CEO.CA Chairman's Briefing

Subsequent to quarter-end, Galaxy executed a non-binding term sheet with a U.S.-based hyperscaler to host high-performance computing at its Helios campus in West Texas.

NEW YORK, Nov. 7, 2024 /CNW/ - Galaxy Digital Holdings Ltd. (TSX: GLXY) (the "Company" or "GDH Ltd.") today released financial results for the three months and nine months ended September 30, 2024, for both itself and Galaxy Digital Holdings LP (the "Partnership" or "GDH LP"). In this press release, a reference to "Galaxy", "we", "our" and similar words refer to GDH Ltd., its subsidiaries and affiliates including GDH LP, or any one of them, as the context requires.

Corporate and Business Updates

Financial Highlights: In the third quarter, Galaxy reported a net loss of $54 million, representing a significant narrowing of our net loss from the second quarter. We generated operating revenue growth of over 30% quarter-over-quarter ("QoQ"), despite industry spot trading volumes declining 15% and ether declining 24% in the quarter. For the nine months ended September 30, 2024, Galaxy reported net income of $191 million, driven by strong operating performance and positive digital asset markets. Galaxy's equity capital was $2.1 billion as of September 30, 2024.

Helios: Subsequent to quarter-end, Galaxy executed a non-binding term sheet with a U.S.-based hyperscaler to host high-performance computing at its Helios campus in West Texas. The term sheet includes options to allocate all of Helios' 800 megawatts of currently approved power capacity to HPC hosting and support. The consummation of the transaction is subject to execution of definitive documents, customary due diligence and approvals of the parties.

US Listing and Reorganization: Galaxy continues to work on completing its proposed reorganization and domestication to become a Delaware-incorporated company and subsequently list on the Nasdaq, upon completion of ongoing SEC review and subject to stock exchange, shareholder and applicable regulatory approvals of such transactions. On July 26, 2024, Galaxy filed an amendment to its registration statement responding to SEC comments, which is under review.

Galaxy Global Markets

Galaxy Global Markets ("GGM") offers institutional-grade expertise and access to a broad range of digital asset products, including digital asset spot and derivatives trading, financing, M&A advisory, and equity and debt capital markets services. GGM operates in two discrete business units – Trading and Investment Banking.

Trading reported counterparty trading revenue of $54 million in the third quarter, a 117% increase quarter-over-quarter ("QoQ"), despite a 20% decrease in trading volumes, primarily driven by increased revenue from derivatives and lending activity. Galaxy's average loan book size expanded to $863 million, a 23% increase QoQ driven by increased demand from both new and existing counterparties, who relied on our lending desk to provide them with margin-based financing. Galaxy continues to onboard new counterparties, including large traditional asset managers and hedge funds, and ended the third quarter with 1,280 total trading counterparties.

Investment Banking successfully closed one deal subsequent to quarter-end, serving as the exclusive financial advisor to an existing client on a small buyside acquisition. Galaxy is executing against a pipeline of mandates representing $2.4 billion in potential deal value.

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KEY TERMS

Counterparty Trading Revenue: revenue from counterparty-facing activities from our Derivatives, Credit, Over-the-Counter Trading, and Quantitative Trading businesses, net of associated funding charges.

Loan Book Size (Average): average market value of all open loans, unfunded arrangements to finance delayed trading/settlement (for example over weekends), and uncommitted credit facilities in the period. As of September 30, 2024, unfunded, uncommitted facilities accounted for approximately $156M of total Loan Book Size (Average).

Active Trading Counterparties: counterparties with whom we have traded within the past 12 months and who are still onboarded with Galaxy's trading business.

Pipeline: the number of open engagements and transactions the Investment Banking team has in market.

Deal Value of Pipeline: the theoretical aggregate deal value associated with the Investment Banking pipeline. 

