Hyperion DeFi, Inc.

Greetings, and welcome to the Hyperion DeFi fourth quarter and full year 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Jason Assad, Director of Investor Relations. Thank you. You may begin.

Good morning and welcome to Hyperion DeFi's 2025 Fourth Quarter and Full Year Earnings Call. Joining me today are CEO Hun-Soo Jung and CFO David Knox. Before we get started, please note that our remarks today may include forward-looking statements. These statements are subject to risk and uncertainties and actual results may differ materially. During this call, we may use words like anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions, which indicate forward-looking statements. For a more comprehensive discussion of these and other risks, please refer to our filings with the SEC, available on SEC.gov and in the IR section of our website at HyperionDeFi.com. We also reference certain non-GAAP financial measures today. Please refer to our earnings release and earnings supplement on our website for a full reconciliation of these non-GAAP measures to the most comparable GAAP measures. We'll start this morning's call with prepared remarks from Hun Su and David, followed by Q&A. I'll now turn the call over to our CEO, Hun Su Jung.

Thank you, Jason, and good morning, everyone. Welcome to Hyperion DeFi's fourth quarter and full year 2025 earnings call. Our second full quarterly earnings call since completing our strategic transformation as the first U.S. publicly listed decentralized finance company building on the hyperliquid blockchain. In our first earnings call as Hyperion DeFi, we stated that we would set ourselves apart from other digital asset treasury companies with our comprehensive ecosystem engagement strategy. At the time, it may have been difficult for investors to understand the concept of DeFi, let alone the idea of a public company using these strategies to generate revenue. The fact of the matter is, a public company can successfully participate in DeFi, especially in the right blockchain ecosystem, using appropriate, meticulously designed on-chain architecture. We have worked with key protocols to develop first-of-its-kind infrastructure native to Hyperliquid that have the potential to create long-term recurring value to Hyperion, our partners, and for our shareholders. We have executed on every strategy detailed in our previous report and are immensely proud to showcase the long-term possibilities of our unique strategies in today's call. It starts with what we view to be the most important digital asset, Hype, the native token of the Hyperliquid blockchain. In these market conditions, proper asset selection is paramount. We've seen the impact it can have when looking at the relative performance of numerous companies in the DAT sector. However, our vision always went far beyond just buying the right asset. It is essential to be able to effectively deploy the assets to directly contribute to the growth of the underlying blockchain ecosystem. This is our DeFi flywheel in demonstrating how effectively we can compound returns on hype beyond just staking. DeFi monetization is one of our four strategies, which works by compounding returns on our stake hype by effectively restaking hype to unique proprietary strategies. In Q3, our hype asset use service, or house, was a concept just starting to gain traction. In Q4, this business line grew substantially, especially with the mainnet launch of HIP3 in October 2025, which allowed for the creation of non-crypto asset exchanges on hyperliquids. I want to take a moment to acknowledge the incredible growth and global adoption that Hyperliquid, and specifically HIP3, have achieved over the past few months. HIP3 enabled equities, FX, metals like gold and silver, key commodities such as oil, all to trade permissionlessly 24-7 on Hyperliquid, opening up a universe of new tradable assets to users globally. The impact has been tremendous, to say the least. In late January of this year, hyperliquid captured almost 2% of total global primary silver trading volume, which comes out to around $2 to $3 billion of volume on its HIP3 markets. Keep in mind that these markets have only been in operation for about six months, and silver markets specifically had only been in operation for about one month before seeing such rapid utilization. More recently, with the rising conflict in Iran over the weekend of March 6th, we saw price discovery on oil happen for the first time on a decentralized exchange, while traditional venues such as ICE and CME were closed. Just last week, S&P Dow Jones Indices licensed its flagship index to enable the first official S&P 500 perpetual contract to be available exclusively on hyperliquid. This is an incredible institutional cosign and the first of many products from traditional finance to move over to decentralized rails, specifically hyperliquid. Since the beginning, we have continued to emphasize Hyperliquid's critical role in the future of on-chain financial services, and we are seeing this happen now in real time. Market moving events are accelerating, and markets themselves must now catch up to become available 24-7. Currently, this is only possible on Hyperliquid. Within this trend, Hyperion DeFi was the first and only public company to deploy one of these HIP3 markets on Hyperliquid in November 2025 in partnership with Felix Protocol. Our priority has always been on positioning and agility, having a view of how the digital asset space is evolving and preparing to capture value from that evolution. The Felix Exchange demonstrates the value of this focus in having the required infrastructure available. Gold and silver markets were listed in mid-December, just before the massive market attention to metals began a few weeks later. Oil markets were listed in January 9th, months before the conflict in Iran. To date, the Felix exchange has crossed over $2.8 billion in trading volume, with over 14,000 unique traders on a product launched less than six months ago. More importantly, real dollar-denominated fee revenues were earned from trading volumes on this exchange, a share of which returned to Hyperion as revenue. This is a revenue stream agnostic to the price of hype and agnostic to the performance of crypto markets. And of course, all those revenues went to the purchase of additional hype a core component of our DeFi flywheel. As our efforts on-chain became further socialized, we saw demand for House accelerate. We are proud to announce that we have launched House with Silhouette Exchange, a privacy-focused front-end built on top of Hyperliquid. Due to the nature of on-chain transactions being public, traders often seek ways to place trades that are shielded from public view. Silhouette provides the solution, and we believe their products will see significant demand from traders. Through this deal, we will have the opportunity to