Freedom Holding Corp. [FRHC] Filings

10-Q 1 frhc-20240630.htm 10-Q frhc-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended June 30, 2024

			OR

o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from ________ to _________

Commission File Number 001-33034


			FREEDOM HOLDING CORP.
			(Exact name of registrant as specified in its charter)

Nevada

30-0233726

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

“Esentai Tower” BC, Floor 7

77/7 Al Farabi Ave

Almaty, Kazakhstan

50040

(Address of principal executive offices)

(Zip Code)

+7 727 311 10 64

(Registrant's telephone number, including area code)

Securities registered under Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	FRHC	The Nasdaq Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes ☐ No x

As of August 6, 2024, the registrant had 60,745,658 shares of common stock, par value $0.001, issued and outstanding.

FREEDOM HOLDING CORP.

FORM 10-Q

TABLE OF CONTENTS



		Page
PART I — FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements	3

	Condensed Consolidated Balance Sheets as of June 30, 2024, and March 31, 2024	3

	Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income for the Three Months Ended June 30, 2024 and 2023	4

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2024 and 2023	6

	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended June 30, 2024 and 2023	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	51

Item 3.	Qualitative and Quantitative Disclosures About Market Risk	73

Item 4.	Controls and Procedures	77

PART II — OTHER INFORMATION		78

Item 1.	Legal Proceedings	78

Item 1A.	Risk Factors	78

Item 5.	Other Information	78

Item 6.	Exhibits	79

Signatures		80

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FREEDOM HOLDING CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (All amounts in thousands of United States dollars, unless otherwise stated)


	June 30, 2024		March 31, 2024

ASSETS
Cash and cash equivalents (including $257 and $203 from related parties)	$	718,678	$	545,084
Restricted cash (including $1,121 and $— with related parties)	1,179,510		462,637
Trading securities (including $1,256 and $1,326 with related parties)	3,393,936		3,688,620
Available-for-sale securities, at fair value	262,860		216,621
Margin lending, brokerage and other receivables, net (including $37,836 and $22,039 due from related parties)	1,217,885		1,660,275
Loans issued (including $136,558 and $147,440 to related parties)	1,314,552		1,381,715
Fixed assets, net	100,474		83,002
Intangible assets, net	45,535		47,668
Goodwill	50,591		52,648
Right-of-use asset	35,006		36,324
Insurance contract assets	24,949		24,922
Other assets, net (including $23,057 and $5,257 with related parties)	139,584		102,414
TOTAL ASSETS	$	8,483,560	$	8,301,930

LIABILITIES AND SHAREHOLDERS’ EQUITY
Securities repurchase agreement obligations	$	2,558,794	$	2,756,596
Customer liabilities (including $84,970 and $44,127 to related parties)	2,699,912		2,273,830
Margin lending and trade payables (including $255 and $507 to related parties)	836,309		867,880
Liabilities from insurance activity (including $57 and $470 to related parties)	320,394		297,180
Current income tax liability	40,485		32,996
Debt securities issued	266,398		267,251
Lease liability	35,390		35,794
Liability arising from continuing involvement	505,659		521,885
Other liabilities (including $8,349 and $9,854 to related parties)	68,040		81,560
TOTAL LIABILITIES	$	7,331,381	$	7,134,972
Commitments and Contingent Liabilities (Note 22)	—		—

SHAREHOLDERS’ EQUITY
Preferred stock - $0.001 par value; 20,000,000 shares authorized, no shares issued or outstanding	—		—
Common stock - $0.001 par value; 500,000,000 shares authorized; 60,721,010 shares issued and outstanding as of June 30, 2024, and 60,321,813 shares issued and outstanding as of March 31, 2024, respectively	60		60
Additional paid in capital	197,205		183,788
Retained earnings	1,033,140		998,740
Accumulated other comprehensive loss	(81,393)		(18,938)
TOTAL FRHC SHAREHOLDERS’ EQUITY	$	1,149,012	$	1,163,650

Non-controlling interest	3,167		3,308
TOTAL SHAREHOLDERS’ EQUITY	$	1,152,179	$	1,166,958

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	8,483,560	$	8,301,930

The accompanying notes are an integral part of these condensed consolidated financial statements

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FREEDOM HOLDING CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE INCOME (Unaudited) (All amounts in thousands of United States dollars, unless otherwise stated)


	Three Months Ended June 30,
	2024		2023

Revenue:
Fee and commission income (including $866 and $15,896 from related parties)	$	115,489	$	98,703
Net (loss)/gain on trading securities	(52,102)		31,816
Interest income (including $270 and $5,352 from related parties)	226,004		149,349
Insurance underwriting income	129,408		44,889
Net gain on foreign exchange operations	8,089		19,301
Net gain/(loss) on derivative	12,494		(30,605)
Other income	11,333		2,757
TOTAL REVENUE, NET	$	450,715	$	316,210

