TON Strategy Q3 2026 Earnings Call Transcript

TON Strategy (NASDAQ:TONX) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

TON Strategy Company reported a decrease in total revenue to $13.1 million, primarily due to lower Gram prices, despite consistent Gram earnings from staking.

The company held approximately 235.1 million Gram, with 99% staked, generating a gross annualized yield of 16%, contributing to an increase in their net treasury position by 4.6 million Gram.

Operating expenses decreased significantly by 39% to $8.4 million, driven by reduced advisory fees, personnel costs, and professional services expenses.

The company reported a net loss from continuing operations before taxes of $22.9 million primarily due to a $27.2 million net loss from changes in the fair value of Gram holdings.

TON Strategy highlighted strategic initiatives including the rollout of Telegram’s native Gram wallet and network upgrades that enhance transaction capacity and integration with Telegram.

Management emphasized disciplined capital allocation, focusing on maintaining U.S. dollar liquidity while maximizing Gram exposure through strategic treasury management.

Future outlook includes monitoring the adoption and usage metrics of Telegram’s Gram wallet to evaluate TON adoption and Gram demand.

Full Transcript

OPERATOR

Good morning and welcome to TON Strategy Company’s third quarter 2026 earnings conference call. Joining us today are Chief Executive Officer Kevin Wilson and Chief Financial Officer and Chief Operating Officer Sarah Olsen. Earlier today, the Company issued a press release reporting financial results for the quarter ended September 30, 2026. The release is available through the Investors section of the Company’s website. Following prepared remarks, management will address selected questions submitted in advance by shareholders.

Before we begin, I would like to remind everyone that today’s call includes forward-looking statements within the meaning of the federal securities laws. These statements are based on management’s current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to the Company’s filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2025, for discussion of these risks and uncertainties.

The Company undertakes no obligation to update any forward-looking statements except as required by law. Today’s remarks may also refer to non-GAAP financial measures and supplemental measures that are not defined under GAAP, and the required reconciliations and explanations of these measures are included in the earnings release. I will now turn the call over to Kevin Wilson. Please go ahead.

Kevin Wilson (Chief Executive Officer)

Thank you, operator, and good morning, everyone. On our Q2 call in August, we outlined TON Strategy’s next phase in three: Own, Advance and Compound. Those three pillars define both our long-term strategy and the priorities guiding our day-to-day decisions. Own refers to our significant Gram treasury and our role in supporting TON security and operation through staking and validator participation. Advance represents our opportunity to support the infrastructure, accessibility and economic development of the TON ecosystem and the Gram market, and Compound describes our objective of building long-term per-share value for all shareholders through productive treasury management and disciplined capital allocation.

During the third quarter, we continued to make progress across all three areas. Our treasury earned approximately the same number of Gram as in Q2, continuing to benefit from elevated network staking economics introduced by TON’s April network upgrades. We also made progress toward more efficient operations as we continued simplifying the business following the wind-down of inherited VERB operations. On the network side, we participated in validator governance decisions that established important new infrastructure for Telegram’s native Gram wallet and increased TON’s capacity to support transaction activity.

Telegram also began a limited rollout of its native Gram wallet during the third quarter, an important step toward bringing Gram transfers directly into the Telegram experience. I’ll begin today’s discussion with an overview of our treasury performance. Sarah will then review the financial results in greater detail, and I’ll return to discuss our capital allocation approach and developments across TON and Telegram. Turning to our treasury performance, at September 30, we held approximately 235.1 million Gram, including approximately 232.9 million, or 99% of our Gram holdings, deployed in staking. During the quarter, our treasury earned approximately 9.4 million additional Gram.

Consistent with the prior quarter, our staking operations generated an annualized gross yield of approximately 16% during Q3. As we discussed on our Q2 call, TON’s Catch 2.0 consensus upgrade shortened block production times and increased validator reward issuance. Along with improvements to the TON virtual machine, these network changes have supported substantially higher staking yields than those available earlier this year. As one of the network’s largest staking participants, we continue to benefit from these improvements through additional Gram earned on our holdings.

Our net treasury position increased by approximately 4.6 million during the quarter even after other treasury activity, including sales to support U.S. dollar liquidity. In line with our Compound pillar, staking continues to enable us to earn additional Gram through participation in network validation without requiring additional cash purchase of those tokens. Those rewards can themselves be staked, contributing to future reward generation. The other major operational priority is ensuring that the benefits of our productive treasury are supported by an appropriately sized corporate cost structure.

