Earnings Transcript for DEFTF - Q1 Fiscal Year 2024

Jamie Frawley: Thank you for joining us today. My name is Jamie Frawley, Vice President at irlabs and it's my pleasure to moderate this webinar on behalf of DeFi Technologies. We're here and fortunate to have Olivier Roussy Newton, CEO and Director; and Russell Starr, Head of Capital Markets on the panel today, and I'll turn it over to them shortly to present a review of the Q1 financials. [Operator Instructions] And before I turn it over to Olivier and Russell, I'd like to remind everyone that certain statements made during today's presentation may contain forward-looking information within the meaning of applicable securities laws. Such statements may include estimates, projections, goals, forecasts or assumptions that are based on current expectations and are not representative of historical facts or information. We want to be clear that such forward-looking statements represent the company's beliefs about future events, plans or objectives, which are inherently uncertain and are subject to numerous risks and uncertainties that may cause the actual results, performance...

Russell Starr: Jamie?

Jamie Frawley: Yes.

Russell Starr: There's someone on the screen that claims they're me. They're not me, just so you can see it. They just dropped off. I don't know who it was.

Jamie Frawley: Okay. Thank you. And with that, I'm going to turn it over to Oli to kick us off. Over to you, Oli.

Olivier Roussy Newton: Thanks. Thanks, Jamie, and thanks, everyone, for tuning into our Q1 financial call. So I'll get things started here. So starting with our financial highlights of Q1 2024. The company reported a cash balance of $9.4 million compared to $6.7 million in December 31 year-end. The company's venture portfolio investments were valued at $41.8 million as of March 31, 2024. AUM grew 78.7% to approximately $908 million as of March 31, 2024, up from $508 million as of December 31, 2023. Total operating revenues were $13.4 million for the Q1 2024 period. This is a significant improvement from the operating revenues of $3.6 million for the same period in 2023. Total revenues were $4.9 million for Q1 2024 compared to $11.3 million for the same period in 2023. Operating general and administration costs for Q1 were $3.3 million, up from $2.1 million for the same period in 2023. The company's annualized operating revenue is forecasted to be approximately $119 million, equivalent to just under USD 90 million for 2024. Here is a visual of our AUM and net sales in USD equivalent on the Nordic Growth Market, our main trading revenue in Stockholm. So just to reiterate, our AUM is just close to the quarter just shy of $1 billion at $908 million, up just under 80% from December 31, mostly attributed to new product launches. And as we're seeing today and for the last few months, a more robust digital asset price discovery that we're seeing. So for our 2024 outlook, 800% increase in AUM from market lows in late 2022, to touch on that kind of last visual. We've really seen net new inflows on our AUM pretty much every trading day. So that shows kind of the robustness in our business model. As of March 31, 2024, Valour AUM stood at approximately $908 million with daily trading volumes exceeding $20 million. Given the current AUM price of digital assets and activity level in the digital asset market, the company's annual operating revenues is forecasted to be approximately $119 million for 2024. Growth in AUM is expected to lead to proportional increases in revenue. Right kind of before this call, we were discussing some kind of AUM targets and predictions. I think with two of our larger subsets of products, Bitcoin and Solana, with Bitcoin at around $100,000 a BTC and Solana at $225, we would be looking at about USD 1.35 billion in AUM, which I think is just under CAD 2 billion. In addition to the company's existing business units, a new alpha-generating business, DeFi Alpha unit was formed in Q2 2024 in order to generate yield on the company's excess liquidity. Just -- this is something we've been kind of exploring for some time now due to kind of our cash reserves and unique opportunities that get presented to us. We decided to formalize our alpha trading desk to work on proprietary trading strategies and kind of interesting ideas from the trading team. The focus is on arbitrage trading opportunities in the digital asset space with low risk in both centralized and decentralized markets with minimal or no protocol exposure thereby minimizing downside in revenue volatility. DeFi Alpha has started exceptionally well, generating just under CAD 60 million -- just over $40 million thus far in 2024. The ETP business aims to maximize AUM through increased ETP launches and geographical expansion. Our plan is to launch about 15 to 20 new ETPs. We've done about 10 thus far in 2024 and 30 more in 2025. And we're actively working on expanding to new markets in the Middle East, which we've press released our opening of our trading desk in the United Arab Emirates and we'll be kind of hopefully doing similar things shortly within the Asian geographies. So here is a list of some of our single-asset ETPs. We were excited about being kind of a market-first leader in launching in the last few weeks. The 20 ETP Polygon's native token, which we're quite excited about, and we'll have adjoining research coverage from our newly acquired subsidiary Reflexivity Research to coincide with new product launches going forward. Other new ones, ICP, Hedera, HBAR, our short Bitcoin product and lots more in the works along with the Chainlink ETP. So these are some of our joint venture ETPs physically backed products or asset-backed products. So we're -- as people might have saw, we launched the first yield-generating Bitcoin product in collaboration with Core. We'll also be announcing hopefully very shortly a Core ETP, specifically in collaboration with the foundation and great owners at the Core Foundation. So we wanted to include a bit of a concise overview on Reflexivity Research as a business. For this quarter, they closed just under USD 500,000 in revenue, most of that coming from quarterly research report engagements, clients, including Hedera, Fortune, eToro and Fantom. We hosted our first ever kind of maiden conference Bitcoin Investor Day in New York, sold out proud, very overwhelming positive feedback, sponsorship deals included Franklin Templeton, Coinbase and Copper had a great line of those speakers and attendees. Reflexivity also hosted Twitter space with all blockchain clients, and it was co-hosted by CoinMarketCap's official Twitter with 7 million followers. So kind of over, I would say, the next few quarters, we will start to combine forces with Reflexivity to, one, drive research on new product launches that we have going out at Valour so that all of our clients can have market-leading research on new products that we're posting, and Reflexivity as a stand-alone business will continue to grow and be covering leading foundation quarterly reports, and hope to also plan further conferences in the future. So this is a slide that we're working on, not that it encompasses all of our product-centric road map. So we obviously have digital assets. We've been working on commodities and the underlying prospectus is associated with the regulatory approvals to make those happen, fanatic ones and -- as well as active strategies, which we've been working on for some time. So the idea kind of behind also growing our digital asset exposure is we have a sticky customer base that comes to us, looks to us for new products and innovations. So why don't we give them more exposure to interesting investment theses that we see in this kind of new world that we're entering into.

