on regulatory approval of such an investment vehicle. Within our active sleeve, our liquid alpha fund is coming up on its 1-year track record and has generated more than 550 basis points of alpha net of fees for our onshore Class A investors relative to Bitcoin from inception through April of this year. And we are continuing to explore new liquid active risk managed strategies, both quantitative and fundamental as we look to build out our actively managed product suite. Finally, on the venture side, we successfully completed the migration of our venture investing team into our asset manager, which includes $343 million of previously reported balance sheet investments that are now captured as AUM. Our unified venture platform now consists of our interactive venture franchise, our venture fund of funds business and these newly migrated crypto venture investments, which collectively now represent $1.4 billion in venture assets under management. Galaxy central positioning in the digital asset ecosystem provides an unparalleled sourcing funnel and a differentiated ability to underwrite individual portfolio companies and correctly priced portfolios. Our team has made more than 300 direct venture investments and 35 venture fund commitments over the past 5-plus years. No other investment manager in the world with expertise in crypto has this access expertise and vantage point. Finally, our Digital Infrastructure Solutions Group. Our third operating business is continuing to gain momentum following our acquisitions of Helios and GK8. Let's start with mining. We've already reached approximately 3 exahash of hashrate under management across our proprietary mining and hosting footprint, doubling where we were at the end of Q4 and putting us ahead of schedule in achieving our goal of 4x exahash by the end of the year. Our current hashrate under management represents roughly 1% of the total Bitcoin network hash rate, even with the continued rise of hashrate over the same time frame. As a reminder, our proprietary mining operations represent approximately 30% of our hashrate under management our hosted mining business represents the other 70%. At Helios, our flagship mining site, we have been focused on retrofitting and stabilizing the asset, laying the groundwork to allow us to achieve our long-term plans to scale the facility well beyond its current capabilities. We executed the first quarter with precision and feel really good about our operational upgrades leading into the summer months. Our team is now focused on expanding the existing data center to roughly 220 megawatts of operating mining capacity which will require an investment of approximately $20 million to $25 million and which we expect to achieve by early next year. I'm also very excited to share that just last week, we received approval from ERCOT and the Wind Electricity Coordinating Council WECC, to scale up to 800 megawatts at the Helios site over the coming years, which is approximately 4x our current electricity access. We are in the very early stages of planning this expansion, including evaluating various financing options. With respect to our smaller mining facility in Diboll, Texas, half of that site is currently energized and operating, and we are on track to bring the full 16 megawatts online by the end of the second quarter. We continue to actively manage our power cost exposure and since our previous earnings have increased our hedge position, keeping our effective cost of power extremely competitive and our marginal cost to mine low. In addition to mining, we're also operating and providing other services at the blockchain infrastructure layer. This includes running validator nodes for proof-of-stake consensus mechanisms and providing self custodial technology solutions via GK8. We're excited to announce that since the close of GK8 acquisition in February of this year, GK8 has won 4 new clients already to reach 11 total clients, including Galaxy and has also seen a significant increase in its pipeline of potential enterprise clients. Technology will accelerate Galaxy's product innovation and development, including the ongoing build-out of our Galaxy One offering. There is a huge opportunity for Galaxy to build and invest in technology that powers the digital asset ecosystem and I'm incredibly bullish on the long-term growth of our Digital Infrastructure Solutions business. I'll now turn the call over to Alex to cover financial results, and then we'll jump into questions.

Thank you, Chris. Good morning. We had a strong quarter. Galaxy reported net income of $134 million in this quarter, compared to a net loss of $288 million for the prior quarter. On a comparative basis, the preliminary first quarter results we provided on our last call, based on the information through March '24, for the full quarter before taxes and noncash equity compensation, we earned $163 million compared to our estimate of $150 million. Most of the beat was driven by strong last week of the first quarter. Correspondingly, our equity was $1.6 billion at the end of this quarter, an increase of $158 million from year-end. We ended the quarter with total liquidity of $814 million, consisting of $400 million in cash and equivalents, $209 million of non-algorithmic stable coins, predominantly USDC, issued by Circle and $205 million of net digital assets, excluding stable coins. On our combined cash and stable coin balances, we're down by $214 million from year-end, primarily due to a larger amount of outstanding fully collateralized [ FIP ] loans to our customers, GK8 acquisition and investments. In this quarter, we continue to navigate discovabilation in commercial banking without issues. Now I would like to highlight changes made to our reporting segments to better reflect developments in our business from organic initiatives and from acquisitions, we adjusted our financial reporting into 3 complementary operating businesses: Galaxy Global Markets, Galaxy Asset Management and Galaxy Digital Infrastructure Solutions. Galaxy Global Markets, with a little bit of background music, consists of trading and investment banking, which were stand-alone businesses prior to this quarter. Galaxy Asset Management consists of passive, active and venture investment strategies and now includes select venture investments that were historically reported as principal investments. Galaxy Digital Infrastructure Solutions consists of our proprietary and hosted Bitcoin mining services, the newly acquired GK8 technology and self-custody capabilities and validator services. These segments have been reported in our financials starting with the first quarter. For additional detail on resegmentation, please see management's discussion and analysis for this quarter. Now back to the operator for questions. Thank you.

