# Freedom Holding Corp. (FRHC) FY 2025 MD&A Verbatim Item 7 Management's Discussion and Analysis from Freedom Holding Corp.'s 10-K for fiscal year 2025. SEC filing source: https://www.sec.gov/Archives/edgar/data/924805/000092480525000012/frhc-20250331.htm Accession: 0000924805-25-000012 Filing date: 2025-06-13 Report date: 2025-03-31 Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization. Confidence: high Company profile: /company/FRHC/ All MD&A years: /company/FRHC/mda/ Previous year: /company/FRHC/mda/fy2024/ (FY 2024) Next year: /company/FRHC/mda/fy2026/ (FY 2026) ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis is intended to assist you in understanding the results of operations and present financial condition of Freedom Holding Corp. ("FRHC") and its consolidated subsidiaries in Part II Item 8 of this annual report as well as the information set forth in Part I Item 1 "Business" of this annual report. Except where the context otherwise requires or where otherwise indicated, references herein to the "Company," "Freedom," "we," "our," 61 Table of Contents and "us" mean Freedom Holding Corp. together with its consolidated subsidiaries. This discussion contains certain forward-looking statements that involve known and unknown risks, uncertainties, and other factors as described under the heading "Special Note About Forward-Looking Information" in this annual report. Actual results could differ materially from those projected in any forward-looking statements. For additional information regarding these risks and uncertainties, see the disclosure under the heading "Risk Factors" in Part I Item 1A of this annual report. This discussion summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and capital resources for fiscal 2025 and 2024. For a discussion of our results of operations for fiscal 2023, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II Item 7 of our annual report on Form 10-K for the fiscal year ended March 31, 2024 filed with the SEC on June 14, 2024. OVERVIEW Freedom Holding Corp. is organized under the laws of the State of Nevada and acts as a holding company for all of our operating subsidiaries. Our subsidiaries engage in a broad range of activities including securities brokerage, securities dealing for customers and for our own account, underwriting, market making activities, investment research, investment counseling, retail and commercial banking, insurance products, payment services, and information processing services. We also own several ancillary businesses which complement our core financial services businesses, including telecommunications and media businesses in Kazakhstan that are in a developmental stage. 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. Our principal executive office is in New York, United States. We have a presence in Kazakhstan, Uzbekistan, Kyrgyzstan, Cyprus, Germany, the United Kingdom, Greece, Spain, France, Poland, Lithuania, Austria, Bulgaria, Italy, Netherlands, Belgium, the United States, Turkey, Armenia, Azerbaijan, Tajikistan, and the United Arab Emirates. We divested our Russian subsidiaries in February 2023. Our subsidiaries in the United States include an SEC- and FINRA-registered broker dealer. As of March 31, 2025, we had 8,764 employees, 202 offices (of which 49 offered brokerage services, 56 offered insurance services, 30 offered banking services and 67 offered other financial and non-financial services). Russell 3000® Index Inclusion. On May 29, 2025, the Company announced its forthcoming inclusion in the Russell 3000® Index as part of its 2025 annual reconstitution, effective after the close of U.S. trading on June 27, 2025. Management believes that index membership may raise our profile among institutional investors and could improve the liquidity of our common stock; however, we cannot predict the magnitude or duration of any resulting impact on market price or trading volume. This subsequent event does not affect the accompanying consolidated financial statements. Summary of Results of Operations The highlights of our consolidated results for fiscal 2025 are as follows: •We had total revenues, net of $2,050.5 million for fiscal 2025, as compared to $1,666.4 million for fiscal 2024. The increase from fiscal 2024 and 2025 was primarily attributable to the following: ◦Our interest income for fiscal 2025 was $864.5 million, representing an increase of $36.2 million, or 4%, compared to fiscal 2024. The increase was primarily driven by increased usage of margin loans by customers and continued expansion of Freedom Bank KZ's customer loan portfolio. This was partially offset by lower interest income from trading securities due to a strategic reduction in interest-bearing instruments. ◦Our fee and commission income for fiscal 2025 was $505.0 million, an increase of $64.7 million, or 15%, compared to fiscal 2024. The increase was mainly attributable to higher fee and commission income from brokerage services, primarily driven by the growth in retail brokerage customers from 530,000 in 2024 to 683,000 in 2025. The increase was partially offset by a decrease in commission income from payment processing and bank services. 62 Table of Contents ◦Our net loss on trading securities for fiscal 2025 was $57.8 million, a decrease of $191.7 million, or 143%, compared to fiscal 2024, due to unrealized losses for fiscal 2025 that were attributable to the temporary decrease in the market prices of Kazakhstan sovereign bonds held in our proprietary portfolio during the year. ◦Our insurance underwriting income for fiscal 2025 was $617.6 million, an increase of $353.4 million or 134%, compared to fiscal 2024. The increase was driven by the expansion of our insurance operations such as pension annuity and accident insurance classes and increase in the number of customers from 534,000 as of March 31, 2024 to 1,170,000 as of March 31, 2025. •We had net income of $84.5 million for fiscal 2025, as compared to $375.0 million for the fiscal year ended March 31, 2024. •Our total assets increased to $9.9 billion as of March 31, 2025 from $8.3 billion as of March 31, 2024. Of our total assets: ◦Our investment securities portfolio decreased by 38% to $2,275.3 million as of March 31, 2025 from $3,688.6 million as of March 31, 2024, which reflects a strategic shift in response to increased market volatility and rising interest rates. ◦The loan portfolio of Freedom Bank KZ increased by 16% to $1,587.6 million as of March 31, 2025 from $1,374.1 million as at March 31, 2024 mainly due to the growth of mortgage and collateralized bank customer loans portfolio between the two periods. •We had approximately 683,000 total retail brokerage customers as of March 31, 2025 as compared to approximately 530,000 as of March 31, 2024. •We had approximately 2,515,000 bank customers at our Freedom Bank KZ subsidiary as of March 31, 2025 as compared to approximately 904,000 as of March 31, 2024. The operating results for any period are not necessarily indicative of the results that may be expected for any future period. Key Factors Affecting Our Results of Operations Our operations have been, and may continue to be, affected by certain key factors as well as certain historical events. The key factors affecting our business and the results of operations include, in particular: market and economic conditions, expansion of our digital ecosystem, acquisitions and expansion into new business areas and markets, our transactions with related parties, our arrangements with market maker customers and governmental policies. Each of these factors is discussed in more detail below. Market and Economic Conditions Performance in the financial services industry is heavily influenced by the overall strength of economic conditions and financial market activity, which generally have a direct and material impact on our results of operations and financial condition. These conditions are a product of many factors, which are mostly unpredictable and beyond our control, and may affect the decisions made by financial market participants. Changes in economic and political conditions, including economic output levels, interest and inflation rates, employment levels, prices of commodities including oil and gas, exogenous market events, consumer confidence levels, tariffs, fiscal and monetary policy can affect market conditions. While many global financial markets have shown signs of improvement in recent years, uncertainty remains. A period of sustained downturns and/or volatility in the securities markets, and/or prolonged levels of increasing interest rates, could lead to a return to increased credit market dislocations, reductions in the value of real estate, and other negative market factors which could significantly impact our revenues and profitability.     Financial markets may also be impacted by armed conflicts, political and civil unrest occurring in the Middle East, Eastern Europe, Russia and Ukraine, South America and Asia. Hostilities between Russia and Ukraine have created global uncertainties around the spread of the conflict and have impacted global supply chains of energy supplies and food supplies throughout the world. These issues could have unforeseen and negative impacts upon the financial markets and our company and its operations. 63 Table of Contents Expansion of our digital ecosystem Over the past few years, we have significantly expanded our customer base across brokerage, banking, and insurance by building a unified digital ecosystem. At the core of this growth is the launch of our SuperApp, which brings together essential financial services, including banking, insurance and lifestyle services in a single application. The addition of attractive loyalty and referral programs has further supported customer adoption, increasing overall engagement within the ecosystem. Our mission is to provide our customers with the most convenient, seamless, and beneficial experience possible, engaging them across a broad range of digital products, each offered on terms designed to deliver maximum value and ease of use. We expect the increase in our customer base in recent years will positively impact our future growth prospects. This includes opportunities for increased revenue generation through the ongoing development of our integrated digital fintech ecosystem and expanded cross-selling capabilities. Additionally, we anticipate benefits from network effects, where the value of our services increases as our customer base grows, enabling us to achieve economies of scale by reducing operating costs per customer and enhancing overall operational efficiency. A larger and more diverse customer base also gives us access to a broader pool of data and customer insights, which may allow us to better understand customer preferences, tailor our product offerings, and optimize marketing and sales strategies. However, while the expansion of our customer base presents significant opportunities, it also exposes us to certain risks and uncertainties related to the effective management of our growth. These include potential increases in customer liabilities, intensified competition from both existing and new market participants, and a heightened regulatory burden. Moreover, managing a larger customer base along with developing new businesses, such as telecom and media businesses, and implementing new technologies may introduce operational difficulties and increase the demands on our information systems and management resources. The growing reliance on digital channels and the increasing volume of customer data heighten our exposure to cybersecurity threats. 