Russell Starr: And Oli, let me just back a little bit. So everyone listening to this, Oli has given you some really major data points here. And I always try to just simplify this down to math for everyone. So Bitcoin $100,000, Solana $225, that's USD 1.35 billion in AUM. And as our product offerings diversify, our yield grows. So we've given you sort of guidance towards a 7.2% yield on these products. But that's assuming that we were sort of almost pulled down a little bit by Bitcoin and Ethereum. Now that our Bitcoin offerings can be staked on the Core network, we can actually generate substantial revenue from there. So you could actually see $1.35 billion in AUM with closer to 8%, 9% yield, depending on how our staking goes on our own validators. And if you just really simplify it, USD 1.35 billion at 10%, that's USD 135 million in revenues. And our costs due to exemplary management by Oli and the team are now in and around that USD 10 million because of the debt we paid down. So if you guys are looking for some sort of forward-looking guidance, you kind of have it, USD 135 million in revenues, less $10 million, that's $125 million add in the $40 million on the desk, that's $165 million assume if you just look at Galaxy, and Galaxy generates a lot of their pro forma valuation off of their trading desk revenues. And even if you just model out $10 million or $15 million in trading profits per quarter for us, maybe not the robust $40 million. You can see this company in and around a USD 150 million in profits. And our market cap, even at the share price today, is only 2, 3x that. So I'd almost say to you, even though our stock has done quite well, we're actually cheaper today than we were before because our trading desk now has really meaningful alpha in front of it. And I would argue that Bitcoin has reassumed its positive trajectory as well as the Altcoins. And so this company like the future is very, very bright. I know there's questions about the Middle East. I know there's questions about Hong Kong. But the reality is the trading desk is a global effort all the time, no matter what. So you don't really need to think of the trading desk as either Middle Eastern opportunities or either Hong Kong. It's a 24/7 business in this industry. But you can think of assets growing in our ETP substantially once we get the ball moving in those new jurisdictions. So apologies for interceding there, Oli. But I just think it's really important that people understand that we're already on a $55 million to $60 million run rate in two quarters for this company, not for the year. You annualize that, then you're getting to that $120 million, $130 million in net income, if not just pure profits. And that's why I keep on harping on yes, the stock is doing well, but if you were to talk to Oli and I off the record, someone can pay us 300% premium for the company right now, and it would be a take under based on our profits. People need to start really thinking about not just trading and making 10% or 20%, but actually what the fundamental valuation of this company is. I'll stop there.

Olivier Roussy Newton: No, I think all good points. I think that -- yes. So I think, yes, not just to encapsulate off to a great start to the year, great -- good to see a rebound in digital assets, especially kind of going into this week. I think we'll -- we have a strong foundation for the future. And as you touched on, really robust revenues with just a great fixed cost that we have been working hard on maintaining to -- for the future. And I think we can start taking some questions.

A - Russell Starr: Do you want to just alternate Oli, you start with Mike and I'll do Fab and then you do Boris?

