Freedom Holding Corp. (FRHC) - Q1 2026 (Ended June 30, 2025) Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2025 (Q1 of Fiscal 2026). Freedom Holding Corp. operates as a diversified financial services holding company with segments in Brokerage, Banking, Insurance, and Other (including telecommunications and media). The company is headquartered in Nevada with primary operations in Kazakhstan, Cyprus, the U.S., and other jurisdictions. As of June 30, 2025, the company had 61,221,687 shares of common stock outstanding.
Key Financial Metrics
| Metric | Q1 2026 (Jun 30, 2025) | Q1 2025 (Jun 30, 2024) |
|---|---|---|
| Total Revenue, Net | $533.4 million | $455.0 million |
| Net Income | $30.4 million | $34.3 million |
| Diluted EPS | $0.50 | $0.57 |
| Total Assets | $9.69 billion | $9.91 billion (Mar 31, 2025) |
| Total Liabilities | $8.46 billion | $8.70 billion (Mar 31, 2025) |
| Shareholders' Equity | $1.23 billion | $1.21 billion (Mar 31, 2025) |
| Cash & Cash Equivalents | $567.9 million | $837.3 million (Mar 31, 2025) |
| Restricted Cash | $1.10 billion | $807.5 million (Mar 31, 2025) |
| Net Cash from Operating Activities | $480.8 million | $854.1 million |
| Debt Securities Issued | $670.1 million | $469.6 million (Mar 31, 2025) |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 17% year-over-year (YoY) to $533.4 million. This was driven by an 18% increase in insurance premiums ($153.3M) and a significant swing in trading securities from a $52.1M loss in Q1 2024 to a $45.6M gain in Q1 2026, largely due to rising prices of Kazakhstan sovereign bonds.
- Net Income Decline: Despite revenue growth, net income decreased 11% YoY to $30.4 million. This was primarily due to a 70% increase in insurance claims incurred ($80.3M vs $47.3M), a 62% rise in payroll and bonuses ($93.1M), and a higher effective tax rate (25.0% vs 17.6%).
- Expense Increases: Total expenses rose 19% YoY to $492.9 million. Notable increases included stock compensation expense (up 117% to $23.1M) and professional services (up 79% to $13.0M).
- Balance Sheet Shifts: Total assets decreased slightly from the prior quarter ($9.91B to $9.69B). Cash and cash equivalents dropped significantly from $837.3M to $567.9M, while restricted cash increased to $1.10B. Debt securities issued increased by $200.6M due to new bond issuances in May 2025.
- Foreign Exchange Impact: A 3.3% depreciation of the Kazakhstan tenge against the U.S. dollar resulted in a foreign currency translation loss of $41.8 million, contributing to a comprehensive loss of $8.2 million for the quarter.
Guidance, Outlook, and Risks
- Strategic Expansion: The company continues to expand its "Digital Fintech Ecosystem," including the acquisition of Astel Group Ltd. (telecommunications) for approximately $22.3 million in April 2025. Capital expenditure commitments for the telecom business are approximately $96.7 million over five years.
- Segment Performance: The Brokerage segment generated $74.3M in net income, while the Banking segment contributed $17.4M. The Insurance segment reported a net loss of $1.8M due to high claims, and the "Other" segment reported a net loss of $59.5M.
- Dividends: The company does not anticipate paying cash dividends in the foreseeable future, intending to retain earnings for business expansion.
- Risk Factors:
- Geopolitical Risk: Exposure to conflicts in Russia-Ukraine and the Middle East, which may impact sanctions, trade flows, and currency stability.
- Credit Risk: Deterioration in macroeconomic conditions has led to increased provisions for expected credit losses ($4.8M provision vs $1.8M recovery in prior year).
- Legal Proceedings: An arbitration case with Einride AB regarding a $10 million convertible debenture subscription is ongoing, with a final award expected in May 2026.
- Regulatory Capital: All regulated subsidiaries met minimum net capital and solvency requirements as of June 30, 2025.
Investor Verification Checklist
- Trading Securities Valuation: Verify the sustainability of the $45.6M net gain on trading securities, which was heavily influenced by the price appreciation of Kazakhstan sovereign bonds.
- Insurance Claims Trend: Monitor the 70% YoY increase in insurance claims incurred and its impact on the Insurance segment's profitability.
- Related Party Transactions: Review the significant related party balances, including $231.7M in loans issued to related parties and $149.6M in customer liabilities from related parties.
- Currency Exposure: Assess the impact of the Kazakhstan tenge's volatility on consolidated earnings and the $41.8M translation loss.
- Capital Expenditures: Track the execution and funding of the $96.7M committed capital expenditures for the new telecommunications business.
- Einride Arbitration: Follow the status of the $10 million arbitration claim filed by Einride AB.