Q1 2025 Galaxy Digital Holdings Ltd Earnings Call
Please stand by, your program is about to begin.
Good day, everyone, and welcome to the Galaxy Digital First Quarter 2025 earnings call. At this time, all participants are in and listen only mode. Later, you have the opportunity to ask questions during a question and answer session.
To register, ask a question you may press the star and one on your touchtone telephone anytime. If you find your question has been answered, you may remove yourself from the queue by pressing star two.
Speaker Change: Please note, space call may be recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the program over to Mr. Jonathan Gudowsky, Head of Investor Relations. Please go ahead.
Jonathan Goldowsky: Good morning and welcome to Galaxy's first quarter 2025 earnings call.
Jonathan Goldowsky: Before we begin, please note that our remarks, including answers to your questions, may include forward-looking statements.
Jonathan Goldowsky: Actual results could differ materially from those described in these statements as a result of various factors including those identified in the disclaimers in our earnings release or other filings which have been filed with the U.S. Securities and Exchange Commission and on Cedar Plus.
Jonathan Goldowsky: Forward-looking statements speak only as of today and will not be updated.
Jonathan Goldowsky: Additionally, we may discuss references to non-GAAP metrics, the reconciliations of which can also be found in our earnings release.
Jonathan Goldowsky: Finally, none of the information on this call constitutes a recommendation, solicitation, or offer by Galaxy or its affiliates to buy or sell any securities.
Speaker Change: With that, I'll turn it over to Mike Novogratz, founder and CEO of Galaxy.
Good morning everyone, it's an exciting week here at Galaxy.
Speaker Change: Three minutes after midnight last night, we officially became a US company. That was a long time coming. We literally looked back. It was...
Speaker Change: 1,317 days ago where we first filed to try to be public here in the US and so for all of us here and for all of you investors that have been with us there's both a side relief and a great sense of excitement.
You know, why NASDAQ, and why am I so excited? Listen, the...
Speaker Change: The opportunity to participate in the US Capitol markets is an exciting one. For the first time, we're going to be accessible to platforms like Robin Hood and E. Toro and all the retail platforms that have been driving a lot of US equity performance.
Speaker Change: That had been driving a lot of U S equity performance, where Oscar become eligible for inclusion in market indices like the S&P, the Russell MSCI and so just with the enhanced visibility being able to actually talk about our company.
Speaker Change: C N B C.
Speaker Change: We just think it's going to drive a lot of excitement we're a growth company a period. We've got two two vectors right now our crypto business and our AI business and we see huge opportunities in both.
Speaker Change: We continue to hope for clear and regulations coming out of D. C I'm a little disappointed.
Speaker Change: The grid lock rate going on right there around crypto.
Speaker Change:
Speaker Change: And so we're hoping and we're working really hard to help in that legislative process, but even without the legislative process. The regulatory process. The clarity thats coming out of the FCC and CFT C is giving you the whole industry is a huge boost we haven't seen this much activity from institutions.
Speaker Change: In a long long time.
Speaker Change: I think I I first mentioned the phrase the herd is coming this idea that institutions would come to crypto.
Speaker Change: Way back in 2016, or 2015, even and I was I was really early but I can tell you emphatically and categorically. The institution institutions are here now they are looking at ways to get involved not just in crypto space, but in the whole blockchain as infrastructure space.
Speaker Change: We are gonna token is real world of assets Youre going to see equities on the blockchain.
Speaker Change: So it's the dawn of a new new era, that's just starting.
Speaker Change: Before I pass this to Chris and Tony.
Speaker Change: Talk about the guts of the quarter I would say two things Q1 was not a great quarter for crypto or for galaxy. Thank goodness.
Speaker Change: Both the crypto markets have rebounded and in our P&L has as well and so we're coming into this this listing week with what we feel is great momentum.
Speaker Change: And great energy.
Speaker Change: Finally, I want to thank both Dominic and Damien who are stepping down from our board.
Speaker Change: Been a great service to Galaxy, and we wish them, well and I'm sure they'll still be part of the Galaxy family.
Speaker Change: Tony.
Speaker Change: Pass it to you for the the fun stuff.
Mike Novogratz: Great. Thank you, Mike and thanks, everyone for joining our call today.
Mike Novogratz: Before I walk through the Q1 results I want to take a moment to discuss an important update to our financial reporting framework that reflects the ongoing evolution of galaxies business bigger.
Mike Novogratz: Beginning this quarter, we are transitioning from reporting financial results across our previous three operating business segments Global markets asset management and digital infrastructure to a new consolidated structure with two operating business segments digital assets and data centers and one corporate segment called Treasury and corporate.
Mike Novogratz: This re segmentation reflects both how we operate internally and.
Mike Novogratz: And how we believe investors can best evaluate the strategic and financial performance of our business going forward.
Mike Novogratz: Our digital asset segments brings together all of galaxies franchise crypto related operations under one umbrella. This segment now aligns our global markets businesses, which include our trading and investment banking activities, along with our asset management and infrastructure solutions businesses, including investment management and blockchain infrastructure off.
Mike Novogratz: <unk>, such as Staking Tokenism mission and custodial technology.
Mike Novogratz: These businesses increasingly operate in lockstep from how we engage with clients to how we deploy technology to how we manage our risk. We believe this reporting structure will provide the investment community with a more cohesive view into the breadth and performance of our client facing digital asset business.
Second we've introduced a dedicated data center segment to reflect the growth and strategic importance of our plan to transform Helios into a world class data Center.
Mike Novogratz: While we do not expect to generate revenue from this segment until sometime in early 2026 Galaxy is already making investments and incurring certain expenses as we retrofit the existing facility and as we prepare for further expansion of the site.
Mike Novogratz: We are currently capitalizing these expenses.
Mike Novogratz: <unk> staffing equipment and certain financing costs as they directly contribute to preparing the facilities for operational readiness. These investments are capitalized costs will be depreciated over the assets useful life. Once we begin delivering.
Mike Novogratz: Critical load and recognizing revenue early in 2026.
Mike Novogratz: Although we expect de Minimis operating income from the datacenter segment. This year breaking it out now provides clear visibility into how current investments are laying the foundation for future revenue and how we are allocating capital to drive to drive long term value across our operating businesses in.
Mike Novogratz: In addition to the two operating segments, we have established a new treasury and corporate segment, which captures the economic impacts from our balance sheet investments along with other financial results not directly tied to our operating businesses such as non client facing activities and certain legal costs.
Mike Novogratz: Due to the retirement of our mining activity at our Helios campus in Q1, which consisted of over 90% of our total mining capacity.
Mike Novogratz: This segment will also include our remaining bitcoin mining operations in East, Texas, which is much smaller and is now propriety entirely proprietary in nature.
Mike Novogratz: Introducing this new breakout is intended to enhance transparency and provide a clear distinction between our balance sheet activities and the performance of our core operating businesses. This new reporting framework is taking effect this quarter and we will make.
Mike Novogratz: Recast historical results in this construct available for comparison purposes.
Mike Novogratz: In addition, we've also moved to reporting U S. GAAP financials, beginning this quarter, reflecting our domestication is a Delaware incorporated company, which will streamline both our internal and external reporting processes going forward, we will no longer be reporting I F. R. S financials, but again, we will make U S. GAAP quarterly results available for historic.
Mike Novogratz: For comparison purposes.
Mike Novogratz: One thing to note on our reported results under U S. GAAP, the notional value of purchases and sales of certain digital assets with clients and exchanges are required to be reported as revenue and transaction expenses on a grossed up basis.
Mike Novogratz: As you'll see on page two of our earnings release. This gross up results in a very large value for GAAP revenue and transaction expenses due to this accounting treatment. We believe that adjusted gross profit a non-GAAP measure provides a more meaningful reflection of our revenue and financial performance.
