GMO Financial Holdings,Inc. Q2 FY2025 earnings call

Overall Financial Performance

• OTC FX, the company's core strength, continued strong performance and drove overall group results. Operating profit and net profit for the first half reached all-time record highs. Quarterly dividend per share hit an all-time high of 20.43 yen per share.
• Selling, general and administrative (SG&A) expenses decreased 36.0% year-over-year, which is primarily due to the absence of the 4.5 billion yen bad debt provision for the Thailand securities business that was recorded in the prior year quarter. Excluding this one-time item, SG&A has held steady around 7.5 billion yen.
• Second quarter (April-June 2025) operating profit increased 837.7% year-over-year to over 5.5 billion yen, a comparison distorted by the prior year one-time provision.

Strategic Direction

• The core strategic priority remains unchanged: "make strong businesses stronger", build a portfolio of No.1 platforms, diversify the business portfolio, and reinvest profits from core businesses into new high-growth sectors to create a sustainable growth cycle.

Core Business Initiatives

• OTC FX: Improve service convenience to strengthen competitive advantage, expand marketing to grow the customer base, and introduced the industry's first fixed order amount service for new retail traders to simplify required margin calculation. After shifting strategy from pure market share growth to prioritizing customer growth and deposit growth, share has resumed a gradual upward trend after a temporary decline.
• CFD: Revise marketing strategy to improve product awareness and increase cross-selling to existing FX and equity customers to grow margin deposits.
• Equities: Eliminated all domestic stock trading commissions and investment trust sales fees, and achieved the industry's lowest credit trading interest rates to build a leading low-cost, user-friendly online brokerage to mark GMO Click Securities' 20th anniversary. Fully compensated customers for all confirmed unauthorized trading losses up to May 2025 (recording a 36 million yen special loss), and will mandate multi-factor authentication to prevent future incidents. Added carefully selected new investment trust holdings to meet retail investor demand. Launched exchange-traded CFD (kurikku kabu 365) with industry-low fees and a user-friendly trading app.
• Crypto Assets: Strengthen stock-type services including staking, crypto lending, and accumulated crypto purchases (added a weekly accumulation plan in response to customer demand) to stabilize revenue, and enhance large-block trading services for institutional and VIP clients. Launched API integration with third-party investment advisory services to support automated program trading for customers.

New Business Initiatives

• Virtual Office Business: Expanded to 18 locations nationwide (most recently adding a Roppongi location), surpassed 30,000 total users, and continues growing the customer base with planned location expansion and new services.
• Medical Platform Business: Accelerate launch activities to roll out the service to the market.
• NFT Business: Develop regional revitalization projects that generate ongoing local support funding through secondary NFT trading royalties, with pilot initiatives completed for Japanese sake breweries.

Shareholder Return

• Strengthened shareholder return starting in the 2025 fiscal year, with a target consolidated payout ratio of 65% or higher.

Total consolidated operating revenue for the first half (January-June 2025) was 26.893 billion yen.

1. Securities & FX Segment: Contributed over 80% of total operating revenue. Operating revenue increased 0.3% year-over-year, and operating profit increased 144.6% year-over-year, driven by strong performance in over-the-counter (OTC) FX that offset declines in CFD revenue and financial income related to the exit from the Thailand securities business. OTC FX trading volume share rose to 21.5% with a 15% share of quarterly active users (QAU), and margin deposits saw a stable 0.7% year-over-year increase despite widespread market stop-outs. Equity segment financial income increased 50.6% year-over-year due to higher interest income on segregated client trust assets.
2. Crypto Asset Segment: Contributed 12.9% of total operating revenue. Operating revenue increased 1.5% year-over-year, while operating profit decreased 7.1% year-over-year. Trading volume increased 4.4% year-over-year, total accounts grew by 98,000 year-over-year, and client-held assets increased 62.8% year-over-year (partly due to rising crypto asset prices).
3. Other Segments: Contributed approximately 5% of total operating revenue, including the virtual office business and NFT projects.

• SG&A expenses are expected to hold steady near 7.7 billion yen in the third quarter, consistent with recent levels.
• No changes were announced to the company's 2025 full-year strategic or financial targets, with all previously stated strategic priorities maintained.

• The company completed an exit from the Thailand securities business, and the outstanding receivable balance under a structured repayment agreement has decreased from 11 billion yen in January 2025 to 8.3 billion yen as of the end of the first half 2025. The company will continue to pursue repayment from the debtor per the agreement, but full collection remains uncertain.
• U.S. tariff policy has driven increased volatility in global equity and foreign exchange markets, which creates both trading opportunities and increased risk of client margin stop-outs that can temporarily erode client deposit balances.
• CFD business faces the ongoing key challenge of growing client margin deposit balances, which have declined 2.3% year-over-year.

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