TON Strategy (TONX) Q2 2026 Earnings Call Transcript

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DATE

Tuesday, Aug. 11, 2026 at 9:00 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer - Kevin Wilson
• Chief Financial Officer and Chief Operating Officer - Sarah Olsen

TAKEAWAYS

• Revenue -- $15 million, driven by higher staking rewards generated by the company's Gram holdings.
• Gram Treasury Balance -- 230.5 million Gram, representing approximately 4.4% of the total Gram supply at the end of the second quarter.
• Gram Staked -- 229.9 million Gram, representing approximately 35% of all Gram staked across the network.
• Annualized Gross Staking Yield -- 17%, reflecting the impact of the network's consensus upgrade that increased the frequency of block production.
• Quarterly Staking Rewards -- 9.4 million Gram, compared to 2.2 million Gram earned in the first quarter.
• Fair Value of Digital Assets -- $369.5 million, up from $272 million in the prior quarter due to reward accumulation and market value appreciation.
• Operating Income -- $0.5 million, an improvement from an operating loss of $3.7 million in the previous quarter.
• Net Income from Continuing Operations -- $83.5 million, primarily resulting from an $82.8 million net gain from changes in the fair value of Gram holdings.
• Cash and Restricted Cash -- $29 million, managed with zero debt obligations.
• Annual Cash Operating Cost Savings -- $4 million to $5 million, expected following the wind-down of legacy VERB operations.
• Network Block Production Speed -- 400 milliseconds, reduced from 2.5 seconds following the Catchain 2.0 consensus upgrade.
• Transaction Finality -- 1 second, improved from approximately 10 seconds due to technical network updates.
• Network Throughput -- 10-fold increase, intended to strengthen infrastructure for consumer payments and AI applications.
• Transaction Fee Reduction -- sixfold, bringing average costs to a small fraction of 1 cent under a fixed fee model.
• Network Traffic Reduction -- 2-fold to 4-fold, achieved through a new networking layer implemented in June.
• API Data Indexing -- 2-fold to 4-fold faster, improving the accessibility of blockchain information for applications.
• Accelerated Stock Compensation -- $5.5 million, a non-cash charge resulting from the surrender of certain legacy restricted stock units.
• Kingsway Advisory Write-off -- $2.9 million, a non-cash expense recorded after the termination of the advisory services agreement.
• Cumulative Staking Revenue -- $22 million, generated since the company began staking operations in August 2025.
• Legacy Operation Savings Visibility -- Full run-rate savings expected in the fourth quarter as transition and wind-down costs subside.

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RISKS

• Olsen stated, "we are not running the business on the assumption that today's staking economics could continue indefinitely. Yields are naturally going to evolve as the network matures," noting that protocol changes or governance decisions could impact future returns.

SUMMARY

Management at TON Strategy Company (NASDAQ:TONX) reported financial results for the second quarter of 2026, highlighting the expansion of its digital asset treasury and the substantial completion of its transition away from legacy operations. The company introduced a "Own, Advance, Compound" capital allocation framework designed to prioritize long-term value per share by evaluating treasury management, ecosystem investments, and shareholder returns on a competitive basis. Management noted that technical upgrades to The Open Network, including the Catchain 2.0 consensus update, have improved transaction speeds and reduced costs, which the company expects to support broader network utility. Strategic priorities for the second half of 2026 include compounding the Gram treasury, maintaining U.S. dollar liquidity, and evaluating selective operating company investments that reinforce the TON ecosystem.

• CEO Wilson introduced the "Own, Advance, Compound" framework, stating, "Our objective is to produce returns beyond those available from simply holding Gram, which requires that we compare every use of capital... on the same per share basis."
• The company supported a community-approved rebrand of its native asset from Toncoin to Gram on June 8, 2026, to distinguish the network from its currency.
• Management highlighted the role of AI agents in driving future network activity, with Wilson noting, "As AI evolves from generating information to taking authorized actions on behalf of users, an agent could be asked inside Telegram to buy a product, book a service, or pay another agent to complete a task."
• CFO Olsen confirmed the elimination of inherited costs, stating, "we expect the wind down of the legacy VERB businesses to reduce annual OpEx by approximately $4 million to $5 million."
• Management identified the integration with Telegram as a core competitive advantage, noting the platform provides a global distribution engine of more than one billion users for TON-powered applications.
• The company is currently evaluating "staking as a service" as a potential future offering under its strategic expansion pillar.

