Galaxy Digital Announces Fourth Quarter and Full Year 2018 Financial Results and Provides Corporate Updates
NEW YORK, April 29, 2019 /CNW/ - Galaxy Digital Holdings Ltd. (TSXV: GLXY; Frankfurt: 7LX) ("Galaxy Digital", "GDH Ltd.", or the "Company"), today released both Galaxy Digital Holdings LP's ("GDH LP" or the "Partnership") and GDH Ltd.'s financial results for the fourth quarter ("Q4 2018" or "the fourth quarter") and full year ("FY 2018" or "2018 year-end") ended December 31, 2018, as well as the Partnership's corporate updates through the date of this press release.
GDH Ltd. is a holding company which holds a minority interest in GDH LP as its only material asset. GDH LP is a diversified, multi-service merchant bank dedicated to the digital assets and blockchain technology industry. The financial results of GDH LP have been prepared and are shown separately, as GDH LP is not deemed to control GDH Ltd. as of December 31, 2018.
"While 2018 was a challenging year for the industry, I am pleased with the ways in which our team navigated difficult market dynamics, and believe we are well positioned to scale our business strategically over time. We have used our capitalized position to both identify and invest in a number of unique opportunities, while also continuing to build an institutional-quality platform," said Michael Novogratz, CEO of Galaxy Digital. "The first few months of 2019 have yielded a notable increase in activity across our business lines. We are already benefiting from both the strong foundation we laid in 2018 as well as the year-to-date rally in digital asset markets. We expect to continue to build upon this positive momentum through the remainder of 2019 and beyond."
Corporate Highlights
- Principal Investments
-- During the fourth quarter, the Partnership's principal investments team
("GDPI") executed on eight new investments and three add-on investments,
representing $19.7 million and $4.5 million of invested capital,
respectively. These investments included:
-- Six new and one add-on equity investments, including:
-- BitGo Holdings, Inc., a security, compliance, and custodial services
company ($7.5 million);
-- Bakkt Holdings, LLC, a company which is building an open, seamless
global network to enable customers and institutions to buy, sell,
store, and spend digital assets ($5.0 million);
-- Mercantile Global Holdings, Inc., a trading and banking platform to
enable customers to trade, bank, and administer digital assets ($4.0
million);
-- Galaxy EOS VC Fund, LP, a Galaxy Digital Capital Management ("GDCM")
managed fund ($2.4 million);
-- Clause, Inc., a software company building the infrastructure for
smart connected and computable legal contracts ($1.5 million);
-- Spring Labs, which is building a decentralized network for financial
institutions focused on identity and credit data ($0.5 million); and
-- Bison Trails Co., a staking and infrastructure services company for
the digital assets market ($0.2 million).
-- Two new and one add-on convertible notes; borrowers included a
distributed digital assets data library which serves as an investor
portal and directory for digital assets, a digital asset-secured
consumer lending platform, and a company which provides network
resources to applications ($1.2 million in total).
-- An additional $2.0 million of eligible loans were purchased from a
digital asset-secured consumer lending platform.
-- In aggregate, GDPI deployed approximately $132.9 million represented by
25 new investments and 10 add-on investments for the full year 2018.
- Asset Management
-- Since the start of 2019, Galaxy Digital Capital Management ("GDCM") has
been capitalizing on the improvement in the digital asset markets,
generating inflows into the Galaxy Benchmark Crypto Index Fund ("the
GBCIF") and making meaningful progress towards future commitments. The
GBCIF is a passively managed index fund which tracks the Bloomberg
Galaxy Crypto Index ("the BGCI"), an index co-branded and administered
by Bloomberg which is designed to track the performance of the largest,
most liquid portion of the digital asset market. Since the start of the
year, the BGCI has returned 18.8%(1).