Mike Novogratz: And accordingly, we will reference this metric as a primary measure for digital assets on today's call and going forward.
Mike Novogratz: With that let me turn to the highlights for the quarter.
Mike Novogratz: As Mike mentioned in Q1, we saw meaningful pressure across crypto markets with bitcoin down 12% for the quarter and aether aether enchilada down between 30 and 50% against this backdrop, we reported a net loss of 200 and $295 million for the first quarter, driven primarily by the reduced value of our balance sheet digital asset holdings.
Mike Novogratz: Our operating expenses, excluding grossed up transaction costs were $188 million for the quarter.
Mike Novogratz: And this was down.
Mike Novogratz: Approximately $143 million quarter over quarter, driven by a reduction in the G&A from the absence of a legal settlement in Q4, and partially offset by a onetime $57 million impairment charge tied to the wind down of mining operations at Helios and <unk>.
Mike Novogratz: Excluding one time items total operating expenses were roughly $130 million in the first quarter.
Mike Novogratz: Our equity capital remains strong at $1 9 billion as of March 31, including $1 $1 billion in cash and net stable coins.
Mike Novogratz: We ended the quarter with roughly $740 million of non current investments on our balance sheet, consisting primarily of fund private equity and venture investments, which are marked at fair value as at March 31.
Mike Novogratz: In Q1, we proactively managed our risk exposure by reducing a portion of our digital asset holdings, while increasing our cash and net stable coin position.
Mike Novogratz: As we embark on a multiyear multibillion dollar datacenter build maintaining a disciplined approach to capital and liquidity management is paramount.
Mike Novogratz: We remain focused on managing our balance sheet in a way that supports the capital intensive demands of the datacenter expansion. While also ensuring we are well positioned to meet the evolving opportunities across our digital asset businesses.
Mike Novogratz: Our risk management framework and deliberate approach to capital deployment enable us to invest with high conviction, when we see opportunities and just as importantly, reduce risk when and where appropriate.
Mike Novogratz: This approach provides us the capacity to support growth across our businesses, while offering clients counterparts and investors the confidence to partner with Galaxy as we continued to grow.
Mike Novogratz: Now turning to our operating business results, starting with digital assets.
Mike Novogratz: Our digital asset segment generated approximately $65 million in adjusted gross profit and $3 $5 million in operating income in the first quarter.
Mike Novogratz: As previewed on our Q4 earnings call our trading business experienced strong client demand in January but faded into February leading to a slowdown in activity and a softening of trading revenue, particularly in the latter half of the quarter.
Mike Novogratz: On a positive note our lending business continued to be a point of stability with healthy activity throughout the quarter.
Mike Novogratz: We grew our average loan book modestly from Q4 to roughly $870 million in Q1 and delivered net interest revenue of roughly $23 million up 25% quarter over quarter.
Mike Novogratz: We continue to maintain a disciplined approach to underwriting and our lending business, which has been well received by both new and existing counterparties.
Mike Novogratz: On the investment banking side, we were proud to serve as a co manager on the core we've IPO in Q1, and our team continues to deepen relationships across the ecosystem as the broader market environment gains momentum.
Mike Novogratz: Bigger picture, we are seeing increasing interest from traditional financial institutions, particularly those particularly those seeking regulated structured access to crypto currency markets. In response, we've taken a deliberate approach to securing key licenses, notably our registration as a U S swap dealer and more recently, our U K registration.
Mike Novogratz: Under the approval of the U K FCA.
Mike Novogratz: This new FCA license enables our London based teams to execute transactions on behalf of clients further expanding our global reach and institutional capabilities.
Mike Novogratz: These formal regulatory registrations reflect our commitment to operating with the highest standards of compliance and governance positioning galaxy is a trusted counterparty to institutions globally.
Mike Novogratz: Now turning to our asset management and infrastructure solutions business. We ended the first quarter was approximately $7 billion in combined assets under management and assets under stake a 20, 29% decline quarter over quarter, reflecting the pullback in crypto prices. Despite this in Q1, our asset management and infrastructure solution.
Mike Novogratz: Segment delivered $22 million in adjusted gross profit, which you can think of is essentially fee based revenue down just 8% from the prior quarter.
Mike Novogratz: In general we continue to see healthy demand for our asset management products and I am pleased to share that we achieved a key milestone in our venture franchise raising over $160 million and commitments to the Galaxy Crypto venture fund exceeding our initial target.
Mike Novogratz: We continue to see healthy momentum in fundraising reflecting growth growing institutional confidence in our long term approach to venture investing in the digital asset ecosystem on.
Mike Novogratz: On the distribution front, one of the largest U S wealth platforms with over two trillion in client assets recently began offering BTC O R. U S spot bitcoin Etfs. This quarter. This further expands galaxies products across traditional wealth channels and reinforces the continued integration of digital assets.
Mike Novogratz: Into mainstream investment portfolios.
Mike Novogratz: Subsequent to quarter end, we launched a salon in ETF in partnership with C. I in Canada. The first of its kind to incorporate staking intuit structure. This ETF will leverage galaxies, salada validate or nodes as well.
Mike Novogratz: One of its taking providers and as a notable product innovation, which aligns our broader commitment to delivering differentiated institutional grade access to crypto markets.
Mike Novogratz: Our sticking business continues to integrate with additional platforms, including Zodiac announced last week, whose clients can now access our staking services directly through their custodial accounts we.
Mike Novogratz: We see these integrations as an important growth drivers over time, and we remain focused on expanding our pipeline of strategic partners.
Mike Novogratz: We're all excited about the opportunities ahead of us and digital assets. We see we are seeing a powerful shift in the wealth landscape, where a new class of high net worth individuals is emerging one that traditional banking services have often underserved at galaxy. We believe this presents a significant opportunity to deliver institutional grade digital assets.
Mike Novogratz: Solutions to a broader more dynamic investor base.
Seven plus years of experience building products and infrastructure to support the crypto economy positions us uniquely to bridge the digital and traditional financial ecosystems. We are still in early early in this evolution and we continue to and innovating new products and services and look forward to sharing more with you on our ambition.
Mike Novogratz: In this space in the months and quarters to come.
Mike Novogratz: A quick comment on our data center segment as I mentioned earlier, we do not expect material financial results from this segment until early 2026, when we begin recognizing revenue in accordance with the phase one lease in Q1, we did recognize certain expenses prior to the lease signing leading to a modest operating loss of $3 million going forward we.
Mike Novogratz: This operating loss to be roughly flat during the remainder of the construction period.
Mike Novogratz: Lastly, I'll touch on our Treasury and corporate segment and Treasury and corporate we reported a first quarter loss of $392 million, primarily due to the decline in digital asset prices in Q1, along with a one time impairment charge and associated disposal costs related to the wind down of our mining operations at Helios.
Mike Novogratz: As part of this transition we fully unplugged, all bitcoin mining machines at our Helios campus at the end of Q1, we've made progress on our plan to reallocate to relocate our mining infrastructure and are actively exploring other strategic alternatives, including a potential sale of equipment as.
Mike Novogratz: As noted we maintained a healthy liquidity position with cash and stable coins up approximately 60 $60 million to $1 1 billion at Q1.
Mike Novogratz: And at $900 million of net digital ASIC exposure at the end of the quarter, consisting of $520 million in bitcoin $150 million and ether and $240 million in other token exposure.
Mike Novogratz: Before I turn it over to Chris I want to touch on our Q2 preliminary performance and provide an update on the status of our domestication and reorganization enlisting.
Mike Novogratz: So far Q2 has seen a marked improvement in digital asset prices and overall activity with bitcoin up 26% year to date or quarter to date and ether in salon are up roughly 40% and notably the volatility profile of bitcoin and other large crypto currencies has begun to steady in recent weeks.