INDUSTRY GLOSSARY

• Gram: The native cryptocurrency of The Open Network (TON), formerly known as Toncoin.
• TON (The Open Network): A decentralized blockchain platform originally designed by the Telegram team.
• Catchain 2.0: A consensus upgrade to the TON network that significantly improved block production speed and transaction finality.
• Nominator Pools: Smart contracts that allow multiple participants to pool their assets for staking to secure the network.
• API (Application Programming Interface): A set of tools and protocols that allows different software applications to communicate and share data.

Full Conference Call Transcript

Operator: Good morning, and welcome to TON Strategy Company's Second 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 filed its quarterly report on Form 10-Q for the quarter ended June 30, 2026, and issued a press release with its financial results. Both are available in the Investor section of the company's website. An accompanying presentation was posted to the Investor section of the company's website before today's call and will be referenced during management's prepared remarks. The press release, quarterly report, presentation, and webcast replay of today's call will be available on the company's website.

Following management's prepared remarks, the company 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 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, and its quarterly report on Form 10-Q for the quarter ended June 30, 2026, 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. Any required reconciliations and explanations of these measures are included in the earnings release. With that, I'd like to turn the call over to TON Strategy Company's CEO, Kevin Wilson. Please go ahead.

Kevin Wilson: Thank you, operator, and good morning, everyone. For today's call, I'll begin with an overview of our Q2 operating progress and recent developments across TON. Sarah will then review our financial results and staking performance. I will come back on to discuss our capital allocation framework, our priorities for the second half, and the longer-term opportunity we see developing around TON and Telegram. The second quarter demonstrated the productivity of our Gram treasury at current scale, while we also made important progress in simplifying the rest of the business around that treasury and the TON ecosystem. We ended June with approximately 230.5 million Gram, including approximately 229.9 million Gram deployed in staking.

During the quarter, we earned approximately 9.4 million Gram compared to approximately 2.2 million in the first quarter and recognized $15 million of staking revenue. The increase in rewards primarily reflected TON's April network upgrade, which increased the frequency of validation rounds, along with the larger amount of Gram deployed throughout the quarter. Since staking operations began in August 2025, we estimate the treasury has earned approximately 13.8 million Gram through June 30, 2026, and generated approximately $22 million of cumulative staking revenue. Those rewards increased our Gram holdings without requiring additional capital to purchase the tokens. Once earned, the additional Gram can be staked to generate future rewards, creating a simple but powerful compounding effect.

In Q2, we also largely completed the actions required to discontinue the inherited VERB legacy operations and focus the business around the Gram treasury and the TON ecosystem. During the quarter, we terminated vendor agreements, reduced contractor and personnel expenses, and certain lower-margin service contracts. Sarah will discuss the expected cost savings in greater detail. I also want to briefly address the Kingsway advisory agreement. As I'm sure you've seen, the company filed a Form 8-K on August 10, announcing that we terminated our advisory services agreement with Kingsway Capital Partners, following the previously disclosed efforts to negotiate a settlement. The company stopped making monthly payments under the agreement in March 2026.

During the quarter, the TON community approved the rebrand of TON's native digital asset from Toncoin to Gram, with the ticker GRAM. The rebrand took effect on June 8 following a community vote. The token name and ticker changed, but the underlying blockchain, token balances, addresses, and smart contracts were not affected. Gram was the original name of the currency envisaged in Telegram's first TON white paper. Restoring that identity helps distinguish The Open Network, or TON, from Gram, the network's native currency. The name change occurred as a series of technical improvements made TON faster, less expensive, and more useful. Pavel Durov, CEO of Telegram, has publicly described a 7-part initiative for improving TON.

Based on public announcements, 4 elements have been identified to date: increasing network speed, reducing transaction fees, expanding Telegram's role in network validation, and restoring the Gram name. The remaining 3 elements have not been publicly detailed, and we will avoid speculating about what those steps may include. The actions announced so far have addressed several hurdles to expanding TON use, including by improving network speed, transaction costs, and validator support. And I'd like to take a moment to explain the technical changes in greater detail.

Telegram's global platform gives TON a distribution engine that most blockchains do not have, but that distribution is only valuable if the underlying network is fast and reliable enough for people to use inside everyday applications. Consumer payments can't be slow or uncertain and small frequent transactions do not fulfill their value proposition if fees consume a meaningful portion of each transaction. The recent upgrades directly addressed both constraints beginning with speed and followed by transaction costs. On April 9, TON deployed the Catchain 2.0 consensus upgrade, reducing blockchain times from approximately 2.5 seconds to approximately 400 milliseconds. Transaction finality improved from approximately 10 seconds to approximately 1 second, while estimated transaction throughput increased approximately tenfold.

