Defi Technologies, Inc. Q3 FY2025 Earnings Call

Hey, everyone. Thanks for joining. Let's give a few moments for the rest of the folks to filter in. We'll wait until 9:01 to get started. In the meantime, I'll remind everyone that this call is being recorded, and there will be some forward-looking statements. This is not investment advice. We'll start the call with an overview of our Q3 financials from Paul Bozoki. Then, we will hear from our current CEO, Olivier Roussy Newton, followed by a statement from Johan Wattenstrom, our incoming CEO; and then some updates on current growth initiatives from our President, Andrew Forson. Let's give everybody about another 30 seconds, and then I'll hand it over to Paul. The Q&A will also be open, so after the presentations and comments, we'll go through questions from retail before bringing in our analysts to ask questions and then wrap up the call. Joining us today, as you can see on the screen, my name is Curtis Schlaufman, VP of Marketing and Comms. We have our current CEO, Olivier Roussy Newton; incoming CEO, Johan Wattenstrom; CFO, Paul Bozoki; and President, Andrew Forson. With that, I'll hand it over to Paul for an overview of the quarterly financials.

Thank you, Curtis. Good afternoon, everybody. Starting with an overview of our AUM. DeFi closed September 30 with AUM of USD 989.1 million. Q3 average AUM increased to $950.7 million from $760.2 million in Q2 and $789 million in Q1 due to crypto price movements and positive cash flows into our ETP products. Q3 saw $38.8 million cash flow into our ETP products, bringing our year-to-date positive cash flows to $116.2 million. Moving on to revenues. Our Q3 revenue was $22.5 million and brought our cumulative IFRS revenues for the 9 months ended September 30 to $80 million. Q3 effective staking and lending income yield was 3.1% on the $950.7 million average AUM, a reduction from the 3.6% realized during Q2. The 0.5% absolute term reduction is due to lower protocol rewards realized in the quarter. We staked approximately 58% of our AUM at the end of Q3. We adapt our staking percentage of our AUM in sync with market conditions and internal risk management policies to ensure we can meet ETP commitments on a timely basis. Our Q3 effective management fee yield was 1.2%, up slightly from the 1.1% realized in Q2 due to additional new management fee-bearing products. Reminding our investors, we don't charge management fees on Bitcoin and Ethereum products. We closed Q3 with 99 products and reached our 100-product goal during October 2025. Moving on to our revenue bridge from our guidance. The company previously disclosed revenue guidance of $218.6 million. This consisted of $116.6 million of core revenues and $102 million of DeFi Alpha-related revenues. DeFi Alpha opportunities have been delayed from the forecast due to the proliferation of digital asset treasury companies and the consolidation in digital asset price movements in the latter half of 2025, thereby delaying arbitrage opportunities and compressing available arbitrage profits. Furthermore, given the unpredictable nature of DeFi Alpha transaction revenues, we understand most analysts were not factoring these revenues into their financial and valuation models. As such, we reiterate our core forecast of $116.6 million revenue for 2025 and guide that the $102 million of DeFi Alpha-related revenues will be deferred over a longer period. We believe the core revenue forecast of $116.6 million will be achievable if cryptocurrency prices post a modest rally into year-end from current levels. Given Bitcoin is currently in a material supply distribution phase and the price is still holding in and around $100,000, plus or minus a few percent, with the increasing institutional and retail participation in cryptocurrencies, we are bullish for cryptocurrency prices in the coming months. We believe DeFi's strong balance sheet, bolstered by the recent $100 million equity financing and our relationships will allow the company to source attractive arbitrage opportunities, which others cannot. Moving on to our operating income. Q3 operating income came in at $9 million and $32.6 million for the 9 months ended September 30, reflecting our strong focus on profitability. Q3 IFRS net income after tax came in at $3.9 million and $33.8 million for the 9 months ended September 30. In terms of our crypto investments, our venture portfolio now consists of 12 private investments with our largest being our 5% stake in AMINA Bank that makes up 83% of our portfolio's fair value. AMINA Bank continues to perform exceptionally well, growing its AUM quarter-over-quarter and year-over-year to approximately CHF 3.5 billion at this time. We also made three new investments during the third quarter being TenX Protocols, Canada Stablecorp and Continental Stable Coin. Lastly, about the $100 million equity raise, the $100 million equity raise in September of 2025 will assist the company to increase its staking back to the 70%-plus target by providing more capital to facilitate ETP market-making on a larger AUM base, provide working capital for DeFi Alpha trades and support our other revenue and AUM growth initiatives. The company is also always on the lookout for accretive M&A opportunities. As of September 30, the company had $119.5 million of cash on hand, treasury crypto holdings of $46.2 million for a combined total of $165.7 million. Management is confident that this capital will support future growth and also provide downside protection in the event of market turbulence. Thank you. Handing it over to Olivier.