Galaxy Asset Management

Galaxy Asset Management ("GAM") provides investors access to the digital asset ecosystem via a diverse suite of institutional-grade investment vehicles that span passive, active, and venture strategies. 

GAM management and performance fees were $8.1 million in the third quarter, representing a 44% decrease QoQ, primarily driven by the nearing completion of an opportunistic mandate to unwind portfolios on behalf of the FTX estate. GAM reported assets under management ("AUM") of approximately $4.6 billion, a 2% increase QoQ, driven primarily by net inflows into GAM's passive and active ETF strategies, which were offset by net market depreciation. In the quarter, GAM, in partnership with State Street Global Advisors, announced the launch of three actively managed digital asset and disruptive technology focused ETFs that offer investors exposure to digital asset and disruptive technology equities, spot cryptocurrencies, derivatives, cash, and cash-like instruments (tickers: DECO, HECO, TEKX). 

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KEY TERMS

Assets Under Management: all figures are unaudited. AUM is inclusive of sub-advised funds, committed capital closed-end vehicles, seed investments by affiliates, affiliated and unaffiliated separately managed accounts, engagements to unwind portfolios, and fund of fund products. Changes in AUM are generally the result of performance, contributions, withdrawals, liquidations and opportunistic mandate wins.

• AUM for committed capital closed-end vehicles that have completed their investment period is reported as NAV (Net Asset Value) plus unfunded commitment.
• AUM for quarterly close vehicles is reported as of the most recent quarter available for the applicable period.
• AUM for affiliated separately managed accounts is reported as NAV as of the most recently available estimate for the applicable period.

Passive Strategies: single- and multi-asset private funds, as well as a suite of regulated spot digital asset exchange-traded funds offered through partnerships with asset managers globally. 

Active Strategies: Galaxy's Liquid Crypto Fund, the management of certain opportunistic mandates, and a suite of actively managed and regulated digital asset and disruptive technology exchange-traded funds offered through a partnership with State Street Global Advisors.

Venture Strategies: organized around two investment themes: Interactive Ventures and Crypto Ventures. Galaxy Interactive invests at the intersection of content, technology, and social commerce, managing client capital across three funds. GAM's Crypto Ventures sleeve includes Galaxy's inaugural crypto venture fund, which is focused on investing in early-stage companies across crypto protocols, software infrastructure, and financialized applications, as well as two global, multi-manager venture funds and a subset of Galaxy's balance sheet venture investments. 

Galaxy Digital Infrastructure Solutions

Galaxy Digital Infrastructure Solutions ("GDIS") consists of proprietary and hosted bitcoin mining services, GK8 self-custody technology solutions, and blockchain infrastructure.

Subsequent to quarter-end, Galaxy executed a non-binding term sheet with a U.S.-based hyperscaler to host high-performance computing at its Helios campus in West Texas. The term sheet includes options to allocate all of Helios' 800 megawatts of currently approved power capacity to HPC hosting and support. The consummation of the transaction is subject to execution of definitive documents, customary due diligence and approvals of the parties.

Mining

Mining revenue was $18.5 million for the third quarter, relative to expenses, net of curtailment credits, of $10.0 million, resulting in a 46% direct mining profit margin. Mining revenue and cost to mine were impacted by the Bitcoin halving, elevated mining difficulty and seasonal curtailment. Galaxy initiated fiber construction at Helios and, beyond the current approved capacity of 800MW, expects approval on a portion of the 1.7 gigawatts currently under study in the first half of 2025.

Blockchain Infrastructure and GK8

Blockchain Infrastructure and GK8 continue to build and invest in the technology that powers the digital assets ecosystem. Blockchain Infrastructure expanded its Assets Under Stake by 58% QoQ to $3.4 billion as of September 30^th, with Galaxy maintaining its position as one of the largest validators globally on the Solana network. Blockchain rewards, net of staking costs, were $10.7 million in the third quarter, up 26% QoQ. GK8 added one new client in the quarter.

