Freedom Holding Corp
For the period ended Sep 30, 2024. Filed Nov 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 8, 2024
FRHC$178.85+0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0000924805-24-000060
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0000924805-24-000068
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 228 previous paragraphs and 304 current paragraphs.
138 unchanged; 78 reworded; 49 added; 9 removed; 3 previous and 39 current paragraphs rearranged.
Tables are not compared: 20 previous and 36 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (49)
Current report
Credit Ratings
Current report
•Our insurance underwriting income for the three months ended September 30, 2024 was $160.3 million, an increase of $102.4 million or 177%, compared to the three months ended September 30, 2023. The increase was driven by the expansion of our insurance operations such as in the pension annuity and accident insurance between the two quarters.
Current report
The foregoing increases in revenues were offset in part by a decrease in our interest income to $210.3 million for the three months ended September 30, 2024, from $213.1 million for the three months ended September 30, 2023. The decrease was primarily attributable to decrease in interest income on trading securities.
Current report
We had net income of $114.7 million for the three months ended September 30, 2024, as compared to $115.8 million for the three months ended September 30, 2023. Our Brokerage, Banking, Insurance and Other segments contributed $85.6 million, $45.7 million, $14.8 million of net income and a net loss of $31.6 million, respectively, to our total net income for the three months ended September 30, 2024.
Current report
Net gain on trading securities
Current report
We had a net gain on trading securities of $68.3 million for the three months ended September 30, 2024, an increase of $17.5 million as compared to a net gain of $50.8 million or the three months ended September 30, 2023. The following table sets forth information regarding our net gains on trading activities during the three months ended September 30,2024 and 2023:
Current report
During the three months ended September 30,2024, we had a realized gain on trading securities of $2.4 million, which is attributable to Kazakhstan sovereign bonds sold during the three months ended September 30,2024. Also, we recognized an unrealized net gain of $65.9 million during the same period due to an increase in the value of securities positions we held as of September 30, 2024. The majority of the unrealized net gain is attributable to Kazakhstan sovereign bonds.
Current report
During the three months ended September 30,2023, we had a realized gain on trading securities of $41.1 million, which is attributable to Kazakhstan sovereign bonds sold during three months ended September 30, 2023. We had an unrealized net gain in the three months ended September 30, 2023, due to securities positions we continued to hold at September 30, 2023, having appreciated by $9.7 million. The majority of the unrealized net gain comes from the appreciated shares of KazMunayGaz and Kazakhstan sovereign bonds. During the three months ended September 30, 2023, KazMunayGas shares increased in value due to an increase in oil prices during such quarter. The sharp decline in the
Current report
National Bank of the Republic of Kazakhstan's base interest rate was the key factor causing the appreciation of the Kazakhstan sovereign bonds during the three months ended September 30, 2023.
Current report
For the three months ended September 30,2024, we realized a net gain on foreign exchange operations of $6.5 million compared to a net loss of $3.7 million for the three months ended September 30,2023. The net gain for the three months ended September 30, 2024 is mainly attributable to a $16.9 million gain on sale and purchases of foreign currency for the three months ended September 30, 2024, which was partially offset by a translation loss of $10.4 million for that quarter. This increase between the two quarters is not only due to there having been more trading gain transactions than loss transactions during the three months ended September 30, 2024 but also due to a 78% increase in Freedom Bank's overall transaction volume with foreign currency between the two quarters.
Current report
For the three months ended September 30,2024, we had net gain on derivatives of $6.3 million compared to a net gain of $1.4 million for the three months ended September 30,2023. The increase in the amount of net gain was primarily attributable to our subsidiary, Freedom Bank KZ, which had a realized net gain of $9.9 million for the three months ended September 30,2024, as compared to an unrealized net gain of $3.1 million for the three months ended September 30,2023 due to a positive revaluation of currency swaps. Freedom Bank KZ engages in currency swaps to diversify its funding sources.
Current report
We recognized provision for allowance for credit losses in the amount of $10.4 million for the three months ended September 30, 2024, as compared to provision for allowance for credit losses of $4.7 million for the three months ended September 30, 2023. As of September 30, 2024, the allowance for credit losses was $48.7 million, compared to $43.6 million as of March 31, 2024. The increase between the two periods is attributable to provisions for uncollateralized bank customer loans. The increase in provisions is primarily attributable to the deterioration of the quality of the portfolio for the digital loans for individual entrepreneurs. The effect of the increase in provisions is partially offset by the revision of the approach to calculating reserve rates for collective loans.
Current report
Comparison of the Six-month Periods Ended September 30, 2024 and 2023
Current report
Revenue
Current report
Percentage of total revenue, net.
Current report
Fee and commission income
Current report
For the six months ended September 30, 2024, total fee and commission income was $236.5 million, an increase of $26.1 million, or 12%, as compared to fee and commission income of $210.4 million for the six months ended September 30, 2023.
Current report
Net gain on trading securities
Current report
Interest income
Current report
For the six months ended September 30, 2024 , we realized a net gain on foreign exchange operations of $14.6 million compared to a net gain of $15.6 million for the six months ended September 30, 2023. The increase in net gain can be attributed to a gain of $29.6 million on purchases and sale of foreign currency that was partially offset by a translation loss of $15.0 million, mainly due to the 95% increase of Freedom Bank's volume of currency transactions compared to the six months ended September 30, 2023.
Current report
Net gain on derivatives
Current report
Insurance underwriting income
Current report
Expense
Current report
Percentage of total expense.
Current report
Fee and commission expense
Current report
Interest expense
Current report
For the six months ended September 30, 2024, we had a $58.5 million, or 105%, increase in insurance claims incurred, net of reinsurance, as compared to the six months ended September 30, 2023. The increase was primarily attributable to the general expansion of our insurance operations between the two periods.
Current report
Payroll and bonuses
Current report
Professional services
Current report
For the six months ended September 30, 2024, our professional services expense was $15.5 million, representing a decrease by $3.1 million or 16% compared to $18.6 million for the six months ended September 30, 2023. The decrease was primarily attributable to a decrease in expenses for auditing services rendered by our external auditors due to timing differences in the provision of such services. The decrease was partially offset by increases in certain professional services expenses, including consulting and legal fees, attributable to the overall growth of our company organically and through acquisitions between the two periods.
Current report
Stock compensation expense
Current report
Advertising expense
Current report
Advertising expense for the six months ended September 30, 2024, was $37.3 million, representing an increase of $20.5 million or 123% compared to $16.7 million for the six months ended September 30, 2023. The increase is primarily attributable to an increase in advertising expenses by Freedom Europe of $15.4 million attributable to marketing campaigns that were initiated during fiscal 2024 and continued in the six months ended September 30, 2024. This increase consisted of an increase of advertising expense, influencer and affiliates advertising expense, marketing and sponsorship expense. There was also an increase of $2.3 million attributable to Freedom Advertising, an advertising company, due to marketing expenditures to third party contractors. There was also an increase of $1.7 million from FRHC due to the company's focus on the brand visibility and enhanced marketing efforts.