-- During the fourth quarter, the Galaxy EOS VC Fund, LP closed on
investments in Bloq, Inc., Varius Solutions, Inc., GoQii, Inc.,
Mythical, Inc., Clause, Inc., Good Money Group, Inc., and Freelance
Labs, Inc., with additional investments made in early 2019 in Lucid
Sight, Inc., OutThere Labs, Digital Assets Data, Inc., and Ciphertrace,
Inc.
-- These investments collectively represent more than $50 million
invested into the EOS ecosystem since the inception of the Galaxy
EOS VC Fund in June 2018, with additional investments anticipated
for 2019.
- Trading
-- The Partnership's trading business ("GDT") continued to build upon its
full-service platform offering, providing clients with access to
intelligent and bespoke trading solutions, market insights, and
research.
-- During the fourth quarter, GDT nearly doubled the number of onboarded
counterparties from the quarter prior. These new counterparties include
a diverse and strategic group of the largest crypto funds, venture
capital funds, digital asset mining companies, blockchain companies,
family offices, and high net worth individuals.
-- During the first quarter of 2019, GDT expanded its product offerings to
include borrowing and lending to a select group of clients.
-- GDH LP currently has no exposure to Bitfinex or Tether.
- Advisory
-- During the fourth quarter, the Partnership's advisory business, Galaxy
Digital Advisors ("GDA"), repositioned its focus from token and
blockchain consulting to instead focus on institutional-quality advisory
services. GDA helps companies raise capital to strengthen and grow their
businesses and assists clients in managing their asset and liability
exposures and their capital. GDA will focus on developing and
maintaining long-term relationships with a diverse and global group of
corporate and institutional clients.
-- In early 2019, GDA selectively hired new bankers and implemented a
comprehensive coverage plan for companies in the space. As of the first
quarter end of 2019, GDA has made significant progress, with several
active mandates for clients across financing, mergers and acquisitions,
and other strategic matters.
_____________________________
(1) Data as of April 26, 2019. Source: Bloomberg
Select GDH LP's Financial Highlights (Q4 2018 and FY 2018)
-- As of December 31, 2018, digital assets and investments totaled $249.1
million, a decrease from $323.0 million as of September 30, 2018. The
$73.9 million decrease for Q4 2018 was primarily a result of $48.7
million of net realized losses on digital assets and $25.0 million of
unrealized loss on investments.
-- Partners' capital decreased $78.3 million to $301.5 million as of
December 31, 2018, primarily due to the $97.0 million net comprehensive
loss, partially offset by $17.0 million of equity-based compensation
(which does not have a net effect on equity due to the accounting
treatment for equity-based compensation).
-- As of December 31, 2018, the Partnership's net book value per unit(2)
was approximately C$1.46 (US$1.07).
-- The net comprehensive loss for the year was $272.7 million due primarily
to net realized and unrealized loss on digital assets of $101.4 million
and $75.5 million respectively and operating expenses of $88.4 million.
The primary drivers of the operating expenses were $31.3 million of
equity-based compensation and $26.9 million of compensation and
compensation related expense.
__________________________
(2) Net book value per unit is calculated as GDH LP's
partners' capital divided by the outstanding number of
units as of December 31, 2018.