Later in April, the network completed a validator software update that reduced transaction fees approximately sixfold, bringing the average transaction cost to a small fraction of 1 cent under a fixed fee model. TON Strategy supported both updates through its participation in network governance. Additional upgrades implemented in June improved how validators communicate, organize transactions, and reach consensus. A new networking layer reduced network traffic by about 2 to 4x and improved node connectivity. TON also continued improving the infrastructure used by applications. New APIs expanded support for staking pools, validator operations, and decentralized applications, and data indexing improvements made frequently referenced blockchain information available 2 to 4x faster.

The technical upgrades have strengthened TON's ability to support activities such as payments and emerging AI agent applications inside Telegram, where near instant settlement and negligible transaction costs can make frequent automated transactions more practical. These upgrades matter directly to TON Strategy. We hold a strategically significant amount of Gram, substantially all of which is staked. Greater network activity can expand Gram's utility by creating more reasons for developers, service providers, and users to hold, stake, or use the asset. Over time, more productive use can support demand for Gram. Separately, the April upgrades also contributed to the staking performance we reported for Q2.

I will now turn the call over to Sarah to discuss our financial results and staking performance. Sarah?

Sarah Olsen: Thank you, Kevin, and good morning, everyone. Our second quarter results reflect a strong quarter of staking performance and productive treasury operations. Before I walk through the results, I want to note that our first and second quarter results reflect the VERB businesses as discontinued operations. Total revenue was $15 million compared with $3 million in the first quarter. The increase was driven by higher staking rewards generated by our Gram holdings. Gross profit was $14.3 million, or 95% of revenue, compared with $2.8 million, or 95% of revenue, in the first quarter. Total costs and expenses were $13.8 million, compared with $6.5 million in the first quarter.

During the quarter, we resolved a historical equity plan issue that predated TONX, which resulted in the surrender of certain legacy RSUs. Under GAAP, this required us to recognize immediately the remaining $5.5 million of unrecognized compensation expense associated with those awards. Therefore, this charge was non-cash and had no effect on cash flows or stockholders' equity. The results also included approximately $2.9 million of non-cash expense associated with the one-time setup fee under the Kingsway advisory agreement. This charge reflects the write-off of the remaining prepaid asset following the termination of the agreement on August 10. Operating income from continuing operations was approximately $0.5 million compared with an operating loss of $3.7 million in the first quarter.

The improvement reflected the increase in staking revenue, and we generated positive operating income despite recognizing the $5.5 million accelerated stock compensation charge and the approximately $2.9 million non-cash Kingsway-related charge I just described. Net income from continuing operations before income taxes was approximately $83.5 million, compared with a net loss of approximately $91.3 million in the first quarter. The second quarter included an $82.8 million net gain from changes in the fair value of our Gram holdings, while the first quarter included an approximately $87.9 million net loss. As mentioned on prior earnings calls, we account for Gram at fair value, so changes in its market price can create significant non-cash gains or losses between reporting periods.

Operating income, therefore, provides a clear view of the performance of our staking activities and the operating cost base. Our digital assets had a fair value of approximately $369.5 million at June 30, compared with approximately $272 million at March 31. The increase reflected both the additional Gram earned through staking and the increase in Gram's market value during the quarter. We ended the quarter with approximately $29 million of cash and restricted cash and no debt. We continue to take a conservative approach to managing U.S. dollar liquidity as our revenues are generated in Gram while our operating obligations are denominated in U.S. dollars. As Kevin mentioned, we also substantially wound down the legacy VERB operations during the quarter.

Those actions are expected to remove approximately $4 million of inherited annual operating costs from our existing cost base. Turning to staking, we earned approximately 9.4 million Gram during the second quarter, bringing our total holdings to approximately 230.5 million Gram at June 30. Our gross staking yield was approximately 17% on an annualized basis during the quarter. As TON is a blockchain, staking economics are determined by the network, not by us. Our focus is positioning the treasury to efficiently capture those economics as they evolve. In April, a change to the network's consensus mechanism increased the frequency of block production.

With substantially all of our eligible Gram staked, that translated directly into greater block production and higher staking rewards for us during the quarter. Our Gram remains unlevered and is staked with institutional partners through segregated nominator pools. We remain focused on institutional-grade custody and staking infrastructure with the goal of keeping our Gram secure, productively deployed, and compounding the treasury over time. I will now turn the call back to Kevin.