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. Acquisitions and Expansion into New Business Areas and Markets We actively pursue non-organic growth through targeted acquisitions as part of our broader strategy to develop and expand our integrated digital fintech ecosystem. These acquisitions enable us to quickly enhance existing services, enter complementary markets and gain new technological capabilities, significantly influencing our business and financial performance. Additionally, consistent with our strategic vision, we have in recent years initiated expansion into new business sectors, including telecommunications and media content in Kazakhstan. Our telecom business, Freedom Telecom, will require significant capital investments in network infrastructure, licenses, and targeted acquisitions, and is expected to incur operating losses in its initial years, transitioning to profitability over the medium term. Similarly, our newly established subsidiary, Freedom Media, will deliver a broad portfolio of digital media content to our customers, also incurring initial losses before becoming profitable within the next several years. While these new ventures are anticipated to enhance long-term growth prospects, they will initially increase capital expenditures, elevate our debt service obligations, and negatively impact consolidated net income during the early stages of implementation. Related Party Transactions During fiscal years 2025 and 2024, we entered into various transactions with the Company's related parties. Historically, a significant portion of these transactions involved FST Belize, an entity wholly owned by our CEO, Chairman, and majority shareholder, Mr. Timur Turlov, but not part of our consolidated Group. We have wound down our arrangements with FST Belize prior to the end of fiscal 2024, resulting in a substantial reduction in the volume and total amount of related-party transactions in fiscal 2025 compared to prior years. While such transactions have decreased, we anticipate continuing to engage in related-party transactions as part of our business. Our related party transactions in the fiscal years 2025 and 2024 primarily include margin lending receivables from brokerage services, deposits held at Freedom Bank KZ, prepayments related to our potential acquisitions and certain consumer loans purchased from FFIN Credit, an entity controlled by Mr. Turlov. Additionally, we have continued to financially support the Kazakhstan Chess Federation - an organization in which Mr. Turlov holds a management position - as part of our community engagement initiatives. For additional information regarding our related party transactions see Note 23 "Related Party Transactions" in the notes to our consolidated financial statements contained in Part II Item 8 of this annual report. Market Maker Customer Arrangements 64 Table of Contents We have derived a significant portion of our fee and commission income and interest income from margin loans to customers from trading activity of certain institutional non-US market maker customers with whom we internalize the execution of trades of our brokerage customers by accepting short sales from this institutional market maker, which match our customers’ purchase orders. All such transactions are carried out under margin-trading principles. These transactions are typically executed and settled on a cash basis through a prime broker and clearing firms. Under this margin-account settlement process, the securities are credited to the purchaser and, where necessary, borrowed by a market maker customer within the prime broker's and clearing firm’s custody, thereby eliminating any external delivery or locate requirement at execution. Relevant short positions are sufficiently collateralized by securities and cash in the market maker customer's margin account. We use the services of third-parties, including some U.S.-registered securities broker dealer and clearing firms to execute our trades. We earn fee and commission income from such market maker customers for executing trades as well as commissions paid by them for order flow, which is net compensation received from firms to which our broker-dealer subsidiaries send equity and options orders, and fees for outstanding short sale positions. We also earn interest income on margin loans we grant to them. Our arrangements with such market maker customers have provided us and our customers with substantial liquidity for trading, including reduced settlement costs for us and enabling faster execution of trades for our customers. Prior to the end of fiscal 2024, we had such an arrangement indirectly with an institutional market maker customer of our former affiliate FST Belize, and since approximately the beginning of fiscal 2024 we have had such an arrangement with an institutional market maker customer of our Freedom Global subsidiary. We receive a commission from such institutional market maker customers for executing their trades, and in the past we earned such commissions indirectly through commissions we received from FST Belize. For the year ended March 31, 2025, we earned fee and commission income from the market maker customer at our Freedom Global subsidiary of $284.7 million, representing 56% of our total fee and commission income for fiscal 2025. For the years ended March 31, 2025 and 2024, we earned interest income from margin lending from the market maker customer at our Freedom Global subsidiary of approximately $32.8 million and $99.6 million, respectively, representing 15% and 57%, respectively, of our total interest income from margin lending for fiscal 2025. Governmental Policies Our earnings are and will be affected by the monetary, fiscal and foreign policies of the governments of the jurisdictions in which we operate, in particular Kazakhstan, the European Union and the United States. The monetary policies of these countries may have a significant effect upon our operating results. It is not possible to predict the nature and impact of future changes in monetary and fiscal policies. Key Income Statement Line Items Revenue We derive revenue primarily from fee and commission income, net gain on trading securities, interest income, insurance underwriting income, and net gain on foreign exchange operations. Fee and Commission Income Fee and commission income consists principally of fees and commissions from brokerage customer trading, banking services, payment processing services and underwriting and market making activities. A substantial portion of our revenue is derived from commissions from customers through accounts with transaction-based pricing. Brokerage commissions are charged on investment products in accordance with a schedule we have formulated that aligns with local practices. Part of our brokerage fees from customer trading consists of commissions we receive for from institutional market maker customers for execution of trades. Fees received for banking services consist primarily of commissions earned from merchants on acquiring operations, commission on transfer and payment processing and commissions on cash operations. Fees for payment processing services are mainly related to charges for handling and processing particular cash transfer transactions or operations. Fee and commission income as a percentage of our total revenue was 25% and 26% in the fiscal years ended, March 31, 2025 and 2024 respectively. Retail brokerage service fee and commission income as a percentage of our total fee and commission income was 85% and 76% in the fiscal years ended March 31, 2025 and 2024, respectively. Interest Income We earn interest income from trading securities, available-for-sale securities, held-to-maturity securities, margin lending, reverse repurchase transactions, and loans to customers. Interest income on trading securities consists of interest earned from investments in debt securities held in our proprietary trading account. Net (Loss)/Gain on Trading Securities 65 Table of Contents Net gain/(loss) on trading securities reflects the change in value of the securities held in our proprietary trading portfolio during the relevant period. A net gain or loss is comprised of both realized and unrealized gains and losses during the period. Realized gains or losses are recognized when we close an open position in a security and recognize a gain or a loss on that position. U.S. GAAP requires that we also reflect in our financial statements any unrealized gain or loss on each open securities positions as of the end of each period based on whether the value of the open position is higher or lower at the period end than it was at either: (i) the beginning of the period, if the position was held for the full period; or (ii) at the time the position was opened, if the position was opened during the period. Fluctuations in unrealized gains or losses from one period to another can occur as a result of factors beyond our control, such as fluctuations in the market prices of the open securities positions we hold resulting from market and economic uncertainty arising from global or local events that cause significant market volatility, or even halting of trading in certain markets, all of which occurred as a result of the Russia-Ukraine conflict. Fluctuations might also result from factors within our control, such as when we elect to close an open securities position, which would have the effect of reducing our open positions and, thereby potentially reducing or increasing the amount of unrealized gains or losses in a period. These fluctuations can adversely affect the ultimate value we realize from our proprietary trading activities. Unrealized gains or losses in a particular period may or may not be indicative of the gain or loss we will ultimately realize on a securities position when the position is closed. As a result, we might realize significant swings in net gains and losses realized on our trading securities year-over-year and quarter-to-quarter. Insurance Underwriting Income Life insurance premiums are recognized as revenue when due; accident and health insurance premiums are recognized as revenue over the premium paying period and property; and casualty insurance premiums are recognized as revenue over the period of the contract in proportion to the amount of insurance protection provided. Net Gain on Foreign Exchange Operations Net gain on foreign exchange operations reflects the net gain from: (i) the change in value resulting from currency fluctuations of monetary assets and liabilities denominated in any currency other than the functional currency of the entity holding such asset or liability; and (ii) purchases and sales of foreign currency. Under U.S. GAAP, we are required to revalue assets and liabilities denominated in foreign currencies into our reporting currency, the U.S. dollar, which can result in gains or losses on foreign exchange operations. The Company may suffer losses as a result of such fluctuations in foreign currency exchange rates. Net Gain/(Loss) on Derivatives The Company enters into various derivative financial instruments, including forwards and swaps, in the foreign exchange markets. These financial instruments are held for trading and are initially recognized at fair value. Fair value is determined based on quoted market prices or valuation models that consider the current market and contractual values of the relevant underlying instruments, along with other factors. Derivative financial instruments with a positive fair value are recorded as assets, while those with a negative fair value are recorded as liabilities. Gains and losses on these instruments are recognized in the Consolidated Statements of Operations and Statements of Other Comprehensive Income as net (loss)/gain on derivatives. Fee and Commission Expense We incur fee and commission expense in our brokerage, banking, and insurance activities. Fee and commission expense consists of expenses related to brokerage, banking, stock exchange, clearing, depository and agent services. Generally, we expect fee and commission expense from brokerage and banking activities to increase and decrease corresponding to increases and decreases in fee and commission income. For our insurance operations, fee and commission expense arises from the deferral and subsequent amortization of the costs of acquiring business, which are referred to as "deferred acquisition costs" (principally commissions, and other incremental direct costs of issuing policies). Deferred acquisition costs ("DAC") for traditional life insurance and long-duration health insurance are amortized over the estimated premium-paying period of the related policies. DAC for property insurance, accident insurance and health insurance is amortized over the effective period of the related insurance policies. Interest Expense Interest expense includes the expenses associated with our short-term and long-term financing, which consist of interest on securities repurchase agreement obligations, customer accounts and deposits, debt securities issued, and loans received. 