Olivier Roussy Newton: So Michael Kim ask, can you provide some color on the new arbitrage trading desk in terms of your capabilities and the opportunity going forward? Any perspective from the revenue outlook particularly in the context of the $40 million that also has already been generated thus far? So yes, we've been -- myself and Russ and the team have been for -- I would say, quite a long time looking at opportunistic trading strategies that present themselves. As prices have rebounded, we've been able to secure treasury and basically assess opportunities as they come in. So I think for the next few quarters, we will be providing more revenue guidance in terms of what that looks like contextualized over a year period, and we should be launching a website that presents the business overview of DeFi Alpha in more specific context. So more information coming soon in terms of us DeFi Technologies opening up our Alpha trading desk for more business and the specific parameters about what that business pertains to. Second part of the question was curious if you would expect to see an uptick in flows into our ETPs, assuming the SEC group's ETFs, do you see a similar trend playing out following SEC approval of BTC ETS? So yes, great question. If there are any ETF approvals, I think, have gone from 25% chance of being approved to 75% plus, last time I checked. When the Bitcoin ETFs got approved, we saw a ton of inflows into our Bitcoin products. I think it's safe to assume we'll see something similar to our Ethereum products, if the SEC approves. If you're an ETF, I would think it would be extremely bullish for the price and people and our clients would want to double down and see more exposure.

Russell Starr: And one addition to that, everyone, everybody, I think, at some point thought that those products might cannibalize our products. But again, everybody needs to remember we have a zero fee structure on our Bitcoin and Ethereum. So what -- when you have perfect tracking, which we do in our products, and you're paying less management fees for those two products, why switch to a product where you have to pay management fees? So I think that as people learn more and more and more about what we're doing and what our cost structure is, you actually might see even greater growth into our products as a result of zero management fees. The question is, what's the status of the trading desk in the Middle East? And can you report any numbers? I mean we have a trader in the Middle East. We are actively looking at migrating and passporting all of our products to the Middle East to Asia and even more immediately, London as LSE is now permitted ETP -- crypto ETP trading in London. But from a trading desk perspective, like I said, I mean, like Johan is one of the most sophisticated long-lived crypto traders out there. His team and Oli are excellent at what they do. And all you really have to do is look at kind of Galaxy's revenue structure where actually the bulk of their revenues tend to come from trading profits, which are really hard to model out quarter-over-quarter. But because of the industry and how nascent it is, you do see these arbitrage opportunities appear very, very regularly where you can take low-risk our positions and capture meaningful gains. So I think as we continue to hit more and more of those profits, guidance will be a lot easier. I don't know what Oli's thoughts are on repeating 40 per quarter. I think that might be a little bit generous, but there are I mean you never know, there might be a quarter where it's 50 or 60 and then another quarter where it's 12. It's just -- you can't really predict market inefficiencies other than taking advantage of them. Oli, you got anything to add?

Olivier Roussy Newton: I think -- I mean, one in terms of the Middle East trading desk, obviously, for hiring new talent, a lot of younger traders and things are setting themselves up in the Middle Eastern demographics, specifically in the UAE. So we want to foster kind of an environment to provide employees with a great place to live and work. So that's also part of the focus of the Middle East. And yes, also to support our upcoming product launches in the Middle East. Yes, as I kind of mentioned, we'll have more information coming online in regards to DeFi Alpha, the opportunities and positioning of our trading desk there. And we are constantly assessing new opportunities kind of every day as they come in. And I think kind of -- as it's kind of fairly new, give us a few months, and we should have some better ideas on guidance and potential opportunistic kind of revenue opportunities as they present themselves.

Russell Starr: This one is for sure in your realm there, Oli, by Boris.

Olivier Roussy Newton: Any plans for stock buybacks. I think at least, I'm not sure Russ's world, but at least in my kind of history in public traded equities, I think you typically see anywhere from a 15 to 30x multiple on revenue in technology space, crypto, sometimes sees outsized returns in terms of that. So I think us sitting at a 2x or 3x multiple is not going to last for longer, and as we see kind of undervalued and we have a large cash treasury, we might make plans to initiate what we previously had installed this NCIB program or share buyback program. We are in discussions with several stock exchanges globally in terms of uplisting and requirements satisfactory crypto regulation. We did have a NASDAQ approval in 2021 and kind of ran into, what I would see as a very fast-paced changing environment among the SEC. So we're -- we remain committed to extracting as much shareholder value and realize that that will happen on a global stock exchange. So that is definitely a top priority for management. With continued revenue prowess, I would say we will definitely explore as a Board the potential for shareholder dividends if that is a suitable scenario balanced with the potential for growth opportunities in this space. The -- where did the USD 19.5 million come from for the outstanding loan pay down? We used that from our revenue generation across the last few quarters, and freed up a considerable amount of collateral. So we're excited about that. And yes, I think we touched on what we're doing systematically to generate revenue for DeFi Alpha.

