Net loss of $288 million for the Fourth Quarter 2022
The Company ended 2022 with Partners’ Capital of $1.4 billion and maintains a strong liquidity
position of $957 million as of year end
Preliminary First Quarter 2023 Income before tax of $150 million1
Focus for 2023: Organic platform build through market downturn, in addition to integrating and
scaling recent strategic acquisitions
NEW YORK, March 28, 2023 /CNW/ – Galaxy Digital Holdings Ltd. (TSX: GLXY) (“Galaxy”, the “Company” or “GDH Ltd.”) today released financial results for the year ended December 31, 2022 for both itself and Galaxy Digital Holdings LP (the “Partnership” or “GDH LP”).
“2022 was a formative year for Galaxy, and while we and our industry faced unprecedented macroeconomic events, we succeeded in staying the course and were able to opportunistically take advantage of strategic opportunities to build our operating businesses for the future. I have never been more confident in our go-forward strategy, businesses, and team,” said Michael Novogratz, Founder and CEO of Galaxy.
“The Company continues to lead from a position of strength, remaining open for business for our clients and counterparties. And as the market has improved year to date, we have generated approximately $150 million1 of Income before tax while retaining a strong liquidity position through March 24, 2023.”
Preliminary Quarter-to-Date Financial Highlights, through Friday, March 24th 2023 1
- Income before tax was approximately $150 million1 through Friday, March 24, 2023.
- Partners’ Capital was over $1.5 billion1 through the same period.
- Our liquidity position remains intact, after recent dislocations in the commercial banking sector. Galaxy had established multiple redundant banking and brokerage relationships prior to the disruption which allowed us to be nimble, and quickly and successfully migrate cash balances. At this time, we’re confident in our diversified U.S. banking relationships.
- Galaxy expects to record net profits1 for the First Quarter of 2023 in its operating businesses and positive gains from its balance sheet holdings of liquid coins and investments.
- Our trading operating business benefited from heightened market volatility and increased volumes from existing counterparties.
- Galaxy Mining has doubled its capacity from the beginning of the year, as we continue to integrate the Helios site acquired at the end of last year. By the end of 2023, GM expects to have a targeted over 4 EH/s of Hashrate Under Management (“HUM”), approximately 50% of which will come from self-mining.
| _______________________________________ |
| 1 This preliminary, unaudited year-to-date financial information is as of March 24, 2023. Financial results exclude impacts from non-cash equity based compensation and completion of the full quarterly valuation process of our investment portfolio. This data is subject to change as management completes its quarterly close procedures. |
Select Financial Highlights for the Fourth Quarter and Full Year 2022
- Net loss was $287.8 million for the fourth quarter, compared to net income of $521.3 million in the prior year period. For the year ended December 31, 2022, net loss was $1.0 billion, compared to net income of $1.7 billion for the year ended December 31, 2021.
- The loss was primarily attributable to unrealized marks to market on investments in our Principal Investments portfolio, driven by depressed market conditions.
- As one of the primary observable benchmarks for valuation in the space, prices for digital assets declined significantly during the year. Bitcoin declined by 64%, from approximately $46,500 to $16,500 per coin and Ethereum declined by 67%, from approximately $3,700 to $1,200 per coin.2
- Partners’ Capital (“Equity”) was $1.4 billion at the end of the year, down 45% from $2.6 billion as of the prior year end. The Company maintained a strong liquidity position of $957 million as of December 31, 2022.
- Liquidity included $542.1 million in cash and a net digital assets2 position of $415 million. Net digital assets included $281 million of non-algorithmic stablecoins, predominantly USD Coin (“USDC”).
- The net digital assets balance of $415 million at December 31, 2022 was flat to the prior quarter, but lower than the $1.2 billion at the end of the prior year. The decrease in net digital assets balance during the year was a result of strategic sales of liquid positions and a decrease in digital asset prices.
Operating Highlights for the Fourth Quarter 2022
- Galaxy Trading (“GT”) reported continued growth of counterparty count and strong GT Operational Net Revenue3 contributions. GT remains invested in the build out of our GalaxyOne integrated institutional prime brokerage platform.
- Cumulative counterparty-facing GT Operational Net Revenue3 within the quarter was approximately $18 million, with approximately 40% derived from our Quantitative Trading businesses, and the remaining contribution approximately equally split between our Derivatives, Over-The-Counter Trading and Credit businesses.
- GT ended the year with more than 930 total counterparties after onboarding over 20 new counterparties to our trading platform during the fourth quarter. We continue to provide liquidity in over 100 cryptocurrencies.
