Onfolio Holdings Inc.

Good morning, and welcome to the Onfolio Holdings First Quarter 2026 Earnings Conference Call. Joining us today are Dominic Wells, Chief Executive Officer, and Adam Treanor, Chief Operating Officer and Interim Chief Financial Officer. Before we begin, I would like to remind everyone that certain statements made during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those expressed or implied. Forward-looking statements are based on management's current expectations as of today's date, and the company undertakes no obligation to update or revise any such statements. For a detailed description of risk and uncertainties, please refer to the risk factor section of the company's most recent Form 10-Q filed with the SEC. Additionally, during this call, management may reference certain non-GAAP financial measures and supplemental operating metrics as indicators of performance. These measures should not be considered in isolation or as substitutes for GAAP results. A reconciliation of non-GAAP measures to the most comparable GAAP measures is available on the company's SEC filings, which can be found on the company's website at investors.onfolio.com forward slash filings. And with that, I'll turn the call over to Dominic Wells.

Thank you and good morning, everyone. We appreciate you joining us today. Before we dive into the quarter and our operational highlights, I wanted to provide a quick overview of who we are at Onfolio Holdings. We are an owner-operator of cash-generating digital businesses, primarily in B2B marketing agencies and B2C online education. Since our IPO in 2022, we have grown revenues from approximately $2 million to $10.7 million in full year 2025. roughly a 5x increase entirely through acquiring and operating real businesses that generate real cash flow. As I discussed on our last conference call, we spent 2023 and 2024 building our initial portfolio. Then at the beginning of 2025, we deliberately paused our acquisition strategy to focus on getting our existing portfolio to a point where it could fund parent company costs As we closed out 2025, we made significant strides in achieving consistent profitability, but we recognized we were not quite there and needed to turn our acquisition machine back on. While we have turned more of our attention to acquisitions, including our recently announced financing, which I'll address momentarily, that does not mean we have stopped building upon our operational momentum and optimizing our current portfolio of companies. In fact, we continue to make progress in Q1, enhancing various business models across our portfolio. This resulted in shedding some unprofitable revenue lines, producing a near-term decline in overall revenue, but greatly increasing operating efficiency and profitability, giving us a more profitable foundation to grow revenue from. So let's dive further into progress made during the quarter in our two segments, B2B and B2C. We continue to see success with our new agency co-structure that I introduced on our last call. As a reminder, we have now begun treating our agencies as a unified platform in an effort to create centralized backend fulfillment, shared sales and marketing infrastructure, and clear accountability across the portfolio. We believe it makes our agency businesses more durable and positions them for the changes AI is bringing to agency work. During Q1, we made significant progress with this strategy that we believe will result in notable profitability growth in the current courses. While our revenue for this segment declined approximately 10% year over year, this was an intentional repositioning, specifically with our revenues and portfolio company, which we began restructuring in late 2025 as the business was running at approximately 8% operating margins. The service was solid, the clients were happy, but the cost structure was heavier than it needed to be. We did two things. First, we consolidated revenues and operational overhead under Eastern Standard, our largest agency and the anchor of the B2B agency platform. Second, we didn't replace departed team members with new hires. Toward the end of 2025, two senior leaders moved on from the company, and instead of replacing them, we rebuilt the core operational processes using AI. The team rethought how content gets produced, how client reporting works, and how campaigns get managed, and the result was a structural reduction in manual overhead and significantly faster turnaround on new business proposals. As a result, operating expenses dropped by over 40%, and the business is now running at approximately 15% operating margins, nearly double where it started, while service delivery quality held. The operational playbook we developed here is now being deployed across additional portfolio companies. The pattern is straightforward. Consolidate operational overhead across portfolio companies rather than running duplicate infrastructure. Rebuild processes with AI rather than hiring to fill gaps and focus the team on revenue generating activities rather than manual overhead. We believe this is what an AI native operating model looks like in practice. In our B2C segment, as we discussed during our last call, we deliberately pulled back ad spend at Proofread Anywhere, where returns have started to compress. Q1 reflects that decision. By cutting advertising spend by more than 80% year over year at Proofread Anywhere, we held the majority of prior year operating profit on roughly one third of the prior year revenue and net operating margin at the business expanded by approximately 800 basis points. Vital Reaction, our other B2C property, turned modestly profitable on the quarter after losses in the prior year period. As we rebuild the revenue base, we're applying the same playbook I described for our B2B segment. Media buying, ad creative production, and email marketing are now consolidated across both B2C properties, and we're putting AI to work in each of those workflows. The goal is to bring paid advertising back at meaningfully better unit economics than before. We believe Q1 is the trough for B2C revenue, and we've already started rebuilding from that base. Now, I wanted to touch on a key development post-Q1. In April, we secured a new $100 million equity facility to further accelerate our acquisition strategy. As I just spoke to, we spent 2025 closing the gap to profitability, and now we're deploying capital to grow. This facility is another tool in our growing capital toolkit It gives us more optionality to move aggressively on acquisitions, plugging each one into the AI infrastructure we've built while continuing to compound through both our operating businesses and our digital asset treasury. The way we think about it internally is straightforward. We are buying online businesses at three to four times free cash flow in a market that is too small for institutional private equity to compete in. We then lay out our AI operating playbook on top of those businesses to expand margins. as we did with RevenueZen. From this, every dollar of capital we deploy through this facility is intended to translate into multiple dollars of intrinsic value per share. The arithmetic works, provided we continue to maintain capital discipline. It is also worth noting that this facility is discretionary. We're not obliged to draw it. We control the timing, the amount, and the use of proceeds. We will only issue equity when we have a specific accretive use of the capital, primarily acquisition that immediately add cash flow, with a smaller portion allocated to growing our digital asset reserve. If conditions are not right, we don't draw. That is a meaningful protection for shareholder value. And lastly, before I turn it over to Adam to walk through the financials, I wanted to highlight that we officially regained compliance with NASDAQ's minimum bid price requirement on May 1st, 2026. Maintaining our NASDAQ listing is foundational to everything we're building. With compliance restored and our recently announced 100 million equity facility in place, we remain committed to executing our AI-powered acquisition and growth strategy and continuing to compound value across our portfolio. With that, I'll now turn the call over to Adam to walk through our financial results for Q1 2026. and then I'll return with more context on our plans for the remainder of the year. Adam, over to you.