Kevin Wilson: Thank you, Sarah. I want to explain how we plan to make decisions from our stronger operating base. One of my priorities during my first 3 months has been to create a simple way of communicating how we evaluate the opportunities available to TON's Strategy. Going forward, we will describe that framework in 3 words: Own, Advance, and Compound. Own refers to the foundation already in place, maintaining the strategically significant position in Gram and participating in securing the TON network through staking. We continue to manage the treasury with a focus on Gram per share rather than the absolute treasury size.

Advance reflects our ability to use that position along with our public company platform and institutional relationships to invest in, acquire, or partner with select businesses and infrastructure that can promote the overall growth of the TON ecosystem. Potential areas include payments, financial services, TON developer infrastructure, AI, digital identity, and the custody, liquidity, and market structure to expand access to Gram. Compound describes how we evaluate capital allocation decisions. Does the allocation increase long-term value per share?

Our objective is to produce returns beyond those available from simply holding Gram, which requires that we compare every use of capital, including additional Gram purchases, share repurchases, maintaining U.S. dollar liquidity, and making operating or ecosystem investments on the same per share basis. This framework is not meant to be rigid, but it's there to guide our decisions. Every use of capital must compete against the alternatives, and retaining liquidity can be the right decision when no other available opportunity offers a sufficiently attractive expected return.

Today, our current focus is on 5 main alternatives: purchasing additional Gram, continuing to stake the Gram we own, repurchasing TONX shares, retaining U.S. dollar liquidity, and selectively investing in operating or ecosystem opportunities. We will be selective. We will not pursue an acquisition simply to add revenue or make the company larger or deploy capital merely because it is available. Any investment should either generate an attractive standalone financial return or strengthen TON adoption, Gram utility, or the market infrastructure around the asset in a way that can support the long-term value of our Gram position, and ideally accomplish both. Put simply, we will selectively invest where strategic initiatives and shareholder value are mutually reinforcing.

The capital allocation framework explains how we make decisions today, but I want to close our prepared remarks by discussing the long-term opportunity that informs where we may choose to advance strategic initiatives and why we believe the opportunity around TON and Gram can become more valuable over time. The internet made information native to the web. Information could be created, distributed, and accessed directly online globally, but asset ownership and economic activity have largely continued to depend on separate financial systems and intermediaries. We believe TON is designed to be able to make asset ownership and transactions increasingly native to the internet.

Practically, this means that payments and settlements can occur directly within digital applications using programmable infrastructure that is continuously available. The TON infrastructure can support a broad array of activities across payments, financial services, commerce, entertainment, and more. TON's fast settlement, low transaction costs, and scalable design make it particularly well-suited to high-volume, always-on applications, while Telegram can provide a familiar interface and direct distribution to users on a global scale. Our primary treasury asset, Gram, serves as the native asset supporting the settlement, validator participation, network security, and coordination across TON. AI agents are one of the most relevant examples of how this shift could develop within the TON ecosystem.

As AI evolves from generating information to taking authorized actions on behalf of users, an agent could be asked inside Telegram to buy a product, book a service, or pay another agent to complete a task. Telegram would provide the interface where the instruction is given, while TON could provide the identity, permissions, ownership, payment and settlement instructions needed to complete it. If this model develops, AI agents could initiate a much larger number of small, recurring, and automated transactions than users initiate manually today. This could expand transaction frequency across TON, although the opportunity remains early and will depend on useful applications being built and adopted.

For TON Strategy, the relevance is that increased activity can create recurring reasons for developers, applications, service providers, and users to hold, stake, or use Gram. If TON becomes increasingly useful as infrastructure for consumer, application-driven, and automated economic activity, network adoption could expand Gram's utility and strengthen the long-term opportunity of our substantial treasury position. Our role is to own and stake Gram through institutional custody, participate in network validation, and provide public market access to that opportunity. Where we have a credible advantage, we can selectively invest or partner around capabilities to support TON's adoption. We are focused on strategic opportunities with identifiable economics and credible paths to improving long-term value per share.

Looking ahead, our priorities for the second half are to manage and compound the Gram treasury, maintain appropriate U.S. dollar liquidity, improve investor access to TON, and evaluate selected opportunities under the framework we discussed today. Our objective is to develop an operating company around a strategically significant Gram position so that the treasury, our public company platform, and any future operating capabilities can reinforce one another over time. That concludes our prepared remarks. Operator?

Operator: [Operator Instructions] Today's questions were submitted in advance by shareholders and will be moderated by Alec Wilson from Gateway Group. Sir, please proceed.

Alec Wilson: Thank you. Our first question is for Sarah. How much of the benefit from the wind down of the VERB operations was reflected in Q2? And when should we expect the full run rate savings to become visible? And what, if any, meaningful residual costs or obligations remain that are associated with the legacy business?