- Counterparty trading volumes increased by approximately 19% over the prior quarter while decreasing by just over 65% year over year.
- The Company’s cumulative gross counterparty loan originations were approximately $370 million within the quarter. The value of GT’s counterparty loan and yield portfolio decreased approximately 8% quarter over quarter.
- The Company is focused on the strategic build out of GalaxyOne — our unified, client-centric prime-brokerage platform for digital assets. A beta version of the trading component of the platform will be released to select customers in the second quarter of 2023.
- Galaxy Asset Management (“GAM”) reported preliminary assets under management (“AUM”)4 of approximately $1.7 billion5 as of December 31, 2022, a 14% decrease from September 30, 2022. This decrease was primarily driven by the markdown of assets within Galaxy Interactive based on the quarterly assessment of NAV, partially offset by inflows into our Liquid Alpha fund during the period.
- AUM consisted of almost $740 million in GAM’s Galaxy Fund Management products and approximately $965 million in the Galaxy Interactive venture franchise.
- GAM strategically focused on scaling active strategies within our Galaxy Fund Management and Interactive products, and as a result, GAM saw positive net flows this year.
- Within the quarter, Galaxy Asset Management announced a strategic partnership with Itaú Asset Management to develop a comprehensive suite of Brazilian-listed, physically backed, digital asset exchange-traded funds and launched the first ETF of the new partnership, the IT Now Bloomberg Galaxy Bitcoin ETF.
- Galaxy Investment Banking (“GIB”) had a robust quarter of deal activity with a number of existing mandates expected to close in the first half of 2023.
- GIB remains engaged in the markets’ prominent shift toward consolidation and M&A activity, while also supporting clients with innovative financing solutions amid a challenging capital markets backdrop.
- GIB continues to execute against an active pipeline of mandates representing over $1 billion in potential transaction value.
- Within the quarter, GIB advised Genesis Volatility, a digital assets data and analytics provider, on its sale to Amberdata and advised CoreWeave, a specialized cloud computing provider, on its strategic investment from Magnetar Capital.
- GIB also served as financial advisor to the Mining business on its acquisition of the Helios bitcoin mining facility and related operations from Argo Blockchain (“Argo”).
| ____________________________________ |
| 2 Represents coinmarketcap.com quoted price as of 23:59 UTC for Bitcoin and Ether. |
| 3 GT Operational Net Revenue is an internal metric that includes revenue from counterparty-facing activities from our Derivatives, Credit, Over-the-Counter Trading, and Quantitative Trading businesses, net of funding charges. |
| 4 AUM is an internal estimate inclusive of a sub-advised fund, committed capital in a closed-end vehicle, and seed investments by affiliates. Changes in AUM are generally the result of performance, contributions, and withdrawals. |
| 5 AUM for committed capital closed-end vehicles that have completed their investment period is reported as NAV (Net Asset Value). Quarterly AUM for close-end vehicles is reported as of the most recent quarter available for the applicable period. |
- Galaxy Mining (“GM”), following the acquisition of Helios, ended 2022 with over 1.5 EH/s in Hashrate Under Management (“HUM”), inclusive of both self-mining and hosting services. GM has approximately doubled that capacity from the beginning of the year, with approximately 30% from self-mining operations.
- In December 2022, Galaxy acquired the Helios bitcoin mining facility and its related operations from Argo. The facility is currently able to operate up to 180 megawatts (“MW”) of mining capacity, with significant room for expansion. We expect to energize approximately 200 MW of mining capacity at Helios alone by year end 2023, with a mix of capacity dedicated to hosting and proprietary mining.
- The Helios transaction will continue to accelerate the expansion of GM’s bitcoin mining operations and services, provide access to tax-efficient mining infrastructure, and reduce reliance on third-party hosting providers.
- Subsequent to year end, Galaxy hedged a majority of Helios’ power obligations with a 24×7 fixed price block of power, which protects from rising power prices, improves site uptime, and allows Galaxy to achieve a lower effective cost of power. Galaxy will layer on additional blocks of power as the site is expanded and wholesale pricing becomes favorable.
- As announced during Galaxy’s third quarter earnings call, Galaxy has also begun energization of our first proprietary mining site in Diboll, Texas, with over half the site expected to be energized in April 2023 and the full 16 MW expected to be energized by end of the second quarter 2023.
- On a proprietary basis, GM continues to mine at well-under the fair market value of bitcoin.
- By the end of 2023 GM expects to have a targeted over 4 EH/s of HUM, approximately 50% of which will come from self-mining.
