Freedom Holding Corp. 10-Q Summary: Quarter Ended December 31, 2025
Business Context and Reporting Period
This report covers the quarterly period ended December 31, 2025 (Q1 Fiscal 2026). Freedom Holding Corp. (FRHC) operates as a holding company for subsidiaries providing securities brokerage, banking, insurance, and lifestyle services across Kazakhstan, Europe, the U.S., and Central Asia. The company is expanding its digital fintech ecosystem, including telecommunications (Freedom Telecom) and media (Freedom Media) ventures in Kazakhstan.
Key Financial Metrics
| Metric | Three Months Ended Dec 31, 2025 | Nine Months Ended Dec 31, 2025 |
|---|---|---|
| Total Revenue, Net | $628.6 million | $1,688.2 million |
| Net Income | $76.2 million | $145.4 million |
| Diluted EPS | $1.25 | $2.38 |
| Total Assets | $12.4 billion | (Balance Sheet Item) |
| Total Liabilities | $11.0 billion | (Balance Sheet Item) |
| Shareholders' Equity | $1.4 billion | (Balance Sheet Item) |
| Cash & Cash Equivalents | $869.2 million | (Balance Sheet Item) |
| Restricted Cash | $2.6 billion | (Balance Sheet Item) |
| Operating Cash Flow (9M) | N/A | $1,733.9 million |
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 5% quarter-over-quarter (QoQ) to $628.6 million and 1% year-over-year (YoY) for the nine-month period. The QoQ drop was driven by a 40% decrease in insurance premiums ($106.9M vs. $177.5M) due to regulatory caps on agent commissions and a 51% drop in net gains on trading securities.
- Net Income: Net income decreased slightly by 2% QoQ to $76.2 million but fell 36% YoY for the nine-month period to $145.4 million, largely due to a higher effective tax rate (25.4% vs. 15.5%) resulting from new Kazakhstani tax legislation.
- Expense Management: Total expenses decreased 6% QoQ to $534.7 million. Notable reductions included a 64% drop in fee and commission expenses and a 79% decrease in the allowance for expected credit losses.
- Balance Sheet Growth: Total assets increased 25% from March 31, 2025 ($9.9B) to December 31, 2025 ($12.4B), driven by growth in restricted cash (customer deposits) and loans issued.
- Foreign Exchange: A significant foreign currency translation gain of $87.7 million occurred in the quarter due to the strengthening of the Kazakhstan tenge against the U.S. dollar.
Guidance, Outlook, and Risks
- Strategic Expansion: Management continues to invest in the telecommunications sector (Freedom Telecom) with capital expenditure commitments of up to $112.3 million. The company is also developing a Sovereign AI Hub in Kazakhstan in collaboration with the Ministry of Artificial Intelligence.
- Regulatory Impact: New tax laws in Kazakhstan effective January 1, 2026, will increase the corporate income tax rate for the banking sector to 25% and introduce a 10% tax on interest income from sovereign securities. A regulatory cap on insurance agent commissions has reduced new business volumes in the insurance segment.
- Legal Proceedings: The company is cooperating with an ongoing SEC inquiry regarding settlement practices and relationships with institutional market makers. No material loss accruals were recorded as of December 31, 2025.
- Dividends: No cash dividends were declared or paid during the quarter. The company intends to retain earnings to fund operations and expansion.
Investor Verification Checklist
- Insurance Segment Viability: Verify the long-term impact of the regulatory cap on insurance agent commissions on the Insurance segment's revenue trajectory.
- Tax Rate Sustainability: Confirm the projected effective tax rate for the full fiscal year 2026 given the new Kazakhstani tax code changes.
- Related Party Transactions: Review the significant related party balances, including $463.3 million in restricted cash and $19.5 million in loans issued to entities controlled by management.
- Telecom CapEx: Monitor the execution and funding of the $112.3 million capital expenditure commitment for the Freedom Telecom subsidiary.
- SEC Inquiry Status: Track developments in the ongoing SEC investigation regarding settlement practices and internal controls.