Mike Novogratz: As of May 12th quarter to date operating income was between positive $1 60, and $170 million. This figure does not include a negative mark to market adjustment of approximately $125 million on the embedded derivatives associated with our exchangeable notes, which is driven by the Q2 to date appreciation and.
Mike Novogratz: Alexey stock price.
Mike Novogratz: Note due to the reorganization and domestication Q2 will be the last quarter that our P&L will be impacted by the charge and value of these embedded derivatives.
Mike Novogratz: As of May 12, our total equity capital was approximately $2 2 billion. This includes a one time increase of approximately $290 million in reported U S. GAAP equity capital driven by the consolidation of our corporate structure, resulting from the reorganization.
Mike Novogratz: Of note due to the accounting treatment for the business combination, there's $290 million will be a onetime direct increase to equity capital in Q2, but it will not have any impact on our net income for the quarter.
Mike Novogratz: Lastly, as Mike mentioned earlier, we are pleased that galaxy is moving forward with our planned transition to NASDAQ. This Friday may 16th this is a pivotal milestone for our firm one that we bought we believe will unlock meaningful long term value for our shareholders. NASDAQ is one of the largest and most liquid equity markets globally with deep trading volume and broad investor participation.
Mike Novogratz: Dissipation listing on NASDAQ will provide us a more powerful platform to strengthen our market presence expand our investor base and access capital at greater scale over time, we expect galaxy to be included in certain U S equity indices, something that will serve to broaden institutional ownership provide investors stability and improves Trey.
Mike Novogratz: <unk> depth over time.
Mike Novogratz: As Mike mentioned, we expect our U S listed stocks to be added to many of the largest retail brokerage platform significantly expanding access for individuals interested in investing in galaxy.
Mike Novogratz: We're excited about what's ahead and appreciate the support of our investors as we enter this next chapter Chris I'll turn it over to you.
Chris: Thank you Tony let's talk data centers.
Chris: Since we reported Q4 earnings that team has been busy executing on our plan to transform our Helios campus for a bitcoin mining facility into a world class data Center campus in the Panhandle region of West Texas.
Chris: Last quarter, we announced the execution of a 15 year build to suit lease agreement with core we've to support 133 megawatts of critical load and just a few weeks prior to today's call. We shared that <unk> has executed one of their options to contract additional capacity at our Helios campus.
Chris: The exercise option will bring an additional 260 megawatts of critical load online through new Greenfield developments at our Helios campus to support core weaves AI and HBC needs.
Chris: Over the course of the second 15 year lease once we have energized the full 260 megawatts of critical load, we expect to generate approximately $9 billion of total incremental revenue or approximately $600 million of average annual revenue when accounting for annual escalators.
Chris: As with phase one excluding the costs associated with galaxies onsite personnel all operating expenses, we pass through to our tenants and we expect similar EBITDA margins of approximately 90% for both phases for the duration of the contract.
Chris: Unlike the phase, one retrofit, which leverages, our existing 126000 square foot data center shell phase two involves the construction of new data center buildings purpose built for AI and H P C.
Chris: While certain infrastructure elements from our phase one build such as campus fiber can be leveraged for phase two we anticipate slightly higher capex due to the added civil structural and architectural requirements associated with Greenfield development.
Chris: As a reminder, we already have power agreements in place and have secured the long lead electrical infrastructure ready to be energized that our private substation.
Chris: Our timeline to energize phase two is meaningfully faster than a typical greenfield development because of these strategic long lead infrastructure purchases.
Chris: We are still finalizing delivery timelines with core we've on phase two but expect to begin delivering critical load within the first half of 2027.
Chris: To support our construction and expansion of our Helios campus. We are actively pursuing project level debt financing for both phase one and phase two.
Chris: We continue to see robust demand in the financing market for these projects and we anticipate closing financing for phase one in the coming weeks with long term refinancing optionality expected once the projects are fully operational and stabilized.
Chris: Phase one and phase two at our Helios campus represent the cornerstone of our long term data center business strategy with a combined 393 megawatts of critical load now contracted and underdevelopment.
Chris: Together these projects position galaxy to generate over $13 billion of revenue over the next 15 years completely uncorrelated from digital asset prices and volatility.
Chris: Core we are executing the phase III option agreement underscores the growing confidence in our Helios campus as a long term high value asset for AI and H P. C infrastructure and galaxies continued evolution into a trusted provider for one of the world's largest AI cloud service providers.
Chris: And still we are only just beginning as.
Chris: As a reminder, we have ERCOT approval to scale, our Helios campus up to 800 megawatts of gross power capacity today, and we feel highly confident in our ability to contract. The remaining 200 megawatts. We also have an additional one seven gigawatts currently under various stages of study and our team is working closely with <unk> and other stakeholders to finalize these approvals.
Chris: Furthermore, the team has been hard at work building a pipeline of actionable opportunities that we have been evaluating for future potential acquisition and development.
Chris: Evaluated close to 40 different potential sites, primarily across the United States with approximately half of them, having advanced for further analysis through our evaluation pipeline.
Chris: While we are primarily focused today on executing on phase one and now phase two for core we've at our Helios campus. We are encouraged and excited about the consistent growth in actionable pipeline opportunities that are coming across our desks and we intend to prudently prudently pursue expanding our forward opportunity set so that we are positioned to be a leading a leading AI H P. C.
Chris: Infrastructure developer five years from now and beyond.
Chris: In a market, where near term AI and HBC infrastructure severely supply constrained and lead times for new utility capacity can be multiyear galaxy is positioned to not only be one of the largest early developers of large scale Nextgen data center infrastructure at Helios, but also to then leverage that platform to grow into one of the long term winners in this space.
Chris: I'll now pass it back to the operator, and we'll do questions. Thank you.
Speaker Change: Thank you as a reminder, at this time, if you would like to ask a question. It is star and one on your Touchtone telephone.
Speaker Change: At any point you find your question has been answered you may remove yourself from the queue by pressing star too well.
Speaker Change: We'll take our first question from Greg Lewis at BTG. Please go ahead. Your line is open.
Greg Lewis: Yes, Thank you and good morning, and thank you for taking my questions.
Speaker Change: I was hoping this.
Speaker Change: First talk a little bit about the data center opportunity can appreciate the comments around the around the 40 potential sites and realizing that the immediate focus is on really getting the financing getting phase one up and ready, but just given the long lead time cycles. It does take to develop data center sites for the <unk>.
Speaker Change: Sure.
Speaker Change: I guess any kind of color around the timing of potential additional acquisitions and then as we think about the size.
Speaker Change: Realizing that.
Speaker Change: <unk> is has the potential to be a multi gigawatt site is there.
Speaker Change: Not going to be easily replicable what.
Speaker Change: Types of.
Speaker Change: Project sizes are we thinking about.
Greg Lewis: Sure Hey, Greg and good morning, I. Appreciate you are you joining.
Greg Lewis: Yeah. So I would say you know as I said in the remarks first and foremost.
Greg Lewis: The most important thing item number 123 and four on our priority list is executing on phase one and now phase two at Helios start with core <unk> and executing on it excellently both from a project.
Greg Lewis: Delivery being on time on budget from a financing perspective, getting our capital capital structure.
Greg Lewis: Right and strong to be able to continue to develop that I felt like that's priority priority number one through five for us.
Greg Lewis: Your comment is correct, though we do view this opportunity as not just a single project that we're that we're going to monetize but we view it as a.
Greg Lewis: A long term business opportunity for the firm and frankly, if we given the work we've done so far and the position we have in the market.
Greg Lewis: We view ourselves as one of only a handful of people who.
Greg Lewis: If we do well have won the right to actually win the space long term and so building building. Our pipeline is of opportunities is has been next on our list and has been in the works in the background.