Current report
General and administrative expense
Current report
Income tax expense
Current report
Net income
Current report
As a result of the foregoing factors, for the six months ended September 30, 2024, we had net income of $148.7 million compared to $183.4 million for the six months ended September 30, 2023, a decrease of 19%. Our Brokerage, Banking, Insurance and Other segments contributed $155.3 million, $17.2 million, $28.6 million net income and $52.3 million net loss, respectively, to our total net income for the six months ended September 30, 2024.
Current report
Non-controlling interest
Current report
Net loss attributable to non-controlling interest was $0.3 million and $0.5 million for the six months ended September 30, 2024 and September 30, 2023, respectively.
Current report
In the three months ended September 30, 2024, total revenue, net in the Other segment increased mostly due to an increase of $8.6 million in net gain on foreign exchange operations mainly from FRHC, which was attributable to an appreciation of the U.S. dollar against the Kazakhstan tenge between the two quarters. There was also an increase in the other income of $5.1 million, as well as an increase in $2.3 million from net gain on trading securities. The overall increase was offset by a decrease of $6.5 million in fee and commission income.
Showing the first 40 of 49 passages. Open the source sections for the rest.
Removed paragraphs (9)
Previous report
Change in Reportable Segments
Previous report
Effective from the beginning of fiscal 2024, we underwent a strategic realignment in our business management and reporting structure. Our Chief Executive Officer, Chief Financial Officer and President, collectively acting as the Chief Operating Decision Maker (CODM), have initiated a new approach to managing our operations. This approach is based on a segmented analysis based on our business activities, allowing for more precise operating decisions and performance evaluations. All prior period segment information has been recast to reflect this change in reportable segments.
Previous report
Changes in Credit Ratings
Previous report
•Our interest income for the three month ended June 30, 2024 was $226.0 million, representing an increase of $76.7 million, or 51%, compared to the three months ended June 30, 2023. The increase in interest income was primarily attributable to increases in interest income on margin loans to customers, loans to customers and trading securities.
Previous report
•Our insurance underwriting income for the three months ended June 30, 2024 was $129.4 million, an increase of $84.5 million or 188%, compared to the three months ended June 30, 2023. The increase was driven by the expansion of our insurance operations such as pension annuity and accident insurance classes between the two quarters.
Previous report
We had net income of $34.4 million for the three months ended June 30, 2024, as compared to $68.1 million for the three months ended June 30, 2023.
Previous report
Net (loss)/gain on trading securities
Previous report
For the three months ended June 30, 2024, we realized a net gain on foreign exchange operations of $8.1 million compared to a net gain of $19.3 million for the three months ended June 30, 2023. The decrease in net gain can be attributed to a 5.5% depreciation of the Kazakhstan tenge against U.S. dollar during the three months ended June 30, 2024 as a result of which we had a net loss of $19.7 million at our subsidiary Freedom Bank KZ in the three months ended June 30, 2024 due to translation difference loss. The net loss was offset by a net gain of $17.0 million by FRHC and a $9.8 million net gain by Freedom Global in the three months ended June 30, 2024, as both companies conduct business in U.S. dollars.
Previous report
Net Cash Flows Used In Operating Activities
Reworded paragraphs (78)
Previous wording
The following discussion and analysis presents management’s perspective on financial condition and results of operations of Freedom Holding Corp. ("FRHC") and its consolidated subsidiaries. Except where the context otherwise requires or where otherwise indicated, references herein to the "Company," "Freedom," "we," "our," and "us") mean Freedom Holding Corp. together with its consolidated subsidiaries. References to "fiscal year(s)" means the 12-month periods ended March 31 for the referenced year. The following discussion and analysis is intended to highlight and supplement data and information presented elsewhere in this quarterly report on Form 10-Q, and it should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes included in this quarterly report on Form 10-Q and the discussion under the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in our annual report on Form 10-K for the fiscal year ended March 31, 2024, filed with the Securities Exchange Commission ("SEC") on June 14, 2024 (the “2024 Form 10-K”).
Current wording
The following discussion and analysis presents management’s perspective on the financial condition and results of operations of Freedom Holding Corp. ("FRHC") and its consolidated subsidiaries. Except where the context otherwise requires or where otherwise indicated, references herein to the "Company," "Freedom," "we," "our," and "us" mean Freedom Holding Corp. together with its consolidated subsidiaries. References to a "fiscal year(s)" mean the 12-month periods ended March 31 for the referenced year. The following discussion and analysis is intended to highlight and supplement data and information presented elsewhere in this quarterly report on Form 10-Q, and it should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes included in this quarterly report on Form 10-Q and the discussion under the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in our annual report on Form 10-K for the fiscal year ended March 31, 2024, filed with the Securities Exchange Commission ("SEC") on June 14, 2024 (the “2024 Form 10-K”).
Previous wording
The main market of our operations is Kazakhstan. Our operating subsidiaries are located in Kazakhstan, Cyprus, the United States, Armenia, the United Arab Emirates, Uzbekistan, and Turkey, and we also have a presence in Austria, Azerbaijan, Belgium, Bulgaria, France, Germany, Greece, Italy, Kyrgyzstan, Lithuania, The Netherlands, Poland, Spain and the United Kingdom. We divested our Russian subsidiaries in February 2023. Our subsidiaries in the United States include an SEC- and FINRA-registered broker dealer. As of June 30, 2024, we had 6,819 employees, 132 offices (of which 49 offered brokerage services, 60 offered insurance services, 20 offered banking services and 47 offered other financial and non-financial services).
Current wording
The main market of our operations is Kazakhstan. Our operating subsidiaries are located in Kazakhstan, Cyprus, the United States, the United Kingdom, Armenia, the United Arab Emirates, Uzbekistan, Kyrgyzstan, Tajikistan, Azerbaijan, and Turkey and we also have a presence in Austria, Belgium, Bulgaria, France, Germany, Greece, Italy, Lithuania, The Netherlands, Poland and Spain. We divested our Russian subsidiaries in February 2023. Our subsidiaries in the United States include an SEC- and FINRA-registered broker dealer. As of September 30, 2024, we had 7,146 employees and 189 offices (of which 42 offered brokerage services, 56 offered insurance services, 26 offered banking services and 65 offered other financial and non-financial services).
Previous wording
As of June 30, 2024, in our Brokerage business segment we had 49 offices that provided brokerage and financial services, investment consulting and education, including offices in Kazakhstan, Cyprus, Armenia, United States, Uzbekistan and Kyrgyzstan and representative offices in a number of other European countries. We provide a comprehensive range of securities brokerage services to individuals, businesses and financial institutions. Depending on the region, our brokerage services may include securities trading and margin lending. Our investment banking business consists of investment banking professionals in Kazakhstan, Uzbekistan and the United States who provide strategic advisory services and capital markets products.
Current wording
As of September 30, 2024, in our Brokerage business segment we had 42 offices that provided brokerage and financial services, investment consulting and education, including offices in Kazakhstan, Cyprus, Armenia, United States, Uzbekistan and Kyrgyzstan and representative offices in a number of other European countries. We provide a comprehensive range of securities brokerage services to individuals, businesses and financial institutions. Depending on the region, our brokerage services may include securities trading and margin lending. Our investment banking business consists of investment banking professionals in Kazakhstan, Uzbekistan and the United States who provide strategic advisory services and capital markets products.