Thanks, Tom. Glad to be speaking with you all today. Unless otherwise noted, all comparisons are first quarter 2026 versus first quarter 2025. Starting with our P&L, total revenue for the first quarter of 2026 was $1.9 million, a decrease of 34% from 2.8 million in the first quarter of 2025. Revenue from services, primarily our B2B segment, was $1.6 million, a decrease of about 10% from $1.8 million in the prior year period. As Don described, this primarily reflects the intentional repositioning of revenue zone, where we consolidated operational overhead under Eastern Standard and rebuilt core processes using AI, partially offset by continued growth at Eastern Standard and a new contribution from our PACE generative subsidiary, which did not exist in the comparable period. Revenue from product sales, primarily our B to C segment, was $307,000 compared to a million in the prior year period. The decline reflects the deliberate ad spend pullback at Pruford Anywhere that we initiated in the second half of 2025 to preserve unit economics, as well as lower contribution from vital reaction in the period. Gross profit for the first quarter was 0.9 million compared to 1.7 million in the prior year period. Gross margin was approximately 49% compared to 61% in the first quarter of 2025. The margin contraction primarily reflects the shift in revenue mix, as higher margin digital product sales declined as a percentage of total revenue. As our agency platform continues to deliver on the AI-driven operating leverage Dom described, and as our B2C business has normalized, we still expect gross margin to trend into the mid-60% range over the course of 2026. Total operating expenses were $1.8 million, a decrease of 30% from $2.5 million in the prior year period. Within that, selling, generative, and administrative expenses decreased $901,000, or 41%, to $1.32 million. The decrease was driven primarily by lower advertising and marketing costs, with the remainder spread across compensation, contractor, and other G&A categories. This is the agency code and AI-native operating model showing up in the financials. Professional fees did increase to $431,000, primarily driven by higher legal and audit fees related largely to our recent capital markets activity. Loss from operations was 833,000, essentially flat compared to the prior year period, despite the revenue decline, reflecting the meaningful operating expense reductions. Net loss for the first quarter of 2026 was 1.9 million, compared to a net loss of 0.9 million in the prior year period. This figure includes approximately $365,000 in non-cash expenses, a $674,000 non-cash loss on a change in fair value of digital assets, and a $71,000 non-cash loss in a change in fair value of derivative liabilities. None of those latter two items had a comparable amount in the prior year period. They relate to the convertible note facility we opened in November 2025 and mark-to-market movements in our digital asset holdings during the quarter. We also recorded approximately $218,000 of additional interest expense year over year as a result of higher note balances. Excluding those non-cash items, the underlying operating performance is more consistent with the prior year than the headline number suggests. As a reminder, we believe portfolio operating profit is a non-gap metric that most directly reflects the health and trajectory of our businesses. On a trailing 12-month basis, portfolio operating profit was a loss of approximately $1.6 million. compared to a loss of approximately $1.2 million in the prior trillion 12-month period. The reported comparison reflects approximately $440,000 of non-cash impairments we took during 2025 on legacy joint venture investments. Excluding those one-time impairments, portfolio operating profit was modestly improved year over year, despite the deliberate revenue actions we took during the year, including the revenues on restructuring on the B2B side and the ad spend pullback approved for Dennyware. We expect both of those actions to support expanding portfolio profitability over the course of 2026. Turning to our balance sheet, as of March 31st, 2026, we had cash of $842,000 compared to $2.2 million at year-end 2025. The decline reflects normal operating uses, payment of accrued preferred dividends, scheduled debt service, and the absence of any new financing inflows as our $100 million equity facility was entered into post-quarter end. Our digital asset holdings had a total fair value of approximately $1.6 million a quarter end, compared to $2.3 million at year-end 2025. The decline was driven almost entirely by mark-to-market price movements and is reflected in the $674,000 non-cash loss I mentioned earlier. Our current holdings consist of 5.32 Bitcoin, approximately 320 Ethereum, of which approximately 288 are staked, and approximately 6,888 Solana, all of which are staked. These holdings continue to generate staking rewards. We received approximately $15,000 in staking rewards during the quarter, plus approximately $11,000 in digital assets received in settlement of customer accounts receivable. We continue to view these holdings as a long-term balance sheet asset rather than a trading position. On debt, total outstanding indebtedness was $7.7 million compared to $7.8 million at year end. The slight decrease primarily reflects a reduction in deferred revenue and scheduled paydowns of notes payable. Notes payable to related parties, primarily our Eastern Standard revenues and seller notes and certain related party advances, totaled approximately $1.3 million across current and long term, down from approximately $1.4 million at year end. On our Series A preferred stock, 169,460 shares remain outstanding, carrying a 12% cumulative annual dividend payable quarterly. The board declared and the company paid the regular quarterly preferred dividend during the quarter, consistent with our record of paying every Series A preferred dividend on time since 2020. With that, I'd like to hand the call back to Dom to discuss our go-forward strategic priorities at more length.