Greg Lewis: As I said, we are looking primarily in the United States for now I think there is a very large demand here from some of the largest companies in the world.
Greg Lewis: And for a lot of reasons.
Greg Lewis: The U S is extremely well positioned from a cost of energy perspective.
Greg Lewis: From a land availability perspective from a workforce perspective with with a government that is now extremely focused and behind growing the industry and so were focused there.
Greg Lewis: Great site sizes are not not today.
Greg Lewis: Accessible at the size of Helios is that truly with the potential to be up to two five gigawatts. It is truly a a.
Greg Lewis: One of only a few if not one of one asset that we already have.
Greg Lewis: So I would think about it as we're looking at both behind the meter opportunities with.
Greg Lewis: With co load with a new generation projects as well as power land opportunities.
Greg Lewis: At our at.
Greg Lewis: Either already.
Greg Lewis: Greed and connected or power or are applying for internet interconnect opportunities and the sizes are I think the average size in the in the pipeline that we looked at is close to 500 megawatts, but of course. These are sort of like projected project sizes, and so they'll vary too from a 100 megawatts to 300 to 500 megawatts of sort of the average size we're looking at.
Greg Lewis: Okay, Great and then I did want to shift gears and talk a little bit about the snaking business.
Greg Lewis: I guess a couple questions here and you know as we think about the stake in business and realizing it's going to grow over time, but as we kind of think about where it is today.
Greg Lewis: We were kind of doing some numbers and you know maybe these theorems thinking market is an 85 billion dollar market.
Greg Lewis: Just the rough kind of gas.
Greg Lewis: Just kind of have any views on.
Greg Lewis: What size.
Greg Lewis: Where does galaxy fit in in the speaking market with institutional clients on a market share basis and as we think about this is this an opportunity.
Greg Lewis: Beyond the crypto market, just growing in CRM or salon, maybe beyond those actual.
Greg Lewis: Tam is growing.
Greg Lewis: We kind of have a view on what is potential for galaxy in terms of that opportunity.
Greg Lewis: Yes sure.
Greg Lewis: I'll take the first crack at it so.
Greg Lewis: The <unk> market is relatively decently fragmented today theres, probably a couple of dozen.
Greg Lewis: Providers out in the marketplace that.
Greg Lewis: On the high end have tens of billions of assets already in their stake and on the low end a couple of hundred million and we sort of sit somewhere in the middle with with a with a with a few billion dollars of assets under stake.
Greg Lewis: The the we.
Greg Lewis: We do think the market is evolving is going to continue to evolve.
Greg Lewis: We have seen it and we expect it to see how long as as is what happens in most financial services.
Greg Lewis:
Greg Lewis: Businesses long term is fee compression, but fee compression.
Greg Lewis: Offset with much.
Greg Lewis: Much higher volume coming in and so.
Greg Lewis: We've been focused on organically building.
Greg Lewis: Some of the best Staking technology that we and we attack the market today through to two main channels, one direct and so their galaxy client institutional galaxy clients.
Greg Lewis: Who have their assets at various places or on platform at Galaxy, who who directly choose in contract to steak with Galaxy Validators, the other approach, which which we've had some good early traction on is because we've been focused on building that technology away from where the assets actually sit on the custodial side.
Greg Lewis: Is two.
Greg Lewis: To create partnerships with custodians that include our Validators set as simple point and click options for their custodial clients to then allocate those assets to our validate our notes and so.
Greg Lewis: Being independent.
Greg Lewis: Unlike some of our other competitors, who have a vertical stack, where they offer custody and staking.
Greg Lewis: Allows us to hit not just our clients, but clients of every other custodial offering out there in the marketplace. The other important thing.
Greg Lewis: So.
Greg Lewis: The other strategic thing that we think is also important as clients want their assets to be.
Greg Lewis: As useful as possible and so the area that where we are we have been focused on is building <unk>.
Greg Lewis: Acknowledging and integrating it with our own risk management and lending practices.
Greg Lewis: To offer an ability for client stake staked assets, which have some various liquidity constrictions once your stake between.
Greg Lewis: And bonding periods and other things like that to pledge those assets as collateral to then be able to get financing against them to make them as as active as possible and can create capital efficiency for our highest and so while while total notional dollar volume of acid Interstate we do think our.
Greg Lewis: We are going to grow both from price depreciation asset adoption.
Greg Lewis: The fee compression our focus is on offsetting that with additional services, which is why galaxy sort of end to end platform offering offering of all kinds of financial services on top of digital assets is the right strategy. So that we can capture the share of wallet for clients, regardless of sort of which which bucket is getting competitive or not.
Okay, Great that was super helpful. Thank you very much.
Speaker Change: Thank you and we'll take our next question from.
Greg Lewis: Joseph.
Safi: Safi with Canaccord Genuity. Please go ahead.
Greg Lewis: Yeah.
Speaker Change: Hey, everyone. Good morning, congrats on the upcoming NASDAQ listing super exciting for sure.
Speaker Change: Maybe we can just talk about that a little bit obviously it provides access to a lot more investors to galaxy equity, but wondering maybe how does that help the business do you think it helps bring in more counterparties with the NASDAQ listing just yeah, maybe a little bit of color there.
Speaker Change: You know how it helps you move the business forward and I'll have a quick follow up.
Speaker Change: Yes.
Speaker Change: <unk>.
Speaker Change: The profile will certainly be a lot larger and.
Speaker Change: While we think we know most institutional accounts.
Speaker Change: And we're in touch with as many as we can be.
Speaker Change: We're just going to have a much higher profile, but the real difference is access to capital markets.
Speaker Change: We're a growth business in south sporadically, we want to access the capital markets are.
Speaker Change: Most of galaxies growths over the last seven years was internally funded with investing profits are trading profits.
Speaker Change: And so there was a regulator on how fast we can grow.
Speaker Change: And depending on the environment and depending on the opportunities we see.
Speaker Change: Being able to tap.
Speaker Change: The deepest capital market in the World is a huge advantage.
Speaker Change: And so that's what we're most excited about are.
Speaker Change: We've got lots of ways to tap liquidity as we get more established in.
Speaker Change: This world has always been the bigger you get more people are willing to deal with you right. So the bigger balance sheet you have counterparties feel more comfortable with you and so bigger is better in financial services, and we plan to get a lot bigger.
Mike Novogratz: Thanks for that color, Mike and then kind of maybe.
Mike Novogratz: We're up on your comments on access to capital are nice to see that loan book.
Speaker Change: Well in Q1, even in the down crypto quarter.
Mike Novogratz: Maybe I mean, it sounds like that's really good business. It's profitable. It's maybe one of your higher growth businesses just wondering.
Mike Novogratz: Your thoughts on how big the loan the loan business can be here and as it scales. How do you think about risk management relative to what looks like a pretty good big opportunity.
Mike Novogratz: Yeah.
Mike Novogratz: In this market.
Speaker Change: And partially this comes from Chris Ferrara, DNA of being a credit guy and having a healthy does a healthy dose of skepticism, but we've built in to the DNA of Galaxy.
Speaker Change: A real credit to focus and we really think it's our business to win.
Speaker Change: And.
Speaker Change: Again, any credit business the cheaper your access to capital faster you can grow your business and so.
Speaker Change: I would be disappointed if our business is significantly larger in the next few years.
Speaker Change: We're looking at opportunities both on the asset management side, using our credit expertise and on the and on the main galaxy side of extending.
Speaker Change: Credit to Counterparties.
Speaker Change: No.
Speaker Change: Stay tuned, but there's a huge focus on that and.
Speaker Change: We think we've built up a great track record, we have a very good muscle and DNA both from counterparty analysis.
Speaker Change: The direct lending side.