Expense:
Fee and commission expense (including $157 and $99 from related parties)	$	80,147	$	28,684
Interest expense (including $381 and $168 from related parties)	145,718		95,046
Insurance claims incurred, net of reinsurance	47,309		21,514
Payroll and bonuses	57,524		31,630
Professional services	7,268		6,625
Stock compensation expense	10,615		1,233
Advertising expense	17,201		8,100
General and administrative expense (including $2,725 and $478 from related parties)	45,105		24,475
(Recovery of)/provision for allowance for expected credit losses	(1,770)		14,326
TOTAL EXPENSE	$	409,117	$	231,633

INCOME BEFORE INCOME TAX	41,598		84,577

Income tax expense	(7,339)		(16,656)

NET INCOME	$	34,259	$	67,921

Less: Net loss attributable to non-controlling interest in subsidiary	(141)		(181)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	34,400	$	68,102

OTHER COMPREHENSIVE INCOME
Change in unrealized gain on investments available-for-sale, net of tax effect	3,374		2,239
Reclassification adjustment for net realized loss on available-for-sale investments disposed of in the period, net of tax effect	(18)		(958)
Foreign currency translation adjustments	(65,811)		(1,760)
OTHER COMPREHENSIVE LOSS	(62,455)		(479)

COMPREHENSIVE (LOSS)/INCOME BEFORE NON-CONTROLLING INTERESTS	$	(28,196)	$	67,442

Less: Comprehensive loss attributable to non-controlling interest in subsidiary	(141)		(181)

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FREEDOM HOLDING CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE INCOME (Unaudited) (All amounts in thousands of United States dollars, unless otherwise stated)


COMPREHENSIVE (LOSS)/INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(28,055)	$	67,623

EARNINGS PER COMMON SHARE (In U.S. dollars):
Earnings per common share - basic	0.58		1.16
Earnings per common share - diluted	0.57		1.15

Weighted average number of shares (basic)	59,258,085		58,512,215
Weighted average number of shares (diluted)	60,255,593		59,293,691

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FREEDOM HOLDING CORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (All amounts in thousands of United States dollars, unless otherwise stated)


	For the Three Months Ended June 30,
	2024		2023

Cash Flows From Operating Activities
Net income	$	34,259	$	67,921
Adjustments to reconcile net income used in operating activities:
Depreciation and amortization	4,154		2,607
Amortization of deferred acquisition costs	48,115		8,724
Noncash lease expense	2,868		1,927
Change in deferred taxes	(796)		4,778
Stock compensation expense	10,615		1,233
Unrealized loss/(gain) on trading securities	64,943		(20,951)
Unrealized (gain)/loss on derivatives	(8,150)		3,112
Net realized gain on available-for-sale securities	(18)		(958)
Net change in accrued interest	69,821		(16,304)
Revaluation of purchase price of previously held interest in Arbuz	—		(1,040)
Gain from sale of ITS tech	(4,201)		—
Change in insurance reserves	40,958		15,002
Change in unused vacation reserves	1,009		1,186
(Recovery of)/provision for allowance for expected credit losses	(1,770)		14,326
Changes in operating assets and liabilities:
Trading securities	(24,454)		(933,290)
Margin lending, brokerage and other receivables (including $(15,797) and $(89,703) changes from related parties)	399,425		(147,366)
Insurance contract assets	565		2,454
Other assets	(70,073)		(18,236)
Brokerage customer liabilities (including $(40,843) and $(50,531) changes from related parties)	260,972		29,037
Current income tax liability	7,492		11,202
Margin lending and trade payables (including $252 and $(3,239) changes from related parties)	26,888		55,045
Lease liabilities	(1,539)		(1,631)
Liabilities from insurance activity	(2,076)		206
Other liabilities	(4,941)		6,882
Net cash flows from/(used in) operating activities	854,066		(914,134)

Cash Flows Used In Investing Activities
Purchase of fixed assets	(24,178)		(10,682)
Net change in loans issued to customers	(2,591)		(263,370)
Purchase of available-for-sale securities, at fair value	(103,679)		(82,979)
Proceeds from sale of available-for-sale securities, at fair value	48,033		104,698
Consideration paid for Arbuz	—		(13,281)
Consideration paid for Internet Tourism	—		(31)
Consideration paid for Aviata	—		(690)
Consideration paid for Ticketon	—		(3,003)
Cash, cash equivalents and restricted cash disposed as a result of deconsolidation of Freedom UA	—		(1,987)
Cash, cash equivalents and restricted cash received from acquisitions	—		1,807
Capital contribution to investment in associate	(1,240)		—
Cash, cash equivalents disposed from sale of ITS Tech	(542)		—
Prepayment on acquisitions	(10,488)		—

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FREEDOM HOLDING CORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (All amounts in thousands of United States dollars, unless otherwise stated)


