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Galaxy Digital Announces Fourth Quarter and Full Year 2018 Financial Results and Provides Corporate Updates

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NEW YORK, April 29, 2019 /CNW/ - Galaxy Digital Holdings Ltd. (TSXV:GLXY, Frankfurt: 7LX)) ("Galaxy Digital", "GDH Ltd.", or the "Company"), today released both Galaxy Digital Holdings LP's ("GDH LP" or the "Partnership") and GDH Ltd.'s financial results for the fourth quarter ("Q4 2018" or "the fourth quarter") and full year ("FY 2018" or "2018 year-end") ended December 31, 2018, as well as the Partnership's corporate updates through the date of this press release.

GDH Ltd. is a holding company which holds a minority interest in GDH LP as its only material asset. GDH LP is a diversified, multi-service merchant bank dedicated to the digital assets and blockchain technology industry. The financial results of GDH LP have been prepared and are shown separately, as GDH LP is not deemed to control GDH Ltd. as of December 31, 2018.

"While 2018 was a challenging year for the industry, I am pleased with the ways in which our team navigated difficult market dynamics, and believe we are well positioned to scale our business strategically over time. We have used our capitalized position to both identify and invest in a number of unique opportunities, while also continuing to build an institutional-quality platform," said Michael Novogratz, CEO of Galaxy Digital. "The first few months of 2019 have yielded a notable increase in activity across our business lines. We are already benefiting from both the strong foundation we laid in 2018 as well as the year-to-date rally in digital asset markets. We expect to continue to build upon this positive momentum through the remainder of 2019 and beyond."

Corporate Highlights

Principal Investments

  • During the fourth quarter, the Partnership's principal investments team ("GDPI") executed on eight new investments and three add-on investments, representing $19.7 million and $4.5 million of invested capital, respectively. These investments included:
  • Six new and one add-on equity investments, including:
    • BitGo Holdings, Inc., a security, compliance, and custodial services company ($7.5 million);
    • Bakkt Holdings, LLC, a company which is building an open, seamless global network to enable customers and institutions to buy, sell, store, and spend digital assets ($5.0 million);
    • Mercantile Global Holdings, Inc., a trading and banking platform to enable customers to trade, bank, and administer digital assets ($4.0 million);
    • Galaxy EOS VC Fund, LP, a Galaxy Digital Capital Management ("GDCM") managed fund ($2.4 million);
    • Clause, Inc., a software company building the infrastructure for smart connected and computable legal contracts ($1.5 million);
    • Spring Labs, which is building a decentralized network for financial institutions focused on identity and credit data ($0.5 million); and
    • Bison Trails Co., a staking and infrastructure services company for the digital assets market ($0.2 million).
  • Two new and one add-on convertible notes; borrowers included a distributed digital assets data library which serves as an investor portal and directory for digital assets, a digital asset-secured consumer lending platform, and a company which provides network resources to applications ($1.2 million in total).
  • An additional $2.0 million of eligible loans were purchased from a digital asset-secured consumer lending platform.
  • In aggregate, GDPI deployed approximately $132.9 million represented by 25 new investments and 10 add-on investments for the full year 2018.

Asset Management

  • Since the start of 2019, Galaxy Digital Capital Management ("GDCM") has been capitalizing on the improvement in the digital asset markets, generating inflows into the Galaxy Benchmark Crypto Index Fund ("the GBCIF") and making meaningful progress towards future commitments. The GBCIF is a passively managed index fund which tracks the Bloomberg Galaxy Crypto Index ("the BGCI"), an index co-branded and administered by Bloomberg which is designed to track the performance of the largest, most liquid portion of the digital asset market. Since the start of the year, the BGCI has returned 18.8%1.
  • During the fourth quarter, the Galaxy EOS VC Fund, LP closed on investments in Bloq, Inc., Varius Solutions, Inc., GoQii, Inc., Mythical, Inc., Clause, Inc., Good Money Group, Inc., and Freelance Labs, Inc., with additional investments made in early 2019 in Lucid Sight, Inc., OutThere Labs, Digital Assets Data, Inc., and Ciphertrace, Inc.
    • These investments collectively represent more than $50 million invested into the EOS ecosystem since the inception of the Galaxy EOS VC Fund in June 2018, with additional investments anticipated for 2019.

Trading

  • The Partnership's trading business ("GDT") continued to build upon its full-service platform offering, providing clients with access to intelligent and bespoke trading solutions, market insights, and research.
  • During the fourth quarter, GDT nearly doubled the number of onboarded counterparties from the quarter prior. These new counterparties include a diverse and strategic group of the largest crypto funds, venture capital funds, digital asset mining companies, blockchain companies, family offices, and high net worth individuals.
  • During the first quarter of 2019, GDT expanded its product offerings to include borrowing and lending to a select group of clients.
  • GDH LP currently has no exposure to Bitfinex or Tether.

Advisory

  • During the fourth quarter, the Partnership's advisory business, Galaxy Digital Advisors ("GDA"), repositioned its focus from token and blockchain consulting to instead focus on institutional-quality advisory services. GDA helps companies raise capital to strengthen and grow their businesses and assists clients in managing their asset and liability exposures and their capital. GDA will focus on developing and maintaining long-term relationships with a diverse and global group of corporate and institutional clients.
  • In early 2019, GDA selectively hired new bankers and implemented a comprehensive coverage plan for companies in the space. As of the first quarter end of 2019, GDA has made significant progress, with several active mandates for clients across financing, mergers and acquisitions, and other strategic matters.

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1 Data as of April 26, 2019. Source: Bloomberg

Select GDH LP's Financial Highlights (Q4 2018 and FY 2018)

  • As of December 31, 2018, digital assets and investments totaled $249.1 million, a decrease from $323.0 million as of September 30, 2018. The $73.9 million decrease for Q4 2018 was primarily a result of $48.7 million of net realized losses on digital assets and $25.0 million of unrealized loss on investments.
  • Partners' capital decreased $78.3 million to $301.5 million as of December 31, 2018, primarily due to the $97.0 million net comprehensive loss, partially offset by $17.0 million of equity-based compensation (which does not have a net effect on equity due to the accounting treatment for equity-based compensation).
  • As of December 31, 2018, the Partnership's net book value per unit2 was approximately C$1.46 (US$1.07).
  • The net comprehensive loss for the year was $272.7 million due primarily to net realized and unrealized loss on digital assets of $101.4 million and $75.5 million respectively and operating expenses of $88.4 million. The primary drivers of the operating expenses were $31.3 million of equity-based compensation and $26.9 million of compensation and compensation related expense.

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2 Net book value per unit is calculated as GDH LP's partners' capital divided by the outstanding number of units as of December 31, 2018.

 

GDH LP's 2018 Financial Results


December 31,

December 31,


2018

2017

Assets



Current assets



Cash

$

66,488,012

$

32,098,217

Digital assets

69,765,339

22,650,240

Investments

179,365,696

-

Receivable for digital asset trades

8,579,058

-

Receivables

1,238,694

-

Prepaid expenses and other assets

2,002,880

-

Loans receivable           

2,369,024

-


329,808,703

54,748,457




Loans receivable

15,892,320

-

Property and equipment

4,223,252

-


20,115,572

-

Total assets

$

349,924,275

$

54,748,457







Liabilities



Current liabilities



Accounts payable and accrued liabilities

$

14,558,914

$

1,011,795

Payable for digital asset trades

9,832,737

-

Digital assets sold short

18,666,957

-

Due to related party

1,177,498

42,650,240

Due to exchange

-

9,344,613

Total liabilities

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