earn additional revenues based on trading activity conducted via Silhouette, in addition to future ecosystem rewards. In this quarter, we also saw the benefit of our first ecosystem rewards, receiving around 0.2% of KNTQ, the native token of the Kinetic protocol. Kinetic offers the leading liquid staking protocol on Hyper-EVM and enables us to access hype liquid staking tokens. providing us with the flexibility to pursue volatility strategies on hype to generate additional income. Through the utilization of their protocol, Hyperion received Kinetic points, which converted into KNTQ tokens during Kinetic's token genesis event. KNTQ grants governance rights to the Kinetic protocol and benefits from continued buybacks of KNTQ with revenues generated by Kinetic's various products, similar to Hyperliquid's assistance fund model. Kinetic's products include their flagship liquid staking platform, which currently has almost $1 billion in hype deposits, as well as markets by Kinetic, another HIP3 market which also crossed over $2 billion in trading volume just four months after launch. Kinetic currently has a second ongoing points program in which we are participating. We have strong conviction in the long-term value of additional alpha generated from supporting the growth and adoption of key applications built on the Hyper-EVM. These opportunities are not forever. In the same way that there was a limited window to participate in the airdrops of early protocols like Uniswap, Optimism, Arbitrum, and Jupyter, once the opportunity has passed, it may become more challenging to find. Iperion D5's edge is the ability to find, coordinate, and compound these opportunities, and we've continued to demonstrate this ability. Following the success of our ecosystem rewards efforts in the fourth quarter, We've received substantial interest from other builders in Hyperliquid to partner and build institutional DeFi infrastructure. In February 2026, we announced the institutional volatility income vault, developing partnership with Risk Protocol. Risk has recently surpassed over $60 million in total value locked and are working quickly to integrate additional liquidity providers and depositors onto the platform. These upgrades should ultimately enable risk to offer users the most competitive options premium on-chain in a user-friendly format. As part of supporting this build-out, Hyperion DeFi will earn a share of vault revenues in addition to earning risk points. Soon after, in March, we announced private lending pools built by HyperLend Protocol. HyperLend aims to be the credit layer on the Hyper EVM and to date has surpassed over $17 billion in total deposits. By matching KYC lenders and borrowers using smart contract infrastructure, we have the opportunity to bring new capital to the Hyper-EVM. These products can provide safer, more efficient, non-consolidial infrastructure for accessing credit, which can be used for various strategies both on and off-chain. We will provide more detail on these pools once they are fully live. In similar fashion, Iperion DeFi will earn a share of the revenue on total capital allocated to these pools in addition to earning HPL tokens. Together, our partnerships with Risk and HyperLend unlock institutional primitives for yield and borrow lending on the Hyper EVM, in addition to new revenue streams for Hyperion. These also build upon the partnerships with Kinetic, Native Markets, and Felix, given that we use Hype LSTs and USDH in the Hyper EVM, and can coordinate market listings for perpetuals via HIP3. The value of early partnerships and directly participating in the growth of the DeFi application ecosystem being built on HyperLiquid cannot be understated. Our recent results are a tangible affirmation of what we have accomplished to date. We recognize that we are early in our journey, but it should be clear to those that have been following our story that Hyperion DeFi is about first principles and positioning. to be able to see what will come before it does and being agile enough to move first and aligning with the right teams to build the best long-term scalable products. This is ecosystem building at its finest. I've done it before, but the opportunity in Hyperliquid is fundamentally different. Hypercore's continued success should serve as a powerful tailwind for the growth of Hyper-EVM. We introduced our DeFi flywheel strategy last quarter, highlighting its ability to accelerate as we create synergies around diversified strategies. We ended the year with growth across all of our core strategies, as well as establishing the infrastructure required to scale them. The past several weeks has demonstrated just the beginning of Hyperliquid truly breaking into the mainstream consciousness. It should be clear now why we have chosen to build our businesses on Hyperliquid. I will again recognize that our innovations are possible because of the Brecknick pace of innovation in the Hyperliquid Labs team. In the beginning of March, the next hyperliquid improvement proposal, HIT4, which allows for outcome markets on hyperliquid, went live on testnet. Outcome markets, or more colloquially known as prediction markets, create a new form of hedging instrument directly available on the hyperliquid platform. This unlocks one-time cost hedging opportunities for assets, starting with digital assets like BTC and HEIST. We believe that this product will quickly expand beyond digital assets and enable options like hedging for real-world assets, the same way we saw the dramatic adoption in HIP3. We are monitoring the situation closely and are keenly aware that this could be another avenue for Hyperion DeFi to expand our business lines. And what does this mean for our shareholders? It highlights something that we are calling the Hyperion Triple Dip, our unique ability to generate a multiple above the baseline return on hype. This is only possible because of our management team's respective backgrounds that positioned us to be at the forefront of DeFi innovation. David Knox joined Hyperion from PayPal, managing multi-billion dollar loan books, and was a pioneer in building some of the most unique and sophisticated structures in asset-backed finance, like Cantor Fitzgerald and SoFi. Robert Rubenstein has a multi-decade background in the gaming and exchange-traded derivative markets. Altogether, we believe this positions HypeD as the de facto best solution for compounding hype on hype returns, more so than any other DAT or ETF. We are much more than just hype. Long term, we are positioned to generate more real revenue on hype, accelerating our ability to redeploy hype to new strategies. So far, we have executed on every objective we set for ourselves, and we don't plan to stop anytime soon. With that, I'll hand it off to David to dive into the numbers and demonstrate how these strategies are starting to show their long-term potential.

