Horizon Kinetics Holding Corporation (HKHC) Earnings Call Transcript & Summary

Good afternoon. Thank you for joining us on this call. My name is Mark Herndon, CFO of Horizon Kinetics. We are pleased to have you here to join us for this call, then we'll cover the results for our quarter and year ended December 31, 2024. But first, a reminder that today's presentation may include forward-looking statements. Reliance on forward-looking statements involve certain risks and uncertainties, including, but not limited to, uncertainty about the future security valuations or our performance. During the course of today's call, words such as expect, anticipate, believe and intend may be used in our discussion of our goals and events in the future. Management cannot provide any assurance that future results will be as described in our forward-looking statements. Furthermore, the statements made on this call apply only as of today. The information on this call should not be construed to be a recommendation to purchase or sell any particular security or investment fund. The opinions referenced on this call today are not tended to be a forecast of future events or a guarantee of it should be assumed that any of the security transactions referenced today have been or will prove to be profitable or that future investment decisions will be profitable or will equal or exceed past performance of the investments. We encourage you to read our filings with the SEC on our Form 10-K as well as our other filings, which describe the risks and uncertainties associated with managing our business. The company does not assume any obligation to update any forward-looking statements made today. These filings can also be found at the OTC Markets website and our press releases or other information is in our corporate website at www.hkholdingco.com. Today's discussion will be led by Murray Stahl, Horizon Kinetics' Chairman and CEO. And I will also be available to answer applicable questions and we'll moderate the questions. [Operator Instructions] And with that, I will turn it over to Murray for a few opening remarks.

Okay. Thanks, Mark. Thanks, everybody, for joining us today. So normally, when I do these sorts of calls, I start with general remarks, and I'm going to have general remarks. But this time, because it's our first time presenting Horizon to the public really in our year-end results. I'm going to be a little bit less general in the beginning, normally in. And so let's start with Horizon's earnings for 2024 were a record for anything we've done in 30-year history of Horizon. So that's great. And the balance sheet figures were all sort of record. So that's great. And now we're going to go to a few things that are less general we'll come back to the general. So in order to understand, what's going on in the Horizon, the first thing you need to understand is we now have consolidated investment statements. What does that mean? That means that our earnings are consolidated with some of the funds we manage. So the balance sheet amounts are greater in consolidation mode in the way we would look at it in terms of just the assets that pertain to Horizon [ Quorizon. ] That's the first thing to understand. Let me give you an example or 2, if I might. So the way the earnings are presented in the Form 10-K, this would be the income statement that you might see on Page 26. The revenue number is a little over $57 million. We wouldn't look at it that way. And in point of fact, if you were to go to Page 38, I apologize for doing this the outset, by the way, because it's not the way I normally like to work, but I think it's necessary for understanding purposes. So if you did it, if you had this document in front of you, which I guess you could have be going to the SEC website, and look, you'll see on Page 38, you will see the revenue presented the way we would look at it internally. Net revenue number is over $113 million. So what's the difference. The difference is the performance fees. So performance fees, which obviously were over half our revenues, very, very substantial. And we need to pay our own marketing staff commissions and those fees. So if you look at our income statement, what you'll see is you'll see a certain revenue number then you'll see all of our expenses. And then the $60-odd million performance fees, where is it? It's embedded in the investment gains? So you can't really understand how profitable a business horizon really is unless you understand the accounting treatment. When Mark Herndon gets a chance to speak, he'll explain to you why it's done that way. And I mean the short answer is, of course, it's -- those are the rules we have to do it, but there -- it has a logic. And we'll explain that. So it's not so easy to read the financial statements, the way they're presented here. Anyway, a lot of our -- the highest margin revenue that we have, which was our performance fees actually appears and this is the salient point, it appears below the operating income line, not above the operating income line. So operating margin is actually extraordinarily high even by the standards of investment management. Another interesting thing about the performance fees they were so large. To be honest, that, we ourselves during the course of the year, we didn't plan for performance fees that were this large, so higher than even we had anticipated. And that's a nice problem to have. But as a publicly traded company, we need to pay the taxes to our government prior to actually collecting the fees. So the fees we would actually receive in January because we don't know the precise amount until December 31, but taxes are due on December 15. So interesting enough, they were so large, they almost exhausted all our cash reserves, which is kind of interesting. We didn't think that could ever happen. Now we never had a liquidity problem. We have plenty of assets, we have plenty of liquidity was never an issue. But we really don't want to sell assets that we're delighted to hold and pay even more taxes just through a privilege of paying the taxes and cash. That situation didn't require selling. But for a couple of days there, we did wonder. So we almost didn't have the money to pay our own Texas. It's hard to imagine such a circumstance, but it almost happened. So that we'll have to do better in thinking that through the future. Another interesting thing which was a nice issue. So as a public traded company now, you have more detail about this later. Our taxes, state and local taxes are not going to be computed on the old basis. The old basis was the taxes are due to the authority in the jurisdiction where the service or prop was produced. And since we're in New York City and New York State, of course, we're in the highest of tax brackets. In the future, our taxes are going to be computed based on where the service or product is consumed because a lot of our clients are not residents in the state of New York. A lot of them have be residents in states where there are no income taxes or if there are income taxes stating on Texas, local income taxes, are actually very low. There in the future, which is 2025, a year and we're now, we'll actually get some, in my opinion, decent tax deductions or tax advantages, I should say, not deductions. So that's kind of nice. So what else should I tell you, the first thing is I would certainly advise on Pages 37 and 38, you pay very close attention to the consolidated and the deconsolidated statements and make sure you familiarize ourselves with both sets of financials because they're both important. So it's that you can't content yourself, which is looking at your income statement and balance sheet that's presented. And that brings us to some now back to general points. I'd like to expand that a little bit and now I'll turn it over to Mark, who'll give you more detailed accounting information. So the first thing is, had we achieved record earnings when we really weren't raising tremendous amounts of assets? And the answer, of course, is our goal wasn't to raise a lot of money. Our goal was to make a lot of money. Those are 2 entirely different things. So let me explain. Number one, have we raised egregious amounts of money, there's a number beyond which if we go that way to raising money, we're going to basically outrun our own capacity, meaning the best investment ideas we have will become smaller positions. We have to fill in the balance with very large liquid companies. And it's something wrong with very large liquid companies, except that they're not likely to have the returns you can get from special situations. So it's very, very important to be mindful of that. They are important to remain mindful of, and this relates to the tax question, it relates to it both in the client sense and our own capital sense. So look at our balance sheet and look at our deferred tax liability. Can you imagine if we had high turnover as opposed to low turnover, well we have paid those taxes. And the only way we can pay those taxes is by selling off assets. And when you sold off assets, they wouldn't have appreciated. So I didn't do it, but it's possible to calculate if we had the standard 100% plus total rate of the average manager I think it's fair to say -- well, I didn't calculate number of specificity, our capital position would be much, much lower than what it is. And therefore, if you accept that proposition, by extension because we're doing exactly what the clients do, where you could say phrased alternatively, the clients are getting what we're getting, meaning we're eating our own cooking, clients be in the same position. So how are they going to pay their taxes well, they would have to withdraw funds from us, they would have less money and further reduced by the fact that they have to withdraw money from the various investment products to pay the taxes. If you were to look at Horizon Kinetics in that dimension as a capital accumulation vehicle. You'd see in that scenario, a great diminution of return. So when we talk about the earnings, we -- record earnings, we didn't do ourselves justice because we're talking about the earnings as operating earnings. And they're very high. There are records, but there's also a return from our own capital or the accumulation of capital by just leaving it alone lending it grow. So they're really big earnings. And if we -- if it kept going on this rate, it could be very substantial and not very prolonged period of time. Is that something I want to leave you with, and I have one other thought, and now I'll turn it over to my colleague. We have some digital assets, which have done reasonably well in this fund. Later in Q&A, I'm sure people have questions about Bitcoin and digital assets in general. There is this sister company that we're trying to bring public called Consensus Mining that is important to us from the point of view of we intend to do in cryptocurrency. So it's on the verge, I'm told of being a listed company. And assuming we make it, I'm pretty sure we're going to make it, but there can be no guarantees in the future. I'll make more reference to it. So the mining business in crypto, is a great business, done properly. Done properly means you can't be mindful to create a very low-cost environment. That's been done. And you have to be a little creative in the way you go about mining. So in the world of cryptocurrency mining, shorter distance between 2 points is not necessarily a straight line. And hopefully, next time we do this call, I'll be able to enlight you much more about what we're doing there. I just want to let you know that, that's an interesting part of our strategy, and we're on the verge of doing something really unique, which is coming public and a lot of things are going to fall off next. So I'll just give you a highlight for the future. No guarantees are going to be successful, but it's looking good at the moment. And with that, those are the highlights. I'll turn it over to Mark Herndon who can give you more detailed information on the accounting and how we got to where we got, if you'd like to take it away, Mark.

