10-K: Freedom Holding Corp. Reports Mixed Fiscal 2025 Results: Revenue Soars Amidst Digital Expansion, But Net Income Plummets Due to Trading Losses and Strategic Investments

Freedom Holding Corp. announced a 23% increase in total net revenue to $2.05 billion for fiscal year 2025, driven by growth in brokerage and insurance segments, despite a significant 77% decrease in net income attributed to unrealized trading losses and increased operational investments.

Summary

• Total net revenue for fiscal year 2025 increased by 23% to $2,050.5 million, up from $1,666.4 million in fiscal 2024.
• Net income for fiscal year 2025 decreased significantly by 77% to $84.5 million, compared to $375.0 million in fiscal 2024.
• The company reported a net loss on trading securities of $57.8 million in fiscal 2025, a substantial decline from a $133.9 million gain in fiscal 2024, primarily due to unrealized losses on Kazakhstan sovereign bonds.
• Insurance underwriting income saw a 134% increase, reaching $617.6 million in fiscal 2025, driven by expansion in pension annuity and accident insurance classes and a rise in insurance customers from 534,000 to 1,170,000.
• Interest income grew by 4% to $864.5 million, primarily due to increased usage of margin loans by customers and the continued expansion of Freedom Bank KZ's customer loan portfolio.
• Fee and commission income increased by 15% to $505.0 million, mainly attributable to a rise in retail brokerage customers from 530,000 to 683,000.
• Total assets increased by 19.3% to $9.9 billion as of March 31, 2025, from $8.3 billion as of March 31, 2024.
• The investment securities portfolio decreased by 38% to $2,275.3 million, reflecting a strategic shift in response to increased market volatility and rising interest rates.
• Freedom Bank KZ's loan portfolio increased by 16% to $1,587.6 million.
• The company's total number of employees grew to 8,764 as of March 31, 2025, from 3,689 as of March 31, 2023.
• Freedom Holding Corp. launched its all-in-one financial platform, Freedom SuperApp, in April 2024, which saw monthly active users climb to 1.02 million by March 2025.
• The company is strategically expanding into the telecommunications and media sectors in Kazakhstan, which are currently in a developmental stage.

Sentiment

Score: 4

Explanation: While Freedom Holding Corp. achieved substantial revenue growth and significant customer expansion across its segments, the 77% decline in net income, primarily due to unrealized trading losses and a sharp increase in operating expenses, indicates a challenging fiscal year for profitability. The strategic investments in new telecommunications and media businesses, while promising for long-term growth, are currently contributing to losses and increased capital expenditure. The company faces ongoing geopolitical, regulatory, and market risks, including inflation and foreign currency fluctuations.

Positives

• Total net revenue increased by a robust 23% to $2,050.5 million in fiscal 2025, demonstrating strong top-line growth.
• The company achieved significant customer base expansion, with retail brokerage customers growing from 530,000 to 683,000, bank customers from 904,000 to 2,515,000, and insurance customers from 534,000 to 1,170,000.
• Insurance underwriting income surged by 134% to $617.6 million, indicating successful expansion in this segment.
• Interest income increased by 4% to $864.5 million, driven by higher margin loan utilization and growth in the banking segment's loan portfolio.
• The successful launch of the Freedom SuperApp in April 2024 has enhanced customer experience and engagement, with monthly active users reaching 1.02 million.
• Strategic expansion into the telecommunications and media sectors in Kazakhstan is underway, diversifying business operations.
• Freedom Holding Corp. was selected for inclusion in the Russell 3000 Index, effective June 27, 2025, which is expected to enhance visibility and trading liquidity of its common stock.
• The company remediated previously identified material weaknesses in its internal control over financial reporting as of March 31, 2024, and maintained effective internal control as of March 31, 2025.
• All regulated subsidiaries exceeded their minimum required net capital and capital adequacy requirements as of March 31, 2025.