Net cash flows used in investing activities	(94,685)		(269,518)

Cash Flows From Financing Activities
(Reimbursement)/proceeds from securities repurchase agreement obligations	(54,912)		1,059,944
Proceeds from issuance of debt securities	—		5,784
Repurchase of debt securities	(29)		(1,702)
Repurchase of mortgage loans under the State Program	(13,001)		(9,071)
Funds received under state program for financing of mortgage loans	20,453		24,889
Net change in bank customer deposits	293,411		181,159
Purchase of non-controlling interest in Arbuz	—		(3,228)
(Repayment of)/proceeds from loans received	(388)		758

Net cash flows from financing activities	245,534		1,258,533
Effect of changes in foreign exchange rates on cash and cash equivalents	(114,815)		(2,575)
Effect of expected credit losses on cash and cash equivalents and restricted cash	367		—

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	890,467		72,306

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	1,007,721		1,026,945

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	1,898,188	$	1,099,251


	For The Three Months Ended June 30,
	2024		2023

Supplemental disclosure of cash flow information:
Cash paid for interest	$	142,595	$	113,120
Income tax paid	$	819	$	224

Supplemental non-cash disclosures:
Operating lease right-of-use assets obtained/disposed of in exchange for operating lease obligations during the period, net	$	1,855	$	4,677

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows:


	June 30, 2024		June 30, 2023

Cash and cash equivalents	$	718,678	$	597,364
Restricted cash	1,179,510		501,887
Total cash, cash equivalents and restricted cash shown as in the statement of cash flows	$	1,898,188	$	1,099,251

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FREEDOM HOLDING CORP. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)


	Common Stock			Additional paid in capital		Retained earnings		Accumulated other comprehensive loss			Total equity attributable to the shareholders'			Non- controlling interest			Total
	Shares	Amount

At March 31, 2023	59,659,191	$	59	$	164,162	$	647,064	$	(34,000)		$	777,285		$	(6,549)		$	770,736

Cumulative adjustment from adoption of ASC 326	—	—		—		(22,772)		—			(22,772)			—			(22,772)
Stock based compensation	—	—		1,233		—		—			1,233			—			1,233
Disposal of FF Ukraine	—	—		—		(6,549)		—			(6,549)			6,549			—
Purchase of Arbuz shares	—	—		—		5,457		—			5,457			3,640			9,097
Foreign currency translation adjustments, net of tax effect	—	—		—		—		(1,760)			(1,760)			—			(1,760)
Other comprehensive income	—	—		—		—		1,281			1,281			—			1,281
Net income/(loss)	—	—		—		68,102		—			68,102			(181)			67,921

At June 30, 2023	59,659,191	$	59	165,395		$	691,302	(34,479)		0	$	822,277	0	3,459		0	$	825,736

At March 31, 2024	60,321,813	$	60	$	183,788	$	998,740	$	(18,938)		$	1,163,650		$	3,308		$	1,166,958

Delivered stock awards from previous year	—	—		3,092		—		—			3,092			—			3,092
Stock based compensation	—	—		10,325		—		—			10,325			—			10,325
Foreign currency translation adjustments, net of tax effect	—	—		—		—		(65,811)			(65,811)			—			(65,811)
Other comprehensive income	—	—		—		—		3,356			3,356			—			3,356
Net income/(loss)	—	—		—		34,400		—			34,400			(141)			34,259

At June 30, 2024	60,321,813	$	60	$	197,205	$	1,033,140	$	(81,393)		$	1,149,012		$	3,167		$	1,152,179

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FREEDOM HOLDING CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)

NOTE 1 – DESCRIPTION OF BUSINESS

Overview

Freedom Holding Corp. (the "Company" or "FRHC" and, together with its subsidiaries, the "Group") is a corporation organized in the United States under the laws of the State of Nevada that through its operating subsidiaries provides securities brokerage, securities dealing for customers and for our own account, market making activities, investment research, investment counseling, investment banking services, retail and commercial banking, insurance products, payment services, and information processing services. The Company also owns several ancillary businesses which complement its core financial services businesses, including telecommunications and media businesses in Kazakhstan that are in a developmental stage. The Company is the holding company of subsidiaries incorporated in Kazakhstan, Cyprus, the United States, the United Kingdom, Armenia, the United Arab Emirates, Uzbekistan, Kyrgyzstan, Tajikistan, Azerbaijan, and Turkey, and also has a presence in Austria, Belgium, Bulgaria, France, Germany, Greece, Italy, Lithuania, The Netherlands, Poland and Spain. The Company's subsidiaries in the United States include a broker-dealer that is registered with the United States Securities and Exchange Commission ("SEC") and the Financial Industry Regulatory Authority ("FINRA"). The Company's common stock trades on the Nasdaq Capital Market, the Kazakhstan Stock Exchange ("KASE"), and the Astana International Exchange ("AIX").