GDH LP's 2018 Financial Results
December 31, December 31,
2018 2017
Assets
Current assets
Cash $
66,488,012 $
32,098,217
Digital assets 69,765,339 22,650,240
Investments 179,365,696
Receivable for
digital asset
trades 8,579,058
Receivables 1,238,694
Prepaid expenses
and other assets 2,002,880
Loans receivable 2,369,024
329,808,703 54,748,457
Loans receivable 15,892,320
Property and
equipment 4,223,252
20,115,572
Total assets $
349,924,275 $
54,748,457
Liabilities
Current
liabilities
Accounts payable
and accrued
liabilities $
14,558,914 $
1,011,795
Payable for
digital asset
trades 9,832,737
Digital assets
sold short 18,666,957
Due to related
party 1,177,498 42,650,240
Due to exchange 9,344,613
Total liabilities 44,236,106 53,006,648
Equity
Partners' capital 301,520,591 1,741,809
Non-controlling
interest 4,167,578
Total equity 305,688,169 1,741,809
Total liabilities
and equity $
349,924,275 $
54,748,457
For the period from
formation on
Year
November 30, 2017
ended
to
December 31, 2018
December 31, 2017
Income (Loss)
Advisory and management
fees $4,192,808
$ -
Net realized gain (loss)
on digital assets (101,394,823) 1,495,597
Interest income 1,361,203
Other Income 1,085,092
(94,755,720) 1,495,597
Operating expenses
Equity based compensation 31,281,892
Compensation and
compensation related 26,875,317 815,000
General and
administrative 11,777,456 277,947
Professional fees 11,391,527
Interest 4,798,337 135,962
Insurance 2,188,081
Director fees 50,000
(88,362,610) (1,228,909)
Net unrealized gain
(loss) on digital assets (75,494,453) 1,475,121
Net unrealized loss on
investments (8,459,854)
Unrealized foreign
currency gain 35,196
Realized foreign currency
gain 612,407
Goodwill impairment (6,216,914)
(89,523,618) 1,475,121
Income (loss) for the
period $(272,641,948) $1,741,809
Income (loss) attributed
to:
Unit holders of the
Partnership (267,930,435) 1,741,809
Non-controlling interest (4,711,513)
$(272,641,948) $(1,741,809)
Other comprehensive loss
Foreign currency
translation adjustment (35,766)
Comprehensive income
(loss) for the period $(272,677,714) $1,741,809
Comprehensive income
(loss) attributed to:
Unit holders of the
Partnership (267,966,201) 1,741,809
Non-controlling interest (4,711,513)
$(272,677,714) 1,741,809
Income and expenses by each reportable segment of GDH LP for the three months ended December 31, 2018 are as follows:
Principal
Asset Advisory Corporate
Trading Investing
Management Services and Other
Totals
Income
Advisory and management fees
$
$ $
1,344,705 $
41,593
$ $
1,386,298
Net realized loss on digital assets (10,071,594) (38,589,882) (48,661,476)
Interest Income 24,140 662,202 27,554 838 714,734
Other Income 803,345 88,831 (12,743) 879,433
(9,244,109) (37,838,849) 1,331,962 69,147 838 (45,681,011)
Operating expenses
Equity based compensation 5,174,613 2,651,917 3,235,635 2,224,673 3,683,970 16,970,808
Compensation and compensation related 1,873,961 760,028 2,118,634 1,026,418 1,948,997 7,728,038
General and administrative 1,762,060 1,134,464 1,189,086 409,036 1,648,292 6,142,938
Professional fees 421,129 404,316 (16,560) (49,595) 1,240,636 1,999,926
Interest 14,345 489,323 503,668
Insurance 435,616 435,616
Director fees 25,000 25,000
9,246,108 5,440,048 6,526,795 3,610,532 8,982,511 33,805,994
Net unrealized gain (loss) on digital assets 11,708,464 (3,845,617) 7,862,847
Net unrealized (loss) on investments (25,004,873) (25,004,873)
Unrealized foreign currency gain (loss) (75,715) 18,846 (56,869)
Realized foreign currency (loss) (280,428) (552) (280,980)
11,352,321 (28,850,490) 18,846 (552) (17,479,875)
Net (loss) $
(7,137,896) $
(72,129,387) $
(5,194,832) $
(3,522,539) $
(8,982,225) $
(96,966,879)
* Above table represents the
three months ended December 31,
2018. These amounts can also
be derived by subtracting the
nine months ended September 30,
2018 from the year ended
December 31, 2018, with the
exception of certain figures
relating to the macro-trading
of the Partnership's digital
assets which were reclassified
from the Trading segment to the
Principal Investing segment.