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KEY TERMS

Hashrate Under Management: the total combined hashrate of active proprietary and hosted mining capacity managed by Galaxy.

Proprietary Mining Hashrate: the hashrate attributed to Galaxy owned and operated mining machines.

Hosted Mining Hashrate: the hashrate attributed to third-party machines operated by Galaxy for a client. 

Number of Proprietary BTC Mined: the total amount of bitcoin mined from proprietary mining operations.

Average Marginal Cost to Mine: the average marginal cost of production for each bitcoin generated during the period. The calculation excludes depreciation, mark-to-market on power contracts, and corporate overhead.

Assets Under Stake: all figures are unaudited. AUS reflects the total notional value of assets bonded to Galaxy validators, based on prices as of the end of the specified period. This includes certain Galaxy balance sheet assets, Galaxy affiliate assets, and third-party assets.

GK8 Total Client Count: the total number of clients contracted to use GK8's technology solutions.

Summary of Operating Expenses

Overview of Third Quarter Operating Expenses:

• Compensation and compensation related expenses of $40 million decreased by approximately $3 million QoQ, primarily driven by adjustments to cash bonus accrual.
• Equity based compensation of $13 million was roughly flat QoQ.
• General and administrative expenses increased by approximately $3 million from the second quarter of 2024, driven primarily by $2 million of higher depreciation and amortization costs, reflecting the additional depreciation from new mining machines and electrical infrastructure that were energized during the prior quarter.
• Professional fees of $11 million decreased by approximately $3 million QoQ, primarily driven by $2 million of lower legal expense.
• Staking costs increased by approximately $9 million QoQ, reflecting the continued expansion of Galaxy's validation services including the acquisition of the assets of CryptoManufaktur in July 2024. Despite the increase in staking costs, Galaxy's blockchain rewards, net of staking costs, increased by 26% QoQ.
• Interest expense increased approximately $8 million QoQ, reflecting our ability to source non-dilutive wholesale financing to help fund our counterparty trading business, where our revenue increased by approximately $29 million QoQ.

Net Digital Assets Position Summary

Net digital assets includes all digital assets categorized as assets, less all digital assets categorized as liabilities on the statement of financial position and is included in the Company's liquidity measure. Net digital assets as of September 30, 2024 is as follows:

GDH Ltd.'s Financial Highlights

As the only significant asset of GDH Ltd. is its minority interest in GDH LP, its results are driven by the results of GDH LP. GDH Ltd. accounts for its investment in this associate (GDH LP) using the equity method. The investment, initially recorded at cost, is increased or decreased to recognize GDH Ltd.'s share of the earnings and losses of GDH LP. The net comprehensive income (loss) of GDH Ltd. was $(16.4) million for the three months ended September 30, 2024 and $44.1 million for the nine months ended September 30, 2024.

Earnings Conference Call

An investor conference call will be held today, November 7, 2024, at 8:30 AM Eastern Time. A live webcast with the ability to ask questions will be available at: https://investor.galaxy.com/. The conference call can also be accessed by investors in the United States or Canada by dialing 1-800-715-9871, or 1-646-307-1963 (outside the U.S. and Canada) using the Conference ID: 9649375. A replay of the webcast will be available and can be accessed in the same manner as the live webcast on the Company's Investor Relations website.

About Galaxy Digital Holdings Ltd. (TSX: GLXY) ("GDH Ltd.") and Galaxy Digital Holdings LP ("GDH LP")

Galaxy (TSX: GLXY) is a digital asset and blockchain leader providing access to the growing digital economy. We serve a diversified client base, including institutions, startups, and qualified individuals. Since 2018, Galaxy has been building a holistic financial platform spanning three complementary operating businesses: Global Markets, Asset Management, and Digital Infrastructure Solutions. Our offerings include, amongst others, trading, lending, strategic advisory services, institutional-grade investment solutions, proprietary bitcoin mining and hosting services, network validator services, and the development of enterprise self-custodial technology. The company is headquartered in New York City, with global offices across North America, Europe, and Asia. Additional information about Galaxy's businesses and products is available on www.galaxy.com.