- GM remains committed to its goal to reach an 80% sustainable energy mix6 and is actively pursuing multiple long-term solutions to achieve this target.
- Principal Investments (“GPI”): The Company holds 145 investments across 104 portfolio companies as of December 31, 2022. Within the fourth quarter 2022, GPI made an investment in verification platform Veridise, which provides thorough security audits for DeFi applications, and continues to explore additional compelling opportunities in the investing space.
Corporate Updates
- Senior Leadership Update: As previously disclosed, early in the first quarter of 2023 Damien Vanderwilt stepped down from his role as Co-President at the Company, was named a Senior Advisor to Galaxy and joined the Company’s Board of Directors.
- US Listing: As previously announced, the Company intends to complete its proposed reorganization and domestication to become a Delaware-incorporated company and subsequently list on the Nasdaq, upon completion of ongoing SEC review and subject to stock exchange approval of such listing. On February 9th, 2023 Galaxy filed an amendment to its registration statement responding to SEC comments, which is under review.
- Share Repurchase Program: As announced on May 16, 2022, the Company entered into a Share Repurchase Program and as of October 24, 2022, had purchased all 10,596,720 ordinary shares allowable at an average price of $6.65 CAD.
- Additionally the Company has purchased and cancelled $55 million worth of the3.00% Exchangeable Senior Notes due 2026 (the “Notes”) that were announced on December 9, 2021 at a discount, for approximately $30 million, including accrued interest.
- The Company will continue to use all available methods to manage its share capital when it believes that the current market price of its shares does not reflect their intrinsic value and if doing so is consistent with the objective of creating long term shareholder value.
- Helios Acquisition: On December 28, 2022, the Partnership acquired the Helios mining facility from Argo.
- Helios is a large-scale bitcoin mining facility located in Dickens County, Texas, that has the ability to operate up to 180 megawatts (MW) of mining capacity, utilizing immersion cooling technology.
- Upon receipt of certain approvals and incremental investments, Helios could be expanded to provide Galaxy with as much as 800 MW of capacity, enabling the Company to grow its proprietary and hosted bitcoin mining infrastructure.
- The purchase price was approximately $77 million, including transaction costs.
- GK8 Acquisition: Subsequent to year end on February 21, 2023, the Company acquired the assets of GK8, a digital asset self-custody platform for approximately $44 million.
- We believe the market opportunity for GK8’s custodial technology services continues to expand rapidly, particularly as institutional demand in the asset class grows. As such, our primary focus is to invest in GK8’s sales footprint and existing product roadmap to begin capturing market share this year.
- Furthermore, the Company will use GK8’s custody solution in the ongoing development of GalaxyOne, our own unified, client-centric prime-brokerage platform for clients to engage with digital assets.
- Additional benefits of the transaction include expansion of the Company’s geographic reach, adding an office in Tel Aviv, and onboarding an experienced team of nearly 40 individuals, including cryptographers and blockchain engineers.
- The founders of GK8, CEO Lior Lamesh and CTO Shahar Shamai, will lead Galaxy’s custodial technologies offering.
| ______________________________________ |
| 6 “Sustainable Energy Mix” is defined by the Bitcoin Mining Council (BMC) as energy sourced from hydro, wind, solar, nuclear and geothermal energy sources. The BMC’s “Sustainable Energy” definition is based on the principles brought forward by the U.S. Energy Information Administration (EIA) Net Zero by 2050 Report. The definition was updated in the fourth quarter to exclude carbon-based energy with net carbon credits. |
GDH Ltd.’s Financial Highlights
- As the only significant asset of GDH Ltd. is its minority interest in GDH LP, its results are driven by the results of GDH LP. GDH Ltd. accounts for its investment in this associate (GDH LP) using the equity method. The investment, initially recorded at cost, is increased or decreased to recognize GDH Ltd.’s share of the earnings and losses of GDH LP. As of December 31, 2022, an impairment assessment was required under International Financial Reporting Standards and GDH Ltd.’s minority interest in GDH LP was marked down based on the TSX year-end closing share price. An impairment expense of $109.0 million was recognized for the quarter and $252.5 million for the year ended December 31, 2022. The net comprehensive loss of GDH Ltd. was $522.7 million for the year ended December 31, 2022.