Mike Novogratz: Great. Thanks, very much Mike.
Mike Novogratz: Thank you and we will take our next question from Patrick <unk> with Piper Sandler. Please go ahead. Your line is open.
Speaker Change: Yes. Good morning, Thanks for taking the question. So I was hoping you could update us.
Speaker Change: Some more commentary around the one seven gigawatts of power that is currently under study at Helios, how quickly do you think that could be approved and.
Speaker Change: How much of it or would it come in tranches and then as we look at as we look at the scope of the entire data center business. It seems like the demand in your conversations have been going well enough to where you're looking at other.
Speaker Change: Sites is there the potential that we start seeing acquisitions and contracts signed with Hyperscale at other sites prior to your.
Speaker Change: The contract the one seven gigawatts in Helios, how should we kind of think about that.
Speaker Change: Going forward. Thanks.
Speaker Change: Sure. Thanks, Thanks, Patrick good morning.
Speaker Change: So.
Speaker Change: Right so.
Speaker Change: One seven Gigawatts, we have not approved yet currently under study by.
Speaker Change: By ERCOT.
Speaker Change: Their major focus is evaluating the ability for the grid and the infrastructure to support the additional load.
Speaker Change: And if any additional transmission.
Speaker Change: And distribution assets needs to be built in our support it.
Speaker Change: These we were actually pretty far along in the process there.
Speaker Change: There there were a number of approvals that have already come through from Arcata from wet.
Speaker Change: As well and and we do anticipate over the relatively short term will denominate that in in single digit number of months to have some additional capacity come through on approval, obviously, we don't control the timelines.
Speaker Change: And so that we're in we're in a pretty constant dialogue, but but all signs are pretty positive for us on that front.
Speaker Change: The to give a little more color.
Speaker Change: If you think about the one seven in a couple of different tranches. The first tranche, which is 800 megawatts.
Speaker Change: Actually.
Speaker Change: Slots right into our existing Helios grid timeline, which is which can handle is approved for up to one six gigawatts already and so.
Speaker Change: So at least 800 megawatts of the unapproved pipeline.
Speaker Change: We're not aware of any additional transmission assets that need to be built it's just a grid stability approval study.
Speaker Change: The rest of it.
Speaker Change: I actually would we require additional assets through built as well as additional an additional private substation on our side, but those are all those are all things that are that are easily doable and and part of ERCOT is a long term plan, we just need to we just need to officially slotted into there.
Speaker Change: Long term build plants.
Speaker Change: The second question.
Speaker Change: Yes, sorry. The second question I think was you know do you anticipate that we would be.
Speaker Change: Buying acquiring and developing other sites away from Helios B for the remainder of Helios sort of gets approved and developed.
Speaker Change: I think the answer is it's it's hard to tell like the.
Speaker Change: I think the strategy most likely.
Speaker Change: Is going to be thoughtfully and prudently.
Speaker Change: Evaluating and then likely acquiring.
Speaker Change: Powered land and setting up behind the meter opportunities with potential Gen. Gen backed developers.
Speaker Change: First and then once we have line of sight to those assets.
Speaker Change: Using what we've now developed as like a pretty regular dialogue with some of the big hyperscale or to understand what their power needs are matching matching those those assets that we either sign up under LOI or have already acquired with their longer term power delivery needs.
Speaker Change: And so I think the cadence is going to be.
Speaker Change: We know we have size in the pipeline.
Speaker Change: That's far along at Helios for pretty substantial expansion, but.
Speaker Change: We also know that clients have different needs and are also trying to figure out their long term footprint with regards to.
Speaker Change: Cloud services they want to provide.
Speaker Change: Training versus inference, where it needs to sit geographically and for us as a as a portfolio management perspective, while.
Speaker Change: While we are Mega bullish our site in West, Texas that Helios, having diversified land bank and power plant opportunity to develop a platform that that is geographically diversified with customer diversity is a long term goal of ours anything that we're very focused on developing.
Speaker Change: Okay, that's great color and then on the 40.
Speaker Change: Potential sites that you've looked at and you said that you know the average.
Speaker Change: Site that Youre looking at is like between 305 hundred megawatts is that like the average size of those 40 sites and on the actionable pipeline is there any way for you to quantify for us how large that actual that action.
Speaker Change: Actionable pipeline is today.
Speaker Change: Thanks.
Speaker Change: Yeah sure so.
Speaker Change: So the the actual math is like the average is like 540 and the median 500. So there are it's a pretty tight spread.
Speaker Change: In terms of sizes. So there arent there are like some you know five gigawatt site starting there.
Speaker Change: That changes the asset it's a pretty good.
Speaker Change: Widespread diverse diverse set of.
Speaker Change: Power land and behind the meter options across the U S.
Speaker Change: Beyond that like I said this is not something that we are going to that we think the right strategy is to.
Speaker Change: Start acquiring land hand over fist in hopes that that.
Speaker Change: The market will come our way.
Speaker Change: This has to be a.
Speaker Change: Thoughtful one by one.
Speaker Change: Make sure that we identify a site that has all the right characteristics between access to power real estate.
Speaker Change: Connectivity with fiber water et cetera match that with with with our client demand, which as you know is a is robust, but it's also a pretty dynamic thing today in terms of what.
What people want when they think they're going to need power 345 years from now.
Speaker Change: And so so that's the way that's the way we're going to approach. It I think we will we will likely continue to develop helios in parallel and we will likely start to take.
Speaker Change: Take take bites at the Apple at.
Speaker Change: Buying land in setting up partnerships for development and see how demand evolves.
Speaker Change: Okay, great and congrats on the up with some guys. Thanks.
Brett Noble: Thank you. Our next question comes from Brett Noble with Center Fitzgerald. Please go ahead.
Brett Noble: Hi, guys. Thanks for taking my question and congrats on the up listing as well.
Brett Noble: Just curious how we should be thinking about galaxy today, there's a lot going on between maybe data center on the crypto side.
Speaker Change: Did you say your focus is at the moment more on getting the data center up and running for <unk> is it expanding assets on our platform on the crypto side growth thinking lending trading.
Brett Noble: Just broadly how should we be thinking about galaxy today.
Brett Noble: Yeah, It's a great question and why don't we think about a lot.
Brett Noble: Listen we feel like we're at the intersection of two monster trends.
Brett Noble: Right.
Brett Noble: And then the data centers that are going to be used to power AI.
Brett Noble: And crypto, which I said earlier I really think it is just taking off and so.
Brett Noble: We're balancing that but the data center opportunity in some ways.
Brett Noble: It takes capital.
Brett Noble: Time and and.
Brett Noble: And focus but.
Brett Noble: The potential outcomes and potential opportunities are far more limited than what potentially happens in crypto and so.
Brett Noble: From the management brain.
Brett Noble: <unk> spent a lot of his time focusing on it but he's got excess.
Brett Noble: <unk>.
Brett Noble: Excess capacity beyond that to help on the crypto side I'm spending most of my time on the crypto side and sharing them on the data center side.
Brett Noble: Because we see great opportunities, we want to expand assets on platform.
Brett Noble: Staking asset management.
Brett Noble: We're spending a lot of time thinking about.
Brett Noble: How token is Asian really plays out in the World right. I've said this on multiple calls I think it's going to be one of the things that happens real slow and then real fast we haven't hit that inflection point, yet you see people like Apollo <unk> funds and you know there is money market funds being token is and so we're spending.
A tremendous amount of internal time trying to structure, our business properly to take advantage of that looking at with our REIT partners are.
Brett Noble: And so I don't want you guys to think we've pivoted away from from being in crypto business. It's actually quite the opposite we are doubling down on our focus and our intensity.
Brett Noble: I know.
Brett Noble: And like core does that.
Speaker Change: Crypto business will look different in 36 months than it does today.