Okay, sure. I'll do that. Some of the points that I'll go over will reiterate some of the points that you've made and I just -- again, I think it's important that for those of you on the phone hear in a couple of different ways so we can just hammer on the point and the differences between the past and where we're at now in terms of our reporting. And we've provided a lot of information since our last call. So as a short recap, we recently obviously released the Form 10-K. So that's the annual results. Prior to that, we released a press release that has those annual results as well as a comparison to our prior presentation as supplementary information. And then we also filed a [ 10-Q A ], which is -- reflects what we had previously reported for the third quarter of 2024 and reflected under the current basis so that you'll have that trend line to look at. Now importantly, our historical presentation was based on what -- I'll use the term adviser-only financial statements, so not kind of the legacy Horizon Kinetics. So during our year-end process, this first year end as a public company, we concluded that due to our role in ownership level and certain lease proprietary funds, that they should be consolidated into our financial statement presentation and then all of our applicable filings with SEC. And consistent with what we reported in February, you may remember, we filed an 8-K in February notifying shareholders of this circumstance. That presentation -- it is a presentational change, and that change did not impact the company's earnings that are available to HKHC shareholders or the shareholders' equity to HKHC shareholders. And when it did change was that we included the assets from those proprietary is that we consolidated in our balance sheet into a new line item. So you'll see a line item or several line items applicable specific to the funds on our balance sheet assets and liabilities. And then we also have a new line item called redeemable noncontrolling interest. So it's a bit of a technical term. But what that essentially represents is our clients' account balances that are, of course, supported by those assets in those funds. The other notable change that you'll see alluded to this earlier as well, is that the management fees charged to those consolidated investment products under GAAP or -- those revenues are eliminated for consolidation. So since that fund is presented within the context of that set of financial statements, it's akin to an intercompany transaction, which are normally eliminated. But however, the economic benefit related to those fees to the HKHC shareholders remains in our financial statements that economic benefit is reflected through a smaller allocation of the investment returns of those consolidated investment products to the redeemable noncontrolling interest. Smaller than what they would have otherwise received. And that's an important point and distinction. Outside of that complexity in the results of the quarter were we believe, as we indicated, favorable. We had revenues of $19 million for the quarter and $57 million for the annual period under the consolidation model, and as you can see in the supplementary schedules under the advisory-only model that is without the consolidation of the investment products adjustments where we have the annual revenues of $113 million. You may also notice the results of our consolidated entity were favorably impacted by the addition of the funds, which had approximately -- sorry, $860 million of investment returns. And of that $860 million of investment returns, about $702 million was allocated to our clients through that redeemable noncontrolling interest line. And so to reiterate the point again, the difference between those 2 values represents really 2 events that important to an HKHC shareholder that one is the incentive fees, their charge on those investment returns. And the second is around economic interest in those funds. And there's a table deep within the MD&A portion of the 10-K that will also outline that circumstance. And the other large event for the year, and Murray touched on this as well and it's an additional complexity in our financial statements relates to income taxes. And we disclosed this in our last call, where the financial statements reflected a cumulative adjustment for converting from a pass-through entity to a C corp in 2024, resulting in that approximately $60 million in deferred tax liability at the time as well as an expense at that time. This amount would only be realized upon selling of the underlying securities which is the tax efficiency point that Murray was talking about. Moving forward, you will see that deferred tax line item increase or decrease in an offsetting manner as those securities increase or decrease over time. But again, that's not a cash impact, that's an accounting convention to recognize that as potential taxes. The company only paid approximately $11 million in taxes in 2024 as compared to that $104 million of income tax expense, and that's due largely to this deferred income tax relationship. And then -- and that's it. I'll -- Murray turning it back over to you to see if we -- if I created any confusion there or if there is other point you'd like to address before we turn to Q&A.

No, I don't think it's -- there's an confusion here. So just to summarize it, then we'll go to Q&A in a minute or 2. So basically, what you have in Horizon, you have our record operating earnings. You just have to if you want to see them, you have to look at Page 37 and 38. And then apart from the operating earnings, you would say there are certain nonoperating earnings, which comes from a return on our own capital, which are even more substantial than earnings. So when you think of how much our net worth actually increased during the year, it's a very, very big number. So when you go back historically, and I like to do that, and you have no way of knowing this, but in 1994, when we started Horizon, we went back to November of 1994, we're about 30 years old, we started Horizon our total capital everything, including furniture and computers and everything with about $500,000. So now if you think of our own capital, which we're well in excess of $300 million and think about all -- you wouldn't have any way of knowing this, but we paid ourselves many dividends over the years. So if you want to look at it this way, in round number is roughly $500,000 ignoring dividends turned into well in excess, were $300 million. We like to perhaps we flatter ourselves. We'd like to say that we must be doing something right in the field of long-term investing. So hopefully, we're not merely flattering ourselves. There's some substance to our analysis. But with that point, I think now is a good time to go over to questions and answers, which would be delighted to provide you.