Negatives

• Net income decreased substantially by 77% to $84.5 million in fiscal 2025, down from $375.0 million in fiscal 2024.
• The company recorded a net loss on trading securities of $57.8 million in fiscal 2025, a significant reversal from a $133.9 million gain in fiscal 2024, primarily due to unrealized losses on Kazakhstan sovereign bonds.
• Total expenses increased by 57% to $1,937.6 million, driven by higher agency fee expenses ($181.0 million increase), insurance claims incurred ($158.5 million increase), payroll and bonuses ($107.1 million increase), and advertising and sponsorship expenses ($86.3 million increase).
• Allowance for expected credit losses increased by 194% to $62.4 million, attributed to a deterioration in macroeconomic conditions and foreign currency depreciation.
• The Banking segment's total net revenue decreased by 18% to $506.1 million, despite increased transaction volume, due to the strategic implementation of a cashback-based loyalty program that reduced commission income.
• Fee and commission income from payment processing decreased by 31% due to the cessation of operations of a significant counterparty.
• Underwriting and market-making services fee and commission income decreased by 40% due to lower transaction volume.
• The company experienced a foreign currency translation loss of $104.1 million in fiscal 2025, mainly due to the 12.9% depreciation of the Kazakhstan tenge against the U.S. dollar.
• New telecommunications and media businesses are expected to incur losses for the first several years of operation, impacting consolidated net income.

