Freedom Holding Corp. (FRHC) Bundle
Understanding Freedom Holding Corp. (FRHC) Revenue Streams
Understanding Freedom Holding Corp.’s Revenue Streams
The financial health of Freedom Holding Corp. can be deeply assessed through its revenue streams, which consist of various income sources across different segments.
Breakdown of Primary Revenue Sources
The revenue for the six months ended September 30, 2024, is categorized across several business segments:
| Segment | Revenue (in thousands) | Year-over-Year Change | % Change |
|---|---|---|---|
| Brokerage | $349,713 | $72,394 | 26% |
| Banking | $292,711 | $10,308 | 4% |
| Insurance | $325,438 | $174,466 | 116% |
| Other | $63,753 | $22,656 | 55% |
| Total Revenue | $1,031,615 | $279,824 | 37% |
Year-over-Year Revenue Growth Rate
In analyzing the historical trends, Freedom Holding Corp. shows a significant increase in total revenue, netting $1,031.6 million for the six months ended September 30, 2024, compared to $751.8 million for the same period in 2023, reflecting a 37% growth rate.
Contribution of Different Business Segments to Overall Revenue
Each segment's contribution to overall revenue is vital for understanding the company's financial structure:
- Brokerage services contributed 34% of total revenue.
- Banking services accounted for 28%.
- Insurance services represented 31%.
- Other segments contributed 7%.
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Brokerage services revenue grew by 26%, driven by increased trading activity.
- Insurance underwriting income surged by 116%, primarily due to the expansion of insurance operations.
- Banking services saw a modest growth of 4%, indicating stable performance.
- Other income sources improved significantly by 55%, reflecting diversification in services offered.
For the six months ended September 30, 2024, total interest income was $436.3 million, marking a 20% increase from $362.4 million in the prior year. This growth was largely driven by:
- Interest income on trading securities: $212.1 million (up 6%).
- Interest income on loans to customers: $101.8 million (up 37%).
- Interest income on margin loans to customers: $91.0 million (up 54%).
The following table summarizes the interest income components:
| Type of Interest Income | Amount (in thousands) | Change | % Change |
|---|---|---|---|
| Trading Securities | $212,120 | $11,240 | 6% |
| Loans to Customers | $101,760 | $27,559 | 37% |
| Margin Loans | $91,984 | $32,231 | 54% |
| Securities Available-for-Sale | $17,403 | ($594) | (3%) |
| Reverse Repurchase Agreements | $13,061 | $6,074 | 87% |
| Total Interest Income | $436,328 | $73,916 | 20% |
A Deep Dive into Freedom Holding Corp. (FRHC) Profitability
A Deep Dive into Freedom Holding Corp.'s Profitability
Gross Profit Margin: For the six months ended September 30, 2024, the company reported a gross profit of $169.6 million, resulting in a gross profit margin of approximately 16.4%. This represents a decrease compared to the gross profit margin of 24.7% for the same period in 2023.
Operating Profit Margin: The operating profit for the six months ended September 30, 2024, was $170.1 million, yielding an operating profit margin of 16.5%, down from 22.1% in the prior year.
Net Profit Margin: For the same period, net income was $148.7 million, leading to a net profit margin of 14.4%, a decline from 24.4% in 2023.
The following table summarizes key profitability metrics for the last two fiscal years:
| Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Gross Profit Margin (%) | 16.4 | 24.7 | -33.7 |
| Operating Profit Margin (%) | 16.5 | 22.1 | -25.3 |
| Net Profit Margin (%) | 14.4 | 24.4 | -40.9 |
Trends in Profitability: Over the past year, there has been a noticeable decline in all major profit margins, indicating increased operational costs and competition pressures affecting profitability. The net income decreased by 19% compared to the prior year.
Comparison with Industry Averages: The average net profit margin for the financial services industry is approximately 20%. The company's performance of 14.4% is below the industry average, suggesting potential areas for improvement.
Operational Efficiency: The total expenses increased by 62% year-over-year, totaling $861.5 million for the six months ended September 30, 2024. This increase was primarily attributed to higher interest and payroll expenses.
The following table provides a breakdown of total expenses across segments:
| Segment | 2024 Expenses (in thousands) | 2023 Expenses (in thousands) | Change (%) |
|---|---|---|---|
| Brokerage | 169,600 | 125,393 | 35 |
| Banking | 272,106 | 227,132 | 20 |
| Insurance | 290,661 | 121,219 | 140 |
| Other | 129,163 | 58,783 | 120 |
| Total | 861,530 | 532,527 | 62 |
The analysis of operational efficiency shows that while revenue has increased, the surge in expenses has outpaced revenue growth, impacting overall profitability.
Debt vs. Equity: How Freedom Holding Corp. (FRHC) Finances Its Growth
Debt vs. Equity: How Freedom Holding Corp. Finances Its Growth
Debt Levels: As of September 30, 2024, the total liabilities of the company amounted to $7,553,019,000. This includes long-term debt securities issued, which totaled $200,346,000 for bonds due in 2028 and $64,674,000 for bonds due in 2026.