66 Table of Contents Payroll and Bonus Payroll and bonuses represent the costs incurred by a company in compensating its employees for their services and providing performance-based incentives. Professional Services Professional services represent the costs associated with engaging external experts and consultants. Stock Compensation Expense Stock compensation expense represents the cost associated with stock grants to employees and executives as part of their compensation packages. Advertising and Sponsorship Expense Advertising and sponsorship expense represents a component of operating expenses. It includes investments made to promote products, services, or the overall brand to a targeted audience, ultimately driving customer acquisition and revenue growth. Advertising generally refers to paid media placements intended to reach a broad audience through channels such as digital platforms, print, or television. Sponsorship, by contrast, typically involves financial or in-kind support for events, organizations, or initiatives in exchange for brand visibility and association with the sponsored activity. General and Administrative Expense General and administrative expense includes lease cost, depreciation and amortization, communications services, software support, representative expenses, business travel expenses, utilities, charity, fines and penalties, taxes other than income tax, rent and other operating expenses. Insurance Claims Incurred, Net of Reinsurance Insurance claims incurred are expenses directly associated with our insurance activity, and represent actual amounts paid or to be paid to policyholders when insurable events occur, less any amounts we receive from reinsurers related to the insurable event. This amount is adjusted for changes in loss reserves, including claims reported but not settled (RBNS), claims incurred but not reported (IBNR) and not incurred claims reserve (NIC). Foreign Currency Translation Adjustments, Net of Tax The functional currencies of our operating subsidiaries are the Kazakhstan tenge, the euro, the U.S. dollar, the Uzbekistan som, Kyrgyzstani som, the Azerbaijani manat, the Armenian dram, the British pound sterling, the Turkish lira, the Tajikistani somoni and the United Arab Emirates dirham. Our reporting currency is the U.S. dollar. Pursuant to U.S. GAAP, we are required to revalue our assets from our functional currencies to our reporting currency for financial reporting purposes. Net (Loss)/Income Attributable to Non-controlling Interest Net (loss)/income attributable to non-controlling interest includes our net (loss)/income attributable to our non-controlling interests in ReKassa. As of March 31, 2025, we held 90% of the ownership interest in ReKassa. The remaining 10.00% ownership interest in ReKassa is considered as non-controlling interests in our Consolidated Statements of Operations and Statements of Other Comprehensive Income. As of March 31, 2024, FRHC held a 94.73% ownership interest in Arbuz, with the remaining 5.27% recognized as non-controlling interests in our Consolidated Statements of Operations and Other Comprehensive Income, Consolidated Statements of Shareholders' Equity, and Consolidated Statements of Cash Flows. During fiscal 2025, we acquired the remaining 5.27% ownership interest in Arbuz. RESULTS OF OPERATIONS Comparison of Fiscal Years Ended March 31, 2025 and 2024 The following comparison of our financial results for the fiscal years ended March 31, 2025 and 2024 is not necessarily indicative of future results. Prior period presentations and disclosures for fiscal 2024 were reclassified to provide comparability with current period classifications. The comparison of our financial results for the fiscal years ended March 31, 67 Table of Contents 2024 and 2023 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal Years Ended March 31, 2024, 2023 and 2022” in Part II, Item 7 of our annual report on Form 10-K for the fiscal year ended March 31, 2024 filed with the SEC on June 14, 2024. Revenue The following table sets out information regarding our total revenue, net for the fiscal years presented. [[GREPCENT_TABLE]] [["","Year ended March 31,"],["","2025","","2024","","Amount Change","","% Change"],["Fee and commission income","$","505,026","","","$","440,333","","","$","64,693","","","15","%"],["Net gain on trading securities","(57,810)","","","133,854","","","(191,664)","","","(143)","%"],["Interest income","864,453","","","828,224","","","36,229","","","4","%"],["Insurance underwriting income","617,596","","","264,218","","","353,378","","","134","%"],["Net gain on foreign exchange operations","51,684","","","72,245","","","(20,561)","","","(28)","%"],["Net gain/(loss) on derivatives","12,404","","","(103,794)","","","116,198","","","(112)","%"],["Sales of goods and services","40,102","","","21,576","","","18,526","","","86","%"],["Other income","17,072","","","9,696","","","7,376","","","76","%"],["Total revenue, net","$","2,050,527","","","$","1,666,352","","","$","384,175","","","23","%"]] [[/GREPCENT_TABLE]] The following table sets out the components of our revenue as a percentage of total revenue, net for the fiscal years presented. [[GREPCENT_TABLE]] [["","Year ended March 31,"],["","2025","","2024"],["Fee and commission income","25","%","","26","%"],["Net gain on trading securities","(3)","%","","8","%"],["Interest income","41","%","","50","%"],["Insurance underwriting income","30","%","","16","%"],["Net gain on foreign exchange operations","3","%","","4","%"],["Net gain/(loss) on derivatives","1","%","","(6)","%"],["Sales of goods and services","2","%","","1","%"],["Other income","1","%","","1","%"],["Total revenue, net","100","%","","100","%"]] [[/GREPCENT_TABLE]] Fee and commission income The following table sets forth information regarding our fee and commission income for the fiscal years presented. [[GREPCENT_TABLE]] [["","Year ended March 31,"],["","2025","","2024","","Amount Change","","% Change"],["Brokerage services","$","430,136","","","$","333,383","","","$","96,753","","","29","%"],["Commission income from payment processing","28,711","","","41,659","","","(12,948)","","","(31)","%"],["Agency fee income","15,616","","15,872","","","(256)","","","(2)","%"],["Bank services","13,336","","","25,180","","","(11,844)","","","(47)","%"],["Underwriting and market-making services","11,210","","","18,801","","","(7,591)","","","(40)","%"],["Other fee and commission income","6,017","","","5,438","","","579","","","11","%"],["Total fee and commission income","$","505,026","","","$","440,333","","","$","64,693","","","15","%"]] [[/GREPCENT_TABLE]] 68 Table of Contents The following table sets out the components of our fee and commission income as a percentage of total fee and commission income, net for the fiscal years presented. [[GREPCENT_TABLE]] [["","","Year ended March 31,"],["","","2025","","2024"],["","","(as a % of total fee and commission income)"],["Brokerage services","","85","%","","76","%"],["Commission income from payment processing","","6","%","","9","%"],["Agency fee income","","3","%","","4","%"],["Bank services","","3","%","","6","%"],["Underwriting and market-making services","","2","%","","4","%"],["Other fee and commission income","","1","%","","1","%"],["Total fee and commission income","","100","%","","100","%"]] [[/GREPCENT_TABLE]] Fee and commission income for the fiscal year ended March 31, 2025 amounted to $505.0 million, reflecting an increase of $64.7 million or 15% compared to $440.3 million in the fiscal year ended March 31, 2024. This increase was driven by multiple factors, including the factors discussed below. Fee and commission income from brokerage services generated $430.1 million, representing a 29% increase from $333.4 million in fiscal 2024. This growth was primarily due to an increase in the number of retail brokerage customers from 530,000 in 2024 to 683,000 in 2025. During the fiscal year 2025, we earned fee and commission income from a market maker customer at our subsidiary Freedom Global of $284.7 million, representing 56% of our total fee and commission income for that period. Fee and commission income from payment processing decreased to $28.7 million in fiscal 2025 from $41.7 million for the fiscal 2024. The $12.9 million decrease is attributable to a significant reduction in transaction volumes between the two periods, which was in turn due to the cessation of operations of one of our counterparties, which previously contributed substantial transaction volume. Fee and commission income from banking services decreased by $11.8 million to $13.3 million during fiscal 2025, despite a significant increase in transaction volume following the successful launch of SuperApp in April 2024. The decrease was primarily driven by the launch and active use of a cashback-based loyalty program. As part of our strategic approach, we do not prioritize revenue generation from banking service commissions. Instead, the loyalty program is leveraged to effectively reduce transaction costs for customers, supporting customer base expansion and increased engagement across the ecosystem. Fee and commission income from underwriting and market-making activities decreased by $7.6 million from the fiscal 2024 or 40% to $11.2 million, driven by a lower volume of underwriting transactions for the fiscal 2025, as compared to the fiscal 2024. Net (loss)/gain on trading securities We had a net loss on trading securities of $57.8 million for the fiscal year ended March 31, 2025, a decrease of $191.7 million as compared to $133.9 million for the fiscal year ended March 31, 2024. The following table sets forth information regarding our net gains and losses on trading securities for fiscal 2025 and 2024. [[GREPCENT_TABLE]] [["","Realized Net Gain/(Loss)","","Unrealized Net (Loss)/Gain","","Net (Loss)/Gain on Trading Securities"],["Fiscal 2025","$","65,855","","","$","(123,665)","","","$","(57,810)"],["Fiscal 2024","$","38,125","","","$","95,729","","","$","133,854"]] [[/GREPCENT_TABLE]] For the fiscal year ended March 31, 2025, we had a realized gain on trading securities of $65.9 million, which is attributable to Kazakhstan sovereign bonds sold during the fiscal 2025. Also, we recognized a temporary unrealized net loss of $123.7 million due to the decrease in the value of securities positions we held as of March 31, 2025. The majority of this unreal 69 Table of Contents ized loss is related to Kazakhstan sovereign bonds, which experienced a negative revaluation following an increase in the base interest rate in Kazakhstan during March 2025. During the year ended March 31, 2024, we had a realized gain on trading securities of $38.1 million, which is attributable