Russell Starr: And everyone really, really needs to take a minute to think through what Oli said in my opinion. 99% of the world's companies trade at 20x profits. We are trading at 3x profits. If you're not getting a reasonable valuation from the market on your stock, of course, you look at ways to improve that. And if you're trading at 3x, like I mentioned, someone could pay a 300% premium to us, and it would be a take under relative to any other stock trading in the U.S. Therein lies the opportunity from an ownership perspective and why you should be buying the stock. But it creates a lot of fear in our heads, at least it does in mine because like I'm not -- we all -- like I've said this repeatedly between all the Johan's friends family, me, friends family and very, very closely related parties, we control probably 100 million to 120 million shares. We're not looking for $3 on the stock or $4, especially in an environment that we're looking at now. We're looking at $8 to $10, which sounds far-fetched, but $5, $6, $7 is where we should be trading just on a reasonable comp basis. And that's not me making things up, just go look at what all of the other crypto companies are trading for, and I'm not sure any of them are profitable. They're trading on revenue multiples. We...

Olivier Roussy Newton: I would also kind of interject and say kind of the only other comps you have are mining I'm fairly used -- fairly familiar with. And the great thing about our business model is we have fixed costs. So we have no asset depreciation of machines that need to be constantly upgraded and dilutive financings to continually buy new equipment that doesn't fit within our purview. So historically, I think when the market gets frothy and people have used Bitcoin miners as proxies for trading equities, where we're going to see kind of a new world where people start understanding our business model and give us the valuation multiple that is deserving of a company such as ours.

Russell Starr: Yes. So look, huge upside for shareholders everyone, and it's our job, Oli's and mine and the rest of the team, to get this to a reasonable valuation. And obviously, an uplift as quickly as possible will be part of that, whether -- I mean, obviously, the U.S. would be our primary objective, but we're looking at multiple opportunities and options just because clearly, for whatever reason, in Canada and the way we currently trade it, we're just not being given comparable reasonable value to, as Oli mentioned, the miners or even the Galaxies of the world. So I believe that's it for Boris. The other question is, do you have an estimate for AUM in the Middle East and Asia? Look, I mean, that's kind of a Holy Grail type question. Like we mentioned, just Bitcoin appreciating and us launching no other products in Solana going to $225, which it sure looks like it's going to be doing here soon. That's a USD 1.35 billion in AUM, assuming everything else stays static. The Middle East is the fastest-growing crypto ecosystem in the world in terms of headcount adopting crypto as an investment. So if we could theoretically get to anywhere just close to what we're doing now despite the fact that it's growing faster than any other jurisdiction, you're looking at $1 billion, $2 billion, maybe $3 billion, $4 billion, $5 billion. And then similarly in Asia, even if you're just extremely conservative and think we replicate what we've done here in a relatively short period of time, those two jurisdictions would get you to $3 billion, if you just put $1 billion in each of them. And everybody is also forgetting about the London Stock Exchange where we're passporting all of our products, that could be an immediate another $1 billion. And everyone the math gets really quite crazy at that point, assuming $4 billion or $5 billion, that's -- that could conceivably be USD 500 million in revenue and $490 million in profits. And you strap on your 20x multiple and you may have market darling, a unicorn here and a return that would rival many other companies. Oli, you got anything to add to that?

Olivier Roussy Newton: Yes. No, I think just to reiterate on Chris' question, obviously, we are looking to replicate our business model that we've achieved super well in the Nordics and other niche markets where people want exposure to new products paired with groundbreaking research, which we can deliver. So we're assessing those markets and have filed prospectuses and are working with legal on passporting those prospectuses so that we have about our business model and other niche market opportunities. And obviously, if we can mirror similar kind of -- similar addressable markets with larger -- the London Stock Exchange U.K. is probably the largest market in Europe outside of Germany. So we're fairly excited about some of these market opportunities that are presenting themselves. Question from Joseph, are we partnering with anyone in the Middle East? Yes we have several partners that are soon to be announced in helping in the form of marketing, distribution and legal market making, exchange providing services. So similar to what we do in Europe. We have basically a chain of partners that help us with everything from the logistics of rolling out our services to distribution and everything within the stack of our business verticals.

Russell Starr: Why are most of the crypto funds listed in the Swiss Stock Exchange? So they're actually predominantly listed on the Nordic Growth Market. We've thought long and hard. And again, they're migrating to all different jurisdictions in Europe, right? They're starting to trade in Germany. They're starting to trade more on Euronext, everybody needs to remember that eight, nine months ago, Bitcoin was at $16,000 to $20,000 and no one cared about this universe. It's only in this recent new bull run where everyone is starting to pay attention to them. And exchanges have watched and seen how successful we've been in Scandinavia. And my logic for Scandinavia is Johan, who is one of the founders along with Oli. The XBT Provider, which is now CoinShares, which is -- was the first Bitcoin ETP in the world, that started in Scandinavia. And if you look at CoinShares, it's CoinShares is listed as a Scandinavian entity trades in Swedish krona and has an ADR on the NASDAQ. And so for whatever reason, that tends to be the jurisdiction where the vast amount of liquidity is generated, but my suspicion is with London and us passporting all of our prospectuses to London, that liquidity will probably go pretty gangbuster. That's just me speculating, but London is obviously a very meaningful exchange. Similarly in the Middle East. Similarly, in Asia, you're seeing ETFs being permitted in global jurisdictions everywhere. So I would speculate, and again, this is just me looking at the price and seeing what's happening, but we're in inning one or pitch one of inning one of what could be a very, very meaningful crypto move, especially with what we're seeing Bitcoin doing right now, and I'll leave it at that. Oli, you want to do Spencer?