On our last call, we highlighted the simplification of our business following the transition away from our inherited VERB operations. We continue to focus on operating efficiently, treasury management and financial flexibility as we pursue opportunities to increase long-term value for shareholders. I will now turn it over to Sarah to review our financial results.

Sarah Olsen (Chief Financial Officer)

Thank you, Kevin. Our third quarter results were driven primarily by Gram staking activity and movements in the fair value of our digital asset holdings. Total revenue was $13.1 million compared with $15 million in Q2 2026. Revenue primarily consisted of staking rewards recognized at the fair value of Gram when earned. The sequential decrease of approximately 13% was primarily attributable to lower Gram prices while the number of Gram earned remained consistent with Q2.

Gross profit was $12.4 million, or 95% of revenue, compared with $14.3 million, or approximately 95% of revenue, in Q2 2026. Total operating expenses were $8.4 million compared with $13.8 million in Q2, a decrease of approximately $5.4 million, or 39%. The decrease primarily reflected lower Kingsway-related advisory fees, personnel costs and professional services expenses along with the effect of elevated non-cash expenses recognized in Q2. These improvements were partially offset by higher legal fees associated with ongoing litigation matters. Excluding share-based compensation, general and administrative expenses declined approximately $3.4 million, or 41% sequentially, to $4.9 million, primarily reflecting lower advisory fees and personnel costs.

Operating income from continuing operations was $4.0 million compared with income of approximately $0.5 million in Q2 2026. Lower operating expenses more than offset the change in staking revenue, resulting in approximately $3.5 million of sequential improvement in operating income. Net loss from continuing operations before taxes was $22.9 million compared with Q2 income of approximately $83.5 million in the prior quarter. The third quarter included a $27.2 million net loss from changes in the fair value of the Company’s Gram holdings.

Q2 2026 included an $82.8 million net gain from digital asset fair value changes. As a reminder, these fair value adjustments reflect changes in the reported value of our Gram holdings, not cash expenses. At September 30, our digital assets had a reported fair value of approximately $348.5 million compared with $369.5 million at June 30. We held approximately 235.1 million Gram, of which 119.1 million were classified as restricted and 116 million were unrestricted. During the quarter, approximately 42 million previously restricted Gram became unrestricted. As a reminder, restricted Gram can still be staked and generate rewards, although it cannot be transferred or sold while restrictions are in effect.

At September 30, we had approximately $25.3 million in cash and restricted cash compared with $29 million in cash and restricted cash at June 30. The Company has no outstanding debt, which, along with our cash resources and productive digital asset holdings, supports our financial flexibility. Turning to our staking performance, the chart illustrates the increase in Gram rewards following TON’s April network upgrades and the sustained level of staking production through Q3. Our treasury earned approximately 9.4 million Gram during the third quarter, representing a gross annualized staking yield of approximately 16%. Since beginning staking in August 2025, the Company has earned approximately 23.2 million Gram in total. Over that same period, we’ve recognized approximately $35.1 million in cumulative staking revenue.

As a reminder, staking rewards are determined by network-level protocol mechanics and validator participation. At September 30, we had 55.4 million basic common shares outstanding compared with 56.5 million at June 30. This change represents a net reduction of approximately 1.1 million common shares during the quarter, reflecting share repurchase activity in the quarter, part offset by shares issued in connection with vested equity awards. At September 30, we held approximately 4.24 Gram per common share compared with 3.89 at December 31, 2025, representing a 9% increase.

We continue to evaluate our capital allocation decisions with focus on their potential impact on long-term shareholder value, including the amount of Gram attributable per share. With that, I’ll turn it back to Kevin.

Kevin Wilson (Chief Executive Officer)

Thank you, Sarah. Turning now to capital allocation, which is central to our Compound pillar, our disciplined approach to capital allocation continues to guide our decisions as we balance opportunities to enhance long-term value per share with preserving U.S. dollar liquidity and maintaining a productive Gram treasury during periods of elevated network-level staking rewards. As previously announced, on July 1st we entered into a Rule 10b5-1 trading plan to facilitate repurchases of our common stock over a two-month period under the existing $250 million authorization.