Yes. [Operator Instructions] One of the questions and we get this frequently that's come in already is addressing, and you mentioned this point earlier a little bit about raising money, but what have Horizon's plans to grow assets under management other than market appreciation? Can you discuss recent product launches or expected launches over the next year?

Yes, of course. So we have a number of things. We have a number of exchange trade funds. So in exchange trade funds, which didn't exist a couple of years ago, you can go to the exchange trade fund portion of the website, and you will observe over $1.1 billion there. I don't remember the exact number, but you can add it up. and you can see that. We are now in the process. We have -- we're launching yet 1 more ETF should be available about a month or 2, and that will be a Japan ETF. Just a word about why we're doing the ETF in Japan. We actually have some Japanese analysts done a really good job over years with us. In Japan, you could say is maybe the last of the Graham and Dodd markets that exist in the world. So if you're looking for a company in classical Graham and Dodd fashion that's trading for a discount to net current assets. The place to go is Japan to find it. Apart from that, there's some very interesting companies in Japan that have certain product offerings that don't exist anywhere else in the world. So that makes Japan intriguing as well. So hopefully in a month or so, that product will be up and running. The Consensus Mining, as I talked about, you may recall some years back, for those who were long-term followers of Horizon, we were first mining cryptocurrencies for ourselves, then we created some limited partnerships called Horizon Kinetics Cryptocurrency Mining LLC, I think they were called 1 and 2. Then we roll those up into a corporation, we raised some money, and we called it Consensus Mining. And I think in the public realm, there are roughly a dozen publicly traded cryptocurrency mining companies. And I suppose I'm very prejudice to ours. But I'm very, very interested in seeing the reaction in the public when ours gets listed. Incidentally, we're not raising any capital. We're just going to do a direct listing because I don't think we need any capital -- and -- but the shareholders will judge and that will expand our crypto currency product offerings. The center piece of our business is really high net worth individuals, taxable investors. And that can be through mutual funds. That can be through individual accounts, that can be through partnerships. We just spent some time talking about. And of late, that's getting a reasonably robust flow. So that's good. And those will be -- there'll be our primary offerings. We don't want to have too many products because too many products, we will basically dissipate our marketing efforts, and we'll end up helping no one. And we're finding some really interesting things to buy and you will see them reflected in those funds. We also have a private equity division, and can't talk about our name, but we recently raised some money on the order of roughly $25-ish million to invest in what some people call artificial intelligence and I would call high order of computation. I'm the only person who uses that term, by the way, including internal to Horizon. I personally think that's going to be a fund investment. The other private investments we have on exchanges. We have a variety of products to do that. We think we've developed an expertise in exchanges over the years. So I think that rounds out what the product offering is. As I said, we're not going to make a tremendous effort in the biggest capitalization stocks. We're going to find our areas of expertise. We're going to stick to our area expertise and to raise monies appropriate to what can be absorbed within those areas of expertise. So I hope that addresses the question.

Yes. Okay. Another point similar. I don't think we've talked much about the dividend yet today, but we did release recently just announced that the dividend with respect to the fourth quarter, has now been paid. We've gotten some feedback in the fourth quarter dividend was smaller than some people would have guessed. And given the amount of operating income for the quarter, particularly around the incentive fees. Can you just shed some light on -- or reiterate, I should say, the dividend policy and how you compare the dividend versus other investment opportunities for that capital?

Yes. Well, I alluded to this earlier. So we had a performance fee that was so big. We almost didn't have the money to pay the taxes. I just talked a minute ago about some of our private investments. It is within the realm of possibility that not distant future, some of the private investments might be monetized in one way or another. I can't promise that. If indeed, they were monetized at the price that I personally surmised, they might be monetized at we would have a very substantial tax build to pay because we have money in those instrumentalities. The problem is the investment will be monetized, but we might not have been in a position to be able to -- now there would be securities instead of private investments, we might not be in a position to be able to sell them because our shares might not be registered. So it's a wonderful scenario to contemplate, but contemplate the following scenario. That's why I alluded to earlier about we have to think through this question of the taxes. So the wonderful event has happened and the private asset is monetized, which case we have earned an enormously substantial, possibly egregiously substantial performance fee all well and good. And we now owe a very large amount of taxes. And we could be theoretically in a position that we can't pay the taxes because our securities are not registered. So we have to put ourselves in position to be able to pay those taxes if that eventuality would arise. So even though you might see that the dividend is not proportionate historically to what we've done in past quarters. That's the reason for it. So we're preparing for a worst-case scenario in a splendid circumstance. Nice problem to have, but we had -- we'd be irresponsible if we didn't prepare for that circumstance. So what you'll see is the next quarter, which is the quarter we just completed, you will see a dividend declared, and it will reflect our historical proportion of what our dividend is in relation to the income that we report. Hopefully, everything will work out splendidly, but we have to prepare for all sorts of eventuality. So I apologize, dividend isn't bigger, but that's the reason.

Okay. The next question we have relates to the operating leverage in the business model? And should we expect costs such as employee compensation to rise, assuming the AUM and revenue also rises? Or can we expect some other kind of operating leverage in the model?

Okay. So the offering is basically our base expense is employee commissions. And our highest margin business, of course, are the businesses that have the performance fees. If we collect the performance fees, we're obligated to pay commissions to people. So that's the relationship. It's pretty much fixed, except that the performance fee is big enough when 2 things happened. So we're only paying the performance fee on the client assets. There's our assets, we're paying no fees on that. So there's 2 aspects to leverage. There's the fees minus, of course, commissions we pay, the operating expenses daily, rent, electricity, those sorts of things, they are more or less unchanged whatever the asset level is. So the variability is the expenses that the biggest variance has to do with the performance fees. Second biggest variance has to do with the market value of the assets, so they go down, our employee expenses are going to go down as well. And then we have a really great year. We like to pay bonuses to people. So I think they're entitled to it. So they've done a good job. But apart from that, there is the other end of operating leverage, which is the return on our own capital, which one should not ignore. I realize no one puts a multiple on it. But as you can see from our shareholders equity, it's quite a substantial number. In addition to which, it plays its role not directly, but of course, indirectly in the money raising function. Because the first question one is asked when tries to raise money is how much money do you have in the product? And if it's a new product, how much money you prepared to invest. Now we have a lot of capital, and we're prepared to invest. So it makes a lot of things possible in terms of ordinary operating earnings that would not be possible were it not for the capital. So I hope that is a sufficiently expansive answer.

We had a similar question along with the concept of cost structure. So when you've asked just to compare the constructure to similarly sized asset manager right now, not specified which asset manager, but do you feel like we have a competitive cost structure compared to other asset management firms.