to Kazakhstan sovereign bonds sold during the year ended March 31, 2024. We had an unrealized net gain in the year ended March 31, 2024, due to securities positions we held at March 31, 2024, having appreciated by $95.7 million. The majority of the unrealized net gain was attributable to appreciated Kazakhstan sovereign bonds, which appreciation was primarily due to a decline in the National Bank of the Republic of Kazakhstan's base interest rate during the year ended March 31, 2024. Interest income The following table sets forth information regarding our interest income for the fiscal years presented: [[GREPCENT_TABLE]] [["","Year ended March, 31"],["","2025","","2024","","Amount Change","","% Change"],["Interest income on trading securities","$","378,350","","","$","426,428","","","$","(48,078)","","","(11)","%"],["Interest income on margin loans to customers","212,360","","","175,571","","","36,789","","","21","%"],["Interest income on loans to customers","207,802","","","176,539","","","31,263","","","18","%"],["Interest income on available-for-sale securities","40,297","","","32,821","","","7,476","","","23","%"],["Interest income on reverse repurchase agreements and amounts due from banks","24,644","","","16,865","","","7,779","","","46","%"],["Interest income on held-to-maturity securities","1,000","","","\u2014","","","1,000","","","100","%"],["Total interest income","$","864,453","","","$","828,224","","","$","36,229","","","4","%"]] [[/GREPCENT_TABLE]] The following table sets out the components of our interest income as a percentage of total interest income, net for the fiscal years presented: [[GREPCENT_TABLE]] [["","Year ended March 31,"],["","2025","","2024"],["","(as a % of total interest income)"],["Interest income on trading securities","43.8","%","","51.5","%"],["Interest income on margin loans to customers","24.5","%","","21.2","%"],["Interest income on loans to customers","24.0","%","","21.3","%"],["Interest income on available-for-sale securities","4.7","%","","4.0","%"],["Interest income on reverse repurchase agreements and amounts due from banks","2.9","%","","2.0","%"],["Interest income on held-to-maturity securities","0.1","%","","\u2014","%"],["Total interest income","100","%","","100","%"]] [[/GREPCENT_TABLE]] For the fiscal year ended March 31, 2025, we had interest income of $864.5 million, representing an increase of $36.2 million, or 4%, compared to the fiscal year ended March 31, 2024. The increase in interest income was primarily attributable to increases in interest income on margin loans to customers, loans to customers and securities available-for-sale. Interest income on margin loans to customers increased by $36.8 million, or 21%, due to an increase in the usage of margin loans for trades by our customers between the two periods. For the fiscal year ended March 31, 2025, we earned interest income from margin lending from a market maker customer of our Freedom Global subsidiary in an amount of approximately $32.8 million, representing 15% of our total interest income from margin lending for that period. For the fiscal year ended March 31, 2025, interest income on loans to customers increased by $31.3 million, or 18%, compared to the fiscal year ended March 31, 2024 due to the growth of Freedom Bank KZ's customer loan portfolio between the two periods. During the fiscal year ended March 31, 2025, interest income on available-for-sale securities increased by $7.5 million, or 23%, compared to the fiscal year ended March 31, 2024 due to the growth of Freedom Life's available-for-sale portfolio between the two periods. Interest income on trading securities decreased by $48.1 million, or 11% during the fiscal year ended March 31, 2025, as compared to the fiscal year ended March 31, 2024 due to a reduction in the volume of interest-bearing trading securities held durin 70 Table of Contents g the period. This reflects a strategic shift in the investment portfolio in response to increased market volatility and rising interest rates, which adversely impacted reinvestment decisions. Company generated $1.0 million in interest income from held-to-maturity securities in fiscal year ended March 31, 2025, following the growth in the held-to-maturity securities portfolio. The following table provides a summary of the monthly average balances and average interest rates for the major categories of our interest-earning assets for the fiscal years ended March 31, 2025 and 2024. [[GREPCENT_TABLE]] [["","Year ended March 31,"],["","2025","","2024"],["","Average balance"],["Interest-earning assets"],["Trading securities","$","3,149,515","","(2)","$","3,381,287"],["Margin lending, brokerage and other receivables, net","2,202,876","","(1)","933,797"],["Loans issued","1,405,464","","","1,218,935"],["Available-for-sale securities, at fair value","348,847","","(2)","221,356"],["Held-to-maturity securities","14,221","","","\u2014"],["","Average yields (3)"],["Trading securities","12.0","%","","12.6","%"],["Margin lending, brokerage and other receivables, net","8.5","%","","8.2","%"],["Loans issued","14.8","%","","14.5","%"],["Available-for-sale securities, at fair value","11.6","%","","14.8","%"],["Held-to-maturity securities","7.0","%","","\u2014","%"],["","Interest income"],["Interest income on trading securities","$","378,350","","","$","426,428"],["Interest income on loans to customers","207,802","","","176,539"],["Interest income on margin loans to customers","186,463","","","76,871"],["Interest income on available-for-sale securities","40,297","","","32,821"],["Other interest income","24,644","","","16,865"],["Interest income on held-to-maturity securities","1,000","","","\u2014"],["Total interest income","$","838,556","","","$","729,524"]] [[/GREPCENT_TABLE]] (1) Average balance and average yields relate to margin lending activities. (2) Average balance, average yields, and interest income relates to corporate debt, non-US sovereign debt and US sovereign debt activities. (3) Average yields are computed by dividing interest income by the corresponding average monthly balances Interest income on margin loans to customers includes income accrued on off-balance sheet arrangements. The monthly average balance of these arrangements is not included in the table above. These off-balance sheet arrangements mainly included repurchase agreements of our brokerage customers. As of September 30, 2024, the monthly average balance of off-balance sheet arrangements was $688.8 million, with a weighted average interest rate of 8%. Following that date, we had no such off-balance sheet arrangements on which we charge an interest. As of March 31, 2024, the monthly average balance of margin loans to customers was $822.5 million and the weighted average interest rates was 12%. The following table sets forth the effects of changing rates and volumes on interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate), The net column represents the sum of the prior columns. Changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on changes due to rate and the changes due to volume. 71 Table of Contents [[GREPCENT_TABLE]] [["","Year ended March 31,"],["","2025 vs 2024"],["","Increase/ (decrease) due to change in"],["","Rate","","Volume","","Net"],["Interest income"],["Interest income on loans to customers","$","3,752","","","$","27,511","","","$","31,263"],["Interest income on margin loans to customers","2,230","","","107,362","","","109,592"],["Interest income on trading securities","(19,668)","","","(28,410)","","","(48,078)"],["Interest income on available-for-sale securities","(4,652)","","","12,128","","","7,476"],["Interest income on held-to-maturity securities","\u2014","","","1,000","","","1,000"],["Other interest income","\u2014","","","\u2014","","","7,779"],["Total interest income","$","(18,338)","","","$","119,591","","","$","109,032"]] [[/GREPCENT_TABLE]] Insurance underwriting income For the fiscal year ended March 31, 2025, we had insurance underwriting income of $617.6 million, an increase of $353.4 million, or 134%, as compared to the fiscal year ended March 31, 2024. The increase was primarily attributable to a $287.8 million, or 131%, increase in insurance underwriting income from written insurance premiums for the fiscal year ended March 31, 2025, as compared to the fiscal year ended March 31, 2024, due to the expansion of our insurance operations such as pension annuity and accident insurance classes between the two periods. Written insurance premiums increased by a $376.7 million, partially offset by a $17.0 million decrease in unearned premium reserves and a $6.3 million reduction in premiums transferred to reinsurers for the fiscal year ended March 31, 2025, as compared to the fiscal year ended March 31, 2024. The following table sets out information on our insurance underwriting income for the periods presented. [[GREPCENT_TABLE]] [["","Year ended March, 31"],["","2025","","2024","","Amount Change","","% Change"],["Written insurance premiums","$","664,437","","","$","287,773","","","$","376,664","","","131","%"],["Reinsurance premiums ceded","(15,974)","","","(9,647)","","","(6,327)","","","66","%"],["Change in unearned premium reserve, net","(30,867)","","","(13,908)","","","(16,959)","","","122","%"],["Insurance underwriting income","$","617,596","","","$","264,218","","","$","353,378","","","134","%"]] [[/GREPCENT_TABLE]] Net gain on foreign exchange operations For the fiscal year ended March 31, 2025, we realized a net gain on foreign exchange operations of $51.7 million compared to a net gain of $72.2 million for the fiscal year ended March 31, 2024. The change was primarily due to the translation difference loss of $23.4 million which is mainly attributable to the 13% depreciation of Kazakhstan tenge. This loss was offset by a $75.1 million gain on dealing transactions. This change is mostly attributable to Freedom Bank KZ which had a net gain on sales and purchases of foreign currency of $75.4 million in the fiscal year ended March 31, 2025, compared to a $67.9 million gain in the fiscal year ended March 31, 2024. Net gain/(loss) on derivatives For the fiscal year ended March 31, 2025, we had a net gain on derivatives of $12.4 million compared to a net loss of $103.8 million for the fiscal year ended March 31, 2024. The increase in the amount of net gain was primarily attributable to our subsidiary, Freedom Bank KZ, which had a realized net gain of $1.8 million for the fiscal year ended March 31, 2025, as compared to a realized net loss of $98.8 million for the fiscal year ended March 31, 2024. Such change between the two periods was mainly due to a positive revaluation of currency swaps for the fiscal year ended March 31, 2025. 