Speaker Change: There will be new participants and so if we don't.
Speaker Change: Evolve with those with those changes we won't be as happy.
Speaker Change: Right. We have right now we've got a great credit business, a great derivative business growing staking business.
Speaker Change: We know they're going to be competition that comes into those businesses and so.
Speaker Change: What's kept us.
Speaker Change: Alive and thriving loonie since we started was our ability to sense opportunities to staff them and to go after them and Thats continues to be our plan.
Speaker Change: Perfect and then on the <unk>.
Speaker Change: Go ahead go ahead I'm sorry.
Speaker Change: Yeah, I guess, just as just on the competition front I think you know over the past few weeks and even this morning, we've seen kind of M&A across the crypto space pick up.
Speaker Change: To what extent are you interested in going out and participating in that or are you more of a build versus acquire.
Speaker Change: Yeah.
Speaker Change: Yes listen we.
Speaker Change: One of the reasons, we're so excited about going in the NASDAQ as as you get more liquidity as you get a stock that is more fairly valued.
Speaker Change: You can start looking at those opportunities more seriously.
Speaker Change: We spent most of our history with the stock trading below book and so it made acquisition really are difficult on any kind of scale.
Speaker Change: And so excited that that will open up.
Yes, there are some businesses that makes sense to grow organically and some that makes sense to to add on and so I think for you to see a little of both in the in the coming 36 months.
Speaker Change: But we're excited we certainly are our staffing and building up our business development and strategy team.
Speaker Change: Formalizing it we are putting good human capital into that bucket.
Speaker Change: Because like I said youre going to have to be bigger.
Speaker Change: The diversity has to be really good to win in the next 36 months.
Speaker Change: Alright, Thank you guys I appreciate it.
Speaker Change: Thank you and our next question comes from Mike <unk> from H C. Wainwright. Please go ahead.
Speaker Change: Hey, good morning, guys. Thanks for taking my questions and congrats on the upcoming NASDAQ listing here first one from me maybe for you Mike How do you envision trade financing space now that we're seeing less restrictions for them to go ahead and offer digital asset products and services to their end clients and what are the implications for galaxy business.
Speaker Change: Yes, they are.
Speaker Change: We're certainly moving into the space Theyre going to kind of crawl walk run.
Speaker Change: Yeah, the space is big but it's not that big yet.
Speaker Change: Relative to most of their businesses and so they're seeing it as a future I think we're trying to buy as most nervous.
Is around <unk>.
Speaker Change: Like every asset manager thinks so my goodness, if our assets move.
Speaker Change: From accounts to wallets.
Speaker Change: From.
Speaker Change: Physical form to token is form they need to be in that game and so theres a lot of R&D going on in partnership is being created.
Speaker Change: Around that space.
Speaker Change: People are offering simpler products and starting to get into the credit markets.
Speaker Change: We think we need to stay one step ahead of them.
Speaker Change: US really moving more and more unchain and trying to be able to.
Speaker Change: Deliver kind of unchanged.
Variance to trade Fi clients brokerage to us as is certainly a direction of travel.
Speaker Change: But we're not we're not naive at one point.
Speaker Change: Sydney banking Goldman Sachs will have crypto.
Speaker Change: Crypto desks alongside their currency business and their customers have felt really comfortable dealing with them for long periods of time and so we are trying to build our moat through domain expertise to better customer relationships and through kind of staying one step ahead of those guys.
Speaker Change: Okay. Thanks for that.
Speaker Change: Set of digital assets recently came out and said that he has seen a notable uptick in institutional investor interest in bitcoin really when it started a couple from equities here in recent weeks is galaxy is seeing the same dynamic taking place and do you expect this decoupling to persist.
Speaker Change: Yes.
Speaker Change: Clinton is a spectacular.
Speaker Change: Spectacularly interesting asset in the story than that.
Speaker Change: There are two vectors that drive.
Speaker Change: One is the macro outlook.
Speaker Change: Outlet outlook and the other is adoption and the macro outlook.
Speaker Change: It looks like a big tailwind for a big plan for a long time.
Speaker Change: But I I have a feeling that the budget deficit with all the trying that Scot Benson and color are trying to do to to lower it is going to be higher this year than it was last year not lower.
Speaker Change: And so the stream of getting 3% buses budget deficit and 3% growth.
Speaker Change: Looks further away that.
Speaker Change: The administration had hoped.
Speaker Change: And that's good for for crypto prices, but the far bigger story as adoption.
Speaker Change: And we are just seeing it slowly eat the world.
Speaker Change: Right more and more sovereign wealth funds are participating.
Speaker Change: More and more.
Speaker Change: And in every country are starting to see micro strategy like.
Speaker Change: Yes.
Speaker Change: Setups.
Speaker Change: There have been two more launched recently where companies are using bitcoin treasury.
Speaker Change: Schemes I'll call them.
Speaker Change: To attract retail money through the equity market that goes right into bitcoin and so the.
Speaker Change: The orange pulling of the world seems to be accelerating.
And has that adoption increases prices go up that fuels the entire industry quite frankly and so.
Speaker Change: The industry is not mature enough yet to really thrive without big claim price going higher.
Speaker Change: I think that will change in the next few years right when we actually do see.
Speaker Change: <unk>.
Speaker Change: Stable coin is being used to buy your hamburger at Mcdonalds when.
Speaker Change: You see to organizations of of Galaxy stock and Apple stock.
Speaker Change: And in other People's equities, when you see token is Asian of hedge funds and private equity funds.
Speaker Change: It will be less relying on bitcoin price, but right now that bitcoin price drives in liquidity and drives in energy space. So it's still the most important asset.
Speaker Change: That I focus on while running this company.
Speaker Change: We appreciate your insight.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Bill Hoffmann, Doug Ducey with K B W.
Speaker Change: Good morning, gentlemen, thanks for taking my questions and congrats on all the progress recently, including the uplifting and securing a phase two of Helios.
Speaker Change: Wanted to touch on the remaining capacity in the load study.
Speaker Change: So if that first tranche of 800 megawatts is approved.
Speaker Change: The near term just curious on your thoughts of whether Cory with scoop up that capacity has any of that incremental load studied capacity.
Speaker Change: Been allocated to them as part of the expansion options and.
Speaker Change: Or do you think it would be more strategic to diversify the tenant base at that point.
Speaker Change: Yes.
Bill Hoffmann: Morning Bill.
Speaker Change: The simple answer to one of the questions and there is no.
Bill Hoffmann: None of that of that incremental capacity is allocated to anybody yet as of today.
Bill Hoffmann: The.
Speaker Change: <unk> has been an unbelievably good partner.
Bill Hoffmann: To us so far and they've been.
Bill Hoffmann: Great team to work with we've got we've got nothing nothing but positive things to say about senior management team and the senior manager team and the underground development team there.
Bill Hoffmann: We'd love to grow our relationship and partner with them.
Bill Hoffmann: <unk> is the honest answer the other side of that equation like I said before though is for us to build a.
Bill Hoffmann: What we think is the highest value you business for shareholders and for the market is to create a portfolio approach, both geographically and within and tenants and so I think.
Bill Hoffmann: We will be focused on both.
Bill Hoffmann: Maintaining and growing relationship with <unk> as well as diversifying the.
The growth with other clients. So that we have a nice balanced portfolio imbalanced, earning stream from a credit risk perspective.
Bill Hoffmann: And from it from a source of revenue and EBITDA perspective, and so you know that.
Bill Hoffmann: That asset that capacity is is once approved is available.
Bill Hoffmann: And we are working every day to to meet with different potential clients and sort out how we want to allocate it.
Bill Hoffmann: I appreciate that color for the second question, we've seen clear strong appreciation in the tape in recent months.