Thanks, Adam. Our priorities for 2026 remain the same.

Generate more cash flow from the existing portfolio, resume acquisitions that immediately add to that cash flow, and close the gap between what the portfolio distributes and what it costs to run the parent company. When those two numbers cross, we are self-funding. That is the goal we work toward every day. We're also working aggressively to optimize our business by leveraging AI in a meaningful and real way, more than just talk, but delivering tangible improvements across our results, like the revenue zone example I provided earlier. Our AI strategy is centered on delivering high margin managed AI services to new and existing clients by leveraging frontier AI models to provide enterprise grade content, marketing, data analytics, and automation solutions. This is an asset light approach, scaling AI revenue on top of existing frontier model infrastructure without the associated capital expenditure risk. We're already making progress rolling out AI services to our existing client base, plus using AI to improve our margins across the B2B segment of our portfolio. This has already resulted in a significant lift on the sales side also. Sticking with the revenues and example, Q1 2026 was the strongest quarter in the past year for this business, with five new clients closed at $38,000. in new monthly recurring revenue, a record number for this business. In addition, the B2C segment is benefiting from improved AI-powered data analytics, which is also something we plan to roll out as a new service to existing and new B2B clients. As we make more acquisitions and grow our portfolio, this AI-powered services layer will become increasingly important in scaling our platform. With acquisitions at the forefront of our strategy in 2026, I want to spend a few minutes on how we are thinking about deals today, because our framework has evolved meaningfully from the one we were operating under a year ago. The first thing to understand is that our balance sheet position has changed. With our convertible note facility and our newly announced $100 million equity facility in place, we have access to a level of capital that we simply did not have the past several years. That has changed the type of business we can pursue. We are seeing more established leadership teams, less customer concentration, more recurring revenue than we were seeing 12 months ago. Our pipeline currently targets acquisitions totaling $5 to $10 million in annual adjusted EBITDA at an average multiple of two to four times trading 12-month adjusted EBITDA before year-end. As a result, we believe the proposed acquisitions could approximately double our revenue run rate and bring Onfolio to profitability on a consolidated basis. The second thing, and this is where the AI thesis really comes in, is that every business we acquire makes the next acquisition easier and even more accretive. We have spent significant time and effort building an AI infrastructure across the portfolio. Instruction files, agent workflows, content production systems, client reporting, automation, and media buying optimization. Once that infrastructure exists, the marginal cost of plugging in a new acquisition drops meaningfully. A holding company is the ideal structure to deploy this. One team, multiple AI agents applied across every business in the portfolio. The more businesses we own, the more valuable that infrastructure becomes. That is a flywheel that most companies cannot replicate. It also creates a specific kind of acquisition opportunity. There are a large number of profitable online businesses out there that have not adopted AI in any meaningful way within verticals that we already operated, marketing agencies and e-commerce brands, where we've already proven what our AI operating model can do to margins. Many of them trade at lower valuations precisely because they look like they're at the end of their growth runway. We're also looking to expand into financial media and investor services, where we see significant opportunities to build a larger, more diversified platform. We can acquire businesses at attractive multiples and apply our AI operating playbook to drive immediate margin improvement and revenue growth. That is the recipe. Buy at a relative discount, apply the playbook, expand margins, and