GMO Financial Holdings,Inc. Q3 FY2025 earnings call

• Overall Corporate Strategy

  • Maintains long-term strategy of "strengthening strong core businesses" while pursuing business portfolio diversification via investment in new growth areas such as virtual office services and health tech.
  • Strengthened shareholder returns starting in the 2025 December fiscal year, targeting a payout ratio of 65% or higher. For the first three quarters of 2025, total dividend per share reached 49.10 yen, exceeding the total dividend paid over the prior three years combined.

• Core Business Operational Updates

  • OTC FX & CFD: Despite lower near-term volatility reducing revenue, active user counts and margin deposit balances continue growing, building a base for future profit growth when volatility rebounds. A 20th anniversary large-scale promotion launched in late October to acquire new accounts and drive cross-selling to grow CFD customer base and balances.
  • Stock Brokerage: Implemented zero trading commissions and zero investment trust sales commissions starting September 1 as part of a "return to origin" 20th anniversary strategy. September new account growth reached 1.8x the 12-month average, with ongoing marketing campaigns planned to grow the customer base and drive cross-selling to FX, CFD and crypto products. A 0.106 billion yen special loss was recorded this quarter for full compensation of unauthorized trading that occurred before mandatory additional login authentication was implemented, bringing total compensation for pre-mandate unauthorized trading to 0.143 billion yen. Mandatory additional login authentication is already active, with an upgrade to FIDO2 authentication planned for Q1 2026 to strengthen security. Added flexible daily/weekly scheduled investment trust contributions and 8 new leveraged bull/bear funds to cater to existing leveraged product customers from FX/CFD.
  • Crypto Asset Business: Continues to strengthen recurring staking services, with enhanced promotion of combined crypto dollar-cost averaging and staking that allows customers to earn monthly staking rewards on accumulated holdings.

• New Business Updates

  • Virtual office business expanded to 19 locations and surpassed 30,000 total users, adding new drop-in and pre-booked workspace services to improve customer convenience and expand service offerings.

1. Securities & FX Business: Reported a year-over-year decrease in operating revenue, but achieved a year-over-year increase in operating profit. Within this segment, OTC FX and CFD saw an overall 19.3% YoY decrease in revenue driven by lower market volatility reducing trading volumes; CFD also saw modest margin compression from competitive spread reductions. OTC FX holds a 21.5% domestic trading volume share and 15% active quarterly user (QAU) share, with margin deposit balance up 9.2% YoY to a new consecutive all-time high. Stock brokerage saw a 35.9% YoY drop in commission revenue following the September 1 commission free rollout, though trading value increased 2.5% YoY with a 1.4% market share; financial income from customer segregated trust funds rose 65.3% YoY driven by higher interest rates.
2. Crypto Asset Business: Achieved year-over-year revenue and profit growth. Trading volumes increased YoY driven by record high prices for Bitcoin and Ethereum, with revenue and profit moving in line with trading volumes as expected. Total customer accounts increased by 100,000 YoY, and customer assets under custody reached 520 billion yen, up 111.2% YoY (driven largely by price appreciation of held crypto assets). Staking revenue, the firm's core recurring stock offering, continues to grow steadily since launch in March 2021.
3. Other Businesses (including new virtual office business): This segment is in early growth, with GMO Office Support (virtual office) reaching 19 locations nationwide, 30,000 total users after launching its new Ueno location, and expanding service offerings to include workspace booking.

• The company maintains its 2025 full-year strategy of "strengthening strong core businesses" with no changes to prior strategic guidance.
• Q4 2025 selling, general and administrative expenses are projected to be approximately 8.2 billion yen, an increase from the current ~7.5 billion yen run-rate to account for higher marketing spending tied to zero commission rollout and 20th anniversary promotional campaigns.
• For the Thailand Securities business outstanding distressed receivables, management reaffirms the guidance that over 90% of total principal will be collected by the end of 2026.

• Lower volatility in foreign exchange markets reduces OTC FX and CFD trading volumes, leading to near-term revenue declines for the core securities and FX segment.
• The zero commission stock brokerage strategy will lead to near-term declines in commission revenue, and there is uncertainty that growth in customer base, cross-selling, and financial income will fully offset this revenue loss.
• Outstanding distressed receivables from the Thailand Securities business remain outstanding, even though current collateral levels are sufficient and management expects 90% collection by end-2026, there is collection risk that could require future loss provisions.

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