Thanks, Paul, and welcome, and happy to have everyone who's joined us on this call. Q3 2025 was another exceptional quarter of execution and consistent profitability. We delivered revenues of $22.5 million and operating income of $9 million, marking our third consecutive profitable quarter this year. I think this really reflects the scalability and resilience of our model through macro headwinds that we've experienced throughout the last ten months or so. Valour continued to be a major driver of performance, achieving net inflows every month year-to-date and delivering $38.8 million of inflows during the quarter and $116.2 million year-to-date. Importantly, Q3 marked our highest average AUM on record over USD 900 million per month. And all of the aforementioned figures are also in U.S. dollars, just for the record. Ending the quarter at $989.1 million. I mean, in terms of Valour's trajectory, it's quite clear. As AUM compounds, reoccurring revenue scales. With continued product launches and internal expansion, Valour remains at the center of our long-term growth strategy. On to our other exciting acquisition that we made about 1.5 to 2 years ago. Stillman Digital continues to see exceptional trading volume and produced $2.2 million in trading commissions in Q3, continuing to strengthen its position in institutional trading. They recently integrated into the Talos network, which is an FX and stablecoin capabilities network that deepens our liquidity, provisioning, and exposure. And senior hires have been made to exponentially drive higher volumes and improve execution. Stillman's steady growth and high-margin model further enhance our profitability, and we expect a lot more going forward as that business grows. We remain exceptionally well capitalized with just under $120 million in cash and $46.2 million in digital assets for a combined $165.7 million on our balance sheet as of September 30. This financial strength enables us to fund growth, maintain flexibility, and return value to shareholders. During this quarter, we also repurchased just under 1 million shares for $2.44 million. Our NCIB buyback, share back program is still in place, and I think we will continue to execute that moving forward with the larger cash position that we have, something that Paul reflected on. But in terms of a company, Valour specifically, as well as DeFi having never done an institutional capital raise, the ratio to our AUM, I felt was a bit on the lower side of things. I think we kind of timed our financing well. And it gives us a lot of further capabilities to do buybacks, acquisitions and other strategic initiatives. While we've adjusted 2025 revenue guidance to $116.6 million as DeFi Alpha opportunities have been delayed due to the proliferation of digital asset treasury companies and the consolidation in digital asset price movement in the latter half of 2025. The underlying business remains strong, diversified, and profitable. Our asset management, trading, and research divisions are all contributing to a foundation that compounds cash flow and shareholder value. Valour's record AUM levels demonstrate sustained investor demand for regulated digital asset exposure. Stillman's institutional footprint continues to expand, and our balance sheet gives us the strength to capitalize on opportunities across all lines of business. We are executing, scaling and delivering profitability quarter after quarter. Our model works, our platform is compounding, and our focus remains on long-term sustainable growth. As we look forward, I want to take a moment to announce my resignation as CEO. After three transformative years as CEO and Chairman, I've made the decision to step down. This has been one of the most rewarding chapters of my career, not without its ups and downs as we've seen across crypto cycles. I'm extremely proud of what our team has achieved together. We've scaled and institutionalized Valour's ETP platform, strengthened our capital base, executed strategic M&A, and delivered record financial results. And obviously, came out of a mountain of debt that we did so by focusing on revenue generation without the need for diluting shareholders. I'm deeply grateful for the support of the employees, partners, investors throughout the journey. Johan Wattenstrom, who I consider a dear friend, has been by my side since day one, we've been through ups and downs together, and will step in as CEO and Executive Chairman. Johan's leadership, discipline, and deep understanding of our business make him the right person to guide DeFi Technologies into the next phase of growth. Thank you all for your continued trust and support. I could not be prouder of what we've built and even more excited for what lies ahead. I'm not going anywhere. I continue to remain a significant shareholder, partner, and an advisor day-to-day. Hopefully, I won't annoy anyone too much with my pestering. My focus will go towards BTQ Technologies, which has been a 13-plus-year endeavor. I think we're at a critical juncture for digital assets being protected by quantum security, which is a real risk for the entire industry along with businesses such as Valour. DeFi will have working relationships and joint ventures going forward as well. That's it from my side. I'll pass it on to Johan.