Risks

• The company's relatively limited operational history during a period of sustained market growth may not be predictive of future operating results, especially during economic downturns.
• Inability to effectively manage rapid growth in customer accounts, employees, and assets could materially adversely affect business operations.
• Acquisitions, a key component of the growth strategy, carry risks of unsuccessful integration, unfamiliarity with new business lines, insufficient revenue to offset costs, and inadequate internal controls.
• Ongoing related party transactions, particularly with entities controlled by CEO Timur Turlov, expose the company to risks of non-arm's length terms, conflicts of interest, and regulatory non-compliance.
• Intense and evolving competition across all operating regions and service areas from larger, more diversified firms could decrease market share and profitability.
• New telecommunications and media businesses are projected to incur losses for several initial years, negatively impacting consolidated net income and increasing debt service costs.
• The digital fintech ecosystem strategy faces risks including limited experience in new business lines, insufficient revenue generation, changing consumer preferences, strong competition, increased regulatory burdens, and infrastructure integration challenges.
• Significant losses could arise from credit exposure in loans, margin lending, derivatives, and debt securities, exacerbated by macroeconomic downturns and potential increases in default rates.
• Revenue concentration in certain institutional market maker customers and Kazakhstan government/quasi-government debt securities makes the company vulnerable to changes in these relationships or asset values.
• Reliance on a limited number of third-party U.S.-registered securities broker-dealer and clearing firms, and non-U.S. market maker customers, poses risks of service disruption, higher transaction costs, regulatory violations, and negative publicity.
• Operational risks, including human errors, misconduct, or failures in IT systems and infrastructure, could adversely affect reputation, business activities, and financial stability.
• The company's ability to meet obligations and the cost of funding depend on access to liquidity sources, which can be impacted by market dislocations or changes in credit ratings.
• The potential need to raise additional capital, with no assurance of availability on attractive terms, could lead to curtailment of business activities or increased costs.
• Reductions in credit ratings or increases in credit spreads could adversely affect the company's business, liquidity, and cost of funding.
• Proprietary investments, particularly in Kazakhstan sovereign debt and leveraged positions, expose the company to significant risk of capital loss due to market fluctuations and illiquidity.
• Changes in the Kazakhstan Stock Exchange's requirements related to discount coefficients on securities in repurchase transactions could result in significant financial losses.
• The company's risk management framework may not always be effective in mitigating all identified risks and potential losses.
• Models and assumptions used in assessing business risks may differ materially from actual results, leading to mispricing or ineffective risk mitigation.
• In the insurance business, the inability to obtain reinsurance at required levels or prices, or to collect on reinsurance, could increase exposure or limit new policy writing.
• The company is highly dependent on its executive management team, particularly Timur Turlov, and its ability to hire and retain skilled personnel.
• Extraordinary events beyond the company's control, such as pandemics, armed conflicts (e.g., Russia-Ukraine conflict, Israel-Gaza conflict), or natural disasters, could negatively impact business operations.
• Fluctuations in interest rates, especially in Kazakhstan, can adversely affect the value of interest-sensitive assets and increase borrowing costs.
• Exposure to foreign currency fluctuation risks, particularly the depreciation of the Kazakhstan tenge, can lead to translation losses.
• Damage to the company's reputation, stemming from various issues including legal/regulatory non-compliance or related party transactions, could harm its business.
• Failure to adequately obtain, maintain, enforce, and protect intellectual property rights could harm the business and competitive position.
• The ongoing Russia-Ukraine conflict poses continuing challenges, including the risk of secondary sanctions on Kazakhstan's financial sector and potential expansion of sanctions affecting Russian customers.
• Sanctions imposed by Ukraine on CEO Timur Turlov and the former Ukrainian subsidiary could adversely affect relationships with counterparties and regulators in other jurisdictions.
• Non-compliance with U.S., EU, UK, or other sanctions programs could result in criminal or civil penalties and significant reputational damage, especially concerning omnibus brokerage accounts.
• Operating in emerging markets subjects the company to greater political, economic, and legal risks compared to more mature markets.
• Kazakhstan's economy is vulnerable to external shocks (e.g., oil prices, global trade policies) and internal political/social unrest (e.g., internet shutdowns), which can disrupt financial markets.
• Continuing inflation, particularly in Kazakhstan, could increase operating expenses, weaken competitive position, or lower consumer spending power.
• Changes in U.S. or other countries' trade policies, including tariffs, may adversely impact business, financial condition, and results of operations.
• Extensive and evolving government regulation across multiple jurisdictions, with potential for fines, sanctions, and limitations on business activities due to non-compliance.
• Increased regulatory scrutiny in the financial services industry raises the risk of financial liability and reputational harm from adverse regulatory actions.
• Substantial regulatory reporting obligations as a U.S. public company listed on Nasdaq entail significant compliance costs and risks of sanctions for non-compliance.
• Risks related to anti-corruption laws, such as the FCPA, in effect in the United States and non-U.S. jurisdictions where the company conducts business.
• Failure by subsidiaries or the company to meet capital adequacy and liquidity requirements could affect business, financial condition, and cash flows.
• Changing regulatory regimes, policies, and interpretations in operating countries, particularly in emerging markets, can create uncertainty and negatively impact operations.
• Measures to prevent money laundering and terrorist financing violations may not be completely effective, especially concerning omnibus brokerage accounts.
• Substantial potential liability under securities laws and from litigation/arbitration, particularly in underwriting activities involving smaller companies.
• High dependence on the continued and proper functioning of information technology systems and infrastructure, vulnerable to failures, disruptions, and cyber-attacks.
• Interaction with large volumes of sensitive data exposes the company to data breaches and other cybersecurity risks and liabilities, with increasing compliance challenges from new data privacy laws.
• The infrastructure on which IT systems depend is subject to events (e.g., natural disasters, conflicts, outages) that could interrupt operations.
• Failure or compromise of third-party systems operations or security could adversely affect business and expose the company to data breaches and cyber-attacks.
• The need to keep pace with rapid technological change; failure to develop or acquire up-to-date technology could lead to loss of business.
• Incorporating AI technologies into products and processes may present new business, compliance, and reputational risks due to evolving regulatory frameworks and potential vulnerabilities.
• Reliance on centralized infrastructure and cloud services increases exposure to larger scale service disruptions and cyber-attacks.
• Global anti-offshore measures (OECD BEPS, CRS) could complicate tax planning and expose the company to significant fines and penalties.
• The OECD's Inclusive Framework's agreement on Pillar 2 solutions (minimum 15% effective tax rate) could lead to additional taxation in low-taxed jurisdictions and increased compliance burdens.
• Frequent tax law changes, varying interpretations, and inconsistent enforcement in regions where the company operates, particularly Kazakhstan, could adversely affect business and investment values.
• Transfer pricing legislation in certain jurisdictions may require pricing adjustments and impose additional tax liabilities.
• Uncertainties and ongoing changes in Kazakhstan's tax regime, including AIFC tax benefits and corporate tax residency, may have an adverse impact on the business.
• As a diversified holding company with few operations of its own, FRHC is reliant on the operations of its subsidiaries to fund its holding company operations.
• As a 'controlled company' under Nasdaq rules, the company qualifies for exemptions from certain corporate governance requirements, which may adversely affect its stock price.
• The interests of the controlling shareholder, Timur Turlov, may conflict with those of other shareholders.
• Sales of large amounts of common stock by the controlling shareholder, Timur Turlov, or the perception of such sales, could cause the market price of common shares to decline.
• Civil liability may be difficult or impossible to enforce against the company due to certain directors, officers, and substantial assets being located outside the U.S. in jurisdictions without mutual enforcement treaties.
• Past identification of material weaknesses in internal control over financial reporting, with the risk of future identification or failure to establish and maintain effective controls, could materially adversely affect business and stock price.
• The price of the common stock has fluctuated historically and may be volatile due to various factors, including geopolitical events, economic conditions, and company-specific announcements.
• Future offerings of securities that rank senior to common stock may adversely affect the market price of common stock and dilute existing shareholders.
• The company does not intend to pay dividends on its common stock for the foreseeable future, meaning stockholders' return on investment will depend solely on stock price appreciation.