recycle the cash flow into the next deal. and every deal makes the next one more accretive because the platform underneath gets better with each addition. To summarize the key takeaways from today's call, in the first quarter, we made deliberate decisions that reduced near-term revenue but materially improved the operating profile of both segments. We secured a $100 million equity facility post-quarter to fund accretive acquisitions. expand our services layer, and incrementally grow our digital asset reserve. We regained NASDAQ minimum bid price compliance on May 1st, and we have reengaged the acquisition pipeline with a sharper framework, larger target sizes, and a clearer view of how each new business compounds the value of the platform underneath. The plan is the same one we have been executing against. Control parent company costs, grow portfolio cash flow, and acquire additional profitable businesses. What has changed is the position we are operating from. The balance sheet is stronger. The operating model is more efficient. The AI infrastructure is real and producing measurable results, and the capital is in place. Our job from here is execution. With that, I'll hand it back over to the operator to open the call for Q&A.

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 Yegor Zadorinyi with Private Investor. Please proceed with your question.

Good morning. Thank you for taking my questions. I got a few if I may. You discussed the acquisition looking between 5 to 10 in aggregate in adjusted EBITDA, but can you give more color? How many companies or what size of companies you're looking at? Just trying to get better understanding of at what you're looking at in terms of sizes of the company and the actual amount of companies, just to get an idea of integration, any color would help.

Yeah, sure.

So typically, it hasn't changed substantially compared to historically. I would say the minimum that we're targeting is about a million in EBITDA. From a single company, but we're also looking at ones that are doing two million three million and As as always will will take smaller ones if it makes sense in terms of quantity We've got a pretty active pipeline I think if we acquire as many companies as we'd like to maybe half a dozen and It's really about finding the businesses that we feel confident running and the valuation makes sense and the business is in good shape. So I think what's changed since our ELOC announcement and the other financing in November is that we do have much larger businesses coming into business. our pipeline and sellers understand we're able to make larger acquisitions.

So maybe this answer changes in six months or so, but right now I'd say that kind of one to three million EBITDA size. Thank you.

Am I correct in reading that the gross margin declined from 61 to 49?

So is that something that you think? Sorry, go ahead with your question.

Yeah, can you clarify whether a lower gross margin is mostly temporary makes, or is that something we can look forward that you're going to be more in like a 50 range moving on?

I'll let Adam answer that, because he actually touched upon that in his remarks. Yeah, Adam, do you want to take this one?

Sure. So the drop in gross margin doesn't actually reflect a change at the business level. It reflects a shift in the proportion of revenue coming from our services segment versus our B2C digital product segment. Basically, the margin on digital products is quite high. It's close to a 90% margin, whereas our services segment is high for a services industry, but ranges from 50% to 60% depending on the business. And our current revenue reflects a larger percent of our revenue coming from our services segments than in Q1 last year, which had a larger percent of our revenue coming from the high margin digital services segment. So the margin change is really a reflection of a shift of proportion in revenue coming from services versus digital products. And as Dom had mentioned, we're also looking at scaling up advertising from our new more profitable base on the digital product side. So we expect margin to creep up over the course of the year, both as we start to increase the proportion of sales and digital products, but also as our services agencies continue to see the benefits of implementing AI and, you know, margin expansion.