Bill Hoffmann: With the upcoming uplifting curious if you could share your level of appetite to raise additional capital outside the project level financing.
Bill Hoffmann: So we're going to.
We're going to look at all the various.
Bill Hoffmann: Avenues, we have to raise capital.
Bill Hoffmann: We're a growth company and so it would be naive for you guys to think we're not going to raise capital at one point, but we've got lots of different ways to do it.
Bill Hoffmann: The debt markets convert markets.
Bill Hoffmann: Project level financing around the big Helios build.
Bill Hoffmann: And public equity markets and so we're going to evaluate those really.
Bill Hoffmann: <unk> and get back to you.
Bill Hoffmann: I appreciate the color. Thank you.
Speaker Change: Thank you and our next question comes from Joe Flynn with Compass Point Research and trading. Please go ahead. Your line is open.
Joe Flynn: Hi, Thanks for the question I was wondering if you could provide an update on <unk>.
Joe Flynn: The project financing that year.
Joe Flynn: Ultimately undergo.
Joe Flynn: I had read out first with the construction and ultimately in conversations like.
Speaker Change: What does the 17% fixed NOI yield that you guys were able to secure.
Joe Flynn: Like the bad does that unlock.
Joe Flynn: Where is the primary appetite would you characterize that versus private credit and then it's.
Joe Flynn: And baby structures would be very helpful.
Joe Flynn: Sure Good morning, Joe Thanks.
Joe Flynn: Yeah. So on the on the project financing we've been hard at work on it.
Joe Flynn: We have we expect that we will close that in the coming weeks and so we will likely be back out to the market to you guys and investors and provide an update on exactly what that looks like.
Joe Flynn: Say, it's pretty consistent with what we've talked about and announced in the past the the way we think about it so the demand for that has come from a lot of different sources.
Joe Flynn: There is there are a number of.
Joe Flynn: Big Bank platforms that have have smart focused infrastructure project finance groups that look to either solely underwrite or joint underwrite.
Joe Flynn: Financings of this size.
Joe Flynn: That tends to be the best execution in the best.
Joe Flynn: And the best.
Joe Flynn: That way for us to access the most the most efficient process and and frankly economics. There has been a pretty strong demand from outside the banking platform for direct lenders as well.
Joe Flynn: Who either think about coming in directly in competing taking parts of the syndications that that the banks ultimately first will step into an underwrite or looking at the capital structure and and saying you know.
Joe Flynn: We can also offer you a solution that you know.
Joe Flynn: Increases the leverage reduces the equity check need on the galaxy side and it is accretive from an economic perspective and so.
Joe Flynn: I think there are the there are a lot of different options that we have been evaluating and we think are going to be available on the go forward. This first financing like I said, we'd expect to to to put that to a close the next couple of weeks and and really the there's two parts to to each of the data Center development.
Joe Flynn: <unk> cycles.
Joe Flynn: Simplify it from a financing perspective, there's the project financing, which.
Which.
Joe Flynn: Next to our equity, which we've already set aside for example in phase one and is already funded helps finance the build.
Joe Flynn: We really think about that as relatively short term financing.
Joe Flynn: Because once the asset is built and stabilized stabilized being when the tenant starts paying rent. It actually opens up opens up a wholly new market for financing, where rather than thinking about loan to cost and budget and timelines youre thinking more about loan to value and NOI NOI leverage multiples and we highlight we saw.
Joe Flynn: <unk> expect once there there'll be a lot of take out opportunities for us to.
Joe Flynn: To refinance the project financing debt likely take out a decent amount of equity to build a recycled back into further product development.
Joe Flynn: So.
Joe Flynn: Hopefully that's helpful color.
Joe Flynn: Yes, that's very helpful. And then just maybe on it looks like the ability to get 8% largely caused by initial construction has been talked about loan to value on cap rates.
Joe Flynn: On stabilized NOI, but.
Can you maybe talk.
Joe Flynn: Like do you raise sort of maybe maybe just inside on spreads do they ultimately you know factor in Coreys off taker.
Joe Flynn: Like do you see maybe the improvement from built in credit has been set.
Joe Flynn: Maybe.
Joe Flynn: You know exists within your signed contract that the market might not be aware of.
Joe Flynn: Sure Yeah, so I I.
Joe Flynn: I definitely agree with you.
Joe Flynn: The entire economic package.
Joe Flynn: A lot of factors into that go into it in terms of Ulta.
Joe Flynn: Ultimately what the markets will look at as a stabilized cap rate, which which includes the the underlying economics of the lease and so that's why one of our big focuses when restructuring the lease was making it making a tradeoff on economics on either headline lease rate.
Joe Flynn: Our requirements to fund capex versus getting.
Joe Flynn: A structure that is going to operate extremely high EBITDA margins and it looks as close to triple net as possible because the finance ability of those of those cash flow streams improved quite dramatically versus an asset that is highly reliant on an operator that operates at lower EBITDA margins. So.
Joe Flynn: That's a factor obviously the underlying credit I agree with you is definitely a factor.
Joe Flynn: One of our candidly one of our big bets.
Joe Flynn: And we spent a lot of time with the core we've team understanding their business their pipeline, where they stood pre IPO.
Joe Flynn: And we're close to them on ongoing basis is that in core we have success.
Joe Flynn: That should create a re rating for themselves and therefore as a derivative for our asset in terms of.
Joe Flynn: Cap rate compression I evaluation increase and so.
Joe Flynn: That is a factor we do see.
Joe Flynn: A pretty pretty clear path for core we've as our first anchor tenant to improve their own credit quality and therefore.
Joe Flynn: Create uplift for us long term in terms of the value of the asset that is for sure part of the equation.
Joe Flynn: And so as we as we look at.
Joe Flynn: Building, our portfolio of tenants and real estate assets over time, having a good mix of different credit qualities and therefore.
Joe Flynn: Identifiable exit cap rates is a big part of the equation is something that's very top of mind every time, we look at land acquisition or think about talk about a tenant and how we would finance it ultimately how we would Chris.
Joe Flynn: Crystallize value.
Joe Flynn: And then maybe just one more on the equity component of the Capex.
Joe Flynn: I guess beyond.
Joe Flynn: The initial convert raise.
Joe Flynn: I guess what are you what are you guys approaches to ultimately funding.
Joe Flynn: $600 million signed contracts or potentially up to a delay in semi.
Joe Flynn: Let me call. It takes the full 800 megawatts.
Speaker Change: Like as of now are you looking primarily fund it yourself or if there's still exploring potential.
Joe Flynn: Partnership opportunities.
Joe Flynn: Originally that would be helpful.
Joe Flynn: Yes.
Joe Flynn: Look I think.
Joe Flynn: The good news is.
Joe Flynn: With the trajectory of the company and are successful.
Joe Flynn: Move to the U S.
Joe Flynn: And having signed long term off take contracts, we have a lot of options in front of us and so it's really going to come down to two us ultimately on cost of capital like our cost of capital and certainty of capital and so our goal is to maximize return on equity for the assets, we are building and in order to do.
Joe Flynn: Do that and we're gonna so today alone we see a number of different ways. We can do that obviously non dilutive pure debt financing at the asset level, which include both project financing as well as potential takeout financing of Securitizations.
Joe Flynn:
Joe Flynn: Project level equity financing.
Joe Flynn: Which theres a whole pallet of different options.
Joe Flynn: Fund complexes that are specifically set up just to fund this kind of long term equity program at the asset level.
Joe Flynn: That looks that looks a lot more like structured equity and structured returns, which allows for actually accretive equity returns and accretive capital to galaxy's equity returned at doing it at that level.
Joe Flynn: And then obviously the.
Joe Flynn: The corporate parent and the court parents access to capital is is something that we're also excited about given given.
Joe Flynn: Where we sit today and sort of the new listing and everything and so I think all options on the table. The good news is.