This press release should be read in conjunction with (i) GDH LP's Management Discussion and Analysis and Consolidated Financial Statements for the three and nine months ended September 30, 2024 and (ii) GDH Ltd.'s Management Discussion and Analysis and Consolidated Financial Statements for the three and nine months ended September 30, 2024 (together, the "Consolidated Financial Statements" and "MD&As"), which have been filed on SEDAR at www.sedarplus.ca.

Disclaimers and Additional Information

The TSX has not approved or disapproved of the information contained herein. The Ontario Securities Commission has not passed upon the merits of the disclosure record of Galaxy.

This press release is not an offer to buy or sell, nor is it a solicitation of an offer to buy or sell, interests in any Galaxy sponsored fund or any advisory services or any other security or to participate in any advisory services or trading strategy. If any offer and sale of securities in a Galaxy sponsored fund is made, it will be pursuant to the confidential offering memorandum of the fund (the Offering Memorandum or fund prospectus ("Prospectus")). Any decision to make an investment in any Galaxy sponsored fund should be made after reviewing such Offering Memorandum or Prospectus, conducting such investigations as the investor deems necessary and consulting the investor's own investment, legal, accounting and tax advisors in order to make an independent determination of the suitability and consequences of an investment.

The finalization of the transactions contemplated by the non-binding term sheet with Helios are contingent upon the successful negotiation and execution of definitive agreements, satisfactory completion of due diligence, and receipt of all necessary consents and approvals. There can be no assurance that a definitive agreement will be entered into or that the proposed transaction will be consummated.

No Offer or Solicitation

As previously announced, the Company intends to complete its proposed reorganization and domestication to become a Delaware-based company, and subsequently list on the Nasdaq, upon completion of the SEC's ongoing review and subject to stock exchange approval of such listing. The proposed reorganization and domestication is subject to approval by shareholders the Company and applicable regulatory authorities, including the Toronto Stock Exchange. In connection with the proposed reorganization and domestication, the Company has filed a registration statement, including a management information circular/prospectus, with the SEC, which has not yet become effective. SHAREHOLDERS ARE ADVISED TO READ THE FINAL VERSIONS OF SUCH DOCUMENTS, WHEN AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders may obtain a free copy of the registration statement (including the management information circular/prospectus) and any other relevant documents from the SEC's website at http://www.sec.gov. Copies of the final versions of such documents can also be obtained, when available, without charge, via Galaxy's investor relations website: https://investor.galaxy.com/ The Company anticipates holding a shareholder meeting to seek approval following the effectiveness of the registration statement, and further details will be included in the management information circular to be mailed to shareholders and posted on the Company's SEDAR profile at www.sedarplus.ca.

This document shall not constitute a solicitation of a proxy, consent or authorization with respect to any securities or in respect of the domestication or any of the other proposed reorganization transactions. This document does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote of approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction.