72 Table of Contents Expense The following table sets forth information regarding our total expense for the periods presented. [[GREPCENT_TABLE]] [["","Year ended March 31,"],["","2025","","2024","","Amount Change","","% Change"],["Fee and commission expense","$","346,074","","","$","154,351","","","$","191,723","","","124","%"],["Interest expense","535,895","","","501,111","","","34,784","","","7","%"],["Insurance claims incurred, net of reinsurance","298,109","","","139,561","","","158,548","","","114","%"],["Payroll and bonuses","288,163","","","181,023","","","107,140","","","59","%"],["Professional services","28,924","","","34,238","","","(5,314)","","","(16)","%"],["Stock compensation expense","59,592","","","22,719","","","36,873","","","162","%"],["Advertising and sponsorship expense","124,627","","","38,327","","","86,300","","","225","%"],["General and administrative expense","162,474","","","120,888","","","41,586","","","34","%"],["Allowance for expected credit losses","62,445","","","21,225","","","41,220","","","194","%"],["Cost of sales","31,278","","","17,538","","","13,740","","","78","%"],["Total expense","$","1,937,581","","","$","1,230,981","","","$","706,600","","","57","%"]] [[/GREPCENT_TABLE]] The following table sets out the components of our expense as a percentage of total expense for the fiscal years presented. [[GREPCENT_TABLE]] [["","Year ended March 31,"],["","2025","","2024"],["Fee and commission expense","18","%","","12","%"],["Interest expense","28","%","","41","%"],["Insurance claims incurred, net of reinsurance","15","%","","11","%"],["Payroll and bonuses","15","%","","15","%"],["Professional services","2","%","","3","%"],["Stock compensation expense","3","%","","2","%"],["Advertising and sponsorship expense","6","%","","3","%"],["General and administrative expense","8","%","","10","%"],["Allowance for expected credit losses","3","%","","2","%"],["Cost of sales","2","%","","1","%"],["Total expense","100","%","","100","%"]] [[/GREPCENT_TABLE]] 73 Table of Contents Fee and commission expense The following table sets forth information regarding our fee and commission expense for the periods presented. [[GREPCENT_TABLE]] [["","Year ended March 31,"],["","2025","","2024","","Amount Change","","%Change"],["Agency fee expense","$","284,055","","","$","103,020","","","181,035","","","176","%"],["Brokerage services","19,846","","16,587","","","3,259","","","20","%"],["Bank services","20,064","","18,121","","","1,943","","","11","%"],["Exchange services","1,776","","3,302","","","(1,526)","","","(46)","%"],["Central Depository services","707","","446","","","261","","","59","%"],["Other commission expenses","19,626","","12,875","","","6,751","","","52","%"],["Total fee and commission expense","$","346,074","","","$","154,351","","","$","191,723","","","124","%"]] [[/GREPCENT_TABLE]] The following table sets out the components of our fee and commission expense as a percentage of total fee and commission expense, net for the periods presented. [[GREPCENT_TABLE]] [["","","Year ended March 31,"],["","","2025","","2024"],["","","(as a % of total fee and commission expense)"],["Agency fee expense","","82","%","","67","%"],["Brokerage services","","6","%","","11","%"],["Bank services","","5","%","","12","%"],["Exchange services","","1","%","","2","%"],["Central Depository services","","\u2014","%","","\u2014","%"],["Other commission expenses","","6","%","","8","%"],["Total fee and commission expense","","100","%","","100","%"]] [[/GREPCENT_TABLE]] Fee and commission expense increased by $191.7 million, or 124% in fiscal 2025, as compared to fiscal 2024. The increase was mainly attributable to an increase of agency fee expense of $181.0 million in fiscal 2025 as compared to fiscal 2024. The increase was mainly due to an increase of insurance product sales by Freedom Life, which are outsourced to outside agents. Additionally, there was an increase by $3.3 million in brokerage service expense, which was driven by higher customer activity. The increase in other commission expenses is attributable to increased commissions associated with Paybox that is consistent with the growth of its business activities between the two periods. Interest expense During the fiscal year ended March 31, 2025, total interest expense remained relatively flat compared to the same period in 2024. However, its composition changed due to shifts in funding sources and interest rate dynamics. There was a decrease in interest expense on securities repurchase agreement obligations, driven by a 8% decline in the average balance, from $2.6 billion during the fiscal year ended March 31, 2024 to $2.4 billion during the fiscal year ended March 31, 2025. Additionally, the average interest rate applied to these obligations decreased from 16% to 14%, further contributing to the reduction in costs. This decline primarily reflects the Company's decision to reduce exposure to market risk by liquidating a portion of the trading portfolio. Interest expense related to customer liabilities increased as the average balance of customer deposits and brokerage account liabilities grew 8% year-over-year, rising from $1.1 billion to $1.2 billion. This increase was caused by a higher average interest rate, which rose from 7% to 10%, reflecting both market-driven adjustments and an expanded customer deposit base. Additionally, interest expense on debt securities issued increased, primarily due to a rise in the average balance, from $131.0 million to $356.7 million. The average interest rate on these instruments also increased, from 8% to 10%, reflecting a shift toward long-term financing at higher prevailing market rates. This increase in debt securities expense aligns with our broader 74 Table of Contents funding strategy to support business expansion and strengthen liquidity reserves. During fiscal 2025, we issued an additional $200 million of debt securities, which contributed to the increase in average balance and interest expense. The following table provides a summary of the monthly average balances and average interest rates for the major categories of interest-bearing liabilities for the fiscal years ended March 31, 2025, and 2024. [[GREPCENT_TABLE]] [["","Year ended March 31,"],["","2025","","2024"],["","Average balance"],["Interest-bearing liabilities"],["Securities repurchase agreement obligations","$","2,370,620","","","$","2,590,599"],["Customer liabilities 1","1,157,574","","","1,070,098"],["Margin lending payable","647,966","","","218,730"],["Debt securities issued","356,653","","","131,047"],["","Average rates"],["Securities repurchase agreement obligations","14.38","%","","15.54","%"],["Customer liabilities 1","9.64","%","","6.61","%"],["Margin lending payable","7.06","%","","7.77","%"],["Debt securities issued","10.13","%","","7.90","%"],["","Interest expense"],["Interest expense on securities repurchase agreement obligations","$","340,863","","","$","402,665"],["Interest expense on customer accounts and deposits","111,541","","","70,778"],["Interest expense on margin lending payable","45,748","","","16,990"],["Interest expense on debt securities issued","36,130","","","10,356"],["Other interest expense","1,613","","","322"],["Total interest expense","$","535,895","","","$","501,111"]] [[/GREPCENT_TABLE]] (1) Average balance, average rates, and interest expense relates to interest-bearing deposits. The following table sets forth the effects of changing rates and volumes on interest. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. Changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on changes due to rate and the changes due to volume. 75 Table of Contents [[GREPCENT_TABLE]] [["","Year ended March 31,"],["","2025 vs 2024"],["","Increase/ (decrease) due to change in"],["","Rate","","Volume","","Net"],["Interest expense"],["Interest expense on securities repurchase agreement obligations","$","(28,971)","","","$","(32,831)","","","$","(61,802)"],["Interest expense on customer accounts and deposits","34,576","","","6,187","","","40,763"],["Interest expense on margin lending payable","(1,399)","","","30,157","","","28,758"],["Interest expense on debt securities issued","3,627","","","22,147","","","25,774"],["Other interest expense","\u2014","","","\u2014","","","1,291"],["Total interest expense","$","7,833","","","$","25,660","","","$","34,784"]] [[/GREPCENT_TABLE]] Insurance claims incurred, net of reinsurance In fiscal 2025, we had a 158.5 million, or 114%, increase in insurance claims incurred, net of reinsurance, as compared to $139.6 million in fiscal 2024. The increase was primarily attributable to a $103.2 million, or 122%, rise in expenses for insurance reserves, mainly driven by growth in pension annuity and accident insurance products. This reflects the overall expansion of the insurance portfolio and higher premium inflows during the period. In addition, other insurance expense increased by $37.3 million, or 111%, primarily due to higher redemptions under pension annuity contracts and terminations under accident insurance policies. Claims paid also grew by $19.8 million, or 90%, year over year. The increases were partially offset by a $1.8 million, or 183%, decrease in claims paid, reinsurers share between the two fiscal years. Payroll and bonuses In fiscal 2025, we had payroll and bonuses expense of $288.2 million, representing an increase of $107.1 million or 59% compared to $181.0 million in fiscal 2024. The increase is primarily attributable to the expansion of our workforce through hiring, establishment of new subsidiaries and acquisitions. The increase was also due to increased salary and bonus amounts between the two periods. Professional services For fiscal 2025, our professional services expense was $28.9 million, representing a decrease of $5.3 million or 16% compared to $34.2 million for fiscal 2024. The decrease was primarily attributable to a decrease in expenses for auditing services rendered by our external auditors due to timing differences in the provision of such services. Stock compensation expense In fiscal 2025, our stock compensation expense was $59.6 million, representing an increase of $36.9 million or 162% compared to stock compensation expense of $22.7 million for fiscal 2024. The increase is attributable to new stock grants, the majority of which vested on the date of issuance during fiscal 2025 as well as the partial amortization of stock grants awarded during fiscal 2024. Advertising and sponsorship expense Advertising and sponsorship expense for fiscal 2025, was $124.6 million, representing an increase of $86.3 million or 225% compared to $38.3 million for fiscal 2024. Our sponsorship expense was $51 million, which consists of several sponsorship contributions through our subsidiaries during the fiscal year 2025. The most significant contributions were made to the Kazakhstan Chess Federation, Kazakhstan Competitive Programming Federation, Junior Football League of Kazakhstan, Tennis Federation of the Olympic Committee of Kazakhstan and a chess tournament in the USA. The increase is also primarily attributable to an increase in advertising expenses by Freedom EU of $26.2 million due to marketing campaigns that were initiated during fiscal 2024 and continued in fiscal 2025. This increase consisted of an increase in agencies and media partners of advertising expense, influencer and affiliates advertising expense, marketing and sponsorship expense. There was also an increase of $6.3 million attributable to Freedom Advertising, an advertising company, due to marketing expenditures to third party contractors, especially the advertising and promotion services from Wunder Digital. There was also an increase of $2.8 million from FRHC due to the company's focus on the brand visibility and enhanced marketing efforts. 