Previous wording
Freedom EU oversees our European region operations (including Austria, Belgium, Bulgaria, Cyprus, France, Germany, Greece, Italy, Poland, Lithuania and Spain). In Cyprus, it is licensed to receive, transmit and execute customer orders, establish custodial accounts, engage in foreign currency exchange services and margin lending, and trade our own investment portfolio. Freedom EU serves as a hub for our Group's brokerage operations, providing transaction processing and intermediary services to our regional customers and to institutional customers that may seek access to the securities markets in the United States and Europe.
Current wording
Freedom EU oversees our European region operations (including Austria, Belgium, Bulgaria, Cyprus, France, Germany, Greece, Italy, Netherlands, Poland, Lithuania, Spain and the United Kingdom). In Cyprus, it is licensed to receive, transmit and execute customer orders, establish custodial accounts, engage in foreign currency exchange services and margin lending, and trade our own investment portfolio. Freedom EU serves as a hub for the Group's brokerage operations, providing transaction processing and intermediary services to our regional customers and to institutional customers that may seek access to the securities markets in the United States and Europe.
Previous wording
As of June 30, 2024, we had 1,510 employees in our Brokerage segment, including 1,219 full-time employees and 291 part-time employees.
Current wording
As of September 30, 2024, we had 1,658 employees in our Brokerage segment, including 1,378 full-time employees and 280 part-time employees.
Previous wording
Our Banking segment consists of the operations of Freedom Bank KZ which is a pioneer in digital retail and commercial banking services in Kazakhstan, offering a large variety of deposit, debit and credit cards allowing its customers to make purchases around the world in multiple different currencies, pay in installments or on credit, save their funds, manage their investment accounts, or get an increased cashback that is transferred to the International Fund for the Salvation of the Aral Sea. Freedom Bank KZ provides digital mortgages, digital car loans, digital business loans, and payment acquiring services for individual entrepreneurs.
Current wording
Our Banking segment consists of the operations of Freedom Bank KZ, which is a pioneer in digital retail and commercial banking services in Kazakhstan, offering a large variety of deposit, debit and credit cards allowing its customers to make purchases around the world in multiple different currencies, pay in installments or on credit, save their funds, manage their investment accounts, or get an increased cashback that is transferred to the International Fund for the Salvation of the Aral Sea. Freedom Bank KZ provides digital mortgages, digital car loans, digital business loans, and payment acquiring services for individual entrepreneurs. On October 15, 2024 we obtained a banking license in Tajikistan.
Previous wording
As of June 30, 2024, Freedom Bank KZ's assets decreased by 3%, its loan portfolio decreased by 5%, its deposit portfolio increased by 11% and its trading portfolio decreased by 8%, in each case in comparison with March 31, 2024. During the three months ended June 30, 2024, the banking segment continued to exhibit growth. In particular, interest income increased in comparison to the three months ended June 30, 2023. However in the three months ended June 30, 2024, the trading portfolio in the banking segment deteriorated to the negative revaluation of quasi-governmental bonds which were stipulated by current temporary market conditions.
Current wording
As of September 30, 2024, Freedom Bank KZ's assets increased by 1%, its loan portfolio decreased by 1%, its deposit portfolio increased by 12% and its trading portfolio decreased by 2%, in each case in comparison with March 31, 2024. During the three months ended September 30, 2024, the banking segment continued to exhibit growth. In particular, interest income increased in comparison to the three months ended September 30, 2023.
Previous wording
We have 20 office locations in Kazakhstan that provide banking services to our customers. As of June 30, 2024, we had 2,309 employees in our Banking segment, all of which were full-time employees.
Current wording
We have 26 office locations in Kazakhstan that provide banking services to our customers. As of September 30, 2024, we had 2,571 employees in our Banking segment, all of which were full-time employees.
Previous wording
Freedom Life provides a range of health and life insurance products to individuals and businesses, including life insurance, health insurance, annuity insurance, accident insurance, obligatory worker emergency insurance, travel insurance and reinsurance. As of June 30, 2024, Freedom Life had 888,787 active contracts, as compared to 616,301 active contracts as of March 31, 2024. As of June 30, 2024, Freedom Life had total assets of approximately $389.8 million and total liabilities of approximately $304.9 million, as compared to total assets of approximately $371.5 million and total liabilities of approximately $290.0 million as of March 31, 2024.
Current wording
Freedom Life provides a range of health and life insurance products to individuals and businesses, including life insurance, health insurance, annuity insurance, accident insurance, obligatory worker emergency insurance, travel insurance and reinsurance. As of September 30, 2024, Freedom Life had 1,072,794 active contracts, as compared to 616,301 active contracts as of March 31, 2024. As of September 30, 2024, Freedom Life had total assets of approximately $407.5 million and total liabilities of approximately $311.5 million, as compared to total assets of approximately $371.5 million and total liabilities of approximately $290.0 million as of March 31, 2024.
Previous wording
Freedom Insurance operates in the "general insurance" industry and is the leader in online insurance in Kazakhstan and offers various general insurance products in property (including automobile), casualty, civil liability, personal insurance and reinsurance. As of June 30, 2024, Freedom Insurance had 276,234 active contracts, as compared to 190,872 active contracts as of March 31, 2024. As of June 30, 2024, Freedom Insurance had total assets of approximately $156.1 million and total liabilities of approximately $106.4 million, as compared to total assets of approximately $158.0 million and total liabilities of approximately $112.8 million as of March 31, 2024.
Current wording
Freedom Insurance operates in the "general insurance" industry and is the leader in online insurance in Kazakhstan and offers various general insurance products in property (including automobile), casualty, civil liability, personal insurance and reinsurance. As of September 30, 2024, Freedom Insurance had 408,807 active contracts, as compared to 190,872 active contracts as of March 31, 2024. As of September 30, 2024, Freedom Insurance had total assets of approximately $157.0 million and total liabilities of approximately $93.7 million, as compared to total assets of approximately $158.0 million and total liabilities of approximately $112.8 million as of March 31, 2024.
Previous wording
As of June 30, 2024, we had 60 offices and 944 employees, including 920 full-time employees and 24 part-time employees, providing consumer life and general insurance services in Kazakhstan.
Current wording
As of September 30, 2024, we had 56 offices and 959 employees, including 924 full-time employees and 35 part-time employees, providing consumer life and general insurance services in Kazakhstan.
Previous wording
As of June 30, 2024, in our Other segment we had 47 offices and 2,056 employees, including 1,908 full-time employees and 148 part-time employees, providing a range of services including payment processing, entertainment ticketing sales, online air and railway ticket purchase aggregation and an online retail trade and e-commerce services. In addition, we have recently established subsidiaries in Kazakhstan with a view to launching a telecommunications business and a media business, respectively, each of which is in the developmental stage. This revenue of this segment is currently mainly derived from provision of payment processing services, retail online ticket sales and online aggregation of purchasing air and railway tickets.
Current wording
As of September 30, 2024, in our Other segment we had 65 offices and 2,396 employees, including 2,273 full-time employees and 123 part-time employees, providing a range of services including payment processing, entertainment ticketing sales, online air and railway ticket purchase aggregation and an online retail trade and e-commerce services. In addition, we have recently established subsidiaries in Kazakhstan to operate a telecommunications business and a media business, respectively, each of which is in the developmental stage. The revenue of this segment is currently mainly derived from provision of payment processing services, retail online ticket sales and online aggregation of purchasing air and railway tickets.