As of June 30, 2024, the Company owned, directly or indirectly, the following companies:

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FREEDOM HOLDING CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)

Name of subsidiary

Jurisdiction of Incorporation

Number of subsidiaries

Business Area

Brokerage Segment

Freedom Finance JSC ("Freedom KZ")

Kazakhstan

Securities broker-dealer

Freedom Finance Global PLC ("Freedom Global")

Kazakhstan

—

Securities broker-dealer

Freedom Finance Europe Limited ("Freedom EU")

Cyprus

Securities broker-dealer

Freedom Finance Armenia LLC ("Freedom AR")

Armenia

—

Securities broker-dealer

Prime Executions, Inc. ("PrimeEx")

USA

—

Securities broker-dealer

Foreign Enterprise LLC Freedom Finance

Uzbekistan

—

Securities broker-dealer

Banking Segment

Freedom Bank Kazakhstan JSC ("Freedom Bank KZ")

Kazakhstan

Commercial bank

Insurance Segment

Freedom Finance Life JSC ("Freedom Life")

Kazakhstan

—

Life/health insurance

Freedom Finance Insurance JSC ("Freedom Insurance")

Kazakhstan

—

General insurance

Other Segment

Ticketon Events LLP ("Ticketon")

Kazakhstan

Online ticket sales

Freedom Finance Special Purpose Company LTD ("Freedom SPC")

Kazakhstan

—

Issuance of debt securities

Freedom Finance Commercial LLP

Kazakhstan

—

Sales consulting

Freedom Technologies LLP ("Paybox")

Kazakhstan

Payment services

Aviata LLP ("Aviata")

Kazakhstan

—

Online travel ticket aggregator

Internet-Tourism LLP ("Internet Tourism")

Kazakhstan

—

Online travel ticket aggregator

Arbuz Group LLP ("Arbuz")

Kazakhstan

Online retail trade and e-commerce

Comrun LLP ("ReKassa")

Kazakhstan

—

Mobile and web application

Freedom Telecom Holding Limited ("Freedom Telecom")

Kazakhstan

Telecommunications

Freedom Kazakhstan PC Ltd

Kazakhstan

Holding company

Freedom Advertising Ltd

Kazakhstan

—

Advertising

Freedom Shapagat Corporate Fund

Kazakhstan

—

Non-profit

FRHC Fractional SPC LTD

Kazakhstan

—

Issuance of debt securities

Freedom Holding Operations LLP

Kazakhstan

—

Hiring and recruitment

Freedom Horizons LLP

Kazakhstan

—

Business consulting and services

Freedom Finance Azerbaijan LLC

Azerbaijan

—

Financial educational center

Freedom Finance FZE.

UAE

—

Consulting

Freedom Management Ltd.

UAE

—

Consulting

Freedom Finance Turkey LLC

Turkey

—

Financial consulting

Freedom Finance Technologies Ltd

Cyprus

—

IT development

Freedom Prime UK Limited ("Prime UK")

—

Management consulting

Freedom Structured Products PLC

Cyprus

—

Financial services

FFIN Securities, Inc.

USA

—

Dormant

Freedom U.S. Market LLC

USA

Management company

LD Micro ("LD Micro")

USA

—

Event platform

Through its subsidiaries, the Company is a professional participant, with a license to provide one or more types of services, on a number of stock exchanges, including the Kazakhstan Stock Exchange (KASE), the Astana International Exchange (AIX), the Republican Stock Exchange of Tashkent (UZSE) and the Uzbek Republican Currency Exchange (UZCE) and is a member of the New York Stock Exchange (NYSE) and the Nasdaq Stock Exchange (Nasdaq). The Company also owns a

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FREEDOM HOLDING CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)

24.3% interest in the Ukrainian Exchange (UX). Freedom EU provides the Company's clients with operational support and access to investment opportunities in the United States and European securities markets.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting principles

The Group's accounting policies and accompanying consolidated financial statements conform to accounting principles generally accepted in the United States of America (U.S. GAAP).

Basis of presentation and principles of consolidation

The consolidated financial statements present the consolidated accounts of FRHC and its consolidated subsidiaries. All inter-company balances and transactions have been eliminated from the consolidated financial statements.

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements, and related notes thereto, of the Group’s 2024 Annual Report on Form 10-K. Note 2 to the consolidated financial statements in Group’s 2024 Annual Report on Form 10-K contains a summary of all of Group’s significant accounting policies, except following amendments:

Non-Consolidation of Freedom Securities Trading Inc.