76 Table of Contents General and administrative expense General and administrative expense for the fiscal year 2025, were $162.5 million, representing an increase of $41.6 million or 34% compared to $120.9 million for the fiscal 2024. The main factors contributing to the increase were increases in other operating expenses, software support, rent expenses and taxes other than income tax. Other operating expenses increased by $8.6 million, primarily due to increased banking and overhead costs from Freedom Bank KZ, as well as the overall growth of our operations and the addition of new subsidiaries. Software support expenses increased by $5.2 million, mainly due to the support of licensed and other software systems. Rent expenses increased by $4.6 million, driven by business expansion and additional office and retail space. Taxes, other than income tax, increased by $3.9 million, mainly due to the general growth of the Group, including the addition of new subsidiaries. The expansion of our business operations resulted in higher tax liabilities, reflecting our broader market presence and increased operational scale. Provision for allowance for expected credit losses For fiscal 2025 we recognized allowance for credit losses in the amount of $62.4 million, as compared to provisions for credit losses of $21.2 million for fiscal 2024. The increase between the two periods is primarily attributable to increased provisions for uncollateralized bank customer loans, collateralized bank customer loans, mortgage loans and right of claim for purchased loans which were partially offset by the recovery of car loans. The increase in the provision during the period was primarily attributable to a deterioration in macroeconomic conditions and other factors impacting the estimated probability of default in our loan portfolio, and the incorporation of revised forward-looking information, including the adverse impact of foreign currency depreciation, in our allowance estimation. Other income For the fiscal year ended March 31, 2025, we had other income of $17.1 million , an increase of $7.4 million or 76.1% compared to other income of $9.7 million in fiscal 2024. The increase in other income was primarily driven by a $3.0 million gain recognized by Arbuz, reflecting the reversal of previously recorded amortization on a trademark that remains in use, as well as the write-off of vacation reserves, and various other income items. Additionally, other income increased by $1.5 million due to the revaluation of the investment in ITS Ltd. Income tax expense We had net income before income tax of $112.9 million and $435.4 million in fiscal 2025 and 2024, respectively. Our effective tax rate for fiscal 2025 increased to 25.2%, from 13.9% during fiscal 2024 as a result of changes in the composition of the revenues we realized from our operating activities and the tax treatment of those revenues in the various jurisdictions where our subsidiaries operate along with the incremental U.S. tax on GILTI. Due to a $322.4 million decrease in our net income before income tax compared to fiscal 2024, combined with a higher effective tax rate, our income tax expense decreased by $32.0 million, which contributed to a reduction in net income for fiscal 2025. Net income As a result of the foregoing factors, for fiscal 2025 we had net income of $84.5 million as compared to $375.0 million for fiscal 2024, a decrease of 77%. Foreign currency translation adjustments, net of tax Due to a 12.9% depreciation of the Kazakhstan tenge against the U.S. dollar during the year ended March 31, 2025, we realized a foreign currency translation loss of $104.1 million for the year ended March 31, 2025, as compared to a foreign currency translation gain of $12.1 million for the year ended March 31, 2024. BUSINESS SEGMENT OPERATIONS We report our results of operations through the following four business segments: Brokerage, Banking, Insurance, and Other. These operating segments are based on how our CODM makes decisions about allocating resources and assessing performance. The total revenue, net associated with our segments is summarized in the following table: Table of Contents [[GREPCENT_TABLE]] [["","Year ended March 31,"],["","2025","","2024","","Amount Change","","% Change"],["Brokerage","$","717,349","","","$","621,954","","","$","95,395","","","15","%"],["Insurance","683,026","","","344,601","","","338,425","","","98","%"],["Banking","506,148","","","615,870","","","(109,722)","","","(18)","%"],["Other","144,004","","","83,927","","","60,077","","","72","%"],["Total revenue, net","$","2,050,527","","","$","1,666,352","","","$","384,175","","","23","%"]] [[/GREPCENT_TABLE]] Total revenue, net for fiscal 2025 increased across brokerage, insurance and other segments compared to fiscal 2024. In our segment reporting, we account for all operations within each business segment, including all related subsidiaries and their activities. Below is a discussion of revenue of our segments in fiscal 2025 compared to fiscal 2024. Brokerage Segment •In fiscal 2025, the Brokerage segment experienced a significant increase in total revenue, net, primarily driven by a $89.4 million increase in fee and commission income, reflecting a general increase in brokerage activity between the two periods. Interest income also contributed to the growth, rising by $20.5 million, largely due to increased usage of margin loans for trades by our customers. In addition, in fiscal 2025, we had a $7.9 million net gain on foreign exchange operations and a $2.8 million gain on derivatives, which were offset by a $23.0 million decrease in net gain on trading securities. Insurance Segment •In fiscal 2025, total revenue, net in the Insurance segment increased mainly due to a significant increase for $353.4 million in income from insurance activity, and a $3.9 million increase in net gain on foreign exchange operations due to an appreciation of the U.S. dollar against the Kazakhstan tenge between the two periods. This increase was partially offset by a decrease for $12.3 million of net gain on trading securities, $3.1 million of interest income, $0.3 million of fee and commission income and $3.2 million of other income due to changes in securities portfolio. Banking Segment •In fiscal 2025, total revenue, net in the Banking segment decreased mainly due to the decrease for $153.9 million of net gain on trading securities due to the price decrease on the majority of the governmental securities, decrease for $69.4 million net gain on foreign exchange operations due to an appreciation of the U.S. dollar against the Kazakhstan tenge between the two periods, and a decrease for $11.5 million of fee and commission income in this segment. These decreases were partially offset by the increase of $107.1 million of net gain on derivative and increase of $19.6 million of interest income in this segment. Other Segment •In fiscal 2025, total revenue, net in the Other segment increased mainly due to an increase of $37.1 million in net gain on foreign exchange operations mainly from FRHC, which was attributable to an appreciation of the U.S. dollar against the Kazakhstan tenge between the two periods. Additionally, other income and sales of goods and services increased by $14.2 million and $18.5 million, respectively, reflecting our expansion into the telecommunications sector through the acquisition of SilkNetCom and increased customer activity and order volume at Arbuz. These increases were partially offset by a $12.8 million decrease in fee and commission income attributable to a decrease in Paybox's transaction volumes due to the cessation of operation of a counterparty that contributed significantly in the past to its transaction volume. The total expenses associated with our segments are summarized in the following table: 78 Table of Contents [[GREPCENT_TABLE]] [["","","Year ended March 31,"],["","","2025","","2024","","Amount Change","","% Change"],["Brokerage","","$","340,721","","","$","273,040","","","$","67,681","","","25","%"],["Insurance","","660,914","","","302,128","","","358,786","","","119","%"],["Banking","","600,892","","","489,140","","","111,752","","","23","%"],["Other","","335,054","","","166,673","","","168,381","","","101","%"],["Total expense, net","","$","1,937,581","","","$","1,230,981","","","$","706,600","","","57","%"]] [[/GREPCENT_TABLE]] For fiscal 2025, total expenses, net increased across each of our business segments compared to fiscal 2024. Below is a discussion of changes in expenses for each of our segments in fiscal 2025 versus 2024: Brokerage Segment •In fiscal 2025, the total expenses, net, increased in our Brokerage segment, primarily driven by higher payroll and bonus expenses, which increased by $27.3 million, reflecting our continued efforts to attract and retain top talent. Advertising and sponsorship expenses also increased by $25.6 million, as we intensified marketing activities to expand our customer base. Additionally, stock-based compensation increased by $16.2 million, which was driven by a higher volume of equity awards granted to employees and management, and fee and commission expenses increased by $4.5 million, due to higher customer activity during the period, further contributing to the overall increase. These rises in expenses were partially offset by a decrease in interest expense, mainly related to lower interest paid on securities repurchase agreements, as well as a reduction in general and administrative expenses. Insurance Segment •In fiscal 2025, total expenses, net in our Insurance segment increased mainly due to a $181.2 million increase in fee and commission expense from agency fee, $158.5 million increase in insurance claims incurred, net of reinsurance due to the increase in insurance portfolio of compulsory motor third-party liability (MTPL) class, $13.6 million increase in payroll and bonuses expense due to the increase in headcount and bonuses paid, $12.3 million increase in general and administrative expense due to the charity, new branch offices and $8.0 million increase in stock compensation expense due to new stock grants, the majority of which vested on the date of issuance as well as the partial amortization of stock grants. These increases were partially offset by the effects of decrease in interest expense by $17.6 million on trading securities and repurchase agreement obligations as a result of changes in securities portfolio. Banking Segment •In fiscal 2025, total expenses, net in our Banking segment increased primarily due to $32.6 million increase in interest expense on customer accounts, deposits and customer liabilities portfolio growth, $38.4 million increase in provision for credit losses which is primarily attributable to increased provisions for uncollateralized bank customer loans, collateralized bank customer loans, mortgage loans and right of claim for purchased loans which were partially offset by the recovery of car loans. The increase in provisions was mainly due to deterioration in assumptions used in calculation of probability of default as well as the change of estimate as a result of currency depreciation. In addition, total expenses, net in our Banking segment increased due to $16.8 million increase in general and administrative expenses, in particular for the class of charity, software support, depreciation and amortization expenses, $13.9 million increase in payroll and bonuses expense, and $6.5 million increase in stock compensation expense due to new stock grants, the majority of which vested on the date of issuance as well as the partial amortization of stock grants, reflecting the general growth of Freedom Bank KZ's operations between the two periods. Other Segment •In fiscal 2025, total expenses, net in our Other segment increased due to increases in general and administrative expenses, payroll and bonuses, interest expense and cost of sales. The increase of $15.8 million in general and administrative expense in the Other segment was attributable to our overall growth and the addition of new subsidiaries. Additionally, our advertising and sponsorship expense increased by $58.2 million due to expanded marketing expenditures to third party contractors at Freedom Advertising and Aviata and several sponsorship contributions made through our subsidiaries during the year ended March 31, 2025. The most significant contributions were made to the Kazakhstan Chess Federation, Junior Football League of Kazakhstan, Tennis Federation of the Olympic Committee of Kazakhstan, and to the organization of a chess tournament in the USA. There was a $52.4 million increase in payroll and bonuses in the Other segment 79 Table of Contents which is mostly attributable to the overall growth of our operations as well as the addition of new subsidiaries. Interest expense in the Other segment increased by $25.0 million, mainly attributable to an increase in interest expense