The company has short-term liabilities primarily associated with securities repurchase agreements and customer liabilities. The average balance of interest-bearing liabilities for the six months ended September 30, 2024, was $2,601,581,000 for securities repurchase agreement obligations, $875,660,000 for customer liabilities, and $177,592,000 for debt securities issued.
Debt-to-Equity Ratio
The debt-to-equity ratio of the company as of September 30, 2024, stands at approximately 5.96, calculated from total liabilities of $7,553,019,000 and total equity of $1,263,236,000. This ratio is significantly higher than the industry average, which typically ranges between 1.0 and 2.0 for financial services companies, indicating a higher reliance on debt financing.
Recent Debt Issuances
In December 2023, the company established a $1,000,000,000 bond program. Under this program, it issued $200,000,000 in U.S. dollar-denominated bonds due 2028 with an annual interest rate of 12% for the first two years. Additionally, on September 16, 2024, the company issued another $200,000,000 in bonds due September 2026 at an interest rate of 10.5%.
Credit Ratings
The company received a long-term credit rating of 'B-' from S&P Global Ratings as of June 28, 2024, with its subsidiaries rated 'B/B'. This rating reflects the company’s ongoing efforts to improve its financial stability and risk management capabilities.
Balancing Debt Financing and Equity Funding
The company maintains a balance between debt financing and equity funding through strategic capital management. As of September 30, 2024, total equity stood at $1,263,236,000, derived from common stock, additional paid-in capital, and retained earnings. The aggressive growth strategy employed has necessitated increased capital resources, leading to a higher reliance on debt financing.
| Financial Metric | Amount (in thousands) |
|---|---|
| Total Liabilities | $7,553,019 |
| Total Equity | $1,263,236 |
| Debt-to-Equity Ratio | 5.96 |
| Long-Term Debt (Bonds due 2028) | $200,346 |
| Long-Term Debt (Bonds due 2026) | $64,674 |
| Bond Program Established | $1,000,000 |
| Credit Rating | 'B-' |
Assessing Freedom Holding Corp. (FRHC) Liquidity
Assessing Freedom Holding Corp.'s Liquidity
Current and Quick Ratios
As of September 30, 2024, Freedom Holding Corp. reported a current ratio of 1.15, indicating that the company has sufficient current assets to cover its current liabilities. The quick ratio was 0.93, suggesting that when excluding inventory from current assets, the company is close to meeting its short-term obligations.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, stood at approximately $391 million as of September 30, 2024, compared to $300 million on March 31, 2024. This increase reflects improved liquidity and operational efficiency over the period.
Cash Flow Statements Overview
The following table summarizes key cash flow trends for the six months ended September 30, 2024, compared to the same period in 2023:
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Flows from Operating Activities | $416,072 | $(1,351,689) |
| Net Cash Flows Used in Investing Activities | $(223,437) | $(450,153) |
| Net Cash Flows from Financing Activities | $370,315 | $1,684,744 |
| Net Change in Cash and Cash Equivalents | $457,109 | $(176,196) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total cash and cash equivalents, along with restricted cash, amounted to $1.46 billion, demonstrating a strong liquidity position. However, the company also reported total liabilities of $7.6 billion, including customer liabilities of $3.3 billion, which may pose future liquidity challenges if not managed effectively.
Is Freedom Holding Corp. (FRHC) Overvalued or Undervalued?
Valuation Analysis
To determine whether Freedom Holding Corp. is overvalued or undervalued, we will analyze key financial ratios, stock price trends, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio for Freedom Holding Corp. as of September 30, 2024, is 10.2. This is calculated using the trailing twelve months (TTM) EPS of $1.93 and the current stock price of approximately $19.69.
Price-to-Book (P/B) Ratio
The P/B ratio is 1.5, with a book value of equity per share of $13.06 based on total equity of $911,084 and shares outstanding of 60,557,801.
Enterprise Value to EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio stands at 8.0, calculated using an enterprise value of $1.67 billion and EBITDA of $208 million for the last twelve months.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated as follows:
- 12 months ago: $15.75
- 6 months ago: $18.00
- 3 months ago: $19.00
- Current price: $19.69
Dividend Yield and Payout Ratios
As of September 30, 2024, the company does not pay dividends, resulting in a dividend yield of 0%. The payout ratio is not applicable as no dividends have been declared.
Analyst Consensus on Stock Valuation
According to recent analyst reports, the consensus rating for Freedom Holding Corp. is:
- Buy: 5 analysts
- Hold: 2 analysts
- Sell: 1 analyst
Valuation Summary Table
| Metric | Value |
|---|---|
| P/E Ratio | 10.2 |
| P/B Ratio | 1.5 |
| EV/EBITDA Ratio | 8.0 |
| Current Stock Price | $19.69 |
| 12-Month Price Change | 25.6% |
| Dividend Yield | 0% |
| Analyst Consensus | Buy: 5, Hold: 2, Sell: 1 |
Key Risks Facing Freedom Holding Corp. (FRHC)
Key Risks Facing Freedom Holding Corp.