Important U.S. Tax Information – Action Required by U.S. Shareholders
Galaxy shareholders who are U.S. taxpayers should be aware that there may be significant and adverse U.S. federal income tax consequences relating to Galaxy’s PFIC status for 2022 and prior years and in connection with Galaxy’s domestication from Cayman to Delaware unless they make certain elections on their originally filed U.S. federal income tax returns for 2022, which are generally due on April 18, 2023 (subject to allowable extensions). These consequences and, therefore, the need to take action apply to both direct and indirect holdings of Galaxy shares. These elections are described in the notice posted by Galaxy in March 2023 on its website at https://investor.galaxy.com/financials/annual-reports/default.aspx. Before filing their U.S. federal income tax returns for 2022, direct and indirect Galaxy shareholders who are, or who have investors who are, U.S. taxpayers are urged to review the notice and to consult their tax advisors regarding the advisability of making these elections on their U.S. federal income tax returns for 2022.
Earnings Conference Call
An investor conference call will be held today, March 28, 2023 at 8:30 AM Eastern Time. A live webcast with the ability to ask questions will be available at: https://investor.galaxy.com/. The conference call can also be accessed by investors in the United States or Canada by dialing 1-877-300-8521, or 1-412-317-6026 (outside the U.S. and Canada). A replay of the webcast will be available and can be accessed in the same manner as the live webcast on the Company’s Investor Relations website. Through April 18, 2023, the recording will also be available by dialing 1-844-512-2921, or 1-412-317-6671 (outside the U.S. and Canada) passcode: 10176337.
About Galaxy Digital Holdings Ltd. (TSX: GLXY) (“GDH Ltd.”) and Galaxy Digital Holdings LP (“GDH LP”)
Galaxy (TSX: GLXY) is a digital asset and blockchain leader providing institutions, startups, and qualified individuals access to the crypto economy. Our full suite of financial services is custom-made for a digitally native ecosystem, spanning multiple synergistic business lines: Trading, Asset Management, Investment Banking, Mining, and Ventures.
Galaxy’s CEO and Founder Michael Novogratz leads a team of crypto enthusiasts and institutional veterans working together on a mission to engineer a new economic paradigm. The Company is headquartered in New York City, with global offices across North America, Europe, and Asia.
Additional information about Galaxy’s businesses and products is available on www.galaxy.com
This press release should be read in conjunction with (i) GDH LP’s Management Discussion and Analysis and Consolidated Financial Statements for the year ended December 31, 2022 and (ii) GDH Ltd.’s Management Discussion and Analysis and Consolidated Financial Statements for the year ended December 31, 2022 (together, the “Consolidated Financial Statements” and “MD&As”), which have been filed on SEDAR at www.sedar.com.
Disclaimers and Additional Information
The TSX has not approved or disapproved of the information contained herein. The Ontario Securities Commission has not passed upon the merits of the disclosure record of Galaxy.
This press release contains certain pre-released first quarter 2023 financial information (the “pre-released financial information”). The pre-released financial information contained in this press release is preliminary and represents the most current information available to management. The Partnership’s actual consolidated financial statements for such period may result in material changes to the pre-released financial information summarized in this press release (including by any one financial metric, or all of the financial metrics) as a result of the completion of normal quarter and year end accounting procedures and adjustments and annual independent audit or due to other risks contained in the Annual Information Form for the year ended December 31, 2022. Although the Company believes the expectations reflected in this press release are based upon reasonable assumptions, the Company can give no assurance that actual results will not differ materially from these expectations.
No Offer or Solicitation
As previously announced, the Company intends to complete its proposed reorganization and domestication to become a Delaware-based company, and subsequently list on the Nasdaq, upon completion of the SEC’s ongoing review and subject to stock exchange approval of such listing. The proposed reorganization and domestication is subject to approval by shareholders the Company and applicable regulatory authorities, including the Toronto Stock Exchange. In connection with the proposed reorganization and domestication, the Company has filed a registration statement, including a management information circular/prospectus, with the SEC, which has not yet become effective. SHAREHOLDERS ARE ADVISED TO READ THE FINAL VERSIONS OF SUCH DOCUMENTS, WHEN AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders may obtain a free copy of the registration statement (including the management information circular/prospectus) and any other relevant documents from the SEC’s website at http://www.sec.gov. Copies of the final versions of such documents can also be obtained, when available, without charge, via Galaxy’s investor relations website: https://investor.galaxy.com/ The Company anticipates holding a shareholder meeting to seek approval following the effectiveness of the registration statement, and further details will be included in the management information circular to be mailed to shareholders and posted on the Company’s SEDAR profile at www.sedar.com.
This document shall not constitute a solicitation of a proxy, consent or authorization with respect to any securities or in respect of the domestication or any of the other proposed reorganization transactions. This document does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote of approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction.