from the debt securities issued by Freedom SPC. Cost of sales increased by $13.7 million due to higher sales volumes, which reflect our expansion into the telecommunications sector through the acquisition of SilkNetCom, as well as increased customer activity and order volume at Arbuz. Fee and commission expense increased by $4.6 million, mostly driven by higher bank commission expenses related to an increase in payment processing operations at certain Paybox subsidiaries. In addition, stock based compensation expenses increased by $6.1 million as a result of the issuance of new stock grants, the majority of which vested on the date of issuance during fiscal 2025 and the partial amortization of stock grants. LIQUIDITY AND CAPITAL RESOURCES During the periods covered in this report our operations were primarily funded through a combination of existing cash on hand, cash generated from operations, returns generated from our proprietary trading and proceeds from the issuance of bonds and other borrowings. We regularly monitor and manage our leverage and liquidity risk through various committees and processes we have established to maintain compliance with net capital and capital adequacy requirements imposed on securities brokerages, insurance companies and banks in jurisdictions where we do business. We assess our leverage and liquidity risk based on considerations and assumptions of market factors, as well as other factors, including the amount of available liquid capital (i.e., the amount of cash and cash equivalents not invested in our operating business). While we have in place the risk management monitoring and processes, a significant portion of our trading securities and cash and cash equivalents are subject to collateralization agreements. This significantly enhances our risk of loss in the event financial markets move against our positions which can negatively impact our liquidity, capitalization and business. Certain market conditions can impact the liquidity of our assets, potentially requiring us to hold positions longer than anticipated. Our liquidity, capitalization, projected return on investment and results of operations can be significantly impacted by market events over which we have no control, and which can result in disruptions to our investment strategy for our assets. We maintain a majority of our tangible assets in cash and securities that are readily convertible to cash, including governmental and quasi-governmental debt and highly liquid corporate equities and debt. Our financial instruments and other asset positions are stated at fair value and should generally be readily marketable in most market conditions. The following sets out certain information regarding our assets as of the dates presented: [[GREPCENT_TABLE]] [["","As of March 31,"],["","2025","","2024"],["Cash and cash equivalents(1)","$","837,302","","","$","545,084"],["Restricted cash(2)","$","807,468","","","$","462,637"],["Trading securities","$","2,275,286","","","$","3,688,620"],["Total assets","$","9,914,017","","","$","8,301,930"],["Net liquid assets(3)","$","5,013,290","","","$","3,137,383"]] [[/GREPCENT_TABLE]] (1)Of the $837.3 million in cash and cash equivalents we held at March 31, 2025, $81.1 million, or approximately 10%, were subject to reverse repurchase agreements. By comparison, at March 31, 2024, we had cash and cash equivalents of $545.1 million, of which $135.0 million, or 25%, were subject to reverse repurchase agreements. The amount of cash and cash equivalents we hold is subject to minimum levels set by regulatory bodies, including adequate capital and liquidity levels for each entity. (2)Principally consists of cash of our brokerage customers which are segregated in a special custody accounts for the exclusive benefit of our brokerage customers. (3)Consists of cash and cash equivalents, trading securities, and margin lending, brokerage and other receivables, net of securities repurchase agreement obligations. Includes liquid assets held after deducting securities repurchase agreement obligations. As at March 31, 2025 and 2024, we had total liabilities of $8.7 billion and $7.1 billion, respectively, including customer liabilities of $4.3 billion and $2.3 billion, respectively. We finance our assets primarily from revenue-generating activities and short-term and long-term financing arrangements. 80 Table of Contents Cash Flows The following table presents information from our statement of cash flows for the periods indicated. Our cash and cash equivalents include restricted cash, which principally consists of cash of our brokerage customers which are segregated in special custody accounts for the exclusive benefit of our brokerage customers. [[GREPCENT_TABLE]] [["","Year ended March 31,"],["","2025","","2024"],["Net cash from/(used in) operating activities","$","1,681,058","","","$","(1,064,362)"],["Net cash used in investing activities","(905,472)","","","(638,222)"],["Net cash (used in)/from financing activities","(1,578)","","","1,674,572"],["Effect of changes in foreign exchange rates on cash and cash equivalents and restricted cash","(137,038)","","","12,194"],["Effect of expected credit losses on cash and cash equivalents and restricted cash","79","","","(3,406)"],["NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH","$","637,049","","","$","(19,224)"]] [[/GREPCENT_TABLE]] Net Cash From Operating Activities Net cash used in operating activities during fiscal 2025 was comprised of net cash from operating activities and net income adjusted for non-cash movements (changes in deferred taxes, unrealized gain on trading securities, net change in accrued interest, change in insurance reserves, and allowance for credit losses). Net cash used in operating activities resulted primarily from changes in operating assets and liabilities. Such changes included those set out in the following table. [[GREPCENT_TABLE]] [["","Year ended March 31,"],["","2025","","2024"],["Decreases/(Increases) in trading securities (1)","$","827,157","","","$","(1,048,205)"],["Increases in brokerage customer liabilities (2)","$","1,516,767","","","$","112,258"],["Increases in margin lending, brokerage and other receivables (3)","$","(1,743,595)","","","$","(1,272,652)"],["Increases in margin lending and trade payables (4)","$","474,087","","","$","734,605"]] [[/GREPCENT_TABLE]] (1)Resulted from an decrease in the amount of securities held in our proprietary account. (2)Resulted from increased funds in brokerage accounts from new and existing customers. (3)Resulted from an increase in volume of margin lending receivables. (4)Resulted from increased volume of margin lending payables. The change from net cash used in operating activities of $1.1 billion in fiscal 2024 to net cash from operating activities of $1.7 billion in fiscal 2025 was primarily attributable to a decrease in trading securities and an increase in brokerage customer liabilities. Net cash flows from operating activities in the fiscal 2025 were primarily driven by an increase in customer liabilities, reflecting the growth in customer accounts within our Freedom Global subsidiary. A decrease in trading securities further contributed to the positive cash flow. These inflows were partially offset by an increase in margin lending, brokerage and other receivables, as the Company has provided more margin lending to its customers, which lead to an increase in related receivable balance. Net Cash Used In Investing Activities During fiscal 2025, net cash used in investing activities was $905.5 million compared to net cash used in investing activities of $638.2 million during fiscal 2024, and net cash used in investing activities of $1.5 billion million during fiscal 2023 ($629.7 million of which relates to discontinued operations). During the fiscal year 2025, cash used in investing activities was used for purchase of available-for-sale securities, net of proceeds, in the amount of $457.7 million and the issuance of loans, net of repayment by customers, in the amount 81 Table of Contents of $435.8 million. During the fiscal 2025, cash used in investing activities increased by 267.3 million compared to fiscal 2024 ,mainly due to the increase in purchase of available-for-sale securities increased by $227.8 million. Net Cash Used In Financing Activities Net cash flows used in financing activities for the fiscal year 2025 was $1.6 million compared to net cash flow from financing activities in amount of $1.7 billion during the fiscal year 2024. This change was primarily attributable to a $2.3 billion change in net repayment/proceeds from securities repurchase agreement obligations. Cash flows used in financing activities during the fiscal year 2025 consisted principally of repayment of securities repurchase agreement obligations in the amount of $1.1 billion, bank customer deposits received in the amount of $829.1 million due to the growth of banking activity, proceeds from the issuance, net of repurchase, of debt securities in the amount of $201.7 million, and mortgage loans sold to JSC Kazakhstan Sustainability Fund as the Program Operator, net of repurchase, under the state mortgage program "7-20-25" in the amount of $26.6 million. Capital Expenditures In alignment with our digital fintech ecosystem strategy, we are expanding our business into the telecommunications market in Kazakhstan through our Freedom Telecom subsidiary. Our expansion will require significant capital expenditures, the specific amount of which is currently uncertain. Total capital expenditures for the development of this business area are currently expected to be required for, among other things, construction of network infrastructure, including a backbone network, obtaining licenses or other rights to provide services where required and acquisitions of smaller companies in the sector. Our plans and budget for Freedom Telecom continue to be regularly reassessed and are subject to revisions, which may be material. We currently plan to finance our capital expenditures for this business area with a combination of own funds and borrowings, including vendor financing, including the proceeds of a $200 million U.S. dollar domestic bond placement on the AIX that we completed on December 19, 2023. In addition, on September 16, 2024, Freedom SPC authorized and issued a series of $200 million bonds, the proceeds of which were also allocated to finance capital expenditures in this business area. For further information, see "Indebtedness - Long-term" below. As a further step in implementing our strategy to build a digital fintech ecosystem, on January 25, 2024, Freedom Telecom established a subsidiary, Freedom Media, in Kazakhstan for the purposes of providing media content to customers in Kazakhstan. Total capital expenditures incurred during the fiscal year 2025 amounted to $9.2 million. We will finance our capital expenditures related to Freedom Media primarily using our own funds. On May 10, 2023, our subsidiary Freedom EU signed a contract for the construction of Elysium Tower, a building in Limassol, Cyprus. The building is planned to be a new office building for our Freedom EU subsidiary. Capital expenditures amounted to approximately $7.5 million in fiscal year 2024, and $2.4 million incurred during the fiscal year 2025. The remaining balance of approximately $3.8 million is expected to be incurred in during the 2025 calendar year. We are financing this construction project primarily using our own funds. Dividends We did not declare or pay a cash dividend on our common stock during fiscal 2025 or fiscal 2024. Any payment of cash dividends on our common stock in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital requirements, financial condition, future prospects, contractual and legal restrictions and other factors deemed relevant