Do we have a competitive I think it's more than competitive. So I'll say a couple of reasons, but I'll let you be a judge. First reason, there's a senior management of which, I guess, I am the example. The first thing is competitive cost structure, see my salary and compare it to any other investment advisory firm that's publicly traded, which you can obtain information. I think I've got -- speaking personally, I think I've got the lowest cost structure because I think I make less money than any of them. That's number one. Then my senior executives compare their salaries to their comparable competitors and other firms. I think you'll reach the same conclusion. So the variation is, of course, the commissions, which you only get in success mode. So my philosophy is, I'd rather pay less money on a normalized basis and more money in success mode. So this way, our expense structure can decline. If we're not successful, it would decline naturally as more fluidity and flexibility in their cost structures. But at the end of the day, for any investment management company, the cost structure is people costs. So -- and the biggest cost, of course, to the senior people. So I'll let you be the judge of what I think -- what you think we merit in my personal case, I'm more than content to make the bulk of my return such as is through shares.

Okay. I'm going to switch gears just a little bit. I have two questions that have come around our, I'll call it, the ownership structure or affiliated organizations that are nearby Horizon, sometimes I'll use the term Horizon Universe. But specifically, the question is, what is the relationship between FRMO and Horizon HKHC and then as a follow-up to that, there's references to Winland, Consensus, FRMO, RCG and just -- is there the relationship between all of those companies in HKHC? And is there some opportunity to simplify structure and consolidate.

Okay. So let's just explain the various relationships is 1 you didn't mention, which I'll lead off with, which is roughly 44% of the shares of the Horizon Kinetics we're talking about now is owned by a private company called Horizon Common. So it does similar things to Horizon. As a matter of fact, it has its own capital account, which if you look at is it's similar. It's not exactly the same, but it's very similar to Horizon's capital account, and it have shown roughly 44% of shares of Horizon. So that said, you can think of that thing as controlling company. And then there's FRMO. FRMO, when we got to a certain point after 6 or 7 years of existence, we want to do some non-investment management-related activities. So to the extent that FRMO had some money, we created this company, and we put our own personal money into it. And to the extent we didn't have an idea for noninvestment management related activity, we just bought Horizon's products. So FRMO owns and you can see it in their financial statement, they own a variety of Horizon products. You'll see it disclosed, I think, pretty detailed fashion in the footnotes. And it's had basically the same investment experience with Horizon. So there's a lot of capital there, as you can see from their financial statements. We made the decision a number of years ago, where we want FRMO to focus on is cryptocurrency. So we did that before there was a consensus mining. So we bought a controlling interest in a publicly traded company, a very small company, a microcap company called Winland Electronics. And basically, Winland Electronics make sensors -- makes sensors from moisture. It makes sensors for humidity. It's not a very big business. It's not a very technologically complex business. It's sufficiently simple and not that many people want to do it, and therefore, it has one little niche and it makes a little money. We didn't want to disturb that, but we began doing some cryptocurrency activities in that. And if you follow FRMO, you would realize that FRMO has been increasing its investment in Winland. So right now, FRMO owns 40-ish percent of Winland. And you look very closely, you'll see FRMO is usually buying Winland shares in the open market through a 10b5 program. And at the moment, we're in a cooling off period. So you can't do a 10b5 forever. You have to have a term in state and you can renew it. But if you renew it, there's got to be a cooling off period and standard cooling off period is 30 days. In practice, it's a few more days. Why is it a few more days than 30 because you need to fill out the documents, and they're a little more complicated than meets the eye, so I think our cooling off period is 35 or 36 days. But in the event, I believe I may be off by a day. So forgive me, but I believe April 12 or 10b5. It's on file with the SEC. So I'm not telling you anything secret. Our 10b5 resumes, and we were buying more of Winland. So Winland is cryptocurrency mining company. We're doing some pretty creative things there and FRMO intends to develop itself into an operating company. On what basis do I say that? Again, I've said this many times in public, we get to over 50% Winland. If we ever get there, we would have to consolidate Winland and FRMO and that would make a FRMO in operating companies. That's Winland that FRMO. FRMO is going in the cryptocurrency direction. So I've covered Horizon Common. I've covered FRMO, I've covered in Winland. And now we have to cover Consensus Mining. So as I said earlier, Consensus Mining was really 2 partnerships. Horizon Kinetics Cryptocurrency Mining 1, Cryptocurrency Mining 2. The difference was, in 1 case, we held on to the cryptocurrency kept it further appreciation. In other cases, people just want the cash, and we just sold it and distributed the cash. And the idea was we're going to roll it up into a corporation and raise some money, which we did in a private stock transaction and basically bring it public. So that's on the verge of happening. So the route we went is rather than do another IPO, which we could have done. Basically, we want to have direct listing through FINRA and that requires a tremendous documentation. I believe we filed everything now there have been informed there -- nothing other than minor questions. It's an enormous electronic file. So it's not surprising. There are minor points that we noted. And in very, very short measure, hopefully, it's extremely short measure, maybe even in days. Consensus will be a publicly traded company. From the point of view of Horizon, Horizon Kinetics, this company we're talking about is managing the cryptocurrency business of Consensus. So you might wish to think about as a new dimension of asset management. So I wish I could tell you more, but it's not public yet, so I have to use some degree of discretion, but you see where this thing is going. So ultimately, the management of the cryptocurrency is a dimension of cryptocurrency mining. There are a lot of interesting things that can be done with cryptocurrency. I like to think we are ahead of the crowd. And looking at the publicly traded, I don't know if I want to call them competitors, but the publicly traded alternatives, of course, I'm biased and prejudiced, but I like what we're doing greatly and I think it's going to open up a whole new return vector for Horizon Kinetics shareholders. I think I've covered all the related companies with the sole exception of the RENN fund, so rent fund is a closed-end fund, and you might observe been buying a lot of shares of the RENN fund. It's a small closed-end fund. I think we -- I think I and funds that are affiliated with me personally on something like 11% through shares. I think it's over 11% through shares. We buy every day, you'll see SEC filings set degree, if you care to look and a lot of things you can do to close in, but you can raise capital via rights offerings we've done that a couple of times, still a closed-end fund. You could merge it with other funds. And it's another thing we might explore. So it may in the future have a more central role in what's happening in Horizon Kinetics. You may say, why is you are ready? Well, my answer to you would be last 12 months, look, what we've been doing. There is the Scott's Liquid Gold deal on Horizon. There is Consensus Mining. There is some ETFs that we got started we're just -- we only have so much bandwidth. So we have to prioritize certain activities. So I apologize that we didn't do things with RENN fund that we might otherwise have done, but I think that covers everything. So I hope it's a thorough answer for you.

Yes, and I'll vouch for it being a busy year as well. But looking forward to the next.