Olivier Roussy Newton: Yes. So Spencer, I think you can stay tuned for our website launch of DeFi Alpha, and that will consist of basically some of our information that we would dispose publicly in terms of opportunities we're looking for, partners we're working with and types of reference kind of business models to kind of point and we'd like nothing more than to provide kind of transparent guidance and more information. Some of the stuff we are doing is proprietary. So to keep a competitive advantage for keeping a lid on some things, but we'll definitely have more information in the next few weeks.

Russell Starr: And one thing I can add to that, Spencer. 20 years ago, 30 years ago in the traditional capital markets, spreads were far greater. And you were seeing the original hedge funds capturing 10%, 20% profits just on new issues. Where I'm going with this is the crypto trading universe is like those historical days in the equity markets as liquidity increases and as crypto becomes more household adopted, those spreads will change and those opportunities will change. But for the time being, you can just go look at what Galaxy has done of their trading desk on a quarter-over-quarter basis. We realized we were crazy not to be trying to do the same thing because like I mentioned, Johan, Thomas, Oli, these are crypto pioneers who know this stuff inside and out and have the relationships to capture meaningful profit. So it's not something that I think is going to be there for a decade. But for the near term, it's something that you can, and I hope will expect and will see meaningful returns for us, especially for a company that really only costs like we said, about $10 million to generate. If we can do that in one quarter consistently, we -- that's $30 million in profit just off of our trading desk, not to mention just the liquidity revenues we're generating, which we haven't even talked about. But we're making close to USD 50 million, just providing liquidity for people buying our products daily. Oli, do you want to do the uplist just because the next James is a buddy, and I wouldn't mind answering his question.

Olivier Roussy Newton: Sure. Yes. I mean, uplist, I think we touched on that. And I think in the coming kind of weeks, you'll see more news in terms of our strategy and visibility there.

Russell Starr: And I'll do -- I'll do both of your questions here. Obviously, thanks for joining in and glad to have you as a shareholder. I really appreciate your support. What are the barriers to entry in our business model? They're regulatory and the way I think about it is how long did it take us to get this company permitted and that's Oli and Johan. And if I misspeak this, Oli, you can tell me. But you're basically looking at a three to four year regulatory moat. It's not easy to go through the process of getting all of this approved, making sure your systems work, having the wherewithal to stick with all the regulatory questions. And why that's so important is literally just as recent as nine months ago, I don't think anybody was looking at getting into this industry because Bitcoin was hovering at 16,000 to 20,000, and there were people speculating that the ecosystem was dead. The question about our yields and margins, I think follows from that three to four years. But the way I think about it, Jim, is -- and Oli, if you have a different thought for sure, get in here. But because of the moat and because of our revenue model and you're seeing how difficult it is just even in the U.S, the SEC is permitting these products, but they're not allowing staking. They're making it very hard to even get the products approved. That's due to political issues, not due to the viability of the ecosystem, in my opinion, because the rest of the world is adopting it. And in fact, in my opinion, if you think of it just logically, the U.S. is hurting themselves because they could be owning and really embracing this ecosystem. But the yields and margins, they've held up for a decade already. So even if it's just another three or four years or five years, we become a very appealing acquisition target because other folks such as the BlackRocks, the Vitos, the Vanguards, everyone else who are launching these ETFs, their revenue model is management fees. Ours is far more substantial than that. And then the next question is where are we breakeven? I mean we did the math on that. I think it was 12,000 Bitcoin, Oli? It's obviously changed now because of all of our other products. And Jim, it will continue to change because as we launch more products, we become more diversified, and so that breakeven drops lower and lower and lower. So it protects us more and more and more. Oli, have you got any?

Olivier Roussy Newton: Yes, I think with majority of our debt erased off of our balance sheet, I think that goes considerably lower. And I think we'll always be in a way where we can also make money off of our products like Short Bitcoin, possibly would be coming out with new products like Short Solana, Leverage Solana and all of these things. So I think the more products, the more robust we'll have in terms of profitability matrix for both scenarios of volatility up and down and be able to unlock value in both market movements.