Right. I'll start to comment a bit on use of funds, DeFi Alpha monetization rates. But first of all, I also want to thank Olivier for everything so far, and we will have continued great cooperation going forward as well. I'm super excited to take the CEO role in a time where we have never had a better infrastructure, a more solid balance sheet, and more potential on the upside than we have right now. As we've seen in the last quarter, we had the highest average AUM we've ever had; we have a stronger balance sheet than we ever had, and we're making weekly progress on all our core areas and also expansions beyond that. On the use of funds, DeFi Alpha monetization rates, they are quite intertwined. One first comment would be on the monetization rate, where we had a temporary dip during the end of Q2 and during Q3 due to the launch of numerous products. We expanded market-making efforts significantly and need more operational capital in those businesses. However, we've worked to build the infrastructure and the potential monetization rate to be of much higher potential. I would say that for this quarter and starting next week, we'll be able to deploy all the AUM to generate yield for the company. I believe that our annual ongoing monetization rates from in a week or two will be higher than they've ever been historically. This improvement is largely thanks to the capital raise we executed, which greatly supports more efficient handling of market-making, the flows, and the capital we need to deploy to operate at the most optimal level. This also applies to DeFi Alpha, which opens up new opportunities. We had hoped to execute more on the DeFi Alpha side now. None of the opportunities on our pipeline have disappeared; they still remain. Some are dependent on specific project levels. We're optimistic about executing on these and more in the coming 6 to 12 months and remain very positive about this line of our business. It's worth noting the market timing has shifted, and we believe we will see new demand in regions like France, which has been difficult to penetrate before. We're also seeing the start of increased institutional participation in Europe, influenced by what's happening in the U.S. this year. This will trigger a significant expansion in our addressable market. In terms of use of funds, we've communicated before that some will go to optimizing our treasury, DeFi Alpha and market-making businesses, providing liquidity for our products and facilitating new deals. We also have our UCITS funds coming up with actively managed certificates that we hope to execute on before year-end. As soon as they're ready, we'll obviously PR on those. Part of this involves putting some seed in a few of these to attract institutional flow, which will be redeemed once we achieve a critical mass of AUM in those products. We're increasingly active in our treasury, as well as in the arbitrage operations, to ensure high returns on all our assets, be they crypto or fiat. We're always looking for strategic deals. We're extremely selective, as it depends a lot on the market. We've seen a uptick in interest within the crypto market recently, which I believe is positive as it presents more accessible deals for us at favorable prices. Our aim is to build our business more efficiently, to grow our AUM, and enhance monetization rates, which remain our primary targets. We've also increased efforts in institutional sales and marketing budgets in core markets. We have already added to crypto treasury over time at low prices. Beyond seeding, we're working on treasury strategies with these funds. We're confident in our ability to yield high returns on our liquidity in the next 3 to 6 months, backed by our strong balance sheet. We believe that the current focus on digital asset treasury companies has occasionally drawn attention away from operationally profitable companies like ours, but we are committed to executing our business going forward. That's all from me. I’ll hand it over to Andrew.

Yes. Thank you so much, Johan. And of course, thank you, Olivier, for all the hard work and the many early mornings and late nights. I think it's always a challenge whenever we talk about geographic expansion because there can be the impression that these things can happen quickly. While we can't assure that they always happen quickly, we can assure that they will happen. We've been working very tirelessly, speaking with different jurisdictions. I can indeed confirm that we have had success. However, we are not able to announce the particular market where we will be listing next until the regulator and exchange provide us with the listing date. This has been a significant team effort, and I'm particularly excited because we now have a strategic approach to identifying markets that are more receptive. Some markets are even reaching out to us, but it will take time. It is not overnight, and we cannot discuss it publicly until authorized by the regulators. Another critical factor is the importance of our home market in Europe, which has a lot of potential. We demonstrated our commitment to Europe with our first DeFi Alpha Global Insights event based in Frankfurt. There is a tremendous opportunity for us in reaching broker-dealers, private wealth managers, family offices, and banks within the European ecosystem. We are actively pursuing this. Our average inflows have been quite significant irrespective of new product launches, and we will continue to push for growth in our AUM, not just from capital increases in underlying assets. In the coming weeks, we will definitely have more focused information on new products and initiatives. One thing close to my heart is the idea of data. Coming from the DeFi space but with a background in quantitative finance, the data we can access means we can do a lot to feed into the decentralized finance world. I’m excited for our rejuvenated reflexivity operation, focusing on using our own IP to provide scoring services for digital assets on a fee basis, which would be available to both institutional investors and foundations seeking novel ways to maximize utility and communicate project messages. Regarding SovFi, which has been questioned, it has been a long-term project, pre-COVID, and we are strategically working to leverage our existing platform to maximize revenue and shareholder value for DeFi. This will take time, but we can successfully establish many products and research offerings. We anticipate having meaningful geographic expansions tied to these new products. So, I look forward to discussing this further. We have a great growth story, we’re well-capitalized, and as Warren Buffett said, 'In the short term, the market is a voting machine, but in the long term, it's a weighing machine.' Our focus is on generating significant revenues, providing proof to our shareholders and communities of our effectiveness, with novel products and strong results.