Previous wording
In addition to trading capabilities, we have expanded our digital solutions to include mortgages, auto loans, and insurance products. We also operate Ticketon Events LLP ("Ticketon"), the largest online ticket sales company in
Current wording
In addition to trading capabilities, we have expanded our digital solutions to include mortgages, auto loans, and insurance products. We also operate Ticketon Events LLP ("Ticketon"), the largest online ticket sales company in Kazakhstan and Paybox platform, the digital payment aggregator which enables our customers to accept payments from buyers using a wide range of payment methods, including bank cards, online banking, electronic money, and more.
Previous wording
Going forward, we prioritize further expanding our digital fintech ecosystem by integrating our online and mobile brokerage services, banking offerings, insurance products, payment processing systems, and online commercial ticketing services. Our strategic objective is to provide customers with a comprehensive and user-centric digital experience, offering them convenient access to a wide array of financial products and services through a single platform. When achieving our strategic objectives, we rely heavily on information technology and its continuous development and innovation to offer our users a seamless customer interaction, meet their diverse needs, and ensure stringent adherence to regulatory requirements and information security standards.
Current wording
Going forward, we are prioritizing the further development of our digital fintech ecosystem by integrating our online and mobile brokerage services, banking offerings, insurance products, payment processing systems, and online commercial ticketing services. Our strategic objective is to provide customers with a comprehensive and user-centric digital experience, offering them convenient access to a wide array of financial products and services through a single platform. When achieving our strategic objectives, we rely heavily on information technology and its continuous development and innovation to offer our users a seamless customer interaction, meet their diverse needs, and ensure stringent adherence to regulatory requirements and information security standards.
Previous wording
In alignment with our digital fintech ecosystem strategy, we plan to expand our business by entering the telecommunications market in Kazakhstan and regional media industry. We seek to establish a new independent telecommunications operator in Kazakhstan to provide a diverse range of telecommunications and telecommunications-related services to customers which may include, among others, high-quality internet connectivity, mobile virtual network operator (MVNO) services, WiFi access, over-the-top (OTT) streaming, internet protocol television (IPTV), traffic transit for operators and cloud solutions, subject to obtaining applicable licenses, acquisitions of telecom assets or entering into partnerships where required. Our new telecommunications business will be operated by Freedom Telecom, a wholly-owned subsidiary of Freedom Holding Corp. incorporated under the laws of the AIFC. Our strategy and budget for Freedom Telecom are currently being reassessed and are subject to revisions, which may be material. During fiscal 2024, we established Freedom Media LLP ("Freedom Media") as a subsidiary of Freedom Telecom that is intended to become a national media platform in Kazakhstan offering tailored streaming services to the Kazakhstan and Central Asia market. This platform is expected to provide unlimited access to a diverse collection of TV shows, movies, documentaries, and exclusive content across multiple genres.
Current wording
In alignment with our digital fintech ecosystem strategy, we are expanding our business by entering the telecommunications market in Kazakhstan and regional media industry in Central Asia. We are seeking to establish a new independent telecommunications operator in Kazakhstan to provide a diverse range of telecommunications and telecommunications-related services to customers which may include, among others, high-quality internet connectivity, mobile virtual network operator (MVNO) services, WiFi access, over-the-top (OTT) streaming, internet protocol television (IPTV), traffic transit for operators and cloud solutions, subject to obtaining applicable licenses, acquisitions of telecom assets or entering into partnerships where required. Our new telecommunications business is operated by Freedom Telecom, a wholly-owned subsidiary of Freedom Holding Corp. incorporated under the laws of the AIFC. Pursuing further development of our telecom business, on September 17, 2024 we completed the acquisition of a 100% interest in SilkNetCom LLP for a purchase price of approximately $23.9 million. SilkNetCom LLP is a company specializing in provider services, IT and construction of telecommunications networks in private and public sectors. See Note 22 Acquisitions of subsidiaries to the condensed consolidated financial statements included in this quarterly report on Form 10-Q. Our strategy and budget for Freedom Telecom are currently being reassessed and are subject to revisions, which may be material. During fiscal 2024, we established Freedom Media LLP ("Freedom Media") as a subsidiary of Freedom Telecom that is intended to become a national media platform in Kazakhstan offering tailored streaming services to the Kazakhstan and broader Central Asia markets. This platform is expected to provide unlimited access to a diverse collection of TV shows, movies, documentaries, and exclusive content across multiple genres.
Previous wording
We had total revenues, net of $450.7 million for the three months ended June 30, 2024, as compared to $316.2 million for the three months ended June 30, 2023. The increase between the two quarters was primarily attributable to the following:
Current wording
We had total revenues, net of $580.9 million for the three months ended September 30, 2024, as compared to $435.6 million for the three months ended September 30, 2023. The increase between the two quarters was primarily attributable to the following:
Previous wording
•We had a net loss on trading securities of $52.1 million for the three months ended June 30, 2024, as compared to a net gain on trading securities of $31.8 million for the three months ended June 30, 2023. The majority of the net loss for the three months ended June 30, 2024 was attributable to declines in the market prices of Kazakhstan sovereign bonds held in our proprietary portfolio during the quarter.
Current wording
•We had a net gain on trading securities of $68.3 million for the three months ended September 30, 2024, as compared to a net gain on trading securities of $50.8 million for the three months ended September 30, 2023. The majority of the net gain for the three months ended September 30, 2024 was attributable to the increase in the market prices of Kazakhstan sovereign bonds held in our proprietary portfolio during the quarter.
Previous wording
•Our fee and commission income for the three months ended June 30, 2024 was $115.5 million, an increase of $16.8 million, or 17%, compared to the three months ended June 30, 2023. The increase was mainly attributable to an increase in fee and commission income from brokerage services, which increase was offset in part by decreases in fee and commission income from bank services, payment processing and underwriting and market-making services.
Current wording
•Our fee and commission income for the three months ended September 30, 2024 was $121.1 million, an increase of $9.3 million, or 8%, compared to the three months ended September 30, 2023. The increase was mainly attributable to an increase in fee and commission income from brokerage services, which increase was offset in part by decreases in fee and commission income from bank services, payment processing, underwriting and market-making services and other fee and commission income.
Previous wording
•We had a net gain on derivatives for the three months ended June 30, 2024 in the amount of $12.5 million, an increase of $43.1 million, or 141%, compared to the three months ended June 30, 2023. This increase was due to revaluation of currency swaps.
Current wording
•We had a net gain on derivatives for the three months ended September 30, 2024 in the amount of $6.3 million, an increase of $4.9 million, or 358%, compared to the three months ended September 30, 2023. The gain for the three months ended June 30, 2024 was due to revaluation of currency swaps.
Previous wording
We had total expense of of $409.1 million, for the three months ended June 30, 2024, as compared to $231.6 million for the three months ended June 30, 2023. The increase was mainly attributable to increases in interest expense, payroll and bonuses, fee and commission expense, general and administrative expense and insurance claims incurred, net of reinsurance.