Got it. Thank you. May I ask a couple more? Yeah, go ahead.

So this one, I don't know how much you can tell me, but it was a little bit of concern, so any color helpful? you know, liquidated damages up in the fall of convertible note in 26 was around about 600 ish. Then, you know, I'm not going to get into the note, but on the, um, it's related to Eastern standard note. Um, there was also another that's getting, um, kind of moved forward about 400. So I'm just trying to understand, you know, 600 there, 400 here, and that's another basically a million of kind of, revenues that or whatever cares that going away how likely this kind of things proceed moving forward or do you think it's it's one offs that hopefully won't repeat just trying to get understanding of this like one else type of things that keep popping up yeah understood um so the liquidated damages was one off um and it's the other question

About the Eastern Standard note, that was really our intention when we first entered into the note in November was to convert the remainder of Eastern Standard's seller note, which is about 800K, to common stock rather than paid off in September or October as originally intended and negotiated with them. And then after closing the transaction, that negotiation happened. kind of changed and it ended up saying actually let's just go back to paying them off with cash in September although the door is open to converting it instead so basically that part of the 8k and the waiver was really just saying okay this didn't get solved on the timeline we thought so let's circle back to it in September in terms of ongoing things I think there's two things that have really caused a lot of these in the... Yeah, so the first one was really related to the actual when we entered into the note and a lot of those moving parts. And so that's why we don't see that happening again. The other was a lot of the acquisitions we made in 2024, we used a heavy reliance on seller financing. And the way we structured it was interest only for two years or for 18 months or three years with a balloon payment at the end. Whereas, and that's kind of what created the Eastern standard note. And we had a revenues end note due at the end of this year and another one paid off at the end of last year. So as we're targeting acquisitions now, we're going to avoid kind of creating this, I don't want to say time bomb, but, you know, creating this, thing where two years from now we have a balloon payment coming. So that would either mean we pay more upfront cash or we make it so that the seller note amortizes and pays out over time rather than just interest only and then a big balloon. So kind of back to your question, do we think it will continue It's not our intention and we don't think it will. But sometimes the structure of a deal might have this element and sometimes not. But we're very mindful of not just continually creating these big cash payments obliged in the future.

Thank you. And I just have a quick one.

Is the current cash, is it about the same If you can share that, because I know we're running, it says kind of running low 800. Is it still the same, excluding the new equity?

We can't really share the finances beyond March 31st. So, yeah, I can't really comment on that. But obviously cash is something we're watching very carefully, and that's why the acquisitions are important too.

Okay, last one. You've been doing a little bit of restructuring, repositioning. Are you thinking that in Q1, this is going to go into Q2 and Q3? And how much efficiency do you think you can add more to lower expenses to get more color in that?

Yeah, I think I'll kind of start the answer and then I'll pass it to Adam because he's more interested in the weeds than I am. But basically, I think the bulk of it was done at the end of Q4 and the beginning of Q1, really, with Eastern Standard and Revenue then, because they're our largest assets in that space. But there is still more opportunity. The smaller assets like DDS Rank, Content Elect have opportunity for us to improve the margins there and kind of just take the playbook from what we've done with the two bigger businesses and then map it across them. Plus, I think revenues and standard, they have room for improvement as well. And I don't mean that in a negative way. I just think there's always room for further optimization. But yeah, Adam, do you want to add anything there?

Yeah, I mean, I think there's still room to eke out single point like margin expansion like across the services businesses over the course of the year. I do think that the bulk of the work in terms of integration and creating efficiency has been realized and that now really what the businesses need is sales volume because we've gotten to a point where They are comfortably able to fulfill and service like their existing customer base. And we've added a ton of new capacity without adding new costs. And so what we'll really see as the year goes on is that we're going to continue to increase the number of customers we're serving at each business without needing to increase capacity, fulfillment or overhead. And so we'll see pretty significant, I think, margin expansion over the course of the year, but it's going to be a factor more of new sales coming into, you know, a base that's been built to be very efficient as opposed to finding increased efficiencies, you know, from existing revenue.

I understand. Okay. Greatly appreciate all the call, guys. Thank you. Yeah, thanks. We appreciate the questions and Always happy to talk.

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Wells for final comments.

Thank you, and thanks, everybody, for joining us today.

We plan to host our next quarterly conference call to discuss Q2 results in mid-August. Have a great rest of your day.

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