Freedom Securities Trading Inc. (formerly known as FFIN Brokerage Services, Inc.) ("FST Belize") is solely owned by Mr. Turlov since July 2014. The Company does not consolidate FST Belize under any of the primary consolidation methods - variable interest entity (“VIE”) accounting method and the voting interest method ("VOE") as (i) FST Belize is not a VIE due to the fact it has sufficient equity at risk to finance its activities without additional financial support and the control over its significant activities is held by its sole shareholder, Mr. Turlov, and (ii) Mr. Turlov has a controlling interest in FST Belize such that under the VOE model FRHC is not required to consolidate FST Belize. Except for Mr. Turlov, there are no other shareholders at FST Belize or parties with participating rights or the ability to remove Mr. Turlov from his ownership position or to make all decisions in respect of FST Belize. While prior to the end of the fiscal 2024 we had omnibus brokerage relationship with FST Belize, such relationship had been terminated as of March 31, 2024.

Deconsolidation of Freedom Finance Ukraine LLC

As at June 30, 2024, the Company owns a 9% interest in Freedom Finance Ukraine LLC ("Freedom UA"), a Kyiv, Ukraine-based broker-dealer. The remaining 91% interest in Freedom UA is controlled by Askar Tashtitov, the Company's president. The Company entered into a series of contractual arrangements with Freedom UA and Mr. Tashtitov, including a consulting services agreement, an operating agreement and an option agreement. Through March 31, 2023, the Company had consolidated Freedom UA into the financial statements of the Company. On October 19, 2022, Freedom UA was added to the Ukrainian government's sanctioned entities list, resulting in suspension of its brokerage license. Given the ongoing uncertainty surrounding the situation in Ukraine and based on the Company's management's belief that the Company does not maintain effective control over Freedom UA, the Company has accounted for the deconsolidation of Freedom UA since April 1, 2023 (the date of loss of control).

Concentrations of Revenue

Revenues from one customer of the Group’s Brokerage segment represents the following amount of the Group’s consolidated revenues:


	Three Months Ended June 30, 2024		Three Months Ended June 30, 2023
Single non-related party	$	84,273	$	35,074

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FREEDOM HOLDING CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)

Impairment of goodwill

Goodwill is allocated to reporting units, which are identified as the operating segments or one level below operating segments that generate separate financial information regularly reviewed by management. The assignment of goodwill to reporting units allows for the assessment of potential impairment at the appropriate level within the organization.

The Group has identified its reporting units based on its organizational and operational structure, as well as the level at which internal financial information is reviewed by management to make strategic decisions. In line with this, the reporting units have been established as follows:

Brokerage Reporting Unit: This reporting unit represents the Group's operations in brokerage business. The management team responsible for the brokerage business regularly reviews financial information specific to this reporting unit, including revenue, expenses, and key performance indicators.

Bank Reporting Unit: This reporting unit comprises the Group's operations in bank business. The management team responsible for the bank business reviews financial information related to this reporting unit, including revenue, expenses, and market trends.

Insurance Reporting Unit: This reporting unit comprises the Group's operations in insurance business. The management team responsible for the insurance business reviews financial information related to this reporting unit, including revenue, expenses, and market trends.

Other Reporting Unit: This reporting unit represents the Group's various businesses operations. The management team responsible for the Group's various businesses reviews financial information related to this reporting unit, including revenue, expenses, and market trends.

Goodwill has been allocated to each reporting unit based on its relative fair value at the time of acquisition or significant triggering events. The fair value allocation of goodwill to reporting units is periodically reassessed to ensure alignment with the Group's evolving organizational structure and operational dynamics.

The Group conducts impairment testing on an annual basis or whenever indicators of potential impairment arise. The impairment testing involves comparing the carrying amount of each subsidiary, including its allocated goodwill, to its fair value. If the carrying amount exceeds the fair value, an impairment loss is recognized.

Further details regarding the measurement of goodwill impairment and the results of impairment tests for each reporting unit are provided below.

The Group discloses information about the reporting units, the carrying amounts of goodwill allocated to each reporting unit, and the impairment losses recognized. The allocation of goodwill to reporting units ensures a focused evaluation of each unit's financial performance and facilitates the identification of potential impairment, enhancing the transparency and reliability of the Company's financial reporting.

As of June 30, 2024 and March 31, 2024, goodwill recorded in the Company's Condensed Consolidated Balance Sheets totaled $50,591 and $52,648 respectively. The Group performs an impairment review at least annually unless indicators of impairment exist in interim periods. The entity compares the fair value of a reporting unit with its carrying amount. The goodwill impairment charge is recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. If fair value exceeds the carrying amount, no impairment is recorded.

The goodwill value at June 30, 2024 decreased compared to March 31, 2024, as a result of foreign exchange currency translation.