Russell Starr: I think we already nailed this next one, right? So let's get rid of that. You want to try that one?

Olivier Roussy Newton: As far as you mentioned, Middle East and Singapore, have you considered Sharia compliance products, knowing that, in essence, growing ETFs that are adopting Sharia compliance can be built specifically for cryptocurrency similar to normal ETF management movements? I mean about three -- I would say, 3.5, four years ago, I met with one of the governors of the Central Bank of Sharjah to discuss specifically this, Sharia compliance products, something that we're actively working on with stakeholders, obviously, with kind of Muslim-centric populations in Singapore specifically in both Middle East, we want to appeal to as a diverse crowd as possible. And I think there's other opportunities in the Middle East, Qatar and other innovative markets, and we'll do everything we can to ensure that our products are accommodating to the most diverse range of people and accessibility parameters. So we're definitely -- a topical question that we're definitely addressing.

Russell Starr: And then Dave is asking what percentage of the trading profit or is trading revenue as a profit? I think everybody needs to look at the company as a whole. So we basically did USD 10 million in revenue in Q1. Q2, the math is really easy, and I'm using U.S. numbers here, but our AUM is basically 50% higher in Q2. So multiply USD 10 million in Q1, which is basically breakeven for the year, just in Q1. So you have USD 15 million, call it, in profits for Q2, and you have $40 million in profits off of the trade. So we're already at a $55 million profit run rate in the first six months. $55 million should be trading at 20x profits because we're not even talking revenues, we're talking profits. That's a $1 billion AUM company. And if you look at our U.S. market, that's a four-bagger from our current share price. So there is a massive valuation disconnect here, which we're obviously going to be working on aggressively to change. There are broker-dealers all over in Canada and the U.S. that are reaching out to us now that they're seeing what this company is doing. And this is the irony, everyone. And people always ask, why don't more companies cover us? Well, my -- I helped build a company called Echelon. And when you're talking to the Canaccord, Stifles, Echelon, Morgan Stanley, you name it anyone, the reason why they love the miners and the reason why they love the Galaxies of the world is because they always need money. They're always diluting shareholders. We don't need to raise money. And as a result, fewer and fewer broker-dealers want to cover us because they can't pay their staff. So it's almost like a double-edged sword where people need to be asking why broker-dealers don't want to cover uber profitable companies? Well, I just gave you the answer. So I'll leave it at that, and let Oli talk about, I guess, Joseph's question here.

Olivier Roussy Newton: Yes. I think also just to touch on that. It's been, I think, my third or fourth bear market. And obviously, over the course of the last kind of two years, I like bear markets because you clamp down on costs, you cut out excess, and focus on core fundamentals. But now that the market is back, robust, buoyance, I think you'll see a lot of other product launches, things coming out of our venture studio. Now that the market is back, we have a sizable war chest to opportunistically roll the dice and make bets in this crypto ecosystem where there's tons of opportunities. So I think DeFi was just kind of one of those one of those opportunities. To move to Joseph's question, your yield offering product on Bitcoin seems like it could be a real game changer. How are you approaching marketing the core chain GP product and getting it in front of -- explain to your existing and new customers? So yes, we definitely think it's a game changer to offer yield and not just a small amount of yield, just under 6% for the world's largest digital asset. We see it as a complete game changer for retail and institutions. We're working with the Core Foundation directly on marketing campaign, and you'll see more initiatives in the format of short-form videos, research coverage of Reflexivity around the product and a lot more marketing to educate customers what it needs to receive such a high amount of yield on an asset class specific to Bitcoin that obviously a lot of people want to hold almost generationally like gold. So you'll see a lot more, Joseph, coming out of our marketing department around the core yield Bitcoin product as well as our core ETP that will be coming out shortly.

Russell Starr: And then Chris asked, do you have any direct competitors? I mean, really, the only competitor I think of as direct is 21Shares, Oli, you agree. I mean there's a couple of smaller guys out there.

Olivier Roussy Newton: Yes, I think there are -- 21Shares, which was essentially kind of created by Johan my co-founder at Valour. I think really what it comes down to in this space is being -- there's so much innovation happening in the crypto ecosystem that is just really staying up to date, up to speed with foundations and the innovators building these new protocols. The next Solanas that are coming out, making sure that we accommodate listing venues for them. And as long as we're at the forefront of that, I see it that we're rowing our canoe.

Russell Starr: Yes. It's -- look, competition will come eventually. It's just that there is a large regulatory hurdle to get there and...

Olivier Roussy Newton: I think we also have a dedicated loyal customer base that trust our technology infrastructure and our product would hopefully like the products that we're introducing to the market. So...