[Operator Instructions] The first question comes from Deepak Kaushal with BMO Capital Markets.

Mike, Chris, Alex, just a question on the DWS opportunity in Europe with Mike getting ratified. Do you have a full regulatory green light in Europe to launch? And maybe you can just discuss some of the milestones that we should expect in terms of the partnership and how it should progress before AUM starts to ramp up?

Yes. Deepak, thanks for the question. Short answer is yes, we have full regulatory green light to proceed. The -- we're going to be launching the product throughout Europe in the markets that represents over 70% of basically all exchange traded products ex-U.S. in the world. We're going to launch in geographies that actually already have a fairly rich offering of different forms of structures of crypto ETP products in the market today. And so unlike the U.S. where we're waiting for an indefinite time period for some approval to actually launch the product there, there's a small but already approved and fairly robust marketplace. We just intend to do it better and bigger together with DWS. In terms of product road map, yes, so we inked the partnership together with them. That was the first step. In parallel, we've been along with that comes with a base product suite that we think addresses needs in the market that in the various markets in Europe that aren't being addressed yet today. We intend to launch those products towards the back end of the year because in first, we're both working with DWS to line up global service providers to support the products and sort of the platform to be actually be able to launch them. And so you'll likely see as we get into the back half of the year, announcements from us, some marketing globally about it and ultimately the launch of the products towards the back half of the year.

Okay. And if I could ask a follow-up. I understand DWS partnership in Europe is exclusive, so you won't be doing anything else with anyone else in Europe. But how do you think about organic growth versus inorganic opportunities? Is this purely market share gain, obviously, in an expanding market? Or are there opportunities for consolidation in the ETP space in digital assets? I'll leave it at that.

Yes. I'll take a quick crack at it first. I think it is an exclusive partnership in the region for those products. We've had the privilege of being in a seat where we are able to look at all the different opportunities out there globally in terms of potential platforms coming up for sale, potential investments. Going this route where we are actually partnering with a global institution, helping develop and launch the product, manage it and ultimately own a partner share of the economics on a go-forward basis is what we felt was by far the highest returning and strategy for us than inorganically going out and buying existing products. Also because some of the existing products in the market, we don't feel like our set up and structured to scale the right way for the future as global adoption really starts to hit pace. So they are out there. We don't have -- we don't currently have any plans to do anything large inorganic on the global ETP front. We think the right strategy is organically build and partner with institutions who have brand that can help us on the distribution front, particularly internationally.

The next question comes from Chase White with Compass Point Research & Trading.

Any color that you guys can provide on the PPA that you guys have at Helios and what kind of the power strategy is for that facility?

Sure. Probably not specifically on the exact terms of the PPA. But in general, our -- the reason why we were so attracted to the Helios site was its location in ERCOT West and our view of that power market over the long term and where prices would be on average over the long term, with the goal of being able to access consistently low-cost power, which is sort of the cornerstone of operating a good Bickley mining operation. We have to date generally aim to hedge out the vast majority of our electricity needs with fixed-price contracts. That actually has been a big benefit to the site, which the site was unable to access before our stewardship with it. And so our balance sheet has allowed us to actually do that, which we think created value on day 1 for the Helios site, which currently wasn't -- it wasn't unlocking prior to that. And so yes, so we're going to take it bit-by-bit, and we're watching the electricity markets. And -- but the goal for us is to really have a low, stable input cost of electricity, so that we can operate the business as efficiently as possible. And we're going to aim to continue to do that pretty consistently.

Got it. And one more, if I may. Since your last earnings update, has there been any change in the banking landscape for you guys? I mean have you had any trouble with existing relationships or entering into new relationships with U.S. banks? Just curious kind of how things have evolved there.