The changes in the carrying amount of goodwill for three months ended June 30, 2024 and 2023, were as follows:

Brokerage

Bank

Insurance

Other

Total

Goodwill, gross

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FREEDOM HOLDING CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)


Balance as of March 31, 2023	$	2,677	$	2,652	$	980	$	8,715	$	15,024
Write-off due to deconsolidation of Freedom UA	—		—		—		(832)		(832)
Foreign currency translation difference	(1)		—		—		—		(1)
Acquired	—		—		—		36,760		36,760
Balance as of June 30, 2023	$	2,676	$	2,652	$	980	$	44,643	$	50,951

Balance as of March 31, 2024	$	2,688	$	2,746	$	1,040	$	46,174	$	52,648
Forex	(55)		(5)		(55)		(1,942)		(2,057)
Acquired	—		—		—		—		—
Balance as of June 30, 2024	$	2,633	$	2,741	$	985	$	44,232	$	50,591

Accumulated impairment
Balance as of March 31, 2023	$	—	$	—	$	—	$	832	$	832
Impairment expense	—		—		—		—		—
Write-off due to deconsolidation of Freedom UA	—		—		—		(832)		(832)
Balance as of June 30, 2023	$	—	$	—	$	—	$	—	$	—

Balance as of March 31, 2024	$	—	$	—	$	—	$	—	$	—
Impairment expense	—		—		—		—		—
Balance as of June 30, 2024	$	—	$	—	$	—	$	—	$	—

Goodwill, net of impairment
Balance as of June 30, 2023	$	2,676	$	2,652	$	980	$	44,643	$	50,951
Balance as of March 31, 2024	$	2,688	$	2,746	$	1,040	$	46,174	$	52,648
Balance as of June 30, 2024	$	2,633	$	2,741	$	985	$	44,232	$	50,591

Recent accounting pronouncements

In August 2018, the FASB issued ASU 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, as clarified and amended by (i) ASU 2019-09, Financial Services - Insurance (Topic 944): Effective Date, and (ii) ASU 2020-11, Financial Services - Insurance (Topic 944): Effective Date and Early Application (collectively referred to herein as ASU 2018-12). ASU 2018-12 changed existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts. ASU 2018-12 includes: (1) a requirement to review and, if there is a change, update cash flow assumptions used to measure the liability for future policy benefits (LFPB) at least annually, and to update the discount rate assumption quarterly, (2) a requirement to account for market risk benefits (MRBs) at fair value, (3) simplified amortization for deferred policy acquisition costs (DAC), and (4) enhanced financial statement presentation and disclosures. The amendments are now effective for SEC filers that are not small reporting companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. For all other entities the effective date is now for fiscal years beginning after December 15, 2024, or interim periods after December 15, 2025. As of November 15, 2019, the Company met the definition of a smaller reporting company.

In March 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-02, “Investments-Equity method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method” (“ASU 2023-02”). These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years and early adoption is permitted. We do not expect ASU 2023-02 to have an impact to our consolidated financial statements.

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FREEDOM HOLDING CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)

In August 2023, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2023-05, Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, which clarifies the business combination accounting for joint venture formations. The amendments in the ASU seek to reduce diversity in practice that has resulted from a lack of authoritative guidance regarding the accounting for the formation of joint ventures in separate financial statements. The amendments also seek to clarify the initial measurement of joint venture net assets, including businesses contributed to a joint venture. The guidance is applicable to all entities involved in the formation of a joint venture. The amendments are effective for all joint venture formations with a formation date on or after January 1, 2025. Early adoption and retrospective application of the amendments are permitted. We do not expect adoption of the new guidance to have a material impact on our consolidated financial statements and disclosures.

In October 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-06 (“ASU 2023-06”), Disclosure Improvements - Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU modified the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC’s regulations. The amendments to the various topics should be applied prospectively, and the effective date will be determined for each individual disclosure based on the effective date of the SEC’s removal of the related disclosure. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, then this ASU will not become effective. Early adoption is prohibited. While the Company is currently evaluating the effect that implementation of this update will have on its consolidated financial statements, no material impact is anticipated.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances reporting requirements under Topic 280. The enhanced disclosure requirements include: title and position of the Chief Operating Decision Maker (CODM), significant segment expenses provided to the CODM, extending certain annual disclosures to interim periods, clarifying single reportable segment entities must apply ASC 280 in its entirety, and permitting more than one measure of segment profit or loss to be reported under certain circumstances. This change is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. This change will apply retrospectively to all periods presented. The Company is currently evaluating the impact ASU No 2024-02 will have on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets. The amendments in ASU No. 2023-08 are intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. The amendments are effective for all entities for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued (or made available for issuance). If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. ASU No. 2023-08 requires a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets) as of the beginning of the annual reporting period in which an entity adopts the amendments. The Company is currently evaluating the impact ASU No 2024-02 will have on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which would require additional transparency for income tax disclosures, including the income tax rate reconciliation table and cash taxes paid both in the United States and foreign jurisdictions. This standard is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact ASU No 2024-02 will have on its consolidated financial statements and related disclosures.