Russell Starr: All right, anonymous question, U.S. listing. Look, we just need to get to a reasonable share price. And again, like the amount of questions I get on, well, why are you trading so cheaply? My answer to that is always the same thing. Well, why aren't you buying it? Like I don't understand -- like it's almost like people look at a valuation opportunity as a weakness. People have made money over a century in the capital markets, finding mispriced equities, getting on them and making a lot of money. The question you should be asking yourself is, why am I not adding as much as possible to this stock in my portfolio because we were trading at $0.60, $0.50, $0.40, and I was very, very adamant. I was very, very bold. And I just said, look, you guys like eventually valuation will always trump mispricing in the markets. We're still there. I would argue, based on where we're guiding and based on what we've told you, we're actually cheaper now at $1.10 or $1.20 then we were at $0.80 or $0.60 when we had a different revenue model because we haven't started DeFi Alpha. We're almost -- our revenues are growing faster. Our revenues and our profits are growing faster than our share price is maybe the best way to look at it, which provides a massive opportunity. So to answer the question about the U.S. listing, we just need the stock to be at USD 2, and we're moving there closely. And we can engage an uplisting or look to pursue an uplisting onto a relevant U.S. exchange. That is absolutely at the top three of our priorities in terms of getting reasonable pricing because of you guys who are listening to us and funds and individuals aren't going to take advantage of this mispriced opportunity, then we have to find other people to do so, and you can do that through obviously uplistings to other major exchanges. But don't just think only U.S., the Middle East is a massive opportunity, Europe is a massive opportunity for us to uplist our stock. That's our primary market right now. If people aren't going to recognize this meaningful opportunity and this divergence between profits and valuation, we will look to go elsewhere for opportunities to do so. Oli, anything to add? Or you want to just take Fabs? It's the same question actually. So I'll get it, I might as well. Look, we're going to do this as soon as possible. Do I think an uplisting is possible by the year-end? I think an uplisting is possible in the next two months based on our guidance and what we've just shown you is the opportunity in our share price. You want to take Mark's, Oli?

Olivier Roussy Newton: Sure. Mark, the question is, can you enumerate for the audience, the ETPs on our shelves for which we are the sole issuer in the marketplace globally? So yes, we have quite a few ICPs, the new one that we just launched TON also chain-link specifically in Core, in the Nordics, Core, which will be coming shortly. And like I said in my kind of our, I would say, the largest growth factor for Valour's business was being timely in our product launch for Solana in the ecosystem. So for us to work with foundations and innovators directly in the form like we're doing so with Core of launching these products before they reach multibillion-dollar market capitalizations and working with regulators to make them comfortable and ensure that our technical and risk parameters are sufficient to give exposure to our clientele at earlier stages is really kind of a significant amount of time. So we definitely have world first. We'll continue to have more world first and I think that will remain as one of our major competitive advantages, is working directly with foundations. We've done so. This really only started a few months ago. But we've directly worked with ICP, Hedera, Core Foundation now, and we'll continue to work with foundations directly, which makes it obviously a lot easier for us to market the products and have kind of mutual -- mutually symbiotic relationship with us as a company and it also attracts other foundations to kind of reach out to us organically. So we're excited about being the leader in a bunch of different new ETPs going forward.

Russell Starr: Jim, always happy to answer your questions again. So why are topline revenues negative? This is kind of the bane of my and Oli's existence on a quarterly basis. There are mark-to-market adjustments that the regulators force us to make. For example, sometimes, we have a very large FX loss. It's actually not our loss. It's that the average price of the Bitcoin we bought for our clients to hedge out the ETP exposure and the Bitcoin or Solana or ICP or whatever. If that happens to be below the average price, there's an average FX mark-to-market loss, which isn't actually a loss, which will skew those revenue numbers. But in this particular case, it was due to a Genesis exposure. And if everybody is following Genesis very similarly to what happened with FTX, there's now about 130% coverage on the Genesis loan we had. So we believe, and all the lawyers are still going through it, but you would have seen recent news saying that Genesis is going to pay back everyone. We believe that we should have zero on that. But we had to make a non-IFRS adjustments which I still feel strongly otherwise. But to satisfy the regulator, even though at the date of Genesis bankruptcy, we already took a hit, the regulator asked us to take another hit, which then subsequent to that number literally three days, four days afterwards, there was news out that Genesis was not only going to pay everybody back, but they actually had the ability to pay everybody back and then some. So we're still waiting on the ultimate outcome. I would argue that it's not even a mark-to-market, it was a contingent. But again, if you just do the math on Q2 and our trading profit, even if you include that, we're still at $45 million in profit. So that's not to say it's not meaningful. It's simply to say that we do fall, unfortunately, underneath a regulator that despises crypto similar to the U.S., and sometimes there are what I would consider to be accounting measures taken that are erroneous and incorrect. But unfortunately, that's the world we live in. And I do believe that as this ecosystem becomes more and more and more accepted and retail adopts it, institutions adopt it, that this whole regulatory dislike for this business will change. So hopefully, that answered to Jim. And if not, happy to talk off this call just because we're at 2

Olivier Roussy Newton: Yes. This one is from Fab with miners having limitations on them. Do you ever see the day that HIVE and DeFi can get strategically closer? We're happy to have HIVE as one of our largest shareholders. And I've had discussions about optimization of using our trading desk technologies with miners and things of that nature. So I definitely think that the nature of miners a lot of them have diversified into artificial intelligence, and other use cases for other revenue streams. So I would definitely think that miners will kind of need to continually diversify their business models.