Thank you, Hunsu, and good morning, everyone. On our first earnings call under the new DeFi strategy in November, we laid the groundwork for our core operating businesses and committed to our investors 31% to 43% quarter-over-quarter operating growth independent of the price of hype. We have exceeded our guidance. with Q4 up 87% quarter over quarter. Our results show that we have transcended the strategy and capabilities of a simple buy and hold death, and instead, we are differentiated as the first publicly listed DeFi company building on the HyperLiquid blockchain. The financial investment thesis in Hyperion DeFi is clear. We are unique among digital asset treasuries with five diversified operating business lines. We earned about three times base staking income in Q4. Our triple dip hype deployment, where we deploy the same tokens into three income strategies at once, is only possible because of our management's unique ability to build and innovate on the HyperLiquid blockchain. And we have strong earnings leverage with a low cost base built for scale and achieved 30% quarter over quarter decline in our core costs. At a glance, thinking about us as a sum of parts. First, we have a growing treasury denominated in over 1.93 million hype, as well as hyperliquid community tokens, such as 1.9 million KNTQ and 1 million HPL tokens as of March 23rd. Second, we have ramping business lines and anticipate 4 million to 6 million adjusted gross profit in 2026, or about four times our 2025 full-year results. And third, we're continuing to build out our third-party institutional DeFi capabilities Hunsu mentioned, including our top 10 validator, commodities and equity partner markets, on-chain secured lending, and institutional vaults, which will help bring more institutions onto Hyperliquid while monetizing those outcomes. When you put it together, we believe our financial profile is a growth stage fintech with a growing hype and hyperliquid community treasury and the premier gateway for retail and institutional investors to gain equity exposure to the growing DeFi and blockchain ecosystem. Before we go into detail on the business activities, I'd like to outline some important updates on Gap Presentment. In Q3 25, three months in, our core DeFi businesses were primarily presented in revenue. In Q4-25, as our strategies have expanded and evolved, they now appear in multiple places in the GAAP financial statements, including revenue, operating income, and other income. In addition, on December 15th, we fundamentally changed our joint validator structure, giving us more control of the combined operations. We became principal from a GAAP perspective. So on and after December 15th, we will now be presenting validator activities on a gross revenue basis with cost of revenue representing the amounts paid out to third parties. Therefore, our adjusted gross profit presents what we believe is the best singular way to view and compare all our core operating activities period over period. And that metric, adjusted gross profit, increased 87% quarter over quarter, from $439,000 in Q3 to $821,000 in Q4, versus prior guidance of 31% to 43% quarter-over-quarter growth in our businesses. I will now go into detail on each DeFi income stream. Our first business activity is staking, where we earn staking yield on our hype tokens at our validator. In Q4, we earned 8.7 thousand hype tokens from staking, up 17% quarter over quarter versus 7.4 thousand in Q3. On a dollar basis, that translated to $305,000 in Q4 versus $340,000 in Q3, a decline of 10% given the effective average hype price in period declined from 45.8 in Q3 to 35.2 in Q4. Now, as opposed to other buy and hold DATs who only stake their tokens and don't have operating businesses, we next add four hype deployment strategies on top of staking, which is how we generated approximately three times base staking income in Q4. Our triple dip strategy is, first, stake our hype. Second, deploy the staked tokens into another business activity, our validator, yield enhancement, or DeFi monetization. And third, position ourselves to receive airdrops and ecosystem rewards. Our second business activity is running our validator and earning commissions. 