Yes. I would say there hasn't been any negative evolution since the last time we talked. We have worked pretty hard at expanding our own banking relationships and being met with some success. But it's also on the flip side, it's not a floodgate of open banking relationships at the biggest banks in the world. So nothing negative, nothing adverse, but pretty measured in terms of access for this sector. And so we're leaning into again, like we talked about last time, the fact that we do have those relationships, we are able to expand our relationships with our existing banks and add new banks to supplement it. And so we're leaning in the fact that we are we are, in effect, one of the trusted nodes now in the crypto sector through which crypto companies can come in and become a client and access our relationships in our banking rails effectively.

The next question comes from Andrew Bond with Rosenblatt Securities.

So as you build out Galaxy One and work with institutional clients on the beta, what are these clients demanding in terms of essential services? And have you seen a shift in terms of what clients are looking for with regard to risk management and portfolio engineering tools similar to what they would use in TradFi given recent events?

Andrew, I appreciate the question. Yes. So there is a heightened focus on all things counterparty and risk management and flexibility focused in crypto. Our MVP launch is meant to be pretty simple functionality but addressing like institutionally built needs for clients. And so it's meant to be trading access, custody and reporting. We think those are the basic fundamental building blocks of institutions, accessing digital markets. To your question, one piece of that, the custody piece, clients are asking more and more for multi-custodial access, which is a differentiator for us because unlike some of our other competitors, we don't in-house on an exchange. We don't in-house today own our own custodian, where -- so with competitors, their options are pretty monoline and singularly focused in terms of that counterparty. Our plan is to offer multi-custodial model. We're going to launch Galaxy One to start with 3 different external custodians, the theory being that clients can come in, and they can choose to allocate their assets between any one of those custodians. They can choose to either have omnibus accounts where they can -- where they will eventually be able to add leverage to it or they can choose segregated accounts where they can pick their custodian. And for us, the key for the build-out is going to be when clients come in and demand that we provide accessibility to their custodian, where that meets -- where there's enough demand and a new large custodian who we haven't onboarded yet, we're going to focus to plug that in and then that now becomes another large custodian that every client at Galaxy One can then access. And so I would say diversification of custody is a key one. Certainly, reporting in terms of trade reporting, do I get my good -- did I get the right fills? Where did I get filled relative to the market, are important. We're focused on that. We think that's an important transparency tool that is generally not available in the market today. So things like that is what we're focused on providing institutional clients.

And just the GK8 acquisition, has that enabled you guys to build faster and more efficiently, given the team and the tech you acquired? And you called out the recent client wins and really strong pipeline there. So is there any primary driver of that recent kind of uptick?

Yes. I mean it's really recent. And so we just closed in February, and we're able to properly get on with integration and then actually plugging in their services. And so we're a little over 2 months into that today. We're fully integrated now as a firm, which is the fastest we've done, I think, with any one of our tuck-in acquisitions, which is great. We've got big hopes for GK8. We think there's a huge untapped market that is growing by the day in terms of global institutions who are going to provide digital asset custody services to their clients on a goal basis. And in particular, because these are digital bearer assets, we think there's going to be many more of those customers globally than we would have seen in traditional finance. And GK8's technology is built quite specifically for that client segment. And so we really think we're on the -- we're -- we've done this transaction at the right time on the front end of a global adoption trend that's going to be the embedding key material management technology into big global institutions. So we're really excited about that. Also, taking their technology and plug it into inside of Galaxy, where we historically have used external vendors. Now we can use an internal vendor, which is a cost saving, but also actually moves our road map forward, in particular, now we're focused on using that to access DeFi markets and do it in a quick risk-managed regulated way, which is quite interesting. But we're on the front end of that because we're 2 months into having integrated the company.

The next question comes from Michael Legg with Benchmark.

Can you talk and give us a little more clarity on the direction you're seeing regulation in D.C.? What type of focus are you seeing there? Any more color you can give us on what's going on there? And then also, as it relates to your venture portfolio and other investments with a million of liquidity. Can you just kind of talk a little bit about pipeline whether the add-on investments, new investments and what you're seeing in your pipeline going forward?

Yes. Maybe I'll take regulation and let Chris take the venture stuff. Listen, the regulatory landscape in the U.S. is not great. I don't think anything we have done in Congress this session, right? There's some small can stable coin bill would go through. But when you look at the politics of it, the White House is kind of putting the Kabash on anything. And so I think we're going to continue to see the regulators, the SEC, the CFDC regulate with lawsuits. And so the court has moved slowly, right? It's been, what, 3 years since the Ripple lawsuit, and we still don't have a judgment, that will probably be the first judgment. But I think this is going to be a slow process probably until the election. The good news is nothing bad is going to come out legislatively, right? There is a pretty fierce Republican pro crypto side that is going to continue to, I think, hold the SEC share to task with hearings, and I don't think any bill on the negative side gets done. And so it's a little bit of a stasis. It's one reason, quite frankly, that we are moving more of our operations offshore and certainly looking at the opportunity set. I mean it's sad in almost ironic that Europe, which was always seen as the slow poke of innovation is certainly a step ahead of the U.S. with their framework they set up. Hong Kong is becoming crypto friendly, our crypto friendlier, I should say. And then places like Abu Dhabi and Dubai are really pushing the envelope to create a robust crypto regulatory infrastructure. And I think you're going to see businesses migrate there, which is frustrating as a red, white and blue patriot, but that's kind of our reality.