Great. Thanks, Andrew. I'll open it up now to some questions that have come in the Q&A, and then we'll turn it over for Q&A from analysts. I'll start with a question from Juan. Do Alpha trades carry a liquidity or price liability? Can you please explain what happens with the May $23.8 million SUI trade if the price is lower or higher than $3.51 per token at maturity? Also, could you explain if and how DeFi is hedged if, for example, DeFi replaced 30% of their fee and liquid SUI tokens at the ETPs for these locked tokens in the March trade, and there is a run on 75% of the SUI? So basically, I think the question is about how we're hedged against these locked token trades, particularly if they trade lower than the valuation acquired at maturity?

Yes, I'm happy to discuss that. With this trade, along with two others from the past, we have effectively hedged all market risk related to our core operations. A portion of the locked-in profit from these trades has been retained in tokens. As a result, this part of the profit will fluctuate with the market; if the market rises, our profit will increase, and if the market falls, it will decrease slightly. While the core arbitrage is fully hedged for the principal amount, the profit we secured is held in tokens that will remain locked for some time. Therefore, we might experience some volatility as time goes on. There is potential for both upside and downside, but the principal from that trade is secured and hedged. This approach aligns with what we've done historically with other trades, where we kept certain portions in the actual tokens involved in the trade. We are committed to this strategy for assets that we strongly believe in and are actively developing, as we support those ecosystems and technologies. In summary, the profit we retained is correlated with the market, meaning it can increase or decrease based on market conditions. Was there anything specific I missed, Curtis?

No, I think you covered it.

So that differs for different trades. If we do these trades in assets where we don't have a high conviction, we typically do not have any exposure at all. We lock in all profits in fiat. For some others, we keep some of the profits in the assets. Yes. I think nothing really has changed in the long-term core strategy. We will continue with a high core focus to maximize AUM and maximize monetization while expanding in all the vectors including new products and value-added offerings. It’s difficult for me to specify how the revenue mix will look in one year, but we’ll consistently focus on executing our core strategy and not miss out on low-hanging fruit in the market. We obviously now have over 100 products, covering all the actual digital assets we want to cover. We will selectively list more trackers if we see exciting technologies emerge. The focus now is to develop new vehicles and leveraged product types, such as bonds and actively managed certificates, to tap into larger and more global markets. We have seen a temporary dip due to necessary upgrades, enhancing our infrastructure, guiding our capacity for higher percentages of our balance sheet in income-generating activities. We're at a strong position in terms of our balance sheet, liquidity, and assets under management, and we believe any temporary macro weaknesses provide better opportunities for growth.

Thanks. I'll now take questions. Kevin, you raised your hand first, so please unmute and ask your question. Kevin Dede from H.C. Wainwright.

I was hoping Johan might offer a little more color around DeFi Alpha and the influence that DAT have on that environment—it's not dots that I can easily connect in my little brain.

Yes, happy to do that. So there are a few particular deals, I would say, maybe three of them, all quite a bigger scale. We have been negotiating for a long time, and at some point, quite a few of these included, obviously, were thought because of the hype in that sector that they would have preferred to participate in public markets, traditional markets through that vehicle instead. I think none of them are looking at that still. But when the hype was created with MicroStrategy and tons of new participants joining in, premiums were super high, and there was a lot of, I would say, maybe a bit too creative solutions being offered to these, which never were set in motion. I think that has delayed a lot of discussions.

Could someone comment on the investment pipeline, given the focus that the company has had on it previously? I guess you can still continue to focus on it. You just have a little more dry powder lately than you've had in the past. And I mean, if asset prices here are any indication of how companies are valuing themselves, please offer some insight on your investment pipeline.