11.8 million HYPE tokens were delegated to our validator as of December 31st, which is plus 43% versus 8.2 million as of September 30th. In Q4, we earned 1.4 thousand HYPE tokens as validator commissions. up 197% quarter over quarter, versus roughly 500 tokens in Q3. On a dollar basis, this translates to $49,000 in Q4 versus $21,000 in Q3, which is up 127% quarter over quarter. As we mentioned on our last earnings call, in Q3, our validator receives a roughly 3 million HYPE token delegation from the Hyperliquid Foundation. In addition, as we scale our third-party DeFi businesses, we expect more third-party tokens to be delegated to our validator over time. Our validator is a critical component of our DeFi flywheel. We are creating a gateway for institutions to participate in our on-chain activities while earning commissions along the way. Our third business activity is yield enhancement. We pursue off-chain and on-chain accretive strategies to enhance yield earned on our assets. Yield enhancement activities generated $79,000 in Q4, plus 2% versus $78,000 in Q3. These strategies include, for example, selling covered call options on the price of hype to institutional counterparties collateralized by our LSTs, so we continue to earn staking yield. In 2026, we have begun executing, within our institutional volatility income vault, with our protocol partner, Risk, and expect our yield enhancement to ramp throughout 2026. Our fourth business activity is D-time monetization. We are just beginning to ramp all these strategies Hunsu mentioned, which generated $102,000 in Q4 versus less than $1,000 in Q3. Fundamentally, these new businesses generate fees for us as trading volume grows on Hyperliquid and as more financial products and asset classes move on-chain. Our fifth business activity and our last within digital assets is ecosystem rewards. Through our active participation in the Hyperliquid DeFi ecosystem, including all of the other business activities I just mentioned, we position ourselves for the receipt of token airdrops, protocol incentives, and other rewards throughout the ecosystem. Ecosystem rewards generated $285,000 in Q4 versus none in Q3 from the receipt of 1.9 million KNTQ tokens from Kinetic. In Q1, we received 1 million HPL tokens from HyperLend as of March 23rd. While we expect there to be some quarterly variability in the magnitude of future tokens and rewards, we feel confident that we will receive more throughout 2026. Our final business activity is our legacy life sciences segment, which did not generate any adjusted gross profit in Q3 or Q4. In our Q3 earnings call, we detailed how we were still developing our proprietary OptiJet user-filled device, or UFD, our last remaining product within the life sciences segment, and that we were continuing to incur ongoing costs, including personnel and IP maintenance, while investing in some additional R&D. The goal was to get the product further along on its development and make it a more attractive asset to the market. Today, we are pleased to announce that in Q1, we executed a non-binding letter of intent to monetize the OptiJet. The transaction is subject to diligence currently underway, as well as other customary closing conditions. But if successful, We expect the transaction to close in the second quarter of 2026. We expect our ongoing operational expenses to decline. And there is now a potential path for future monetization proceeds from the OptiJet. Moving on to operating expenses. Our core operating expenses, R&D plus SG&A and excluding stock-based comp, declined 30% quarter over quarter. from $4.3 million in Q3 to $3.0 million in Q4. We expect our expenses to further decline throughout 2026, especially with the pending outcome of the OptiJet LOI. The next item I'd like to discuss is a new non-GAAP measure called Treasury Gains and Losses, which is meant to capture all the value movements of our digital assets in period, including hype, our LSTs, and any hyperliquid ecosystem tokens such as KNTQ in the fourth quarter. It also aims to remove the gap nuance as it relates to LSTs, which I described further in our Q3 earnings call, where we have to carry those assets at the lower of cost basis or impaired value, which is the low watermarked hype price in the period. While we are strongly convicted in our point of view that hype is the most attractive digital asset, and that the hyperliquid blockchain is ripe for opportunities to deploy income-generating DeFi businesses, we expect hype to remain a volatile asset, i.e., going from about 45 as of September 30th to 25 as of December 31st to 38 as of March 23rd. This is exactly why we break out our operating businesses within adjusted gross profit so that our DeFi activities can be presented independent of the mark-to-market movement of our tokens. Treasury losses were $36.8 million in Q4 versus positive 11.9 million Treasury gains in Q3. Based on the March 23rd price of hype of 38, and depending on where we end the quarter, we could have over $24 million of unrealized Treasury gains in Q1 compared to our December 31st marked market price of 25. This is how we think about our total income in the most simplified fashion. start with our core DeFi activities and adjusted gross profit, minus operating expenses, X