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
The information in this document may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and “forward-looking information” under Canadian securities laws (collectively, “forward-looking statements”). Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. Statements that are not historical facts, including statements about First Quarter 2023 results, the market opportunity and expansion for GK8, the amount of bitcoin expected to be mined and hashrate under management, GalaxyOne Prime, the closing of certain investment banking mandates and the pending domestication and the related transactions (the “transactions”), and the parties, perspectives and expectations, are forward-looking statements. In addition, any statements that refer to estimates, projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this document may include, for example, statements about our businesses and their go-forward strategies and our ability to complete the proposed domestication and reorganization transactions. The forward-looking statements contained in this document are based on our current expectations and beliefs concerning future developments and their potential effects on us taking into account information currently available to us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks include, but are not limited to: (1) the inability to complete the proposed domestication and reorganization transactions, due to the failure to obtain shareholder and stock exchange approvals, or otherwise; (2) changes to the proposed structure of the transactions that may be required or appropriate as a result of applicable laws or regulations or as a condition to obtaining shareholder or stock exchange approval of the transactions; (3) the ability to meet and maintain listing standards following the consummation of the transactions; (4) the risk that the transactions disrupt current plans and operations; (5) costs related to the transactions, operations and strategy; (6) changes in applicable laws or regulations; (7) the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; (8) changes or events that impact the cryptocurrency industry, including potential regulation, that are out of our control; (9) the risk that our business will not grow in line with our expectations or continue on its current trajectory; (10) the possibility that our addressable market is smaller than we have anticipated and/or that we may not gain share of it; and (11) the possibility that there is a disruption in mining impacting our ability to achieve expected results, (12) any delay or failure to consummate the banking mandates and (13) those other risks contained in the Annual Information Form for the year ended December 31, 2022 available on the Company’s profile at www.sedar.com and its Management’s Discussion and Analysis, filed on March 28, 2023. Factors that could cause actual results to differ materially from those described in such forward-looking statements include, but are not limited to, a decline in the digital asset market or general economic conditions; the possibility that our addressable market is smaller than we have anticipated and/or that we may not gain share of the stated addressable market; the failure or delay in the adoption of digital assets and the blockchain ecosystem; a delay or failure in developing infrastructure for our business or our businesses achieving mandates; delays or other challenges in the mining business related to hosting or power; and changes in applicable law or regulation and adverse regulatory developments. Should one or more of these risks or uncertainties materialize, they could cause our actual results to differ materially from the forward-looking statements. We are not undertaking any obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise. You should not take any statement regarding past trends or activities as a representation that the trends or activities will continue in the future. Accordingly, you should not put undue reliance on these statements.
©Copyright Galaxy Digital 2023. All rights reserved.
Galaxy Digital Holdings LP’s Consolidated Statements of Financial Position (unaudited)