by our Board of Directors. We currently intend to retain any future earnings to fund the operation, development and expansion of our business, and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future. Indebtedness Short-term Our short-term financing is primarily obtained through securities repurchase arrangements conducted through stock exchanges. We use repurchase arrangements, among other things, to finance our liquidity positions. As of March 31, 2025, $1.4 billion, or 63% of the trading securities held in our proprietary trading account were subject to securities repurchase obligations compared to $2.8 billion, or 75% as of March 31, 2024. The securities we pledge as collateral under repurchase agreements are liquid trading securities with market quotes and significant trading volume. For additional information regarding our securities rep 82 Table of Contents urchase agreement obligations see Note 12 "Securities Repurchase Agreement Obligations" in the notes to our consolidated financial statements contained in Part II Item 8 of this annual report. Long-term On October 21, 2021, our subsidiary Freedom Finance Special Purpose Company LTD ("Freedom SPC") issued U.S. dollar-denominated bonds due 2026, in an aggregate principal amount of $66 million, which are listed on the AIX. The annual interest rate for such bonds is 5.5%. The bonds are guaranteed by FRHC. On December 19, 2023, Freedom SPC issued U.S. dollar-denominated bonds due 2028, in an aggregate principal amount of $200 million, for the purpose of raising funds to finance the development of the Freedom Telecom business. The bonds are guaranteed by FRHC and are listed on the AIX. For the first and second years, the annual interest rate for such bonds is 12%, and for subsequent years the interest rate will be fixed and set as the sum of the effective federal funds rate as of December 10, 2025 and a margin of 6.5%. On September 16, 2024, Freedom SPC authorized a series of $200 million bonds due September 16, 2026 under the program, with a 10.5% annual interest rate payable quarterly, all of which were placed (i.e., sold) during the three months ended December 31, 2024. As of March 31, 2025, there was an aggregate of $64.8 million and $200.3 million in principal amount of Freedom SPC Bonds due 2026 and Freedom SPC bonds due 2028, respectively, outstanding. The aggregate accrued interest as of March 31, 2025 for both the Freedom SPC bonds due 2026 and the Freedom SPC bonds due 2028 was $3.1 million. On June 21, 2019, SilkNetCom, a Company's subsidiary since September 17, 2024, entered into a KZT denominated loan facility agreement with JSC "Development Bank of Kazakhstan" for up to $26.4 million. The loan is subject to a fixed annual interest rate of 10.0% effective until April 30, 2027, and 15.71% thereafter, with a maturity date of June 21, 2031. As of March 31, 2025, the outstanding aggregate amount under the loan was $13.8 million, including $13.4 million of principal amount and $397 thousand of accrued interest. The purpose of obtaining this loan was to finance the expansion of a broadband internet access in Kazakhstan rural areas. During the fiscal year ended March 31, 2025, Freedom Bank KZ established three Kazakhstan law bond programs: (i) a program of up to 100 billion Kazakhstani tenge, of which 7-year bonds for 50 billion Kazakhstani tenge which have been listed on the KASE, with a floating interest rate to be determined following the first trades, (ii) a program of up to 200 billion Kazakhstani tenge, of which 2-year bonds for 36 billion Kazakhstani tenge have been listed on the KASE with a fixed interest rate determined following the first trades, and (iii) a program of up to $300 million, of which 2-year bonds for $50 million have been listed on the KASE with a fixed interest rate to be determined following the first trades. None of the bonds within the Freedom Bank KZ's bond programs have been placed to investors. Going forward, Freedom Bank KZ may decide to place any or all of these the bonds as needed to support its liquidity. Net Capital and Capital Requirements A number of our subsidiaries (and, in certain instances, the Company as their owner) are required to satisfy minimum net capital and capital adequacy requirements to conduct their brokerage, banking and insurance operations in the jurisdictions in which they operate. This is partially maintained by retaining cash and cash equivalent investments in those subsidiaries or jurisdictions. As a result, such subsidiaries may be restricted in their ability to transfer cash between different jurisdictions and to FRHC. Additionally, transfers of cash between international jurisdictions may have adverse tax consequences that could discourage such transfers. At March 31, 2025, these minimum net capital and capital adequacy requirements for each company ranged from approximately $0.3 million to $175.4 million and fluctuate depending on various factors. At March 31, 2025, the aggregate net capital and capital adequacy requirements of our subsidiaries was approximately $441.1 million. The Company and each of our subsidiaries that is subject to net capital or capital adequacy requirements exceeded the minimum required amount at March 31, 2025. Although we operate with levels of net capital and capital adequacy substantially greater than the minimum established thresholds, in the event we fail to maintain minimum net capital or capital adequacy, we may be subject to fines and penalties, suspension of operations, revocation of licensure and disqualification of our management from working in the industry. Our subsidiaries are also subject to various other rules and regulations, including liquidity and capital adequacy ratios. Our operations that require the intensive use of capital are limited to the extent necessary to meet our regulatory requirements. 83 Table of Contents Over the past several years, we have pursued an aggressive growth strategy both through acquisitions and organic growth efforts. While our active growth strategy has led to revenue growth it also results in increased expenses and greater need for capital resources. Additional growth and expansion may require greater capital resources than we currently possess, which could require us to pursue additional equity or debt financing from outside sources. We cannot assure that such financing will be available to us on acceptable terms, or at all, at the time it is needed. 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. CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Following are the accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results. Allowance for credit losses The Company has recently adopted a new accounting standard, ASC 326 - Current Expected Credit Losses (CECL), effective April 1, 2023. This standard has introduced significant changes to how we estimate and recognize credit losses for our financial assets. Management estimates and recognizes the CECL as an allowance for lifetime expected credit losses for loans issued. This is different compared to the previous practice of recognizing allowances based on probable incurred losses. Under CECL, the allowance for credit losses (ACL) primarily consists of two components: Collective CECL Component: This component is used for estimating expected credit losses for pools of loans that share common risk characteristics. Individual CECL Component: This component is applied to loans that do not share common risk characteristics and require individual assessment. The ACL is a valuation account that is subtracted from the amortized cost of total loans and available-for-sale securities to reflect the net amount expected to be collected. Our methodology for establishing the allowance for loan losses is based on a comprehensive assessment that considers relevant and available information from internal and external sources. This assessment takes into account past events, including historical trends in loan delinquencies and charge-offs, current economic conditions, and reasonable and supportable forecasts. Our processes and accounting policies for the CECL methodology are further described in Note 2 "Summary of Significant Accounting Policies" to the consolidated financial statements included in this annual report on Form 10-K. Goodwill We have accounted for our acquisitions using the acquisition method of accounting. The acquisition method requires us to make significant estimates and assumptions, especially at the acquisition date as we allocate the purchase price to the estimated fair values of acquired tangible and intangible assets and the liabilities assumed. We also use our best estimates to determine the useful lives of the tangible and definite-lived intangible assets, which impact the periods over which depreciation and amortization of those assets are recognized. These best estimates and assumptions are inherently uncertain as they pertain to forward looking views of our businesses, customer behavior, and market conditions. In our acquisitions, we have also recognized goodwill at the amount by which the purchase price paid exceeds the fair value of the net assets acquired. Our ongoing accounting for goodwill and the tangible and intangible assets acquired requires us to make significant estimates and assumptions as we exercise judgement to evaluate these assets for impairment. Our processes and accounting policies for evaluating impairments are further described in Note 2 "Summary of Significant Accounting Policies" to our consolidated financial statements contained in Part II Item 8 of our annual report. As of March 31, 2025, the Company had goodwill of $49.1 million. 84 Table of Contents Income taxes We are subject to income taxes in both the United States and numerous foreign jurisdictions. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations for which the ultimate tax determination is uncertain. As a result, actual future tax consequences relating to uncertain tax positions may be materially different than our determinations or estimates. We recognize deferred tax liabilities and assets based on the difference between the Consolidated Balance Sheet and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. Income taxes are determined in accordance with the laws of the relevant taxing authorities. As part of the process of preparing financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. We account for income taxes using the asset and liability approach. Under this method, deferred income taxes are recognized for tax consequences in future years based on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at each year-end and tax loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates applicable to the differences that are expected to affect taxable income. We periodically evaluate and establish the likelihood of tax assessments based on current and prior years' examinations, and unrecognized tax benefits related to potential losses that may arise from tax audits in accordance with the relevant accounting guidance. Once established, unrecognized tax benefits are adjusted when there is more information available or when an event occurs requiring a change. Legal contingencies We review outstanding legal matters at each reporting date, in order to assess the need for provisions and disclosures in our financial statements. Among the factors considered in making decisions on provisions are the nature of the matter, the legal process and potential legal exposure in the relevant jurisdiction, the progress of the matter (including the progress after the date of the financial statements but before those statements are issued), the opinions or views of our legal advisers, experiences on similar cases and any decision of our management as to how we will respond to the matter.