Current wording
We had total expense of $452.4 million, for the three months ended September 30,2024, as compared to $300.9 million for the three months ended September 30,2023. The increase was mainly attributable to increases in fee and commission expense, insurance claims incurred (net of reinsurance), payroll and bonuses, general and administrative expense and advertising expense.
Previous wording
Our total assets stayed relatively constant at $8.5 billion as of June 30, 2024 as compared to $8.3 billion as of March 31, 2024.
Current wording
Our total assets increased to $8.8 billion as of September 30, 2024 from $8.3 billion as of March 31, 2024.
Previous wording
We had approximately 532,000 total retail brokerage customers as of June 30, 2024 as compared to approximately 530,000 as of March 31, 2024. We had approximately 1,000,000 banking customers at our Freedom Bank KZ subsidiary as of June 30, 2024 as compared to approximately 900,000 as of March 31, 2024.
Current wording
We had approximately 555,000 total retail brokerage customers as of September 30, 2024 as compared to approximately 530,000 as of March 31, 2024. We had approximately 1,202,000 banking customers at our Freedom Bank KZ subsidiary as of September 30, 2024 as compared to approximately 904,000 as of March 31, 2024.
Previous wording
For the three months ended June 30, 2024, total fee and commission income was $115.5 million, an increase of $16.8 million, or 17%, as compared to fee and commission income of $98.7 million for the three months ended June 30, 2023.
Current wording
For the three months ended September 30,2024, total fee and commission income was $121.1 million, an increase of $9.3 million, or 8%, as compared to fee and commission income of $111.7 million for the three months ended September 30, 2023.
Previous wording
Fee and commission income from brokerage services for the three months ended June 30, 2024 was $93.2 million, representing a 69% increase as compared to $55.1 million for the three months ended June 30, 2023. This increase was primarily due to an increase in the number of retail brokerage customers from 399,000 as of June 30, 2023 to 532,000 as of June 30, 2024. The increase in the number of customers was attributable in part to the migration of customers from FST Belize to brokerage companies within our Group between the two quarters. The increase was offset in part by a decrease in fee and commission income from brokerage services generated from FST Belize between the two quarters, as our omnibus brokerage arrangement with FST Belize was wound down and customers of FST Belize closed their accounts at FST Belize and opened accounts with brokerage companies within our Group. During the three months ended June 30, 2024, we earned fee and commission income from a market maker customer at our Freedom Global subsidiary in an amount of $64.9 million, representing 56% of our total fee and commission income for that quarter.
Current wording
Fee and commission income from brokerage services for the three months ended September 30, 2024 was $107.4 million, representing a 27% increase as compared to $84.7 million for the three months ended September 30, 2023. This increase was primarily due to an increase in the number of retail brokerage customers from 434,000 as of September 30, 2023 to 555,000 as of September 30, 2024. The increase in the number of customers was attributable in part to the migration of customers from our affiliate FST Belize to brokerage companies within our Group between the two quarters. The increase was offset in part by a decrease in fee and commission income from brokerage services generated from FST Belize between the two quarters, as our omnibus brokerage account arrangement with FST Belize was wound down and customers of FST Belize closed their accounts at FST Belize and opened accounts with brokerage companies within our Group. During the three months ended September 30, 2024, we earned fee and commission income from a market maker customer at our Freedom Global subsidiary in an amount of $71.4 million, representing 59% of our total fee and commission income for that quarter.
Previous wording
Fee and commission income from payment processing decreased to $8.6 million for the three months ended June 30, 2024 from $18.0 million for the three months ended June 30, 2023. The $9.5 million decrease is attributable to a significant reduction in transaction volumes between the two quarters, which was in turn due to the cessation of operations of one of our counterparties, which previously contributed a substantial transaction volume.
Current wording
Fee and commission income from payment processing decreased to $6.0 million for the three months ended September 30, 2024 from $10.3 million for the three months ended September 30, 2023. The $4.3 million decrease is attributable to a decrease in transaction volumes between the two quarters, which was in turn due to the cessation of operations of one of our counterparties, which previously contributed a substantial transaction volume.
Previous wording
Fee and commission income from banking services decreased by $10.3 million or 80% to $2.5 million in the three months ended June 30, 2024 from $12.8 million in the three months ended June 30, 2023. The decrease in fee and commission income from banking services was primarily due to a $9.6 million decrease in commissions generated on transfer and payment processing, which was a result of a lower volume of transfer and payment processing transactions between the two quarters.
Current wording
Fee and commission income from banking services decreased to $1.9 million in the three months ended September 30, 2024 from $9.3 million in the three months ended September 30, 2023, a decrease of $7.4 million or 80%. The decrease in fee and commission income from banking services was primarily due to a $5.4 million decrease in commissions generated on transfer and payment processing, which was a result of a decrease in the volume of transfer and payment processing transactions between the two quarters.
Previous wording
Interest income on margin loans to customers includes income accrued on off-balance sheet arrangements, the monthly average balance of which is not included in the table above. These off-balance sheet arrangements mainly included repurchase agreements of our brokerage clients. As of June 30, 2024 and 2023, the monthly average balance of off-balance sheet arrangements were $962.7 million and $404.6 million, respectively, and the weighted average interest rate was 8.1%, and 10.4%, respectively.
Current wording
Interest income on margin loans to customers includes income accrued on off-balance sheet arrangements, the monthly average balance of which is not included in the table above. These off-balance sheet arrangements mainly included repurchase agreements of our brokerage clients. As of September 30, 2024 and 2023, the monthly average balance of off-balance sheet arrangements were $507.2 million and $788.2 million, respectively, and the weighted average interest rate was 5.7%, and 11.7%, respectively.
Previous wording
For the three months ended June 30, 2024, we had insurance underwriting income of $129.4 million, an increase of $84.5 million, or 188%, as compared to the three months ended June 30, 2023. The increase was primarily attributable to a $93.8 million, or 175%, increase in insurance underwriting income from written insurance premiums for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, due to the expansion of our insurance operations such as pension annuity and accident insurance classes between the two quarters. This increase in income from written insurance premiums was partially offset by a $1.0 million increase in reinsurance premiums ceded for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The following table sets out information on our insurance underwriting income for the periods presented.
Current wording
For the three months ended September 30, 2024, we had insurance underwriting income of $160.3 million, an increase of $102.4 million, or 177%, as compared to the three months ended September 30, 2023. The increase was primarily attributable to a $109.8 million, or 183%, increase in insurance underwriting income from written insurance premiums for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, due to the expansion of our insurance operations such as in the pension annuity and accident insurance between the two quarters. This increase in income from written insurance premiums was partially offset by a $1.2 million increase in reinsurance premiums ceded for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The following table sets out information on our insurance underwriting income for the periods presented.
Previous wording
During the three months ended June 30, 2024, we had a $50.7 million, or 53%, increase in interest expense as compared to the three months ended June 30, 2023. The increase in interest expense was primarily attributable to a $17.0 million, or 22%, increase in interest expense on short-term financing through securities repurchase agreements due to an increase in the volume of such financing, and a $7.5 million, or 48%, increase in interest expense on customer deposits. Compared to the three months ended June 30, 2023, we increased our volume of short-term financing through securities repurchase agreements primarily in order to fund our investment portfolio. The increase in interest on customer deposits was a result of growth of our banking client base due to the expansion of the operations of Freedom Bank KZ between the two periods.