| (in thousands) | December 31, 2022 | December 31, 2021 | |
| Assets | |||
| Current assets | |||
| Cash and cash equivalent | $ 542,101 | $ 840,776 | |
| Digital assets | 566,690 | 2,420,777 | |
| Receivable for digital asset trades | 9,063 | 8,332 | |
| Digital assets loans receivable, net of allowance | 49,971 | 192,684 | |
| Digital assets receivables | 12,423 | 52,998 | |
| Assets posted as collateral | 25,138 | 71,400 | |
| Receivables | 10,887 | 26,665 | |
| Derivative assets | 17,719 | 45,669 | |
| Prepaid expenses and other assets | 32,818 | 25,768 | |
| Loans receivable | 62,611 | 190,087 | |
| Due from related party | 13,857 | 25,023 | |
| Total current assets | 1,343,278 | 3,900,179 | |
| Digital assets receivables | 5,154 | 18,659 | |
| Investments (includes $235.4 and $350.6 million of equity method investments) | 595,122 | 1,069,776 | |
| Loans receivable, non-current | 100,977 | — | |
| Right of use assets | 13,735 | 11,746 | |
| Property and equipment | 208,538 | 58,187 | |
| Deferred tax asset | 47,746 | 10,259 | |
| Intangible assets | 6,948 | 3,087 | |
| Goodwill | 24,645 | 24,645 | |
| Total non-current assets | 1,002,865 | 1,196,359 | |
| Total assets | $ 2,346,143 | $ 5,096,538 | |
| Liabilities and equity | |||
| Current liabilities | |||
| Investments sold short | 91 | 11,630 | |
| Derivative liabilities | 16,568 | 25,567 | |
| Warrant liability | — | 20,488 | |
| Accounts payable and accrued liabilities | 67,081 | 146,243 | |
| Payable to customers | 9,591 | 142,441 | |
| Taxes payable | 22,717 | 42,341 | |
| Payable for digital asset trades | 2,557 | 13,216 | |
| Digital assets loans payable | 170,566 | 905,013 | |
| Loans payable | — | 33,289 | |
| Collateral payable | 131,506 | 480,088 | |
| Due to related party | 53,984 | — | |
| Lease liability | 4,467 | 2,164 | |
| Non-controlling interest liability | — | 161,536 | |
| Total current liabilities | 479,128 | 1,984,016 | |
| Notes payable | 384,515 | 475,330 | |
| Deferred tax liability | 31,302 | 25,608 | |
| Lease liability | 12,406 | 13,233 | |
| Total non-current liabilities | 428,223 | 514,171 | |
| Total liabilities | 907,351 | 2,498,187 | |
| Equity | |||
| Partners’ capital | 1,438,792 | 2,598,351 | |
| Total equity | 1,438,792 | 2,598,351 | |
| Total liabilities and equity | $ 2,346,143 | $ 5,096,538 |
Galaxy Digital Holdings LP’s Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (unaudited)
| (in thousands) | Year ended December 31, 2022 | Year ended December 31, 2021 | |
| Income | |||
| Advisory and management fees | $ 29,952 | $ | 15,736 |
| Net realized gain on digital assets | 55,138 | 1,014,260 | |
| Net realized gain on investments | 42,022 | 231,388 | |
| Income from lending | 36,762 | 73,051 | |
| Net derivative gain | 191,520 | 10,761 | |
| Income from mining | 35,384 | 14,703 | |
| Other income | 28,684 | 5,682 | |
| 419,462 | 1,365,581 | ||
| Operating expenses | |||
| Compensation and compensation related | 127,909 | 114,426 | |
| Equity based compensation | 100,849 | 70,891 | |
| General and administrative | 163,955 | 37,430 | |
| Professional fees | 28,223 | 53,329 | |
| Profit share arrangement expense | — | 16,568 | |
| Interest | 38,896 | 70,155 | |
| Notes interest expense | 37,029 | 1,769 | |
| (496,861) | (364,568) | ||
| Other | |||
| Net unrealized gain (loss) on digital assets | (659,169) | 451,465 | |
| Net unrealized gain (loss) on investments | (496,184) | 546,997 | |
| Net gain on notes payable – derivative | 57,998 | 12,132 | |
| Net gain (loss) on warrant liability | 20,322 | (45,644) | |
| Foreign currency gain (loss) | (316) | 2,590 | |
| Loss (gain) attributable to non-controlling interests liability | 97,219 | (197,376) | |
| (980,130) | 770,164 | ||
| Income (loss) before income taxes | (1,057,529) | 1,771,177 | |
| Income taxes | (35,952) | 56,900 | |
| Net income (loss) for the period | $ (1,021,577) | $ | 1,714,277 |
| Other comprehensive income (loss) | |||
| Foreign currency translation adjustment | $ (1,726) | $ | 367 |
| Net comprehensive income (loss) for the period | $ (1,023,303) | $ | 1,714,644 |
| Year ended December 31, 2022 | Year ended December 31, 2021 | |