In March 2024, the FASB issued ASU 2024-01, Compensation - Stock Compensation (Topic 718), Scope Application of Profits Interest and Similar Awards. This standard provides clarity regarding whether profits interest and similar awards are within the scope of Topic 718 of the Accounting Standards Codification. This standard is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact ASU No 2024-02 will have on its consolidated financial statements and related disclosures.

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FREEDOM HOLDING CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)

In March 2024, the FASB issued ASU No. 2024-02, “Codification Improvements - Amendments to Remove References to the Concepts Statements.” ASU 2024-02 removes references to various FASB Concepts Statements within the Codification. The guidance in ASU No. 2024-02 is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years, and can be applied either prospectively to all new transactions recognized on or after the date that the entity first applies the amendments or retrospectively to the beginning of the earliest comparative period presented in which the amendments were first applied. Early adoption is permitted. The Company is currently evaluating the impact ASU No 2024-02 will have on its consolidated financial statements and related disclosures.

NOTE 3 – CASH AND CASH EQUIVALENTS

As of June 30, 2024, and March 31, 2024, cash and cash equivalents consisted of the following:


	June 30, 2024		March 31, 2024

Short term deposits in National Bank (Kazakhstan)	$	292,154	$	196,942
Short term deposits in commercial banks	202,830		127,051
Securities purchased under reverse repurchase agreements	150,960		134,961
Petty cash in bank vault and on hand	40,099		22,613
Overnight deposits	14,465		3,557
Cash in transit	7,210		9,633
Short term deposits in stock exchanges	5,062		47,830
Short term deposits on brokerage accounts	5,586		2,917
Short term deposits in the Central Depository (Kazakhstan)	551		42

Allowance for Cash and cash equivalents	(239)		(462)

Total cash and cash equivalents	$	718,678	$	545,084

As of June 30, 2024, and March 31, 2024, cash and cash equivalents balance included short-term collateralized securities received under reverse repurchase agreements which the Group concludes mainly on KASE. KASE, in turn, guarantees payments to the counterparty. The terms of the short-term collateralized securities received under reverse repurchase agreements as of June 30, 2024, and March 31, 2024 are presented below:


	June 30, 2024
	Interest rates and remaining contractual maturity of the agreements
	Average interest rate		Up to 30 days		Total
Securities purchased under reverse repurchase agreements
Corporate equity	14.08	%	104,509		104,509
Corporate debt	3.53	%	31,398		31,398
US sovereign debt	7.95	%	10,302		10,302
Non-US sovereign debt	3.30	%	4,751		$	4,751
Total			$	150,960	$	150,960

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FREEDOM HOLDING CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)


	March 31, 2024
	Interest rates and remaining contractual maturity of the agreements
	Average interest rate		Up to 30 days		Total
Securities purchased under reverse repurchase agreements
Corporate equity	14.57	%	$	96,647	$	96,647
US sovereign debt	4.77	%	16,885		16,885
Non-US sovereign debt	4.45	%	12,468		12,468
Corporate debt	5.31	%	8,961		8,961
Total			$	134,961	$	134,961

The securities received by the Group as collateral under reverse repurchase agreements are liquid trading securities with market quotes and significant trading volume. The fair value of collateral received by the Group under reverse repurchase agreements as of June 30, 2024 and March 31, 2024, was $150,886 and $133,380, respectively.

As of June 30, 2024 and March 31, 2024, securities purchased under reverse repurchase agreements included accrued interest in the amount of $132 and $106, with a weighted average maturity of 2 days and 3 days, respectively. All securities repurchase agreements transactions were executed through the KASE.

NOTE 4 – RESTRICTED CASH

As of June 30, 2024, and March 31, 2024, restricted cash consisted of the following::


	June 30, 2024		March 31, 2024

Brokerage customers’ cash	$	1,099,041	$	366,260
Guaranty deposits	81,125		97,052
Restricted bank accounts	8,161		8,079
Due from banks	6,167		6,374
Deferred distribution payment	23		23
Allowance for restricted cash	(15,007)		(15,151)

Total restricted cash	$	1,179,510	$	462,637

As of June 30, 2024, and March 31, 2024, part of the Group’s restricted cash was segregated in a special custody account for the exclusive benefit of the relevant brokerage customers.