Current wording
During the three months ended September 30,2024, we had a $14.7 million, or 11%, decrease in interest expense as compared to the three months ended September 30,2023. The decrease in interest expense was primarily attributable to a $30.9 million, or 26%, decrease in interest expense on short-term financing through securities repurchase agreements due to a decrease in the volume of such financing. This was partially offset by 6.0 million increase in interest expense on debt securities issued and $5.8 million increase in interest expense on customer deposits. Compared to the three months ended September 30,2023, we decreased our volume of short-term financing through securities repurchase agreements primarily in order to fund our investment portfolio. The increase in interest on customer deposits was a result of growth of our banking client base due to the expansion of the operations of Freedom Bank KZ between the two periods.
Previous wording
The following table provides a summary of the monthly average balances and average interest rates for the major categories of interest-bearing liabilities for the three months ended June 30, 2024 and 2023.
Current wording
The following table provides a summary of the monthly average balances and average interest rates for the major categories of interest-bearing liabilities for the three months ended September 30,2024 and 2023.
Previous wording
For the three months ended June 30, 2024, we had a $25.8 million, or 120%, increase in insurance claims incurred, net of reinsurance, as compared to the three months ended June 30, 2023. The increase was primarily attributable to the general expansion of our insurance operations between the two quarters.
Current wording
For the three months ended September 30, 2024, we had a $32.7 million, or 96%, increase in insurance claims incurred, net of reinsurance, as compared to the three months ended September 30, 2023. The increase was primarily attributable to the general expansion of our insurance operations between the two quarters.
Previous wording
For the three months ended June 30, 2024, we had payroll and bonuses expense of $57.5 million, representing an increase of $25.9 million or 82% compared to payroll and bonuses expense of $31.6 million for the three months ended June 30, 2023. The increase in payroll and bonus expenses is primarily attributable to increased salary and bonus amounts between the two quarters. The increase was also due to the expansion of our workforce through acquisitions, establishment of new subsidiaries and hiring.
Current wording
For the three months ended September 30, 2024, we had payroll and bonuses expense of $66.2 million, representing an increase of $26.2 million or 66% compared to payroll and bonuses expense of $40.0 million for the three months ended September 30, 2023. The increase in payroll and bonus expenses is primarily attributable to increased salary and bonus amounts between the two quarters. The increase was also due to the expansion of our workforce through acquisitions, establishment of new subsidiaries and hiring.
Previous wording
For the three months ended June 30, 2024, our professional services expense was $7.3 million, representing an increase by $0.6 million or 10% compared to $6.6 million for the three months ended June 30, 2023. The increase was attributable to an overall growth of our company organically and through acquisitions resulting in an increased need of professional services including consulting and legal services.
Current wording
For the three months ended September 30, 2024, our professional services expense was $8.2 million, representing a decrease by $3.7 million or 31% compared to $12.0 million for the three months ended September 30, 2023. The decrease was primarily attributable to a decrease in expenses for auditing services rendered by our external auditors due to timing differences in the provision of such services. The decrease was partially offset by increases in certain professional services expenses, including consulting and legal fees, attributable to the overall growth of our company organically and through acquisitions between the two periods.
Previous wording
For the three months ended June 30, 2024, our stock compensation expense was $10.6 million, representing a increase of $9.4 million or 761% compared to stock compensation expense of $1.2 million for the three months ended June 30, 2023. The increase is attributable to new stock grants the majority of which vested on the date of issuance during the three months ended June 30, 2024 and the partial amortization of stock grants which were granted in March 2024.
Current wording
For the three months ended September 30, 2024, our stock compensation expense was $12.1 million, representing an increase of $11.0 million or 1069% compared to stock compensation expense of $1.0 million for the three months ended September 30, 2023. The increase is attributable to new stock grants the majority of which vested on the date of issuance during the three months ended September 30, 2024 and the partial amortization of stock grants which were granted in March, April and June 2024.
Previous wording
Advertising expense for the three months ended June 30, 2024, was $17.2 million, representing an increase of $9.1 million or 112% compared to $8.1 million for the three months ended June 30, 2023. The increase is primarily attributable to an increase in advertising expenses by Freedom Europe of $6.4 million attributable to marketing campaigns that were initiated during fiscal 2024 and continued in the three months ended June 30, 2024. This increase consisted of an increase of approximately $3.4 million on advertising and an increase of $3.0 million on influencer and affiliates advertising. There was also an increase of $0.8 million attributable to Aviata, an online ticket aggregator that continuously promotes its services through advertising, and an increase of $0.9 million from Freedom Advertising, a subsidiary which is an advertising and marketing agency.
Current wording
Advertising expense for the three months ended September 30, 2024, was $20.0 million, representing an increase of $11.4 million or 132% compared to $8.6 million for the three months ended September 30, 2023. The increase is primarily attributable to an increase in advertising expenses by Freedom Europe of $9.0 million attributable to marketing campaigns that were initiated during fiscal 2024 and continued in the three months ended September 30, 2024. This increase consisted of an increase of approximately $4.6 million on advertising and an increase of $3.3 million on influencer and affiliates advertising. There was also an increase of $1.3 million attributable to Freedom Advertising, an advertising company, out of which $1.0 million was paid to advertising contractors and the remainder paid to Yandex Kazakhstan for advertisement placement. There was also an increase of $1.2 million of advertising expenses attributable to FRHC due to its focus on brand visibility and enhanced marketing efforts.
Previous wording
(Recovery of)/provision for allowance for expected credit losses
Current wording
Provision for allowance for expected credit losses
Previous wording
We had income before income tax of $41.6 million and $84.6 million for the three months ended June 30, 2024, and June 30, 2023, respectively. Income tax expense for the three months ended June 30, 2024, and June 30, 2023 was $7.3 million and $16.7 million, respectively. The decrease was primarily due to a decrease in our income before income tax between the two quarters. In addition, our effective tax rate during the three months ended June 30, 2024, decreased to 17.6%, from 19.7% during the three months ended June 30, 2023, as a result of changes in the composition of the revenues we realized from our operating activities, the tax treatment of those revenues in the various jurisdictions where our subsidiaries operate, and the incremental U.S. GILTI tax.
Current wording
We had income before income tax of $128.5 million and $134.7 million for the three months ended September 30,2024, and September 30, 2023, respectively. Income tax expense for the three months ended September 30,2024, and September 30, 2023 was $14.0 million and $19.2 million, respectively. The decrease was primarily due to a decrease in our income before income tax between the two quarters. In addition, our effective tax rate during the three months ended September 30,2024, decreased to 10.9%, from 14.3% during the three months ended September 30,2023, as a result of changes in the composition of the revenues we realized from our operating activities, the tax treatment of those revenues in the various jurisdictions where our subsidiaries operate, and the incremental U.S. GILTI tax.
Previous wording
As a result of the foregoing factors, for the three months ended June 30, 2024, we had net income of $34.3 million compared to $67.9 million for the three months ended June 30, 2023, a decrease of 50%.