Yes, it was pretty good. I think we had our hands full. I think we had our hands full.

Absolutely. All right. So no call would be complete without the -- A question about TPL. This person's question is asking about the share count. Is it reasonable to assume that HKHC owns slightly more TPL than what's specified on the balance sheet? And I guess I would expand on this question and say we own probably a great deal more, right? I mean it's something to the magnitude of 58,000 shares at the HKHC level. But do you want to expand on -- I mean it's obviously held at a variety of other places that the company touches and manages.

Yes, of course. So I own some personally, their various funds that own some. They're controlled by us, meaning I personally have money, and other Horizon partners have money in the various funds. FRMO has money in the funds. Horizon common has money in the funds. So I believe there's an SEC filing that would show us -- that would show us on a look-through basis everything we own. I don't remember the number. There's also my personal SEC filings, if you're curious about that. They're out there. And I usually remember the number. I'm just -- I'm reluctant to quote it because I'll be off by 5 shares, and I don't want to give you any incorrect information. So you can look at my Form 4 filings, and they're usually up to date, 24 hours behind. So you can see. If you want to know the total number of shares we control, the documents to look at for Horizon would be the Form 13F. And if you're interested in me personally -- so the most expansive number you're going to get is from the 13F. I should say that. And if you're interested in me personally, there's a Form 4, and it's on the SEC website. I apologize for not quoting the number, but it's right there. You can see it. You can see how many shares I've got. And I think you'll agree, it's a big number.

For sure. For certain. And then along that line, and I'm sure you've addressed this in other forums before, but would you want to remind our group about the ongoing investment thesis of TPL? And I guess I'll add to that LandBridge or any other major position that kind of comes to mind there.

Sure. So basically, there are a couple of investment theses. So first of all, they get royalty income from the Permian Basin, which is, I think, the greatest geological structure in the United States in the point of view of hydrocarbons, maybe even the greatest geological structure in the world, although geologists debate that. But it's up there. And another benefit unlike -- but you might say, well, if you like oil so much, why don't you buy an oil company? A couple of answers to that. First of all, you have a lot of land. We'll come back to that in a second. It's 900,000 acres of land. Another thing is there's water. Don't forget. Those properties sit on top of the El Capitan reef. So in the modern world, 99% of drilling is fracked. You need water to frac. You need land to dispose of the water, what's called the produced water that comes up out of the ground when you do frac. One of the advantages of owning a royalty as opposed to just buying an oil company is you don't have any capital expenditures. You just get income, and you can dividend out the income. You can buy back shares. You can leave it in the bank. You can do all sorts of things with it. So I feel that's a better business just to illustrate the principle. What if you -- why does TPL trade at a higher P/E ratio than XYZ oil company? Well, truthfully, if you adjust properly, it doesn't. So I'm going to compare TPL now to a hypothetical oil company. It's just a composite of our typical oil company, the P/E and the earnings or whatever they are. And you will conclude, oh, the other oil company is so cheap. Why does this character just buy these other cheaper companies? Well, the reason is that in typical oil company, 70% of your earnings, although you own them, you just don't get them. They had to be reinvested in the business to keep the oil flowing. So what you really should do is if you took the P/E ratio of typical oil company, has a 30% dividend payout ratio and 70% is going back into their business, if you took the P/E, let's say the P/E were point -- let's say P/E were 12 and 30% of the earnings are actually being received by the shareholders, either through share buyback or dividend. Take that P/E. Let's make believe it's 12. Divide by 0.3. That's your real P/E ratio. And I think you'd see that give or take a minor point, that's your TPL earnings with one very, very salient difference, no going -- another difference. The first salient difference is TPL owns all those land. It has a value. So you can't value it 0. Now people can debate what the market value of land is, but it's not 0. So that land appreciates in the fullness of time. It is not the American accounting convention to mark land to market. So I'm just making up a number for illustrative purposes. But if they had $1 billion worth of land and land appreciated by 10% in a given year, that's a $100 million earnings, which, by the way, is not taxable. You're going to add that to the earnings. So if you believe the lands were $2 billion and the depreciation was 20%, or you can make a table and you can see what you want to do, you will see. It's not a very expensive stock at all, suitably adjusted in the manner I just described. And then also, very, very importantly, we're making a huge effort in this country and around the world in a field that everybody calls artificial intelligence and I by myself call high-order computation. In order to do that, you need lots of data centers. So if you're going to build lots of data centers, and big data centers, you need electric power. And people will debate, well, are we going to have natural gas power or are we going to have nuclear -- modular nuclear reactors or some people might even say we're going to have coal. And there's solar and there's wind. So let me just simplify the whole thing. You'll understand how important this is. Data center has to run 24/7 and the sun doesn't shine 24/7, obviously, and the wind doesn't blow 24/7. Although solar and wind can be constituent elements of it, you need something that works 24/7. That gives you 3 choices that people debate: natural gas, nuclear and coal. I think most people would put coal out, and it's between nuclear and natural gas. Well, you can debate all you want, but nuclear and natural gas, although you might think they're very different, they have one thing in common. What is the thing they have in common? They are both thermal power. What does that mean, thermal power? It means at the end of the day, whether it's nuclear or natural gas or even coal for that matter, you're boiling water. Your boiling water converts to steam. The steam is funneled through a turbine. As the blades of that turbine spin, that creates electric power. So the common denominator of all forms of thermal power is water. You need water. So the amount of electric power we're going to need to accomplish what we want to do in data centers is just -- it's unbelievable. It's mind blowing. It's just mind blowing. So it's not because we want a computer that's going to think like a human being. And it's certainly not because ChatGPT is going to do a lot of queries, even though they will do a lot of queries. That's not the reason. So what do we need high-order computation for? Well, very simply, 2 facts that no one is going to argue with, and then I'll explain. First fact is, I'm sure you're aware of this, 93% of all drugs -- just an example to illustrate why we need high-order computation. This is 1 of 100 examples I can give you. 93% of all drugs that go before the FDA never make it. They fail. Why did they fail? Now you know how much money it costs to bring a drug to the FDA. Billions of dollars and 93% fail. Not a great business model. Why did they fail? Because it's designed to treat an ailment, obviously. And in one person, they may actually do so successfully. And another person might have a reaction, and the reaction might even do more harm than good. So why does it happen? Because the disease, or least many of them, they're actually expressed at the molecular level. So in order to understand them, we need to understand them at the molecular level. So we now know enough about disease that -- why the people have certain horrific diseases. Because proteins are being improperly folded when they come in contact with amino acids or polypeptide chains. So we have to understand these reactions at the molecular level. We're talking about unbelievably huge numbers of molecules. So just for one human being because everybody has different body chemistry. If you want to understand the human being in a macular level, imagine how much data you have to load into a computer. And because these things are happening, what's called computationally irreducible sequences -- I'm going to explain what that means in a minute. Just remember, computationally irreducible. I'll get back to it in one second. You have to do trillions upon trillions upon trillions upon trillions of calculations in a microsecond. The microsecond is -- or maybe 2 microseconds. A microsecond is a millionth of a second. Why do you have to do it? Because there's trillions and trillions and trillions and trillions of molecules that are reacting with each other every microsecond. So what does computationally irreducible mean? It means that you can't model it in a way that's faster than it's actually happening. So in other words, if I want to send a spacecraft to Mars, it would obviously take years to get there. But I can devise a mathematical model. I can simulate it on a computer. And the computer, in the course of less than a minute, could show me the trajectory. In other words, I can reduce computationally the time it takes for the spacecraft to make its journey to Mars. I can reduce it computationally to a time that I can understand. But if the thing is happening in a microsecond or 2, I as a human being, I can't even comprehend, and nobody else can either, a microsecond. And it's not one reaction -- one molecular reaction in a microsecond. It's trillions upon trillions upon trillions of reactions -- molecular reactions within a microsecond or 2. So we can't reduce it in any meaningful way. We just have to compute it. So I could -- coming back to the Mars spacecraft example. I could -- I know the thrust of the engines. I know Kepler's laws. I know Newton's gravitational constant. I know the weight of the spacecraft. I know the inertia. I know the mass. I could give you a pretty good estimate of what trajectory is going to be and how long it's going to take to get there. I know the motion of Mars. And I know the gravitational attraction of sun to Mars. I can plot the position in a certain time of the year. I can do all that stuff. You can do a lot of stuff for molecules, too. You just have to have some unbelievable number of transactions. You need a lot of data. You need a lot of powerful computation. Not powerful in the sense you're doing something uniquely complex. Just powerful in the sense that you got to do a lot of it. You need enormous amount of electric power. We're now back to our friends, LandBridge, et al. You need a lot of water for that. So the basic rule of thumb is, in natural gas-fired plant, you need 5,000 gallons of water per megawatt hour. Now if you want to make it barrels, you can take 5,000 divided by 42. Let's just make -- let's make it easy because we're on the phone. Let's say you divide it -- you really should divide it by 42. Let's say 5,000 divided by 50. So make it even worse, 100 barrels per megawatt hour, okay? So what's a barrel? $0.50 a barrel. So at $50 a megawatt hour, how many hours in a day? 24. So now we're, what, $1,200 a day. But we have -- per megawatt hour, we're going to have gigawatts. So it's 1 gigawatt. That's 1,000 times what I just told you, $1,200. Now we're $1.2 million per 1 gigawatt a day. Times 365 days. You see how big that number is? But if you're going to have a 3, let's say, gigawatt data center, you need 2.5 to 3x the power because the power plants are going to be down for part of the time and the data center can never be down. Now start multiplying by those coefficients and just one data center campus. Now we're talking about the power plants, not data center itself. They're going need water, too. It takes some unbelievable number. You never get one of these things on your property. As a matter of fact, let's go a step further. You don't even need it on your property. It was just in the neighborhood of your property. As a matter of fact, it never ever, ever, ever is going to be on your property. It doesn't really matter because all it needs is water. It doesn't need your land. You could put it on your land. You'll make more money. We haven't even talked about a grand lease. We haven't talked about how much natural gas the thing is going to need. Do you see what a big deal this is? That's the investment thesis.