Joe Flynn: As long as we execute and the fact that we have signed long term contracts that are highly valuable puts us in a position to look at a whole plethora of options to be able to optimize our cost of capital.
Joe Flynn: Great. Thanks.
Joe Flynn: Thank you and we will take our final question from <unk>.
Owen Lau with Oppenheimer. Please go ahead.
Speaker Change: Hello, Congratulations on the long overdue uplifting to NASDAQ and welcome home.
Joe Flynn: Mike.
Speaker Change: <unk> highlighted a token isation could you please a little bit more color on how galaxy can play into that and then on AI and Quito San.
Joe Flynn: The intersection point between these two and you.
Joe Flynn: Is there any wake out of sea Tac and try to figure out a good business and go there. Thanks a lot.
Joe Flynn: Let me start with the crypto.
Joe Flynn: Our venture portfolio, we have a few investments that are.
Joe Flynn: Are trying to play that theme.
Joe Flynn: Right, if you think about it.
Joe Flynn: In the future when you have AI agents that are going to be buying and selling your groceries, they're going to be doing so.
Joe Flynn: Over digital rails, using some form of crypto.
Joe Flynn: Will it be sustainable claim will it be its own coin will see and so we've invested a few companies in that space and I think one of the things the venture business has always done for us. It has given us some road map of what might be working what could be coming in so we're going to continue to hit.
Push more venture.
Joe Flynn: Investments into that that intersection.
Joe Flynn: The basic data center business becomes a really sophisticated real estate business and that it doesn't have a direct synergy with crypto other than.
Joe Flynn: The smartest companies in the World are contra.
Joe Flynn: Contracting out your space and that intersection with them and why they are.
Joe Flynn: Contract their space I do think we will give us some edge.
Joe Flynn: There is some kind of straightforward ideas that people have been talking about it again.
Joe Flynn: Looking at adventure when you think about authentication.
Joe Flynn: Right from deep fakes.
Joe Flynn: I think at one point and see a lot of photographs in speeches and IP.
Joe Flynn: Living on blockchain, because youre going to authenticate that it's real.
Joe Flynn: And so.
Joe Flynn: There is there is a natural synergy that should come here.
Joe Flynn: And it's not necessarily showed up yet with with with <unk>.
Joe Flynn: Great companies.
Joe Flynn: Got it that's helpful.
Joe Flynn: Sorry go ahead.
Joe Flynn: I'm just gonna add O&M.
Joe Flynn: On the <unk> side.
Joe Flynn: Your first point, just pretty succinctly like.
Joe Flynn: We think theres a lot of opportunities for Galaxy two play a real role in that process. The market structure is still developing and so and so how it all crystallizes is an open question for the whole industry for us today.
Joe Flynn: We with our with our custodial technology platform, we have wallet infrastructure, both cold and hot wallets.
Joe Flynn: That we think has real strong differentiated technology that that.
Joe Flynn: That will play a role in some of them in some of the major bank.
Joe Flynn: Banks and investment houses long term in terms of securing and transferring digital key material, which is foundational in the version of the World where you have digital bearer instruments that are that are represented.
Joe Flynn: Real world assets.
Joe Flynn: On top of that that that platform also has token innovation capabilities, where we write and maintain.
Joe Flynn: Smart contracts for mid burn redeem which is also a critical component to two wrapping real world assets in digital form and then and then maintaining them unchanged.
Joe Flynn: And then are our advisory business.
Joe Flynn: In terms of helping to structure.
Joe Flynn: Those issuances is something that that group is very focused on as well. So I think we have a number of the pieces of the puzzle today already inside the house. The Galaxy, we will need to develop some more and we will also need to partner with with other institutions that have different elements, including distribution and other life.
Joe Flynn: This is to the extent, we don't get them ourselves to really deliver an end to end product as the market structure comes together.
Speaker Change: Got it that's Super helpful. And then maybe finally on the regulation there was a hiccup last week with a genius egg I'm. Just wondering do you think there is still enough support for the <unk> to get past this year or we have to kind of like we go into next year. Thanks a lot.
Joe Flynn: Yeah.
Speaker Change: Ironically I have spent a lot of time on the last two weekends on the phone with various senators in D C.
Joe Flynn: And I would tell you it.
Joe Flynn: This has been frustrating for both.
Joe Flynn: The space and for them because I think on the both on the Republican side and on the Democratic side.
Joe Flynn: There was a real desire to get something done.
Joe Flynn: Yeah.
Joe Flynn: Making making laws in Washington, and getting stuff done.
As an art form that im on learning, but by no means an expert at because it is very tricky. It felt like it was done both the Democrats and Republicans told me it was getting done.
Joe Flynn: Got sidetracked a little bit.
Joe Flynn: It's something that's going to change it's got to happen in the next week or so or I think we're going to miss this window of opportunity.
Joe Flynn: To get good crypto legislation done.
Speaker Change: I know you ran into.
Speaker Change: New York Congressman last night, who wants to help.
Democrats.
Speaker Change: So I don't think Theres, a lack of desire the politics are tricky right.
Speaker Change: The precedent launched MIM coin as children are very engaged in this space. They are doing some productive things and some things that the Democrats are saying Hey, this doesn't seem right and that is given the Democrats and angle to say well wait a minute and it's not the whole Democratic party by any stretch but.
Speaker Change: It's the far left side of the party is starting to Scream and yell again.
And.
Speaker Change: The core our core group of crypto enthusiast, the Democratic party or trying to get this thing done.
Speaker Change: And it's not easy.
Speaker Change: Republicans don't have full support on their site either there is there is national security issues there is issues around AR.
Speaker Change: The the.
Speaker Change: The dominance of our Big Tech players like Josh Holly says enough is enough and so when you.
Speaker Change: You hear that better wants to get into the stable coin business. Some Republicans are getting nervous and so these are this shouldn't be bipartisan issues. They are unbelievably nuanced.
Speaker Change: Complicated.
Speaker Change: And they don't make for Great City.
Speaker Change: Political.
Speaker Change: One side because.
Speaker Change: Each each each team can pinpoint fingers and so long answer we're very engaged.
Speaker Change: Matter of fact, probably too engaged.
Speaker Change: Given that you know, we're not a U S stable coin issuer and so I can't keep thinking that Galaxy comes from our point of view of a fair judge here.
Speaker Change: Want something good for the industry and good for America.
Speaker Change: We are launching a stable point in Europe.
Speaker Change: With dws and flow traders, which is pretty exciting it'll be bath and.
Speaker Change: Regulated and so it's not like we're not participating in that in that business.
Speaker Change: And I'd say, there's probably a 30% chance at this point, that's something gets done.
Speaker Change: Which is a shame because I would have told you two and a half weeks ago, there was at 85% chance.
Speaker Change: Alright, Thank you for the color thanks, a lot.
Mike Novogratz: Thank you and I'd like to now turn it back to Mike Novogratz.
Mike Novogratz: Sure guys.
Speaker Change: Yes.
Speaker Change: Sure long call appreciate all the questions.
Speaker Change: We are.
Speaker Change: 72 hours away from.
Speaker Change: You know ringing the bell.
That was actually a button at the NASDAQ, but it actually sounds like a bell.
Speaker Change: We really appreciate you guys, having been the ride with us.
Speaker Change: I don't feel like this is the end of a race I feel like it's really the this is the starting bell and so lockdown and stay tuned. Thank you.
Speaker Change: I'd like to thank everybody for their participation on today's conference. Please feel free to disconnect. Your line at any time and have a great day.
Speaker Change:
Speaker Change: Mhm.
Speaker Change: Hum.
Speaker Change: Hum.
Speaker Change: Oh.
Speaker Change: [music].
Speaker Change: Oh.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.