GMO Financial Holdings,Inc. Q4 FY2024 earnings call

• Overall FY2024 Summary:

  • Group operating revenue reached an all-time high, but net operating profit declined year-over-year due to the large bad debt allowance booked for the Thailand securities business.
  • The crypto asset business drove overall group growth, supported by a booming crypto market, with revenue more than doubling year-over-year.
  • Management decided to wind down the Thailand securities business: credit trading services ended in December 2024, and full closure and liquidation are scheduled for December 2025.

• Core Business Operational Updates:

  • FX: Unique active traders grew steadily and domestic trading market share rose to 25.6% across the group's platforms, maintaining high revenue levels despite a year-over-year decline from the prior year's record high.
  • CFD: Trading volume increased year-over-year, revenue grew 10% year-over-year, but stagnant customer deposit balances highlighted low product awareness, requiring revised marketing strategies.
  • Domestic Equities: Brokerage commissions continued a steady decline (down 10.3% year-over-year), though interest income grew slightly from the VIP large client credit trading program, with management acknowledging a need for strategic intervention.
  • Crypto Assets: Total accounts grew by 95,000 year-over-year, and custody balance increased 144.2% year-over-year (driven primarily by rising asset prices). Staking revenue grew from 5 million yen initially to over 100 million yen, becoming a growing stable revenue stream. The company completed a large 2 billion yen IEO for NOT A HOTEL COIN in FY2024.

• Thailand Securities Business Progress:

  • All outstanding credit trading balances were fully resolved by January 15, 2025, closing the credit trading service completely.
  • 10.92 billion yen in remaining non-performing credit claims were converted to structured repayment agreements with 15 borrowers, with an overall collateral coverage ratio of 186%. Over half of the claims have coverage over 200%, and only 536 million yen has coverage below 100%.
  • Management targets recovering over 90% of total principal within the next two years, and had already recovered 839 million yen by the end of January 2025.

• Shareholder Return Update:

  • The Q4'24 dividend was set at 5.24 yen per share.
  • Management is increasing the target consolidated payout ratio from 50%+ to 65%+ starting in FY2025 to strengthen shareholder returns.

1. Securities & FX Segment: Full-year operating revenue decreased 8.4% year-over-year, operating profit decreased 63.5% year-over-year. Within the segment, FX revenue was 26.3 billion yen, down 11.7% year-over-year; CFD revenue was 8.91 billion yen, up 10% year-over-year. The large decline in operating profit is due to the inclusion of 9.5 billion yen in bad debt allowance for the Thailand securities business. In Q4'24, the segment posted an operating loss due to the Thailand securities business impact. This segment accounts for approximately 82.7% of total company revenue. 2. Crypto Asset Segment: Full-year operating revenue was 7.5 billion yen, up 124.6% year-over-year, with operating profit growing sharply year-over-year, leading overall group revenue growth. In Q4'24, the segment's operating profit offset the operating loss from the Securities & FX segment. This segment accounts for approximately 14.9% of total company revenue. 3. New Businesses: Virtual office business passed 20,000 users with steady customer base expansion, but revenue growth remains a challenge. Medical platform business launched in September 2024 and is still in development. 4. Thailand Securities Business: Full-year bad debt allowance totaled 9.5 billion yen, 2.8 billion yen of which was recorded in Q4'24.

• Overall strategic guidance maintains the long-term approach of "strengthening already strong businesses" to drive growth.
• For FX: Improve service convenience to boost competitive advantage, increase marketing investment to grow total customer count and customer deposit balances, with the ultimate goal of expanding domestic trading market share.
• For CFD: Revise marketing strategy to improve product awareness, and target higher cross-selling conversion from existing securities and FX customer bases.
• For Crypto Assets: Expand staking and crypto lending to build stable, recurring (stock-type) revenue and reduce reliance on volatile trading revenue, while also launching enhanced services for institutional and VIP clients. Management plans to pursue 1-2 IEO projects per year going forward.
• For New Businesses: Continue expanding locations for the virtual office business, add new services to push towards profitability, and accelerate the launch and monetization of the medical platform business as scheduled.
• For cost guidance: Selling, general and administrative costs are expected to fall to approximately 8 billion yen in Q1 2025, down significantly from 11.5 billion yen in Q4'24 (which was inflated by bad debt allowance charges).

• The Thailand securities business has 18.24 billion yen in remaining non-performing claims that will be gradually recovered over multiple years. Although the overall collateral coverage ratio for structured repayment claims is 186%, full recovery of all outstanding balances is not guaranteed, and additional loss provisions could be required if recovery falls short of targets.
• A court-ordered temporary halt to collateral liquidation was filed by a borrower, delaying the disposal of 800 million yen in collateral and increasing recovery uncertainty.
• FX and CFD face intensifying industry competition, with pricing competition spreading from spreads to swap rates, compressing margins and requiring higher marketing investment to acquire customers.
• Crypto asset revenue remains highly correlated to Bitcoin price volatility, so a market downturn would lead to sharp declines in segment revenue and profit even with the growth of stable staking revenue.
• Domestic equity brokerage commissions have declined steadily for multiple years, and management has not yet identified effective interventions to reverse this trend, creating ongoing pressure on domestic equity segment earnings.
• New businesses (virtual office, medical platform) have not yet achieved profitability, creating near-term earnings drag while requiring ongoing investment.

No question and answer section was included in the provided transcript.