stock-based comp, plus treasury value gains and losses, plus some small items and adjusted other income and expense, which weren't material in Q3 or Q4, And it gets us to our adjusted EBITDA of negative $38.9 million in Q4 versus positive $8.0 million in Q3 compared to gap net loss of $39.8 million in Q4 versus net income of $6.6 million in Q3. Moving on to the balance sheet. Our gross hype tokens increased from $1.72 million as of Q3 to $1.88 million as of Q4. to over 1.93 million as of March 23rd, or over a 50,000 hype increase quarter to date as we continue to buy more hype and earn staking and validated income in hype. We also currently have 1.9 million KNTQ received in Q4 and 1.0 million HPL received in Q1 as of March 23rd. We did not pay anything for those two tokens, but believe their value over time will be driven by each protocol's growth alongside the hyperliquid ecosystem. Our net asset value, which adjusts for debt and working capital, decreased from $74.5 million as of Q3 to $44.2 million as of Q4. Our $8 million of outstanding debt as of Q4 is at an 8% annual interest rate. It is in an interest-only period until Q1 2027, and half of that interest-only payment is cash, and the other half pays in kind, adding to the balance of the loan. In March, we announced a partnership with HyperLend, whereby we can borrow at a 4.0% fixed rate secured against some of our high hype LSTs. We expect our first draw in the coming weeks and to partially pay down some of our legacy 8% debt with the proceeds. Regarding our cash flows, net cash used in operating activities was approximately $4 million in Q4, versus $3 million in Q3. In Q4, we had a $1.3 million reduction in current liabilities versus Q3, as we continue to streamline the balance sheet and legacy items. Our cash, cash equivalents, and USDH stablecoins total approximately $9.2 million as of March 23rd, giving us multiple quarters of runway. As our expenses decline and our businesses ramp, we continue to anticipate achieving positive net operating cash flows by the end of the year. Net cash used in investing activities to purchase Hype was $6.3 million in Q4 versus $20.0 million in Q3. Q1 quarter to date as of March 23rd, we have bought another $1.5 million in Hype. we raised 9.4 million net proceeds from our at-the-market offering in Q4 versus 21.8 million in Q3. According to Q1, as of March 23rd, we have raised an additional 6.7 million net proceeds from the ATM. There's additional detail in our earnings content regarding full-year results, comparisons to 2024, and per-share metrics, many of which include, to a large extent, our legacy biotech operations, which the company began to scale back beginning in Q4 2024. Looking ahead to 2026, we expect continued growth in our adjusted gross profit driven by our DeFi businesses. Staking and validator revenues are expected to continue to increase as the hyperliquid network expands and our staked and delegated positions grow. We expect our yield enhancement strategies to scale with our new vault partnership with RISC and private lending pools with HyperLend. Our pipeline for DeFi monetization and protocol partnerships is robust, and we believe that the HIP4 upgrade on prediction markets may unlock new opportunities for us in 2026. And we anticipate additional airdrops and ecosystem rewards as we get rewarded by the Hyperliquid community for our triple-dip strategy supporting its growth. 2025 is a remarkable year of firsts for the company. We already achieved about three times base staking yield in Q4, with our strategies only six months old. And in 2026, we believe our flywheel effect to compound our treasury holdings is simply unparalleled. Now imagine this scenario. In a few years' time, HyperLiquid may become the dominant blockchain for financial transactions. After HIP4 prediction markets may come, further upgrades to create new infrastructure that we haven't even thought of yet. After already achieving scale on trading crypto, metals, oil and gas, and the S&P 500, more and more institutional products and asset classes may become regularly traded on hyperliquid. Compounding fees permanently burn outstanding hype tokens, reducing the maximum supply, and its scarcity versus demand may drive the price higher. Meanwhile, the infrastructure we've helped to build is producing recurring DeFi revenues for our shareholders, and our hyperliquid community tokens may become more valuable as those protocols that we help support evolve into compelling platforms and businesses in their own right. This is the vision that we believe in at Hyperion DeFi, and every day we are helping to build that vision into reality. With that, I'll turn it back over to the operator, and we look forward to answering your questions.

Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Gareth Gassetta with Cantor Fitzgerald. Please proceed with your question.

Hi, good morning, guys. I was wondering if you could go into more detail on the HOSS agreements you guys have for HIP3 markets. and maybe how you're thinking about HIP4, and if you might participate similarly to how you've done with HIP3.

Yeah, sure thing. So Hype as a used service is our original proprietary design when we realized that there was a lot of utility behind the Hype token and effectively being able to stake and restake it in the ecosystem. So for HIP3, we saw the value of creating non-crypto perpetual markets that are agnostic to the price of hype and agnostic to the performance of crypto markets. It's a revenue stream that is denominated in dollars and basically lets us continue to scale with increasing volumes on our exchange in partnership with Felix. We earn a share of the revenue from that product design and it's something that we will continue to use. We are seeing significant demand across a global client base as more and more users come to Hyperliquid. And with regard to HIP4, The only guidance that we have right now from the core team is that it will start canonical and could eventually become permissionless. And if there's an opportunity there, we will definitely be positioning and looking to participate given the hype that we have on the balance sheet. Thank you.

Thank you. And maybe just a quick follow-up. We really appreciated kind of the increased description on all of these operating business lines. Could you maybe talk about where you might expect some of these to be more consistent or recurring in nature as compared to maybe some that might be less predictable?

Yeah, absolutely. Thank you, Garrett, for the question. So thinking about the five business lines, and I'll go from the bottom up, staking yield should scale in proportion to the amount of hype that we own ourselves. Validator commissions will scale depending on the amount of tokens at our validator, which we believe is could increase substantially to the extent that our DeFi monetization activities grow and to the extent that we are able to be successful in bringing others onto the HyperLiquid blockchain through the protocol partnerships that we have. DeFi monetization, that can scale from essentially a parabolic perspective to the extent that there's more trading activity on HyperLiquid to the extent that there's more financial products and to the extent that our infrastructure can be adopted by more users. Yield enhancement, similarly, it's first-party strategies that we have, such as selling covered calls, such as cash secured puts, which do increase the yield on our assets while using staked hype as the collateral, our liquid staking tokens, So that could be linear somewhat from a first-party perspective, but it also opens up third-party capabilities with the vault partner that we have, which is risk. And then ecosystem rewards, it's inherently unpredictable to determine the timing of the airdrops between hyperliquid community tokens or potentially hype itself, as well as the other sort of rewards that can exist. But the way that we position ourselves there we think is inherently unique and unlike any other public company, especially within the hyperliquid ecosystem. Thank you, Garrett, for the question.

Thanks, guys.

Thank you. Our next question comes from the line of Brett Knobloch with Cantor Fitzgerald. Please proceed with your question.

Hi, guys. Thanks for taking my question. On HIP3, we're seeing obviously significant kind of volume growth month over month there, and I know HIP3 in general has only really been around for maybe five months at this point. From my understanding, we're still kind of in growth mode, or where HIP3 has growth mode activated, which kind of lowers the fees from those markets. At what point do you think growth mode kind of goes away and this fee potential, oh, more material for both you and the ecosystem from a buyback perspective?

Yeah. Hey, Brett, thanks for the question. So we've had weeks or months where growth mode was not applied to certain assets on the exchange that we have with Felix, and we saw the benefits pretty immediately. Right now, for context, growth mode reduces fees across HIP3 markets by 90%. However, when we talk to TradFi teams or prop firms that are using existing exchanges like CME and so forth, growth mode is necessary right now to be more competitive than the de facto solution. And so right now, we expect that if the leader of the HIP through markets, for example, trade XYZ, they're kind of setting the baseline rate. And so other markets must follow to be competitive. We expect that as the product base expands, the various markets that are available in NHFA3 evolve. We do see that coming down over time. That's something that obviously depends upon the user growth and general activity and what is required for Hyperliquid to become more accessible and offerable to institutional players.

Awesome. And then maybe just... You know, I know we're kind of waiting for legislation in the U.S.

in the Clarity Act, kind of a bit unclear on maybe what that means, if it means anything for hyperliquid. Do you guys have any thoughts on that and maybe the potential where we see hyperliquid eventually become allowed in the U.S.? You know, is that something that you guys envision happening anytime soon?