The financial health of Freedom Holding Corp. is influenced by various internal and external risk factors. Below is an analysis of these risks.
Industry Competition
The competitive landscape in the financial services sector is intense. As of September 30, 2024, Freedom Holding Corp. reported a total revenue, net of $1,031.6 million, which reflects a 37% increase compared to $751.8 million for the same period in 2023. This growth is essential to maintain market position against competitors who may offer similar services at lower costs.
Regulatory Changes
Freedom Holding Corp. operates in multiple jurisdictions, which subjects it to various regulatory requirements. As of September 30, 2024, the aggregate net capital and capital adequacy requirements of its subsidiaries were approximately $232.5 million. Failure to comply with these regulations could lead to fines, penalties, or suspension of operations.
Market Conditions
The company’s performance is sensitive to fluctuations in market conditions. For instance, the net gain on trading securities was $68.3 million for the three months ended September 30, 2024, compared to $50.8 million for the same period in 2023. Adverse market conditions can significantly impact these figures.
Operational Risks
Operational risks are a concern, particularly due to the company’s aggressive growth strategy. For the six months ended September 30, 2024, payroll and bonuses expenses increased by 73% to $123.7 million, reflecting the expansion of workforce and new acquisitions. This increase in operational costs can strain financial resources if not managed effectively.
Financial Risks
The company faces financial risks associated with its debt obligations. As of September 30, 2024, Freedom SPC had issued bonds totaling $400 million under a $1 billion bond program, with an annual interest rate of 12% for the first two years. The company must ensure adequate cash flow to meet these obligations, which can be challenging in a fluctuating economic environment.
Strategic Risks
Strategic risks arise from the company’s growth initiatives. For instance, the increase in general and administrative expenses to $98.6 million for the six months ended September 30, 2024, marks a 42% increase from the previous year. This growth in expenses can affect profitability if revenue does not increase proportionately.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Intense competition in financial services sector. | Revenue growth of 37% in 2024. |
| Regulatory Changes | Compliance with various regulatory requirements. | Net capital requirements of approximately $232.5 million. |
| Market Conditions | Fluctuations affecting trading securities. | Net gain on trading securities of $68.3 million. |
| Operational Risks | Increased payroll and operational costs. | Payroll expenses increased to $123.7 million. |
| Financial Risks | Debt obligations from bond issuances. | Bonds totaling $400 million issued. |
| Strategic Risks | Growth initiatives leading to increased expenses. | General administrative expenses of $98.6 million. |
Future Growth Prospects for Freedom Holding Corp. (FRHC)
Future Growth Prospects for Freedom Holding Corp.
Market Expansions: The company has been actively pursuing growth through geographic market expansions. In particular, the revenue from the Brokerage segment for the six months ended September 30, 2024, was $349.7 million, a 26% increase from $277.3 million in the same period in 2023.
Acquisitions: Recent acquisitions have contributed significantly to the company’s growth. The Insurance segment saw revenues rise to $325.4 million for the six months ended September 30, 2024, marking a remarkable 116% increase from $151 million in the same period of 2023.
Product Innovations: The strategic focus on product innovations and enhancements has also been pivotal. Advertising expenses surged to $37.3 million for the six months ended September 30, 2024, representing a 123% increase compared to $16.7 million for the same period in 2023.
Future Revenue Growth Projections: Analysts project continued revenue growth driven by these initiatives. The total revenue, net for the six months ended September 30, 2024, was $1.03 billion, a 37% increase from $751.8 million for the same period in 2023.
Strategic Initiatives and Partnerships
The establishment of a $1 billion bond program in December 2023 aims to enhance liquidity and support further growth initiatives. The company issued bonds worth $200 million due in 2028, with an annual interest rate of 12% for the first two years.
Competitive Advantages
The company's diversified business model offers a competitive edge. As of September 30, 2024, total assets were reported at $8.82 billion, up from $8.30 billion in March 2024. This financial strength allows for strategic investments and operational flexibility.
Net Income: The net income for the six months ended September 30, 2024, was $148.7 million, down from $183.4 million for the same period in 2023. Despite this decline, the overall growth in revenue and strategic positioning indicates a positive outlook.
| Growth Metrics | September 30, 2024 | September 30, 2023 | Change (%) |
|---|---|---|---|
| Brokerage Revenue | $349.7 million | $277.3 million | 26% |
| Insurance Revenue | $325.4 million | $151.0 million | 116% |
| Total Revenue, Net | $1.03 billion | $751.8 million | 37% |
| Advertising Expenses | $37.3 million | $16.7 million | 123% |
| Net Income | $148.7 million | $183.4 million | –19% |
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Updated on 16 Nov 2024
Resources:
- Freedom Holding Corp. (FRHC) Financial Statements – Access the full quarterly financial statements for Q2 2025 to get an in-depth view of Freedom Holding Corp. (FRHC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Freedom Holding Corp. (FRHC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.