And to follow along with that, could you address Bitcoin -- as a follow-on to that as well as in relation to other crypto or digital assets, fit for the same concepts of investment thesis?

Yes, yes, sure. So the investment thesis of Bitcoin. So the first thing to understand is Bitcoin is a commodity, but it's commodity created by human beings. So the first thing we have to understand is how is Bitcoin different from a commodity created by human beings? So compare it to gold or soybeans or wheat, just to give you an idea. In principle, if I had enough land, I can make more soybeans. I can make more wheat. If the price of gold were high enough -- gold is $3,100 an ounce plus. What if gold were $5,000 an ounce? Well, at $5,000 an ounce, gold is there. It's just not economic extractable at $3,100 and change, but it's very profitable at $5,000 an ounce. So at $5,000 an ounce where we got there, there would be more gold. So the first distinction with Bitcoin you have to understand is there is over 19.8 million units existing today. In the year 2140, there's going to be 21 million units. That's it. It's not ever going to be any more. There's a scarcity factor in Bitcoin that you don't have in commodity. You might say, so what? Why can't they make 10 different versions of Bitcoin? Why can't they make 100 different coins? It's like a pet rock. What difference does it make? Well, it actually makes a lot of difference. So I can tell you, of the tens of thousands -- literally tens of thousands of cryptocurrencies. Obviously, I haven't read all their working papers. But I've had quite a few. And I can tell you right now that I've read some that are truly spectacularly brilliant. And as spectacularly brilliant as they are, they can be improved upon. And a lot of them are a lot better than Bitcoin. So it's the average person who would read that, they'd say, well, it's kind of like Google. Google is really great until somebody comes out with something that's better than Google. Maybe ChatGPT is better than Google, and we'll use that. But you'd be missing the point. The point is Bitcoin is not merely software. It is open-source software. What does that mean? That means that you, right now, if you had a mine tool, you can read every line of code in the Bitcoin protocol if you wanted to. And now you read it, if you had a better idea and you wanted to change it, you could change it and make it better. So the reason people trust Bitcoin is everything that's out there is open source. It can't be controlled by anybody because the great fear is that somebody is going to be able to control the money supply. So you want to create something that nobody could control. The only way to create that nobody would control it, you take away the incentive for somebody to control it. It has to be open source. So somebody came out with something better, which many people already have. They would have to make theirs open source. And nobody seems to want to be able to do that. They could do it. They just don't want to. And you can see why they don't want to. Because they work very hard on their work of genius. And indeed, it is a work of genius. But they don't want to give it away the world for free. That's quite understandable. And if you don't want to give it away for free, you're not beating Bitcoin. So you may say, okay, what if you found somebody who is sufficiently generous and they didn't want to give it away for free? Let's say they did. It's still not going to beat Bitcoin. Why is it not going to beat Bitcoin? Because the Bitcoin users, now having seen this for free, whatever features it had, it was improving in Bitcoin. They can add it to the Bitcoin protocol. And we go on as before. So without understanding open-source code, you can't understand the decentralized nature of it. Now there's one other little piece I have to add to this. I left out a lot of stuff that I could have put in. Actually, I'm going to put in 2 little pieces. I could put a lot of other stuff in, but I didn't do it. First thing is you have to have people to validate your transactions. So in Bitcoin, whatever coins are issued, it belongs to the people in the future who's going to validate the transactions. So naturally, the people who make a cryptocurrency on the day they make it, the coins are theirs because they don't really want to give away the coins to the great unknown massive validators, which in Bitcoin they call miners. But they're really validators. They want to keep it for themselves. Quite understandable. Quite reasonable. Quite human actually. But that's not going to get you anywhere in the world of crypto because why should anybody validate your system if you're going to keep the rewards. They need rewards. So you have to properly incentivize them, which means it cuts you out. So that's the first thing. And then one other thing you have to understand -- sorry for throwing all this detail at you. But -- and I could do a lot more, but you did ask, and I want to give a thorough answer. There's something called the halving. So what does that mean? That's H-A-L-V-I-N-G, meaning to cut in half. So every 4 years, the reward you get for validating transactions, which in Bitcoin they call mining, is cut in half. That's why they call it the halving. So think of it this way. Think of the coins that are mined. Think of those were wheat. They were a harvest. And let's say a given acre of land could produce 1,000 bushels a week. And then -- but after 4 years, land went partially exhausted, and that was the only piece of land in the entire plant that grow wheat. And we want wheat. So at the end of 4 years, you can only grow 500 bushels of wheat. And in 4 years after that, you can only grow 250 bushels of wheat. At the end of that, it can only grow 125 bushels of wheat and so on and so forth. What would be happening to the price of wheat? Well, the yield per acre, 1 acre you have is going down. So the price will go up. If that were engineered to happen, you would say that Bitcoin has been engineered to appreciate, and that's the way it was engineered. It's just wheat. You could never engineer it. But with currency, you could engineer it, and it was engineered to appreciate. And that rate of return was designed that way to make it sufficiently robust such that it would be a unique asset. It would have a much higher rate of return than a typical asset would have. And in the fullness of time, people will come to realize it, and that's what would build the user community of Bitcoin. Now bear in mind, you don't need the whole world to adopt Bitcoin. You only need enough people. It can be a very small portion of the world, and they're making a very robust rate of return. They don't need the mass of the population. The mass of population as far as the Bitcoin users are concerned, they can go on using their fiat currencies, and that's fine. But what's happening if they realize that people think of Bitcoin as if they were a security, they say -- how much is Bitcoin up today? How did it much appreciate is the wrong question because Bitcoin has not appreciated. Bitcoin has never appreciated, and Bitcoin will not appreciate. What's actually happening? The dollar is falling in relation to Bitcoin. So all you have to do is turn the chart upside down. So if on your typical media program, instead of announcing Bitcoin was up X percent today, they simply said, the dollar lost X percent of value in relation to Bitcoin. And since Bitcoin came out in '19 -- in 2009, the dollar has lost 99-plus percent vis-a-vis Bitcoin. Everybody in the planet would buy Bitcoin. They say, oh, my God, my dollar is losing its value in relation to Bitcoin. They don't understand what's happening because they think it's a stock and it's not. So I don't want to elaborate too much. I could say a lot more, but I hope I've touched on the salient points and gave you an idea of what the investment thesis is.