During Q3, we repurchased approximately 1.8 million common shares for an aggregate purchase amount of $5.7 million. Repurchases funded with cash reduce the dollar liquidity available to support our operations and pursue future opportunities. Selling Gram to fund repurchases, meanwhile, preserves cash but reduces the productive treasury that continues to benefit from elevated staking rewards. We also carefully consider the liquidity characteristics of the Gram market, where selling could involve price slippage and transaction costs that affect the overall economics of a repurchase.

We also consider the importance of maintaining sufficient trading liquidity in TONX shares to attract and support long-term institutional ownership. The way I would describe our approach is that we’re evaluating the overall economics of a repurchase beyond just the discount to book value. Against these considerations, additional share repurchases continue to be one option available to us under our existing Board authorization. We will continue evaluating opportunities with our Board of Directors to repurchase shares based on market conditions, valuation and alongside the importance of maintaining U.S. dollar liquidity and preserving the productivity of our Gram treasury.

We also see potential value over time in initiatives that can improve institutional access to Gram, deepen trading liquidity and strengthen custody and execution infrastructure. We have not committed capital to these opportunities to date, and any investment would need to demonstrate a compelling economic benefit to our shareholders. Ultimately, our objective is to make capital allocation decisions that we believe will enhance long-term value per share while maintaining financial flexibility to support our treasury strategy.

Turning to TON, we’ve seen important progress this year in network performance, Telegram’s involvement in TON’s development and, most recently, the introduction of Telegram’s native Gram wallet. The foundation of our investment thesis rests on TON’s ability to support fast, inexpensive transactions at consumer scale, combined with Telegram’s distribution to more than 1 billion users—a combination that creates a direct path for bringing digital asset ownership and consumer payments into a global platform already used around the world.

In April, Telegram founder Pavel Durov introduced a seven-step initiative to accelerate TON’s development and strengthen its integration with Telegram. Four steps have been publicly announced to date: the implementation of Catching 2.0, which substantially accelerated transaction processing; a sixfold reduction in network transaction fees; Telegram’s increased leadership and participation in network validation; and the restoration of Gram as the native currency’s original name.

Telegram’s more active role is significant because it brings network development into closer alignment with the products and services being introduced to its users. The increased alignment was evident during Q3 when validators, including TON Strategy, approved two network upgrades supporting Telegram’s native Gram wallet and improvements in transaction capacity. Config 123 introduced a shared smart contract design that allows Telegram’s native wallets to receive updates through validator-approved network upgrades without requiring users to manually transfer assets to new addresses. Separately, Config 30 was designed to increase network throughput by up to 30%, improving capacity to support more transaction activity on the network.

Taken together, the upgrades position the network to better support consumer applications and improve the wallet experience. One of the most important developments came near the end of Q3 when Telegram began rolling out its native Gram wallet. To put that development in context, Telegram users now have access to two distinct but complementary wallet experiences. The first is Walt, formerly known as Wallet in Telegram. Walt remains available as a separately operated service integrated with Telegram, providing access to multiple digital assets and a broader range of crypto services.

In Q3, Telegram introduced Money, the native self-custodial Gram wallet. Unlike Walt, Money is built directly into the Telegram application and can be accessed through Telegram settings for users who have been granted access during the rollout. As the rollout continues, users will not need to open separate wallet services to begin interacting with Gram. Users can send Gram to a Telegram contact without entering a blockchain address, even if the recipient has not yet activated their wallet.

The recipient can then activate their wallet to access those funds. Telegram also sponsors the network fees for up to five eligible transfers each day, eliminating the need for users to manage transaction fees for those transfers. Money also supports connections to compatible TON applications through TON Connect, allowing users to interact with apps using their wallet while maintaining control of their assets. The significance of Money is that it brings Gram closer to the way people already use Telegram. Users can send Gram directly to a Telegram contact without entering a blockchain address or opening a separate app. We believe the native wallet rollout helps bring TON closer to its original distribution advantage thesis. The new wallet also builds on existing integrations of Gram and TON within Telegram’s digital economy. Advertisers purchase sponsored placements in Telegram channels using Gram, while eligible channel owners can receive ad revenue in Gram.

Creators and developers can withdraw eligible Telegram Stars earnings in Gram, and Telegram users buy and trade collectibles, gifts and usernames through services such as Fragment. Expanded native wallet access could make it easier for Telegram users to transfer Gram and interact with applications built on TON, creating opportunities for TON-within-Telegram integrations to become even more accessible and for additional consumer use cases to develop.