And then on the -- Mike, on your question about capital allocation and venture investing and what we're seeing there. I think you -- yes, I mean, I think you nailed it on what the dynamic there is. The -- if you look at factually by the numbers, we are -- this is both in our previously balance sheet-focused venture investing now in the asset manager. But in our -- in Galaxy's capital, making investment, venture investments as well as our interactive franchise. Overall, the pace of new investing has fallen off quite dramatically here. And that's not just in the first quarter that extended back to the fourth quarter of 2022. We have been focused on portfolio management work, understanding which companies who already had product market fit had traction who we think have the best founders have good businesses. . But at some point, we're going to need capital and the capital markets in general in crypto, then more broadly in venture and more broadly in illiquid investing generally have locked up quite good, right? And so for us, rather than blindly deploying more capital into new things, we are spending all of our time assessing the current portfolio, assessing needs and planning for where we're going to back up the best companies if we get there and if they need it. The good thing was, I think earlier in previous quarters in late last year, we took a look at our portfolio. On average across our portfolio, we had over 3 years of runway in terms of -- at the portfolio company level, the expected needs. It's only been a couple of months since then. That hasn't dramatically changed. And so we built the portfolio to begin with a heightened focus on those companies' runways. I think that's going to pay off for us. The flip side of that is when you think about the offense, where have we been thinking about offense. We've been thinking about offense primarily in the secondary market, which is looking at the market where you've got a set up where you have a lot of asset owners, not a lot of asset buyers, asset owners who would prefer to be liquid rather than illiquid. And so who are willing to sell good assets at great prices in good structures. And so on the offensive side, where we are spending our time is thinking about where can we be opportunistic and increased exposure for investors in our asset management business in great businesses at great prices. And so we're really thinking about it like barbell from that perspective.

The next question comes from Bill Papanastasiou with Stifel.

Just one here. We've recently seen a significant demand of block space with the introduction of these ordinals and BRC 20s that have led to a substantial increase in transaction fees and of course, an increase in cash price in early May. But it's also caused a significant amount of debate in the community on whether the blockchain should be used to settle Wizard JPEGs. I'm hoping to hear more from your team on your thoughts on the matter and its long-term implications to the network and mining operators.

I need Alex Thorn, our Head of Research on this one to get into the picking detail. Listen, I think in the long run, you're going to see Level 2 solutions like lightning in Bitcoin process most of those transactions. It's just an intuitive sense. And people longer and don't want to pay high fees for small transactions. And so that transition will happen and it will happen pretty quickly. It's the same thing we've seen on the theory of network with all its level 2s and side chains. And I think if you want to think about it conceptually, right, the most important transactions are going to get patched on the most secure, probably most expensive bank chains. And as the need for security decreases because of price in general, sometimes price and privacy, you'll see them on faster and cheaper chains. Cheaper chains probably -- and that just is like an intuitive way to think about it. Most people didn't see the Bitcoin blockchain as the blockchain that fast things will be built on top of because of the way it was structured. It's meant to be expensive because that's where the security comes from, right? If it was cheap to run the Bitcoin network, people wouldn't feel comfortable putting the $0.5 trillion of value that's in there. And so in some ways, this was a surprise and the developers are kind of dealing with this as we go, that you have these two use cases pop-up so quickly this year, where most -- because most of that mindset has been being built on Ethereum. And so I think this is just a transition period. But we will get Alex to put out a more focused note on that because I think it's a great question.

Really appreciate that color. That's all I have.

The next question comes from Devin Ryan with JMP Securities.

This is actually Michael Falco on for Devin. Just one for me on the investment banking business. thinking about the macro environment there. It's been a challenging backdrop for fundraising and M&A, just broadly speaking, let alone in the digital asset space. That being said, you did mention an active pipeline with, I think, a dozen mandates. So I was hoping you could provide a bit more color on the level of tone on the level and tone of client dialogues that you're having and how that has evolved? And then maybe have there been any notable shifts in activity or focus from recent quarters? And how are you thinking about the outlook from here?