| GDH LP Net income (loss) per unit: | ||
| Basic | $ (3.13) | $ 5.38 |
| Diluted | (3.13) | 4.88 |
| Weighted average units: | ||
| Basic | 326,024,679 | 318,659,926 |
| Diluted | 326,024,679 | 349,318,648 |
Reportable segments (unaudited)
Income and expenses by each reportable segment of GDH LP for the three months ended December 31, 2022 are as follows:
| (in thousands) | Trading | Principal Investments | Asset Management | Investment Banking | Mining | Corporate and Other | Totals |
| Income (loss) | |||||||
| Advisory and management fees | 747 | — | 5,495 | 2,000 | — | (1,000) | 7,242 |
| Net realized gain (loss) on digital assets | (75,840) | 7,182 | (4,762) | — | — | — | (73,420) |
| Net realized gain (loss) on investments | (3,540) | (18,591) | — | — | — | — | (22,131) |
| Income from lending | 5,671 | 5 | — | — | — | — | 5,676 |
| Net derivative gain | 11,760 | (61) | — | — | — | — | 11,699 |
| Income from mining | — | — | — | — | 9,014 | — | 9,014 |
| Other income | (1,872) | (29) | 3 | — | 540 | 25,745 | 24,387 |
| (63,074) | (11,494) | 736 | 2,000 | 9,554 | 24,745 | (37,533) | |
| Operating expenses | 63,459 | 2,636 | 6,037 | 3,376 | 15,429 | 39,653 | 130,590 |
| Other | |||||||
| Net unrealized gain (loss) on digital assets | (67,556) | 62,501 | 10,092 | — | — | — | 5,037 |
| Net unrealized gain (loss) on investments | 1,715 | (126,695) | 1,114 | — | — | — | (123,866) |
| Net gain on notes payable – derivative | — | — | — | — | — | 1,442 | 1,442 |
| Net gain on warrant liability | — | — | — | — | — | 317 | 317 |
| Foreign currency gain | (3,591) | — | — | — | — | (18) | (3,609) |
| Loss attributable to non-controlling interests liability | — | — | (7,941) | — | — | — | (7,941) |
| (69,432) | (64,194) | 3,265 | — | — | 1,741 | (128,620) | |
| Income (loss) before income taxes | $ (195,965) | $ (78,324) | $ (2,036) | $ (1,376) | $ (5,875) | $ (13,167) | $ (296,743) |
| Income tax benefit | — | — | — | — | — | (8,968) | (8,968) |
| Net income (loss) for the period | $ (195,965) | $ (78,324) | $ (2,036) | $ (1,376) | $ (5,875) | $ (4,199) | $ (287,775) |
| Foreign currency translation adjustment | — | — | — | — | — | (1,016) | (1016) |
| Comprehensive income (loss) for the period | $ (195,965) | $ (78,324) | $ (2,036) | $ (1,376) | $ (5,875) | $ (5,215) | $ (288,791) |
Income and expenses by each reportable segment of GDH LP for the three months ended December 31, 2021 are as follows:
| (in thousands) | Trading | Principal Investments | Asset Management | Investment Banking | Mining | Corporate and Other | Totals |
| Income (loss) | |||||||
| Advisory and management fees | $ 1 | $ — | $ 3,762 | $ 4,092 | $ — | $ — | $ 7,855 |
| Net realized gain (loss) on digital assets | 305,021 | 3,223 | 7,384 | — | — | — | $ 315,628 |
| Net realized gain (loss) on investments | — | 6,391 | (61) | — | — | — | $ 6,330 |
| Income from lending | 33,279 | 377 | — | — | — | — | $ 33,656 |
| Net derivative gain (loss) | (94,595) | — | — | — | — | — | $ (94,595) |
| Income from mining | — | — | — | — | 8,383 | — | $ 8,383 |
| Other income | 443 | — | 3 | 58 | 15 | — | $ 519 |
| 244,149 | 9,991 | 11,088 | 4,150 | 8,398 | — | 277,776 | |
| Operating expenses | 14,143 | 677 | 9,676 | 611 | 3,458 | 5,286 | 33,851 |
| Other | |||||||
| Net unrealized gain (loss) on digital assets | 157,441 | 45,578 | 26,578 | — | (672) | — | 228,925 |
| Net unrealized gain (loss) on investments | 2,050 | 129,919 | 13,799 | — | — | — | 145,768 |
| Net gain on notes payable – derivative | — | — | — | — | — | 12,132 | 12,132 |
| Net gain (loss) on warrant liability | — | — | — | — | — | (20,842) | (20,842) |
| Foreign currency gain | 950 | — | — | — | — | (2) | 948 |
| (Gain) loss attributable to non-controlling interests liability | — | — | (32,646) | — | — | — | (32,646) |
| 160,441 | 175,497 | 7,731 | — | (672) | (8,712) | 334,285 | |
| Income (loss) before income taxes | $ 390,447 | $ 184,811 | $ 9,143 | $ 3,539 | $ 4,268 | $ (13,998) | $ 578,210 |
| Income tax expense | — | — | — | — | — | (56,900) | (56,900) |
| Net income (loss) for the period | $ 390,447 | $ 184,811 | $ 9,143 | $ 3,539 | $ 4,268 | $ (70,898) | $ 521,310 |