NOTE 5 – TRADING AND AVAILABLE-FOR-SALE SECURITIES AT FAIR VALUE

As of June 30, 2024, and March 31, 2024, trading and available-for-sale securities consisted of:


	June 30, 2024		March 31, 2024

Non-U.S. sovereign debt	$	2,135,862	$	2,409,126
Corporate debt	1,084,410		1,108,870
Corporate equity	123,520		126,103
U.S. sovereign debt	43,452		43,173
Exchange traded notes	6,692		1,348
Total trading securities	$	3,393,936	$	3,688,620

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FREEDOM HOLDING CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)


	June 30, 2024		March 31, 2024

Corporate debt	$	194,327	$	173,568
Non-U.S. sovereign debt	52,413		27,016
U.S. sovereign debt	16,120		16,037
Total available-for-sale securities, at fair value	$	262,860	$	216,621

The following tables present maturity analysis for available-for-sale securities as of June 30, 2024, and March 31, 2024:


	June 30, 2024
	Remaining contractual maturity of the agreements
	Up to 1 year		1-5 years		5-10 years		More than 10 years		Total

Corporate debt	37,704		86,644		59,322		10,657		194,327
Non-US sovereign debt	14,240		17,884		13,643		6,646		52,413
US sovereign debt	—		5,132		9,798		1,190		16,120
Total available-for-sale securities, at fair value	$	51,944	$	109,660	$	82,763	$	18,493	$	262,860


	March 31, 2024
	Remaining contractual maturity of the agreements
	Up to 1 year		1-5 years		5-10 years		More than 10 years		Total

Corporate debt	65,415		44,374		59,553		4,226		173,568
Non-US sovereign debt	7,839		7,310		5,797		6,070		27,016
US sovereign debt	—		5,059		9,753		1,225		16,037
Total available-for-sale securities, at fair value	$	73,254	$	56,743	$	75,103	$	11,521	$	216,621

As of June 30, 2024, the Group held debt securities of two issuers each of which individually exceeded 10% of the Group’s total trading and available-for-sale securities - the Ministry of Finance of the Republic of Kazakhstan (Fitch: BBB credit rating) in the amount of $2,175,004 and Kazakhstan Sustainability Fund JSC (Fitch: BBB credit rating) in the amount of $726,402. As of March 31, 2024, the Group held debt securities of two issuers each of which individually exceeded 10% of the Group’s total trading securities and available-for-sale securities - the Ministry of Finance of the Republic of Kazakhstan (Fitch: BBB credit rating) in the amounts of $2,420,855 and the Kazakhstan Sustainability Fund JSC (Fitch: BBB credit rating) in the amount of $727,440, respectively. The debt securities issued by the Ministry of Finance of the Republic of Kazakhstan and Kazakhstan Sustainability Fund JSC are categorized as non-US sovereign debt and corporate debt, respectively.

As of the June 30, 2024 and March 31, 2024, the Group recognized $363 and $413 other-than-temporary impairment in accumulated other comprehensive loss.

The fair value of securities is determined using observable market data based on recent trading activity. Where observable market data is unavailable due to a lack of trading activity, the Group utilizes internally developed models to estimate fair value and independent third parties to validate assumptions, when appropriate. Estimating fair value requires significant management judgment, including benchmarking to similar instruments with observable market data and applying appropriate discounts that reflect differences between the securities that the Group is valuing and the selected benchmark. Depending on the type of securities owned by the Group, other valuation methodologies may be required.

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FREEDOM HOLDING CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)

Measurement of fair value is classified within a hierarchy based upon the transparency of inputs used in the valuation of an asset or liability. Classification within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The valuation hierarchy contains three levels:

•Level 1 - Valuation inputs are unadjusted quoted market prices for identical assets or liabilities in active markets.

•Level 2 - Valuation inputs are quoted market prices for identical assets or liabilities in markets that are not active, quoted market prices for similar assets and liabilities in active markets, and other observable inputs directly or indirectly related to the asset or liability being measured.

•Level 3 - Valuation inputs are unobservable and significant to the fair value measurement.

The following tables present securities assets in the Сondensed Сonsolidated Balance Sheets or disclosed in the Notes to the condensed consolidated financial statements at fair value on a recurring basis as of June 30, 2024, and March 31, 2024:


	Weighted Average Interest Rate		Total		Fair Value Measurements as of June 30, 2024 using
					Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Units
					(Level 1)		(Level 2)		(Level 3)

Non-U.S. sovereign debt	12.43	%	$	2,135,862	$	1,455,803	$	680,059	$	—
Corporate debt	14.52	%	1,084,410		242,177		842,016		217
Corporate equity			123,520		101,371		3,717		18,432
U.S. sovereign debt	4.19	%	43,452		43,452		—		—
Exchange traded notes			6,692		5,853		839		—

Total trading securities			$	3,393,936	$	1,848,656	$	1,526,631	$	18,649

Corporate debt	14.96	%	$	194,327	$	31,643	$	162,684	$	—
Non-US sovereign debt	11.73	%	52,413		45,027		7,386		—
US sovereign debt	4.60	%	16,120		16,120		—		—

Total available-for-sale securities, at fair value			$	262,860	$	92,790	$	170,070	$	—

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FREEDOM HOLDING CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)

Weighted Average

Interest Rate

Total

Fair Value Measurements as of March 31, 2024 using

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Units

(Level 1)

(Level 2)

(Level 3)

Non-U.S. sovereign debt

11.61

2,409,126