Assets by each reportable segment of GDH LP as of December 31, 2018 are as follows:
Principal
Asset Advisory Corporate
Trading Investing
Management Services and Other
Totals
Assets
Cash $35,887,352 $19,064,478 $1,782,993 $349,155 $9,404,034 $66,488,012
Digital assets 20,920,345 48,844,994 69,765,339
Investments 179,365,696 179,365,696
Receivables for digital asset trades 8,579,058 8,579,058
Receivables 19,950 222,855 641,255 129,466 225,168 1,238,694
Prepaids and other assets 109,756 137,871 3,629 227,988 1,523,636 2,002,880
Loans receivable 2,203,828 165,196 2,369,024
$65,516,461 $249,839,722 $2,427,877 $871,805 $11,152,838 $329,808,703
Loans receivable 15,693,341 198,979 15,892,320
Property and equipment 4,200 10,856 4,208,196 4,223,252
4,200 15,693,341 209,835 4,208,196 20,115,572
$65,520,661 $265,533,063 $2,427,877 $1,081,640 $15,361,034 $349,924,275
Select statement of financial position information
The fair value of each asset class by reporting segment of GDH LP as of December 31, 2018 is as follows:
Principal
Asset Corporate
Trading Investing
Management Advisory and Other
Totals
Digital assets:
Cryptocurrency $20,920,345 $48,844,994
$ -
$ -
$ - $69,765,339
Investments:
Pre-ICO 3,444,204 3,444,204
Convertible Notes 1,250,000 1,250,000
Preferred Stock 59,586,719 59,586,719
Common Stock 80,483,775 80,483,775
LP/LLC Interests 33,248,472 33,248,472
Warrants/Trust Units 1,352,526 1,352,526
$20,920,345 $228,210,690
$ -
$ -
$ - $249,131,035
This press release should be read in conjunction with (i) GDH LP's Management Discussion and Analysis and Consolidated Financial Statements for the year ended December 31, 2018 and (ii) GDH Ltd.'s Management Discussion and Analysis and Consolidated Financial Statements for the year ended December 31, 2018 (together, the "Consolidated Financial Statements" and "MD&As"), which have been filed on SEDAR at www.sedar.com.
About GDH Ltd. and GDH LP (Galaxy Digital)
Galaxy Digital Holdings Ltd. is a holding company whose only significant asset is a minority investment in GDH LP. GDH LP is a diversified, multi-service merchant bank dedicated to the digital assets and blockchain technology industry. GDH LP's multi-disciplinary team has extensive experience spanning investing, portfolio management, capital markets, operations, and blockchain technology. GDH LP currently operates four distinct business lines, which include: Trading, Asset Management, Principal Investing and Advisory Services. The CEO of the general partner of GDH LP is Michael Novogratz. The Partnership is headquartered in New York City, with offices in London, Tokyo, Hong Kong, the Cayman Islands (registered office) and New Jersey. Additional information about GDH LP's businesses and products is available on www.galaxydigital.io.
Disclaimers and Additional Information
The TSXV has neither approved nor disapproved the contents of this press release. Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release. The Ontario Securities Commission has not passed upon the merits of the disclosure record of Galaxy Digital.
Forward-Looking Statements
Certain information in this press release, including, but not limited to, statements regarding the future of the industry and our results, business or opportunities, may constitute forward looking information (collectively, forward-looking statements), which can be identified by the use of terms such as "may," "will," "should," "expect," "anticipate," "project," "estimate," "intend," "continue" or "believe" (or the negatives) or other similar variations. Because of various risks and uncertainties, including those referenced below, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. Forward-looking statements are not guarantees of future performance, accordingly, you should not to put undue reliance on forward-looking statements. Information identifying assumptions, risks and uncertainties relating to Galaxy Digital is contained in Galaxy Digital's filings with the Canadian securities regulators available at www.sedar.com. These risks include those discussed in the risks and uncertainties section in the MD&As filed concurrently with this release. The forward-looking statements in this press release are applicable only as of the date of this release or as of the date specified in the relevant forward-looking statement.
SOURCE Galaxy Digital Holdings Ltd.