Yes. And I have a couple more around that concept of investing, if you can. And again, this is probably a question that you've heard before in other forums. And this person asking. He's asking this really in relation to Consensus and FRMO really, but it's similarly applicable to HKHC in that we have -- HKHC has a very small, tiny portion of Bitcoin mining. And if our belief is -- the premise of the question is if you believe Bitcoin is, their words, going up in value relative to other currencies. Why not buy more Bitcoin as opposed to mining, right? The mining operations that we have, either directly or indirectly, are again, in their words, relatively small. So why would we not just make additional financial investments into Bitcoin to accumulate?

I'm going to interpret the question in a certain way, which I hope is not incorrect, but I'm going to take the liberty of interpreting the question. I think what the question -- the sense of the question is, well, Consensus Mining has a certain amount of cash. So why don't we just leave the money in cash and Bitcoin is really appreciating relative to cash. We leave the cash around. Why don't we just invest the cash or at least most of the cash in Bitcoin when we have more money? And that is a problem, to do that. And there are 2 reasons: first, the minor reason and then the major reason. The minor reason. So we want to be in the mining business because it's cheaper to accumulate Bitcoin relative -- in mining than just go out and buy it. I want to do it. The problem if you throw your cash in is the halving. Now you understand what the halving is. So at the moment, we're about 1,110 days away from halving. I may be off a day or 2, but forgive me, it's something like that. It's a little bit less than 3 years. So if I went out and I bought a mining rig today, which I'm not doing, if I did that, it might not be profitable to mine Bitcoin. It might be obsolete 1,110 days from now. As a matter of fact, to be exact, if I bought today, it might take 45 days to get delivery. So we would be like, I don't know, 1,075 days or something, maybe even 1,065. I think it would be 1,065 days. So we won't get a return on investment. So I can't go out and buy the rig right now. Some might say, okay, why don't you go out and buy the coins and take the money and just be that? Because the trouble is this. Let's compare it to an ETF because we -- basically, if we would take Consensus Mining or Winland, we become an ETF. We take the money and we'd buy the coins. And it's okay, we're appreciating, but it will be a dilution, a serious dilution. Why? Because we're a C corp. So we're a C corp, then what's happening is we have to reserve for taxes. So Bitcoin really appreciates. We're not going to cash all the appreciation. We're going to pay the corporate tax. And depending on whatever the corporate tax is at the time, we got to pay that, and we have to reserve against it. So you not going to get all the appreciation. So your next question would be, now that you realize that will be the consequence, well, then why not turn it into a mutual fund? Even a closed-end fund, if you really want to hang on to your money, why not turn it into a closed-end fund and do that? So it can be an open-end fund or a closed-end fund, and you limit tax thing because mutual funds have an exemption from taxes at a corporation to have -- that's the Investment Company Act, gives you an exemption from paying federal income taxes and state income taxes, too. Well, that's all fine, except for the fact that even just to simplistically hold Bitcoin, there are costs to holding Bitcoin. You got to put it somewhere. And what would happen in the fullness of time is you exhausted your money. You spend it all on Bitcoin. Bitcoin is appreciating. But the only asset you have is Bitcoin. You're not getting any cash return. So every month that you have expenses, you have to sell a handful of Bitcoin to pay the expenses. And little by little, you wouldn't realize it. It's very different than a mutual fund. But little by little, you wouldn't realize it. You actually anticipate your Bitcoin holdings. And if you held it long enough, you're not going to have very much Bitcoin. So what you need to do is if you really want to have the optimal investment, you need to set up your portfolio in a way that number of Bitcoin per share, which is the critical variable, is rising. So if you made it into a mutual fund, so you put in a corporation, the number of Bitcoin you have per share because of taxes is going to be declining. That's not going to work over the long run. And then if you say, I eliminate the tax, that's a lot better. I'll turn it into some kind of fund, it's going to dissipate slower. And that's not going to be good. And to make it worse, you don't know what kind of regulations are. What are you going to do if it's a mutual fund and regulation is passed? Let's say it's an ETF. So you can keep your expenses really low if you keep your coins in cold storage. But then people want to trade the ETF. People like to trade Bitcoin, like to trade everything. So what are you going to do if the regulators make a law and they say 50% of your assets can't be kept in cold storage, have to be made available? Because people want to trade, meaning put money into the fund or take money out of the fund. It's a highly plausible scenario. It might happen. Well, you're much more vulnerable being hacked. Now you can guard against that by having enough insurance. So for a price, an insurance company will ensure you against that. But then you're really going to dissipate your Bitcoin. So all those things you think through, they are not viable long-term transactions. So to come back to what we do, you have 3 choices with Bitcoin. You can buy the Bitcoin, obviously. You can mine the Bitcoin, which is a lot cheaper. Or you can do a third thing. You can indirectly mine Bitcoin. So what is indirect mining? I'm going to leave it there because I got to talk about what Consensus Mining is doing, and I don't want to do it because I might inadvertently violate some law. It's not publicly traded yet, so I shouldn't talk about that. But there's a third thing you can do. And when we get to the point where Consensus Mining is publicly traded, I will give you a long and boring lecture on what indirect mining is. I personally think it's really cool. I believe we're really the only people doing it. And I hope you think it's pretty cool, too. But it's highly lucrative. I wish more people would do it, even though you might think I don't want people to copy me, but take my word for it. I'm not going to go into detail right now. If they try to copy us, it'd be a pretty good thing. So I'm going to leave it there. So I'm going to have to leave a little suspense for the day that we can talk more about. But I think you'll find the whole thing fascinating.

