GMO Financial Holdings,Inc. Q1 FY2025 earnings call

Core Business Performance

• OTC FX started the fiscal year at a high, strong profit level, with the segment holding over 20% domestic market share. Management continues to pursue being the clear number 1 service to grow unique active trader numbers.
• GMO Click Securities won first place rankings for its mobile trading app (from MINKABU) and customer satisfaction for swap points (from Oricon), and has held the number 1 domestic OTC CFD market share for 11 consecutive years with over 50% share in both product categories.
• GMO Click Securities added 4 high-interest currency pairs to its FX offering in March 2025, bringing the total to 30 pairs, to meet market demand and compete for customers focused on high-interest products.
• GMO Coin (crypto business) is focusing on expanding staking, a recurring stock-type revenue product that generates steady staking rewards as customer balances grow, to offset volatility from trading-based revenue. The business is also continuing initiatives to broaden its customer base to include new retail investors.

New Business Development

• GMO Office Support launched "Kuboko byGMO" in February 2025, a matching platform connecting companies with vacant workspace to users seeking to rent workspaces. This responds to growing customer demand for meeting and workspaces from the company's existing virtual office client base.

Long-Term Strategic Framework

• Maximize revenue from the core business, centered on GMO Click Securities, GMO FX, and GMO Coin. Management will pursue synergy and operational efficiency to build a large customer base and generate capital for growth.
• Allocate core business growth capital to new business segments to diversify the company's portfolio, leveraging the company's existing strengths in low-cost, convenient service that was built in financial services, to create new value in high-growth adjacent sectors.

1. Securities/FX Business: YoY, operating revenue decreased 5.4%, operating profit decreased 7.6%. Compared to the prior quarter, Q1 25 operating revenue rose ~10%, and the segment secured over 3.2 billion yen in operating profit. Within the segment, OTC FX trading volume increased 18.6% YoY and 5.4% quarter-over-quarter, with a stable domestic market share above 20% and margin deposit balance up 1.4% YoY. CFD revenue decreased 26.4% quarter-over-quarter due to spread reductions for customer acquisition to expand market share, though margin deposit balance rose 3.8% YoY to over 7 billion yen. Domestic stock brokerage commission decreased 27.2% YoY on a 30.4% YoY drop in trading volume, with a market share of 1.4%, though financial income increased 35.4% YoY from higher interest rates driving higher trust investment returns.
2. Crypto Asset Business: YoY, operating revenue increased 6.2%, operating profit was nearly flat with a 0.6% YoY decrease. Compared to the prior quarter, operating revenue decreased 27.3% and operating profit decreased 38.3%, but both remained at high levels. The drop from the prior quarter is due to the prior quarter's crypto market boom tied to the US presidential inauguration and one-off IEO fee revenue that did not recur in Q1 25. YoY, crypto trading volume increased 41.9%, account numbers grew by 103,000, and custody balance increased 25.5% YoY (the quarter-over-quarter drop reflected lower crypto asset prices reducing valuation, not outflows).
3. Thailand Securities Business: The business is winding down, with outstanding claim balances under agreed repayment plans decreasing steadily from 11 billion yen (January 2025) to 9.115 billion yen at end-Q1 25. Total collateral value was over 18.4 billion yen, for a collateral coverage ratio of 202.4%, with 743 million yen in bad debt allowance booked on the balance sheet.

• Management expects selling, general and administrative expenses to remain roughly stable in Q2 FY25, forecasted at approximately 8 billion yen, matching Q1 FY25's level of 7.8 billion yen.
• The company raised its target consolidated payout ratio from prior levels to 65% or higher starting in FY25, and will maintain a quarterly dividend schedule of 4 distributions per year. The Q1 FY25 dividend per share is set at 13.8 yen, which is higher than the prior year's Q1 dividend.

• The Thailand Securities business required an additional 400 million yen bad debt allowance in Q1 FY25, driven by falling collateral values: a previously non-performing claim faced legal delays to stock collateral liquidation, and stock prices fell before the collateral could be sold, resulting in the additional provision.
• Domestic stock brokerage revenue has declined sharply YoY, and the company's market share is very small at 1.4%, so management notes the business requires improvement to reverse the downward trend.
• Crypto asset revenue is highly volatile due to sensitivity to crypto price movements and trading activity, which can create large quarter-over-quarter swings in segment profitability.

No question-and-answer section is included in the provided transcript.