| Foreign currency translation adjustment | — | — | — | — | — | 26 | 26 |
| Comprehensive income (loss) for the period | $ 390,447 | $ 184,811 | $ 9,143 | $ 3,539 | $ 4,268 | $ (70,872) | $ 521,336 |
Assets and liabilities by reportable segment of GDH LP as of December 31, 2022 are as follows:
| (in thousands) | Trading | Principal Investments | Asset Management | Investment Banking | Mining | Corporate and Other | Totals |
| Total assets | $ 1,333,985 | $ 634,121 | $ 32,749 | $ 24,797 | $ 241,743 | $ 78,748 | $ 2,346,143 |
| Total liabilities | $ 351,662 | $ 374 | $ 710 | $ 2,104 | $ 10,519 | $ 541,982 | $ 907,351 |
Assets and liabilities by reportable segment of GDH LP as of December 31, 2021 are as follows:
| (in thousands) | Trading | Principal Investments | Asset Management | Investment Banking | Mining | Corporate and Other | Totals |
| Total assets | $ 2,971,090 | $ 1,277,707 | $ 193,436 | $ 10,727 | $ 292,942 | $ 350,636 | $ 5,096,538 |
| Total liabilities | $ 1,666,488 | $ 174 | $ 171,784 | $ 122 | $ 3,202 | $ 656,417 | $ 2,498,187 |
Select statement of financial position information
The fair value of select assets by reporting segment of GDH LP as of December 31, 2022 is as follows:
| (in thousands) | Trading | Principal Investments | Asset Management | Investment Banking | Mining | Corporate and Other | Totals |
| Digital assets | $ 566,690 | $ — | $ — | $ — | $ — | $ — | $ 566,690 |
| Digital assets receivables | 12,980 | 4,597 | — | — | — | — | 17,577 |
| Digital assets posted as collateral | 25,138 | — | — | — | — | — | 25,138 |
| Investments: | |||||||
| Pre-network launch | — | 5,500 | — | — | — | — | 5,500 |
| Convertible Notes | — | 12,649 | — | — | — | — | 12,649 |
| Preferred Stock | 250 | 256,111 | — | — | 2,100 | — | 258,461 |
| Common Stock | 121 | 61,146 | — | 381 | — | — | 61,648 |
| LP/LLC Interests | — | 255,799 | — | — | — | — | 255,799 |
| Warrants/Trust Units/Trust Shares | — | 1,065 | — | — | — | — | 1,065 |
| $ 605,179 | $ 596,867 | $ — | $ 381 | $ 2,100 | $ — | $ 1,204,527 |
The fair value of each asset class by reporting segment of GDH LP as of December 31, 2021 is as follows:
| (in thousands) | Trading | Principal Investments | Asset Management | Investment Banking | Mining | Corporate and Other | Totals |
| Digital assets | $ 2,121,772 | $ 123,210 | $ 165,300 | $ — | $ 10,495 | $ — | $ 2,420,777 |
| Digital assets receivables | — | 71,657 | — | — | — | — | 71,657 |
| Digital assets posted as collateral | 71,400 | — | — | — | — | — | 71,400 |
| Investments: | |||||||
| Pre-network launch | — | 6,393 | — | — | — | — | 6,393 |
| Convertible Notes | — | 9,768 | — | — | — | — | 9,768 |
| Preferred Stock | — | 382,182 | — | — | — | — | 382,182 |
| Common Stock | 34,991 | 236,303 | — | — | — | — | 271,294 |
| LP/LLC Interests | — | 383,279 | — | — | — | — | 383,279 |
| Warrants/Trust Units | 7,963 | 8,897 | — | — | — | — | 16,860 |
| $ 2,236,126 | $ 1,221,689 | $ 165,300 | $ — | $ 10,495 | $ — | $ 3,633,610 |
Net Digital Assets Position
Net digital assets includes all digital assets categorized as assets, less all digital assets categorized as liabilities on the statement of financial position, less non-controlling interests liabilities, and is included in the Company’s liquidity measure. Net digital assets as of December 31, 2022 is as follows:
| (in thousands) | As ofDecember 31, 2022 | As ofDecember 31, 2021 |
| Assets | ||
| Digital assets | $ 566,690 | $ 2,420,777 |
| Digital asset loans receivable, net of allowance | 49,971 | 192,684 |
| Digital assets receivable, current | 12,423 | 52,998 |
| Digital assets receivable, noncurrent | 5,154 | 18,659 |
| Assets posted as collateral | 25,138 | 71,400 |
| 659,376 | 2,756,518 | |
| Liabilities | ||
| Payables to customers1 | — | 18,565 |
| Digital asset loans payable | 170,566 | 905,013 |
| Collateral payable1 | 73,458 | 458,949 |
| Non-controlling interests liability | — | 161,536 |
| 244,024 | 1,544,063 | |
| Digital assets, net | $ 415,352 | $ 1,212,455 |
| Stablecoins, net | $ 281,048 | $ 240,634 |
| Digital assets, net excl. stablecoins | $ 134,304 | $ 971,821 |
| 1 Excludes cash portion of consolidated balance on the Partnership’s balance sheet. |