Hilbert Group AB (publ)

Good morning and welcome everyone. This is the Hilbert Group presentation for the third quarter in 2024. The agenda is as follows. First, we're going to talk about the Liberty Road capital acquisition. Then we're going to talk about asset management, followed by Coin360. And then we're going to conclude with talking a bit about the CO transition. So we have spent the past six months looking at Liberty Road Capital, LRC, going forward. At the outset, we liked the team, their philosophy around investing and the technology stack that they have built. LRC has a five-year operating history with a strong track record and currently runs 110 million in assets under management. LRC is charting hedge fund fee levels on all their AUM. The firm is profitable and has been generating stable returns for years. This acquisition will add AI trading and crypto derivatives expertise to Hilbert Group's strategy offerings. So very complimentary in that sense. The acquisition also brings Russell Thompson, which is an industry leading figure in hedge fund circles and digital asset management. Russell co-founded LRC in 2019 and in 2003 co-founded the Cambridge Strategy, a world-class traditional hedge fund that peaked at 3.5 billion in AUM before it was sold in 2018. Russell is an experienced CIO, derivatives traders, and possess an extensive global network. Russell will be elected as new board member in an EGM later this year. The other two LRC co-founders, Anna Dinescu and Tom Bowles, brings exceptional operational, technical and quantitative expertise to help Hilbert advance its mission of becoming a world leading digital asset manager. Also, the toolbox that LRC brings will greatly increase our product development capabilities. You can read more about the specific deal structure in the press release, but essentially it is an equity only earn out acquisition deal, which means that as LRC strategies perform on its capital, they will get paid more Hilbert Group equity. This earn out runs over a period of two years and then it stops. It's important to note that Hilbert is today in a place where we have the legal foundations, the team and the operational muscle to leverage our platforms in deals like the LLC one. And doing M&A transactions that we deem are accretive in this sense is something we will continue to focus on. We would like to warmly welcome Russell, Anna and Tom as newly minted Hilbertonians. So if the second quarter in 2024 was a very tough quarter in crypto, the third quarter was only a tough quarter in crypto. Although things have improved considerably in quarter four so far, at the end of Q3, all funds were still below high watermark, except the Sappho Byzantine Fund, which started mid-September. So the third quarter will not look strong on fund management income. But if one looks beyond that quarter, income will start to meaningfully increase. So for example, in Q4, there will be a substantial uptick in income due to a full quarter with the Sapo Byzantine Fund. Then again, in Q1 2025, there will be another uptick since all Liberty Road capital income at that point will flow to Hilbert. During this time, we also expect a meaningful increase in AUM, given the pipelines we have today. There is an example in the CEO address in the quarterly report itself, and that example together with the 2025 AUM target for Xafo-Byzantine fund of at least $2 billion explain why we have a target of $10 million in revenue for asset management in 2025. Coin360 upgrade is scheduled for mid-December 2024. We are currently working on quality assurance and debugging running up to the launch. In connection to the launch, we will introduce a subscription service as well as various customizable features and enable functionality for community contribution to the website. The subscription service will be a new revenue stream for Coin360. The KPIs for the website have improved significantly. For example, monthly visits are up 98% month on month and currently stands at 8.5 million. Year to date, we've had 2 million unique active users. And if we are aiming to convert at least 1% of these two subscribers to the most basic subscription, which will be about $30 a month, If we succeed with that, that would mean another $6 million in subscription revenue alone. At the same time, we're working on increasing the traffic to the site, which will increase the number of active users, enhance subscription income, as well as advertising income. This will be my last CEO address for Hilbert Group because as of 1st of January 2025, Banali Biswal will take the helm of Hilbert. Before joining Hilbert in February this year, Banali was chief investment officer for Atitlan, a quantitative multi-strategy crypto hedge fund in London. Prior to Atitlan, Banali was at Goldman Sachs in London for 14 years as managing director, running its European high yield credit trading business. I have worked closely with Barnali the past year and she has impressed me with her focus and sharp business mind. I am convinced, as is the board, that she is the right person to lead Hilbert Group in this new expansive phase of the company's trajectory. Barnali will be based in London, which is a great place to be from a Hilbert business development point of view. You have all the major fund investors, equity investors and service providers in one place. Please join me in welcoming Barnali to her new position.