CAUTION ABOUT FORWARD-LOOKING STATEMENTS

The information in this document may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended and "forward-looking information" under Canadian securities laws (collectively, "forward-looking statements"). Our forward-looking statements include, but are not limited to, statements regarding our or our management team's expectations, hopes, beliefs, intentions or strategies regarding the future. Statements that are not historical facts, including statements about Galaxy's business pipelines for banking, expectations for increased load capacity at the Helios site, mining goals and our ability to capture adjacent opportunities, including in high-performance computing and the Helios transaction, focus on self-custody and validator solutions and our commitment to the future of decentralized networks and the pending domestication and the related transactions (the "transactions"), and the parties, perspectives and expectations, are forward-looking statements. In addition, any statements that refer to estimates, projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "intend," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained in this document are based on our current expectations and beliefs concerning future developments and their potential effects on us taking into account information currently available to us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks include, but are not limited to: (1) the inability to complete the proposed domestication and reorganization transactions, due to the failure to obtain shareholder and stock exchange approvals, or otherwise; (2) changes to the proposed structure of the transactions that may be required or appropriate as a result of applicable laws or regulations or as a condition to obtaining shareholder or stock exchange approval of the transactions; (3) the ability to meet and maintain listing standards following the consummation of the transactions; (4) the risk that the transactions disrupt current plans and operations; (5) costs related to the transactions, operations and strategy; (6) changes in applicable laws or regulations; (7) the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; (8) changes or events that impact the cryptocurrency industry, including potential regulation, that are out of our control; (9) the risk that our business will not grow in line with our expectations or continue on its current trajectory; (10) the possibility that our addressable market is smaller than we have anticipated and/or that we may not gain share of it; and (11) the possibility that there is a disruption in mining impacting our ability to achieve expected results or change in power dynamics impacting our results or our ability to increase load capacity, (12) any delay or failure to consummate the business mandates or achieve its pipeline goals in banking and Gk8, (13) liquidity or economic conditions impacting our business, (14) regulatory concerns, technological challenges, cyber incidents or exploits on decentralized networks (15) the failure to enter into definitive agreements or otherwise complete the anticipated transactions with respect to the non-binding term sheet for Helios, (16) those other risks contained in the Annual Information Form for the year ended December 31, 2023 available on the Company's profile at www.sedarplus.ca and its Management's Discussion and Analysis, filed on November 7, 2024. Factors that could cause actual results to differ materially from those described in such forward-looking statements include, but are not limited to, a decline in the digital asset market or general economic conditions; the possibility that our addressable market is smaller than we have anticipated and/or that we may not gain share of the stated addressable market; the failure or delay in the adoption of digital assets and the blockchain ecosystem; a delay or failure in developing infrastructure for our business or our businesses achieving our banking and Gk8 mandates; delays or other challenges in the mining business related to hosting, power or our mining infrastructure, or our ability to capture adjacent opportunities; any challenges faced with respect to decentralized networks, considerations with respect to liquidity and capital planning and changes in applicable law or regulation and adverse regulatory developments. Should one or more of these risks or uncertainties materialize, they could cause our actual results to differ materially from the forward-looking statements. We are not undertaking any obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise. You should not take any statement regarding past trends or activities as a representation that the trends or activities will continue in the future. Accordingly, you should not put undue reliance on these statements.

©Copyright Galaxy Digital 2024. All rights reserved.

Galaxy Digital Holdings LP's Consolidated Statements of Financial Position (unaudited)

Galaxy Digital Holdings LP's Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (unaudited)

Reportable segments (unaudited)

Income and expenses by each reportable segment of GDH LP for the three months ended September 30, 2024 are as follows:

Income and expenses by each reportable segment of GDH LP for the nine months ended September 30, 2024 are as follows:

Income and expenses by each reportable segment of GDH LP for the three months ended September 30, 2023 are as follows:

Income and expenses by each reportable segment of GDH LP for the nine months ended September 30, 2023 are as follows:

Assets and liabilities by reportable segment of GDH LP as of September 30, 2024 are as follows:

Assets and liabilities by reportable segment of GDH LP as of December 31, 2023 are as follows:

Select statement of financial position information

Select assets by reporting segment of GDH LP as of September 30, 2024 is as follows:

Select assets by reporting segment of GDH LP as of December 31, 2023 is as follows:

Net Digital Assets Position

Net digital assets includes all digital assets categorized as assets, less all digital assets categorized as liabilities on the statement of financial position and is included in the Company's liquidity measure. Net digital assets as of September 30, 2024 and December 31, 2023 is as follows:

All figures are in U.S. Dollars unless otherwise noted.

SOURCE Galaxy Digital Holdings Ltd.

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