Thank you, Brett, for the question. So taking a step back here, I think it's important to believe fundamentally that industry and regulators and consumers are aligned with the long-term goal, which is fair, transparent, and efficient markets. And that will be driven by the fundamentals of what is available. And we believe that hyperliquid will be of increased demand and of increased importance, and that the long-term regulatory arc will be supportive of its access and of its growth. But that being said, We do not have a crystal ball. We do not know what comes next, at what point in time, and the various incremental steps that will happen. But sitting where we are today, exactly where we are, the business opportunity for Hyperion DeFi is extremely robust. So we will continue to operate in the environment where we are, which is the only thing that we know, and be responsible, be diligent, believing that we have a duty as an innovator within DeFi to be very, very thoughtful on all the activities that we do. However, I do believe there will be long-term upside to us when the regulatory tailwinds continue to accelerate. Thank you for the question.

Thank you, guys. Really appreciate it.

Thank you. Our next question comes from the line of Jim McGillery with Chardon Capital Markets. Please proceed with your questions.

Yeah, thanks, and good morning. David, could you comment on operating cash flow breakeven for the year, and then secondly, the adjusted gross profit expectation that you have for the year? It kind of sounds like it's back-end loaded. I mean, not too much, but it does kind of sound back-end loaded. Is that correct?

Thank you, Jim, for the question. So fundamentally, we had about $3 million of core operating expenses, excluding stock-based compensation in Q4, versus our adjusted gross profit of about $821,000. And essentially, we expect those two elements to converge and flip at some point this year, in 2026. Some of our operating profiles and businesses are in cash. Some of them are in hype. Some of our expenses obviously are denominated in cash and some are not. But the way that we get there is by our ramping DeFi business lines. It is by partially the outcome of the OptiJet LOI, which should reduce our costs. And it's from further cleanup of the balance sheet and a few legacy items that we continue to process through day by day. But we made that commitment in our earnings call in November That continues to be the main target for us as a company. And it's critical to proving that we are more than just a digital asset treasury, that we are a DeFi company, a fintech. And when we get to that level, we believe that'll be a fundamental inflection point for our growth.

Okay.

And as far as the adjusted gross profit outlook, it does ramp during the year. I mean, it would be reasonable to think that it's up every quarter. And I know you've got some, you know, one-time things that are going to impact that, like the HyperLend airdrop. But for the most part, the DeFi businesses are going to ramp quarter to quarter.

That's correct. We are not giving individual quarter guidance. and we are not giving guidance on each of the five businesses individually. But what's important to note is that we have the ability to navigate and be fluid with the ecosystem. And as opportunities present ourselves, we will adapt to the extent that there is an actionable opportunity for us in HIP4, for example, that could change how we're allocated among our different businesses. However, throughout the year, we believe that they should all ramp there will be some variability and that, yes, we will end at the end of the year in levels and run rates greater than we were entering into the year.

Great. And then lastly, on the silhouette announcement that you had yesterday, the day before, is that a similar scenario? is that a similar revenue and earnings opportunity for you that you've had with the others that there's going to be a revenue share and maybe something else attached to it? And then when do you think that that would become operational for you?

Yeah, thanks for the question, Jim. So Hypass at U Service, all of the deals that we write under that structure are revenue share based in addition to being able to receive ecosystem rewards, which are often reflected in the form of tokens native to each of the counterparties. Silhouette is interesting because it is more of a platform built on top of Hyperliquid that offers privacy for traders. And so those that are using sophisticated strategies are able to do them without with them being shielded from public view. And so we expect there to be a lot of volume being done through the platform and the traders receive the benefit of significantly reduced fees. And so a model is where increasing volumes will result in more fee savings, which return back to the company in terms of revenue. And that is something that is also scalable with increasing volumes. We've actually seen the amount of assets in the Silhouette trading accounts rise over a duration of the day after the deal was signed. And so we expect that to continue to ramp up as they also initiate a growth campaign shortly.

And so that's operational for you right now, is that correct?

That's correct. Yes, they are live now. That's great. Okay, that's it for me. Thank you. Thank you, Jim.

Thank you. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Our next question comes from the line of Brian Veton with Siebert Financial. Please proceed with your questions.

Great. Thanks, guys. And great quarter. Hey, just we just talked about the pipeline of capital as a service agreements, your house agreements. Talk about what you're typically looking for in a partner and maybe how much capital you have ready to deploy into those. That'd be like your total hype treasury less what you've already deployed in terms of hype tokens. And I guess is that the bottleneck? Are there maybe, you know, five or 10 of these ready to go once you guys have more tokens? Let me just add a follow-up.