We’re interested in seeing how easier access translates into more recurring network activity and greater utility and demand for Gram. For TON Strategy, the progress we’re seeing strengthens our conviction in the long-term potential of Gram. As Telegram makes the tokens easier to access and use, we’ll be watching how that translates into increased transaction activity, wider usage of TON and recurring demand for Gram. I want to emphasize that our focus is on the factors that we can directly influence—managing a productive treasury, operating the Company efficiently, exercising our large validator position to support TON governance decisions and allocating capital with discipline.

What I think we’ve demonstrated this quarter is continued progress in managing the treasury and business alongside developments across TON and Telegram that we believe strengthen the long-term opportunity. Developments across TON and Telegram are beginning to make the long-term potential of Gram more tangible, and we believe TON Strategy is well positioned to participate as the ecosystem continues to progress. Thank you for joining us today and for your continued interest in TON Strategy.

We’ll now turn to your questions.

OPERATOR

Thank you. We will now begin the question and answer portion of the call. Today’s questions have been compiled in advance and will be moderated by Alec Wilson, Head of Investor Relations of TON Strategy Company. Alec, please proceed.

Alec Wilson (Head of Investor Relations)

Thank you. Our first question is for Sarah. With the wind down of the legacy VERB operation substantially complete, what expenses do you expect will remain associated with the discontinued business?

Sarah Olsen (Chief Financial Officer)

Hey Alec. Thanks. So we’ve substantially wound down all of the legacy VERB operations. You know, I think barring any unforeseen expenses, we expect opex with discontinued ops to be no more than $150,000 for 2027. So we view this as a pretty de minimis cost for the business.

Alec Wilson (Head of Investor Relations)

Awesome. Thank you. Next one for you, Kevin. How should investors think about the incremental value of owning TONX versus holding and staking Gram directly?

Kevin Wilson (Chief Executive Officer)

Sure, Alec, thanks. That’s a great question. So TONX gives investors exposure to Gram through a publicly traded regulated equity security without the operational complexities of wallets, custody or direct staking. We actively manage the treasury, the staking operations, liquidity and capital allocation to seek attractive risk-adjusted returns. And our objective here is to increase the amount of Gram held over time through staking rewards and disciplined capital allocation.

We do see opportunities over time to develop additional revenue streams around validation, staking infrastructure and other types of services supporting the TON ecosystem, which we believe can create potential value beyond direct token ownership. When TONX trades below its underlying treasury asset value, as is the case at present, investors can acquire indirect Gram exposure at a discount. That creates an additional source of potential upside if the discount narrows.

Alec Wilson (Head of Investor Relations)

Great. Thanks, Kevin. Sarah, we’ve got another one for you. How does management evaluate the appropriate level of dollar liquidity to support expenses without compromising the longer-term Gram accumulation strategy?

Sarah Olsen (Chief Financial Officer)

Yeah, so we try to target about 12 months of U.S. dollar liquidity, and when I say liquidity what I mean is our opex, our COGS and any contra revenue obligations. And we think this level supports operations but also mitigate certain risks. That said, we try not to hold too much cash. So our objective is to strike the right balance between financial flexibility and then maximizing our Gram exposure.

Alec Wilson (Head of Investor Relations)

Great, thanks. And Kevin, maybe we’ll do one more for you around Telegram. So with Telegram beginning the rollout of the native Gram wallet, what milestones should investors be watching to evaluate progress in TON adoption and demand for Gram?

Kevin Wilson (Chief Executive Officer)

Sure. So I think the first milestone is the pace of Gram wallet adoption within Telegram, particularly the number of activated wallets and the conversion of those Telegram users into active blockchain participants. So beyond wallet creation, we’re focused on recurring usage metrics like daily and monthly active wallets, transactions per user and retention rates. Sustained engagement will be more meaningful than one-time wallet activations. We also view growth in USDT transfers, payment volumes and Telegram-native commerce as particularly important indicators of real economic activity taking place on TON.

And we will also be watching the number of applications which are incorporating wallet functionality, particularly around things like payments, digital commerce, subscriptions and other types of services that create recurring blockchain transactions. So ultimately the most important measure here is whether increased adoption translates into sustained network activity, fee generation and incremental demand for Gram. We want to see genuine economic utility more than simply growth in wallet numbers.

Alec Wilson (Head of Investor Relations)

Awesome. That concludes our Q&A session for today’s call. Turn it back to the operator.

OPERATOR

Thank you. This concludes TON Strategy Company’s third quarter 2026 earnings call. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.