Yes. And another question on investment style and current -- slash current events here. How is our investment style positioned given the tariff and deficit reduction efforts of the current administration?

Insofar as the tariffs are concerned, fabulous. It almost couldn't be better. We didn't design it that way because it's the same portfolio we had before the tariffs came into place. The reason is, if you look at our portfolios, we don't own -- we don't own global multinational companies. So our companies, say what you will about them, they have their good side and their bad side. We don't import and we don't export for the most part. Now if you look close enough, you might find some tiny, little positions where that's not a truthful statement. There is some variance around that. But as a general legislation, it's absolutely true. So you consider our bigger holdings, they're not bringing anything into the country. They're not taking anything out of the country. They don't buy anything that needs to come to the country to make anything with that might stay in the country or go out of country. Just nonissue for our companies. So we didn't do that consciously. We didn't give a lot of thought to tariffs, that one day there might be tariffs. Never gave it a moment's thought. It just coincidentally, when the issue finally came to the fore and we looked at our portfolio, we just realized we don't have any material exposure. So we just didn't worry about it.

Okay. Another question has come in to kind of go back towards the performance specific to the company. Should -- what should they be expecting with respect to revenues in terms of the ratio of performance fees versus the ongoing management fees? And should that relationship to AUM stay fixed or should be increasing or decreasing over time?

Truthful answer is I don't know. And even if I sat down to try to do it and say X percent of our AUM is subject to performance fee and Y percent of our AUM is not, it wouldn't help to even calculate that number because the performance fee is not so much based on how many assets get a performance fee. It's based on what the performance is. If you have a small number of assets that have fabulous performance and get a performance fee, it can be a big number. So I don't know what the performance fee is going to be. I can just tell you that in planning, which I alluded to this before, we have to think through the problem. If we ended up accruing a performance fee that crystallized at year-end and if it happened in some of the private assets, which really might happen, we need some cash to pay the taxes. So even though we didn't collect anything yet, we accrued it. As far as our government is concerned, they want the money. So I don't know what the ratio is going to be. And that's what makes such a difficult problem. So I don't know the ratio. I also don't know the quantity. I have to plan for the circumstance that I have enough cash laying around to be able to pay any kind of conceivable tax and even a big one. So I think you can look at 2024 Horizon Kinetics earnings in a very different light. Yes, it was the record earnings. That's great. But I think the checks that we paid to the government, they're the record checks we ever paid. We never had expenses that were that big. There's nothing we can do about it. That's the law. We have to pay it. But -- and it's possible it might happen again or even be bigger. So I don't know what the ratio is going to be. I hope we have -- it's a problem. I hope -- it's a very nice problem, and I will be delighted if it happens again. And all I can do is, at the end of the quarter, when we have a number, we can look at it in retrospect, I will certainly report what the number is. But prospectively, just don't know.

Yes. I'm going to add just a little bit, if I can. I would suggest that our cost structure is within the normal or sort of kind of ongoing management fees, right? The management fees we get just from normal operations, sort of that lower base fee is an amount, right? And the cost structure is generally close to that amount. And then the performance fees are, by their very nature, going to be more variable from year-to-year. And then if you think about it from a quarter-to-quarter basis, I just want to make sure that our investors realize that you're not going to see that -- you're not going to see much dramatics on a Q1, Q2, Q3 basis because there's -- most of them have -- from a revenue reporting perspective, the revenue for the -- or the calculation of incentive fees, we can calculate it every quarter. And we disclose it, of what the unearned amount is every quarter, but it's not recorded as revenue until that contingency is resolved, right, because it's based on the performance of the underlying investments. And we'll have a circumstance at the end of the year where that gets finalized and resolved. And you can calculate how much the performance fee is for that particular calendar year. So it will continue to be a fourth quarter event, and I would expect it to continue to be variable based on the results that we achieve. I think we are coming -- I just want to just check one more time to see if we have any other questions in the chat. I think we are running about out of questions. Let me have a quick scan. I think we have covered all the topics that have been presented to us. If I didn't hit your questions, I apologize. And certainly give me a call, and we can talk about them separately. But Murray, did you have any other closing remarks that you want to make before we wrap it up?

Yes. Let me just say this. Obviously, we're going to reprise this in 90 days, and we're actually less 90 days because our first quarter is almost finished. So we can get the quarterly earnings faster. So we're going to be back to you in less than 90 days, consume less 90 days with the first quarter results. And I, of course, will answer any questions. Now you'll be able to read document a little easier. Document will look more like the historical document because, as Mark alluded to, we are calculating the uncrystallized performance fee quarterly. But we're not booking it as revenue, even unearned revenue. It's just a number that we compute internally. So we'll see how that goes. And we will see, so to speak, our nonperformance fee profits. So what you'll see in this case is the expenses will be commensurate with the revenues we get. It will look much more normal to you. And after the conclusion of this call, if you -- there's always a situation where you think I should have asked the following question, but you didn't ask that question. Don't worry about it. Just send us a note or give us a call. We will get to you and answer your question. You don't have to wait until the next conference call. And in any event, I look forward to doing this again. I thought the questions were really fabulous. And thanks for all the support. And with that, I'll just say good afternoon and see you shortly and talk to you shortly in the next call. Thanks so much.