Future Outlook

Freedom Holding Corp. aims to continue building a cross-border banking network and digital financial infrastructure connecting markets across Central Asia, the Caucasus, and beyond. This strategy involves selective acquisitions of fintech providers, digital commerce enablers, and lifestyle service companies to expand service offerings and deepen market presence. The company plans to leverage big data analytics and predictive AI to enhance customer understanding and optimize product offerings. Strategic expansion into the Kazakhstan telecommunications and media markets is expected to continue, with initial operating losses anticipated for several years before transitioning to profitability. The company intends to finance these capital expenditures through a combination of own funds and borrowings, including vendor financing and bond placements. Freedom Bank KZ may also place bonds from its established programs to support liquidity. The company is also evaluating and experimenting with machine learning and AI technologies to improve efficiency in compliance checks and other processes.

Management Comments

• "Our mission has always been to democratize access to financial markets for global customers."
• "Our company was founded to provide access to the international capital markets for retail brokerage customers and has rapidly grown providing a world-class digital infrastructure that has led to innovative, integrated financial technologies that address customer needs in Kazakhstan, our home market, and dozens of other countries across Europe, Asia, and North America."
• Management attributes the expansion of the SuperApp's monthly active users to the rollout of high-impact digital products, including the seven-currency SuperCard, one-tap digital mortgage, and Invest Card, as well as tiered loyalty and referral programs.
• Management expects the Fixed Wireless Access (FWA) grid in telecommunications to evolve into the backbone for a future mobile operator, providing additional distribution capacity for digital services and generating new data streams for predictive AI models.
• Management believes that the company's inclusion in the Russell 3000 Index may raise its profile among institutional investors and could improve the liquidity of its common stock.
• "We remain focused on proactively identifying, mitigating, and responding to these risks as we continue to scale our operations and pursue long-term, sustainable growth."
• "We believe that our current cash and cash equivalents, cash expected to be generated from operating activities, and forecasted returns from our proprietary trading, combined with our ability to raise additional capital will be sufficient to meet our present and anticipated financing needs."