Yeah, so I would say there's a substantial pipeline for hype asset use. The more that this product becomes socialized and people are able to see the benefits, we are the de facto solution for a lot of new products and services, HIP3, increased trading fees, and when HIP4 potentially becomes permissionless, we expect that to be another avenue of opportunity. As we mentioned on the call, we have a little over 1.93 million hype we are at pretty high utilization across our strategies. And as David mentioned, we have the flexibility to migrate or utilize hype for different strategies depending on the opportunity available. So we are always focused on optimizing the return and being able to generate the highest hype on hype or dollar on hype return across the balance sheet assets. And so our focus is to continue to strategically utilize utilize the ATM, generate revenue, and roll that into increasing the hype position so that we can continue to scale and compound these deals. And the benefit of that obviously is we expect the tailwinds behind hype to continue to persist, which also generates more revenues to the validator and delegation operations, in addition to the growth of general ecosystem products, as we are seeing hyperliquid really start to break into the mainstream.

That's great. And then kind of in the same vein, but can you just talk about the return profile of some of those agreements? So like for HIP3, you're locking up 500,000 tokens. Others might require fewer tokens or maybe more. Could you just talk about those hype on hype returns of some of the agreements you've made so far? And maybe just for fun, we could think of the HIP3 business as if growth mode were to end at some point and maybe volume sustained. Thanks.

Yeah, sure thing. So, so, so high passive use are actually mostly denominated in dollar based revenue. So as mentioned earlier, Silhouette is trading fee reduction. So as more volumes are deployed through that platform, that will result in more fee savings and a larger percentage of that will return to Hyperion as revenue. So we actually find that as more of an in-demand product because we are seeing more market makers and teams from traditional finance start to come over to Hyperliquid. And when these teams are doing three, four, $500 million of volume a day, the fees that they're paying to Hyperliquid are quite substantial. So that is a product that we see a lot of opportunity from. With regard to HIP3, like I mentioned earlier, if there wasn't growth mode, the model and projections that we've had prior to HIP3 deployment were quite accurate. It is purely a volume-based product, whereas more training activity is done through Hyperliquid front end and also through the builder codes, which are effectively mobile applications for distribution. we are seeing substantial growth across the user base, and we are working specifically with our partner at Felix to figure out which regionals, which regions, which markets, and which ways are the most effective mechanisms to bring more users and sustainable trading volume to the HIP3 exchange.

Awesome. Thanks, guys. Excellent, too. Thank you, Brian.

Thank you.

that concludes our question and answer session i'll turn the floor back to mr jump for any final comments great thank you so as we conclude today's call i want to highlight how rapidly hyperion d5 has differentiated itself from other companies that are still operating under the digital asset treasury or dat moniker in six short months we have been able to demonstrate the possibilities from a revenue perspective as these unique strategies start to gain momentum this is rooted in our ability to work together with teams in the hyperliquid ecosystem to accomplish the ambitious objective set for ourselves. In many ways, we see these partnerships and the associated products becoming our moat, building upon each other, ultimately accelerating our DeFi flywheel. At the same time, in a space as dynamic as crypto, it is also paramount that we remain flexible and positioned quickly for new developments in hyperliquid. In my shareholder letter published in January, I talked about two megatrends for the year, tokenization and artificial intelligence. we are already seeing the impact of these technologies playing out. Real-world assets like oil and silver seeing price discovery during off hours, in addition to increasing experimentation and utilization of AI agents to execute trading strategies on-chain. This comes at a time when we are seeing large-scale institutional adoption across key components of finance, payments, and frontier tech. It is imperative that we continue to operate for the long term and design on-chain products for a future that is highly financialized and autonomous. The regulatory environment for crypto is also advancing positively, with the recent announcement of the SEC and CFTC working jointly to provide classification and clarity for digital assets. It is encouraging to see the newly founded Hyperliquid Policy Center represent Hyperliquid at the White House, ensuring that our ecosystem's efforts are brought to the attention of key decision makers. We firmly believe that the future is bright for Hyperliquid, With increasing regulatory clarity and maturing institutional infrastructure, the performance advantages of platforms like Hyperliquid should continue to break into mainstream adoption. This positioning is how Hyperion DeFi positions to win. In 2026, our priorities remain focused on three key areas. Continuing to strategically build our Hike position, strengthening our partnerships within the Hyperliquid ecosystem, and scaling our portfolio of DeFi services. developing the institutional infrastructure necessary to bring traditional finance onto the Hyperliquid blockchain. We are so sincerely grateful for the continued support of our shareholders and, of course, to our ecosystem partners as we continue to build and scale our on-chain infrastructure directly on Hyperliquid. Hyperion DeFi is building for the future of finance. This is more than just hype. Thank you.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.