Yes, I mentioned a few ways we currently allocate funds to achieve a high yield on our liquidity and how we utilize it to enhance our asset monetization. A significant aspect is that, similar to our previous efforts with Stillman, Reflexivity, and Neuronomics, we are continuously exploring new opportunities and receive numerous inquiries each week from intriguing projects, competitors, and complementary companies.

Let's move on to Mike from Northland.

First question is maybe for Andrew. It sounds like you were talking about a geographic expansion win in your comments. I mean, was that the case? And is it in a small market, a big market? Just a little more color there. And I know you can't name it. I'm not asking that, but a little more color would be helpful.

Yes. And it's a big market.

Good. Good. That's great. And then, hey, a question maybe for Paul, it looks like year-to-date, you guys have done $64 million, and now you're guiding to $116 million for the year. I mean that implies $52 million in the fourth quarter. What's driving that?

Mike, I'm at $80 million. $80 million for 9 months. And the $116 million is IFRS. So I got to do $36 million in Q4. We just did $23 million, right? $22.5 million. So $36 million.

And apologies, like we have dozens of questions. So if we don't get to your question on the call here, you can always e-mail or give me a call, widely available, as always. But let's hop over to Ed Engel from Compass Point.

Paul, some on the accounting side for you. In the MD&A, there was an add-back for adjusted revenue and EBITDA, which is a price movement on equity investment distribution timing loss. Can you kind of go through that, please?

Yes. We have an investment in a fund, and it took almost 3 weeks for the fund to distribute cash. It was a bunch of Solana, and they sold it at the end of the quarter, and then just the nuance of getting the money to us in Switzerland took a bit of time. So there was some slippage on the crypto price. So it was a one-off, Ed.

Okay. And then as I think about the revenue for the third quarter, crypto prices were broadly higher, and I think your total realized and unrealized impact for 3Q was still negative even if I do that adjustment for the movement. As I think about Q4, crypto seems like it's going to probably not be higher Q-on-Q.

I had my IFRS number is 9.7% in Q3. If you look at the income statement for the digital assets movements, that's got the negative hit from the timing loss, right? So it would be important to note that.

Okay, that's fair. So regarding staking, I understand why the yield was lower. Looking ahead to the fourth quarter after the capital raise, can we expect the staking yield to return to the levels we saw in the second quarter, or will it increase gradually?

Johan, do you want to add? Go ahead.

Happy to jump in. We're quite confident that the staking yield will go higher. We already have deployed a much higher rate of the coins. We did need some of the coins for market-making, for the collateral with new counterparties to be efficient in our market-making. That was part of upgrading our infrastructure, and the capital raise has helped us to not need to do that in the future. We now have a better way for many assets to get higher rates going forward. This has been temporary, and we expect improvements moving past the end of Q2 into the near future.

Okay. And I guess that's even with just staking yields across the industry. I guess they're still probably higher year-on-year, maybe just below the end of last year. Okay. That makes sense. And then just lastly for me, on Stillman Digital, I think initially, you guys were guiding $15 million of revenue for 2025. It looks like you kind of reduced that.

It's going to do USD 8.6 million. It was CAD 12 million to CAD 15 million, so it's going to be $12 million.

And I think we've gotten a couple of questions on the growth path for Stillman Digital. Andrew or Johan, if you wanted to tackle that on how we're effectively scaling, or even Olivier, Stillman Digital and onboarding new services, new clients and then even expanding Stillman services geographically as Valour expands geographically?

Yes. I can comment a bit on that. So for Stillman, I think we see continued really strong growth, entering new geographical areas and acquiring many new clients in Europe. Earlier in the year they onboarded many clients from the USA to our international base in Bermuda. This has opened new markets and clients for them. Stillman is able to grow their business independently from our ETP presence but is experiencing significant growth in both top and bottom line.

The counter on the website significantly understates the gross transaction volume that they've executed since inception—over $51 billion in transactions executed. That said, every centralized exchange, decentralized exchange, on-ramp, and off-ramp I discuss is looking for liquidity. Almost every introduction I make to Stillman has led to a new client. Their growth trajectory is exceptionally promising.

Great. We are a couple of minutes past time. But thank you, everyone, for joining the call. Please, if we didn't answer your questions, feel free to e-mail [email protected] or [email protected]. I'm always happy to jump on a call per schedule. We'll see you guys in March, if not sooner, on some other announcements. Thanks again. We're always widely available; can't stress this enough. Have a great rest of your weekend.