Current wording
As a result of the foregoing factors, for the three months ended September 30, 2024, we had net income of $114.5 million compared to $115.5 million for the three months ended September 30, 2023, a decrease of 1%. Our Brokerage, Banking, Insurance and Other segments contributed $85.6 million, $45.7 million, $14.8 million net income and $31.6 million net loss, respectively, to our total net income for the three months ended September 30, 2024.
Previous wording
As of June 30, 2024, FRHC held a 94.81% ownership interest in Arbuz and a 90.0% ownership interest in ReKassa. The remaining 5.19% of the ownership interest in Arbuz and 10.0% of the ownership interest in ReKassa are recognized as non-controlling interests in our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income, Condensed Consolidated Statements of Shareholders’ Equity and Condensed Consolidated Statements of Cash Flows.
Current wording
As of September 30, 2024, FRHC held a 94.84% ownership interest in Arbuz and a 90.0% ownership interest in ReKassa. The remaining 5.19% of the ownership interest in Arbuz and 10.0% of the ownership interest in ReKassa are recognized as non-controlling interests in our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income, Condensed Consolidated Statements of Shareholders’ Equity and Condensed Consolidated Statements of Cash Flows.
Previous wording
Net loss attributable to non-controlling interest was $0.1 million and $0.2 million for the three months ended June 30, 2024 and June 30, 2023, respectively.
Current wording
Net loss attributable to non-controlling interest was $0.2 million and $0.4 million for the three months ended September 30, 2024 and September 30, 2023, respectively.
Showing the first 40 of 78 pairs. Open the source sections for the rest.
Rearranged current paragraphs (39)
Current report — wording carried from elsewhere
The following table sets out information on our total revenue, net for the periods presented.
Current report — wording carried from elsewhere
Fee and commission income from underwriting and market-making activities decreased by 58% to $1.2 million for the three months ended September 30, 2024 from $2.9 million for the three months ended September 30, 2023, driven by a lower volume of underwriting transactions for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.
Current report — wording carried from elsewhere
Other fee and commission income decreased by 3% to $4.6 million for the three months ended September 30, 2024 from $4.5 million for the three months ended September 30, 2023, due to a decrease in agency fees generated by our online travel ticket aggregator subsidiary.
Current report — wording carried from elsewhere
For the three months ended September 30, 2024, we had interest income of $210.3 million, representing a decrease of $2.7 million, or 1%, compared to the three months ended September 30, 2023. The decrease in interest income was primarily attributable to decrease in interest income on trading securities. Interest income on trading securities decreased by $9.0 million, or 8%, as a result of a decrease in the total size of our trading portfolio and an decrease in the amount of bonds we held as a percentage of our total trading portfolio between the two periods. Interest income on loans to customers increased by $6.5 million, or 15%, compared to the three months ending September 30, 2023 due to the growth of Freedom Bank KZ's customer loan portfolio between the two quarters. Interest income on margin loans to customers decreased by $1.7 million, or 4%, compared to the three months ended September 30, 2023, due to a decrease in the usage of margin loans for trades by our clients between the two quarters. For the three months ended September 30, 2024, we earned interest income from margin lending from a market maker customer at our Freedom Global subsidiary in an amount of approximately $7.6 million, representing 4% of our total interest income from margin lending for that quarter.
Current report — wording carried from elsewhere
Fee and commission expense increased by $59.2 million or 187% in the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The increase is mainly attributable to an increase of agency fees expense of $53.9 million or 268% compared to the three months ended September 30, 2023. The increase in agency fees expenses was due to an increase in insurance products sales by Freedom Life, which are outsourced to outside agents.
Current report — wording carried from elsewhere
General and administrative expense for the three months ended September 30, 2024, was $53.2 million, representing an increase of $23.6 million or 80% compared to general and administrative expense of $29.6 million for the three months ended September 30, 2023. The increase is attributable to the general expansion and development of our business between the two quarters. The main factors contributing to the increase were increases in charity and sponsorship, other operating expenses, rent expenses, lease depreciation and software support. Our charity and sponsorship expense increased by $13.8 million due to several charitable contributions through our subsidiaries during the three months ended September 30, 2024. The most significant contributions were made to the Kazakhstan Chess Federation, Sport Programming Federation and construction work in Konayev city. Other operating expenses increased by $2.8 million mainly due to an increase of other operating expenses at Freedom Bank KZ from banking and other overhead costs. The increase of $1.6 million in rent expense was driven by the addition of new subsidiaries between the two quarters and the overall growth of our operations. Lease depreciation expenses increased by $1.2 million, attributable to our overall growth and the need for more office space. The expansion of our workforce and the establishment of new offices required additional leasing, leading to higher depreciation costs. Software support expenses increased by $0.9 million mainly due to the support of licensed software fee and other software systems.
Current report — wording carried from elsewhere
Due to a 2.1% depreciation of the Kazakhstan tenge against the U.S. dollar during the three months ended September 30,2024, we realized a foreign currency translation loss of $20.0 million for the three months ended September 30,
Current report — wording carried from elsewhere
2024 since most of our companies use the Kazakhstan tenge as their functional currency, as compared to a foreign currency translation loss of $29.9 million for the three months ended September 30, 2023.
Current report — wording carried from elsewhere
The following table sets forth information regarding our fee and commission income for the periods presented.
Current report — wording carried from elsewhere
The following table sets out the components of our fee and commission income as a percentage of total fee and commission income, net for the periods presented.
Current report — wording carried from elsewhere
Fee and commission income from brokerage services for the six months ended September 30, 2024 was $200.5 million, representing a 43% increase as compared to $139.8 million for the six months ended September 30, 2023. This increase was primarily due to an increase in the number of retail brokerage customers from 434,000 as of September 30, 2023 to 555,000 as of September 30, 2024. The increase in the number of customers was attributable in part to the migration of customers from FST Belize to brokerage companies within our Group between the two periods. The increase was offset in part by a decrease in fee and commission income from brokerage services generated from FST Belize between the two periods, as our omnibus brokerage arrangement with FST Belize was wound down and customers of FST Belize closed their accounts at FST Belize and opened accounts with brokerage companies within our Group. During the six months ended September 30, 2024, we earned fee and commission income from a market maker customer at our Freedom Global subsidiary in an amount of $136.3 million, representing 58% of our total fee and commission income for that period.
Current report — wording carried from elsewhere
Fee and commission income from payment processing decreased to $14.5 million for the six months ended September 30, 2024 from $28.3 million for the six months ended September 30, 2023. The $13.8 million decrease is attributable to a significant reduction in transaction volumes between the two periods, which was in turn due to the cessation of operations of one of our counterparties, which previously contributed a substantial transaction volume.
Current report — wording carried from elsewhere
Fee and commission income from banking services decreased by $17.8 million or 80% to $4.4 million in the six months ended September 30, 2024. The decrease in fee and commission income from banking services was primarily due to a $15 million decrease in commissions generated on transfer and payment processing, which was a result of a lower volume of transfer and payment processing transactions between the two periods.
Current report — wording carried from elsewhere
The following tables set forth information regarding our revenue from interest income for the periods presented.