Russell Starr: Is the company planning to make a share buyback immediate? Look, guys, if our share -- Oli already answered this, but if we continue to be -- if people can't figure out how cheap this is and how much of an opportunity it is to buy it, we would not be a good or smart management team not to buy our stock back at 1/6th the reasonable valuation that any other company would be trading at. And that's miners, Galaxy, any of these other crypto entities that are trading at many, many, many multiples higher than we are. Oli, you want to take this one?

Olivier Roussy Newton: From anonymous, how are you modeling the new BTC interest product for analysts? I would assume that's for analysts. Yes, we have all of the information available online and analysts have already started to convert kind of information on those new product launches. We're fairly transparent with all of our product metrics, and I would assume that will get picked up in analyst coverage going forward. I can take the next one from Richard. Can you deploy significantly more capital into the DeFi Ventures line business. Richard, great question. We're absolutely assessing a large number of potential deals and opportunities. One, DeFi Ventures was set up to take stake -- stakes in early-stage protocols that can then be listed in the form of ETP ventures. So kind of specifically strategic crossover relevance for Valour. So we're looking at opportunities like that. And then we're also looking at opportunities that would complement our DeFi Alpha trading line of business and having stakes in some of these earlier-stage protocols benefits us. We'll definitely do that, but we'll definitely look to invest more going forward. And I think you should be seeing some of those announcements quite shortly.

Russell Starr: Greg wants to know why the market is not valuing us adequately? While we're in Canada, we're on the OTC, and we don't have a household name like Galaxy, HIVE, Hut, Marathon, but again, the question you should be asking yourself is why you're not buying more with the opportunity pretty much as obvious as it is right now. As more analysts cover us and there are more looking at us, as more brokers want to take us marketing, there are brokers who want to take us marketing, this valuation discrepancy will disappear. And just like when we were trading at $0.60, and I was committed wholeheartedly to telling people that this will be trading higher -- we're trading at CAD 1.20 now. And I am very, very confident that in two, three, four months, this will be trading at $3, $4, $5 because valuation discrepancies like this never ever, ever stay, basically funds figure it out, people figure it out, and it disappears. So you guys have it. I think this will be much higher very, very shortly. I don't know if we want to give price targets, Oli. I think they can do the math unless you want to.

Olivier Roussy Newton: I think we have covered that.

Russell Starr: I'll just hit Jim quickly just because I do know him really well. Jim, we are already sitting on excess capital. We have $9 million at the end of Q1 and $40 million, less $20 million we paid down for debt. So USD 20 million times 1.35, that's $26 million, $27 million plus $9 million, that's $36 million in cash sitting on the balance sheet today, not including monthly profits that we're generating currently.

Olivier Roussy Newton: Yes. Bobby, there will be a copy of this posted online. I would imagine an email goes to everyone who is subscribed. Spencer yes, I think we've covered all case scenarios unless you wanted to that again, Russ.

Russell Starr: It's just we get to $4 billion or $5 billion in AUM. That's $400 million or $500 million in revenue, minus $10 million for costs. You guys can do the math. That's $16 billion valuation. That's crazy numbers, but it's possible. No. Mike, our revenue guidance includes the revenue from DeFi Alpha, but no revenue projections going forward. So we're just assuming a onetime gain for DeFi Alpha. But as I've walked you through, Mike, we're already at 55. Even our guidance, in my opinion, is low, but it's better to be safe than sorry. And Oli, it's 3

Olivier Roussy Newton: Yes, I'm looking at them. I think we've pretty much covered all of them. Buyback program, we've covered. Jeff, if there's an uplist, will there be a symbol change? We will probably keep our symbol in Canada and drop the F on DFT our U.S. symbol. And I think I think that covers it.

A - Russell Starr: All right, everyone. Thank you very, very much.

Jamie Frawley: Russell, Oli, thank you guys very much. That was a great webinar, really well done.

Olivier Roussy Newton: Thanks, everyone.

Jamie Frawley: That concludes today's webinar. Thanks everybody who's joined the call today. As Oli mentioned, a replay will be available shortly. And keep an eye out on social media channels and e-blast. If you have any follow-up questions, please reach out to me any time. It's Jamie@irlabs.ca. And thank you, everyone, and have a great day ahead.

Russell Starr: Thanks guys. Thanks, everyone. Bye-bye.