Industry Context

Freedom Holding Corp. operates in highly competitive and rapidly evolving financial services, brokerage, banking, and insurance industries, characterized by technological advancements and increasing demand for integrated digital solutions. In Kazakhstan, the company competes with established domestic firms like Halyk Finance, BCC Invest, and First Heartland Securities in brokerage; Halyk Bank, Kaspi Bank, and Bank CenterCredit in banking; and major insurance companies like Halyk-Life and Eurasia Insurance Company. Freedom differentiates itself through direct access to global capital markets, digital infrastructure, an investment-driven banking model, and digital-first insurance distribution. In Europe, it competes with digital-first brokers such as eToro and Interactive Brokers, offering curated research and access to U.S. pre-IPO markets. In the U.S., it competes with boutique investment banks, leveraging cross-border capital raising and emerging market presence. The company's new ventures into telecommunications and media in Kazakhstan will face competition from leading operators like Kazakhtelecom and existing media content providers. The financial services industry globally is experiencing increased regulatory scrutiny, and international tax frameworks like OECD BEPS and Pillar 2 are introducing new compliance challenges for multinational enterprises.

Comparison to Industry Standards

• Freedom Bank Kazakhstan JSC is ranked among the top eight institutions in Kazakhstan based on total assets as of April 1, 2025, according to the National Bank of Kazakhstan (NBK).
• Freedom Life holds a 25% market share in the Kazakhstan life insurance market based on gross written premiums and approximately 74% market share in the Kazakhstan voluntary life-related accident insurance market, according to the NBK.
• Freedom Insurance holds approximately a 6% share of the total Kazakhstan general insurance market based on total assets and approximately a 7% share of the Kazakhstan car owners liability insurance market based on insurance premiums received, according to the NBK.
• Freedom Life has an S&P Global Rating of 'BB' on the international scale with a 'Stable' outlook, and a 'kzAA-' long-term issuer credit rating on the Kazakhstan national scale.
• Freedom Insurance has been assigned a 'BB-' rating with a stable outlook and a 'kzA-' national scale rating by S&P Global Ratings.
• Freedom Holding Corp. holds a long-term issuer credit rating of 'B-' from S&P Global Ratings.
• The company acknowledges that its brokerage execution models, particularly those involving over-the-counter (OTC) arrangements with non-U.S. market makers, differ from and may not be directly comparable to U.S.-based clearing and settlement practices.
• The company states its sustainability data is prepared with a view to aligning with the Global Reporting Initiative (GRI) Standards and the Sustainability Accounting Standards Board (SASB) Standards.
• Some of the company's subsidiaries are certified under ISO 27001, an international information security management systems standard, or undergo regular Payment Card Industry Data Security Standard (PCI) audits.

Corporate Governance

Legal Proceedings

• The company is involved in various claims and legal proceedings that arise in the normal course of business, with accruals for potential losses not material as of March 31, 2025 and 2024.
• In January 2025, Einride AB filed a request for arbitration and statement of claim with the SCC Arbitration Institute against the company, alleging failure to pay $10,000 to subscribe for convertible debentures. The company contests the claim, and the arbitration has not yet proceeded to the merits.

Related Party Transactions

• The company has engaged in related party transactions and arrangements, particularly with companies controlled by its Chief Executive Officer, Timur Turlov, and expects to continue to do so.
• Historically, a significant portion of fee and commission income (60% in FY23, 14% in FY24) was derived from transactions with FST Belize, an entity wholly owned by Timur Turlov, but this arrangement was wound down before the end of fiscal 2024, leading to a substantial reduction in FY25.
• The company has continuing involvement with microfinance organization Freedom Finance Credit, a company outside the FRHC group controlled by Timur Turlov, through the purchase and sale of rights of claims of retail loans.
• In fiscal 2025, the company incurred $11.222 million in advertising and sponsorship expense from Kazakhstan Chess Federation, an organization in which Timur Turlov holds a management position.
• As of March 31, 2025, brokerage and other receivables from PC ITS Central Securities Depository Limited, a subsidiary of International Trading System Limited (controlled by Timur Turlov), amounted to $29.693 million.
• Prepayments on the potential acquisition of A-Telecom to Freedom Data Centers LLP (a related party) accounted for 55% of the company's total related party other assets as of March 31, 2025.
• Bank deposits from Turlov Family Office Securities LTD (wholly owned by Timur Turlov) held by Freedom Bank KZ accounted for 13% of the company's total related party customer liabilities as of March 31, 2025.