Current report — wording carried from elsewhere
The following table provides a summary of the monthly average balances and average interest rates for the major categories of our interest-earning assets for the six months ended September 30, 2024 and 2023.
Current report — wording carried from elsewhere
Interest income on margin loans to customers includes income accrued on off-balance sheet arrangements, the monthly average balance of which is not included in the table above. These off-balance sheet arrangements mainly included repurchase agreements of our brokerage clients. As of September 30, 2024 and 2023, the monthly average balance of off-balance sheet arrangements were $688.8 million and $569.0 million, respectively, and the weighted average interest rate was 8%, and 12%, respectively.
Current report — wording carried from elsewhere
The following table sets forth the effects of changing rates and volumes on interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate), The net column represents the sum of the prior columns. Changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on changes due to rate and the changes due to volume.
Current report — wording carried from elsewhere
Net gain on foreign exchange operations
Current report — wording carried from elsewhere
For the six months ended September 30, 2024, we had insurance underwriting income of $289.8 million, an increase of $186.9 million, or 182%, as compared to the six months ended September 30, 2023. The increase was primarily attributable to a $203.6 million, or 179%, increase in insurance underwriting income from written insurance premiums for the six months ended September 30, 2024, as compared to the six months ended September 30, 2023, due to the expansion of our insurance operations such as pension annuity and accident insurance classes between the two periods. This increase in income from written insurance premiums was partially offset by a $2.3 million increase in reinsurance premiums ceded for the six months ended September 30, 2024, as compared to the six months ended September 30, 2023. The following table sets out information on our insurance underwriting income for the periods presented.
Current report — wording carried from elsewhere
The following table sets out information on our total expense for the periods presented.
Current report — wording carried from elsewhere
The following table sets forth information regarding our fee and commission expense for the periods presented.
Current report — wording carried from elsewhere
The following table sets out the components of our fee and commission expense as a percentage of total fee and commission expense, net for the periods presented.
Current report — wording carried from elsewhere
During the six months ended September 30, 2024, we had a $36.0 million, or 15%, increase in interest expense as compared to the six months ended September 30, 2023. The increase in interest expense was primarily attributable to a $24.1 million, or 373%, increase in interest expense on margin lending payable due to an increase in the volume of such financing, and a $13.4 million, or 40%, increase in interest expense on customer deposits. Compared to the six months ended September 30, 2023. The increase in interest on customer deposits was a result of growth of our banking client base due to the expansion of the operations of Freedom Bank KZ between the two periods.
Current report — wording carried from elsewhere
The following table provides a summary of the monthly average balances and average interest rates for the major categories of interest-bearing liabilities for the six months ended September 30, 2024 and 2023.
Current report — wording carried from elsewhere
(1) Average balance, average rates, and interest expense relates to interest-bearing deposits.
Current report — wording carried from elsewhere
The following table sets forth the effects of changing rates and volumes on interest. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. Changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on changes due to rate and the changes due to volume.
Current report — wording carried from elsewhere
Insurance claims incurred, net of reinsurance
Current report — wording carried from elsewhere
For the six months ended September 30, 2024, we had payroll and bonuses expense of $123.7 million, representing an increase of $52.1 million or 73% compared to payroll and bonuses expense of $71.6 million for the six months ended September 30, 2023. The increase in payroll and bonus expenses is primarily attributable to increased salary and bonus amounts between the two periods. The increase was also due to the expansion of our workforce through acquisitions, establishment of new subsidiaries andhiring.
Current report — wording carried from elsewhere
For the six months ended September 30, 2024, our stock compensation expense $22.7 million, representing a increase of $20.4 million or 901% compared to stock compensation expense of $2.3 million for the six months ended September 30, 2023. The increase is attributable to new stock grants the majority of which vested on the date of issuance during the six months ended September 30, 2024 and the partial amortization of stock grants which were granted in March., April and June 2024.
Current report — wording carried from elsewhere
Provision for allowance for expected credit losses
Current report — wording carried from elsewhere
We had income before income tax of $170.1 million and $219.3 million for the six months ended September 30, 2024, and September 30, 2023, respectively. Income tax expense for the six months ended September 30, 2024, and September 30, 2023 was $21.3 million and $35.9 million, respectively. The decrease was primarily due to a decrease in our income before income tax between the two periods. In addition, our effective tax rate during the six months ended September 30, 2024, decreased to 13%, from 16% during the six months September 30, 2023, as a result of changes in the composition of the revenues we realized from our operating activities, the tax treatment of those revenues in the various jurisdictions where our subsidiaries operate, and the incremental U.S. GILTI tax.
Current report — wording carried from elsewhere
As of September 30, 2024, FRHC held a 94.84% ownership interest in Arbuz and a 90.0% ownership interest in ReKassa. The remaining 5.19% of the ownership interest in Arbuz and 10.0% of the ownership interest in ReKassa are recognized as non-controlling interests in our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income, Condensed Consolidated Statements of Shareholders’ Equity and Condensed Consolidated Statements of Cash Flows.
Current report — wording carried from elsewhere
Foreign currency translation adjustments, net of tax
Current report — wording carried from elsewhere
Comparison of the Three-month Periods Ended September 30, 2024 and 2023
Current report — wording carried from elsewhere
Total revenue, net associated with our segments is summarized in the following table:
Current report — wording carried from elsewhere
In the three months ended September 30, 2024, in our Brokerage segment we had an increase in total revenue, net, primarily driven by an increase in fee and commission income. Fee and commission income in this segment increased, primarily due to a general increase in brokerage activity between the two quarters. The revenue increase were partially offset by a decrease in net gain on trading securities, interest income and net gain on foreign currency exchange.
Current report — wording carried from elsewhere
Total expenses associated with our segments are summarized in the following table:
Current report — wording carried from elsewhere
For the six months ended September 30, 2024, total expenses, net increased across each of our business segments compared to the six months ended September 30, 2023.
Current report — wording carried from elsewhere
In the six months ended September 30, 2024, total expenses, net in our Brokerage segment increased primarily due to an increase in interest expense, which was in turn due to interest paid on securities repurchase agreements and fee and commission expense, which was in turn mainly due to agency fees expense. Additionally, there was an increase in payroll and bonuses, reflecting our efforts to attract and retain top talent. Advertising expenses in this segment also increased as we intensified our marketing efforts to expand our client base. Furthermore, stock compensation expenses increased, attributable to new stock grants and partial amortization of old stock grants. These increases were partially offset by a decrease in general and administrative expenses.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Kazakhstan and Paybox platform, the digital payment aggregator which enables our customers to accept payments from buyers using a wide range of payment methods, including bank cards, online banking, electronic money, and more.
Previous report — wording carried elsewhere
2024, we earned interest income from margin lending from a market maker customer at our Freedom Global subsidiary in an amount of approximately $19.4 million, representing 9% of our total interest income from margin lending for that quarter.
Previous report — wording carried elsewhere
We regularly monitor and manage our leverage and liquidity risk through various committees and processes we have established to maintain compliance with net capital and capital adequacy requirements imposed on securities brokerages and banks in jurisdictions where we do business. We assess our leverage and liquidity risk based on considerations and assumptions of market factors, as well as other factors, including the amount of available liquid capital