Stakeholder Impact

• **Shareholders:** The significant 77% decrease in net income and the net loss on trading securities could negatively impact shareholder returns and stock price. The company's policy of not paying dividends for the foreseeable future means returns depend on stock appreciation. The 'controlled company' status and potential for future equity offerings could also influence shareholder value and control.
• **Employees:** The company's rapid growth has led to a substantial increase in total employees (from 3,689 in FY23 to 8,764 in FY25) and higher payroll and bonuses, indicating positive employment opportunities and compensation. Employee development programs and a Human Rights Policy aim to foster a positive work environment.
• **Customers:** Customers benefit from the expansion of the digital fintech ecosystem, including the Freedom SuperApp, which integrates banking, payments, and investment services, offering convenience and enhanced features. The growth in customer accounts across brokerage, banking, and insurance segments indicates increased service adoption. However, customers are exposed to risks related to IT system failures, cybersecurity threats, and potential impacts from regulatory changes.
• **Suppliers & Creditors:** Increased operational expenses and significant capital expenditures, particularly for telecommunications expansion, suggest continued demand for services from suppliers. The company's reliance on debt financing and bond issuances indicates ongoing relationships and obligations to creditors.
• **Regulatory Bodies:** The company operates in highly regulated industries across multiple jurisdictions and is subject to extensive oversight. Compliance with evolving laws and regulations, including those related to anti-money laundering, sanctions, and capital adequacy, requires significant resources and attention, with potential for fines and sanctions for non-compliance.

Next Steps

• Continue to build a network of banks, brokers, and digital financial infrastructure that connects markets across Central Asia, the Caucasus, and beyond.
• Pursue selective acquisitions of companies whose licenses, technology, or expertise can enhance the company's platform, such as fintech providers, digital commerce enablers, and lifestyle service companies.
• Invest in advanced data infrastructure and analytics capabilities to leverage big data and predictive AI for better customer understanding and tailored product offerings.
• Continue the development and expansion of the telecommunications and media businesses in Kazakhstan, including the construction of network infrastructure and obtaining necessary licenses.
• Freedom Bank KZ may decide to place any or all of its established bond programs to investors as needed to support liquidity.
• The company intends to either acquire microfinance organization Freedom Finance Credit from Mr. Turlov or implement an in-house solution to replicate its functions for retail lending operations.
• Complete the construction of Elysium Tower in Limassol, Cyprus, which is planned to be a new office building for the Freedom EU subsidiary, with the remaining balance of approximately $3.8 million expected to be incurred in calendar year 2025.
• Continue efforts to comply with the extensive and evolving regulatory environment across all jurisdictions where the company operates.
• Monitor and adapt to changes in tax laws, particularly in Kazakhstan and those related to the OECD's Pillar 2 framework, which may impact tax liabilities.
• Continue actively seeking to diversify the customer portfolio to decrease the share of customers located in Russia.
• Continue to appeal the sanctions imposed by Ukraine on CEO Timur Turlov and the former Ukrainian subsidiary.
• Plan to roll out the third-party identity verification platform to all brokerage companies, banks, and other companies within the group.
• Proceed with obtaining a license to provide brokerage services in Turkey, following the principal approval received on January 9, 2025.

Key Dates

Recommendation

Keywords

Financial Services, Brokerage, Banking, Insurance, Fintech, Kazakhstan, Digital Ecosystem, SuperApp, Tradernet, Investment Banking, Capital Markets, Telecommunications, Media, SEC Filing, 10-K, Risk Management, Corporate Governance, International Operations, Emerging Markets, Nasdaq, Timur Turlov, Russell 3000 Index