Sarah Olsen: Hey, Alec, thanks. Sure. So based on a current assessment, we expect the wind down of the legacy VERB businesses to reduce annual OpEx by approximately $4 million to $5 million, and that's on a normalized look-back basis. Because we continue to incur certain transition and wind down costs, we expect the majority of those savings to become visible probably in Q4. I should say while we've substantially wound down the legacy operations, we definitely expect certain limited obligations, think legal, admin, other wind down activities to continue into next year. Those costs are expected to be significantly lower, though, than the historical cost base.

I think it's also worth noting, beyond the financial savings, an important benefit is really just organizational focus. As we complete the transition away from the legacy business, our team can dedicate substantially more time and resources to executing and focusing on our core strategy.

Alec Wilson: Great. Thanks, Sarah. Next one is for Kevin. What developments would give management confidence that TON is becoming more deeply adopted? And how does that translate to value for TON Strategy?

Kevin Wilson: Yes, thanks, Alec, and that's a great question. We think about adoption in a few different ways. First, we really look at how people are actually using TON-powered applications inside Telegram. And by that, I mean not just holding Gram as an investment, but also are they using it for payments, digital goods, things like mini apps, games, what type of creator monetization is happening and other everyday transactions. I think that real utility is ultimately what's going to create durable demand for frontier technology like The Open Network. And second, I think we're really looking at a few different aspects of the developer ecosystem, because a healthy developer environment is often really the leading indicator of long-term network value.

And then finally, we look at the financial health of the network itself. So things like growth in active wallets, transaction volumes, assets staked, validator participation, and really overall network activity itself, these things all tell us whether adoption is broadening and whether the ecosystem is becoming more resilient. I think finally, we would like to see improvements in market structure and believe that this is an area where we can make an impact. Things like greater exchange availability, deeper liquidity in Gram, custodial support for Gram, and broader institutional participation, and really easier access for investors. These things all help reduce friction and support wider adoption over time.

And for our company, those developments matter because our objective is not just to own Gram. We want to own the strategic position in what we believe can become a primary blockchain that powers the next digital economy. And as that ecosystem grows, we believe the value of our treasury can appreciate. Our staking operations will become more valuable, and we then have greater opportunities to deploy capital into the broader TON ecosystem. So in other words, we're investing not just in a digital asset, but in the growth of what we view as an important frontier technology that we feel has an enormous potential.

Alec Wilson: Great, thanks, Kevin. Sarah, we have another one for you. Following the April network upgrade, what are the main variables to consider that could cause staking economics to move from current levels? And how should we think about the staking economics for the next few quarters and into 2027?

Sarah Olsen: Thanks, Alec. First, I'd note that we don't have any unique visibility into future governance decisions or protocol changes beyond what's publicly available to the community. As we've mentioned a couple of times now, the April network upgrade improved validator performance, which increased the number of blocks being validated, and as a result, materially improved our staking economics. We were well positioned to benefit because we substantially had all of our treasury staked. Looking ahead, though, we are not running the business on the assumption that today's staking economics could continue indefinitely. Yields are naturally going to evolve as the network matures.

They can be influenced by governance decisions, including potential changes to block rewards, as well as validator participation and broader dynamics. As a result, we take a conservative approach when planning the business. And I'd say more broadly, and Kevin's touched on this, we've never viewed the investment case for TON as being solely about staking yields. Over the long term, we think the value of this network is going to be driven by adoption. Again, as Kevin mentioned, developers building applications, and other things like stablecoins, payments, and real economic activity happening on chain. Staking is an important component of what we do, but it's really only one opportunity.

Our focus is on supporting the long-term growth of the network. We believe that's ultimately what's going to create the best ecosystem and drive the most return for our shareholders.

Alec Wilson: Great, thank you, Sarah. And Kevin, maybe one more for you. Is staking as a service an offering for outside Gram holders an opportunity that you all are considering?

Kevin Wilson: Yes, thanks, Alec. So we're not currently looking at staking as a service, but I think it's definitely the type of opportunity we might evaluate in the future. I think really the broader point behind our Advance pillar that I identified earlier on in the call is that we believe our position in the TON ecosystem creates opportunities beyond just TON and Gram. And today, we're the largest holder of Gram outside of Telegram, and we're also the largest validator on the network. And that gives us very meaningful operating experience and I think a really unique perspective on how the ecosystem is evolving.

And as that network matures, we'll evaluate opportunities where we believe we can really leverage that expertise and our Gram holdings to create value both for the ecosystem and TONX shareholders. But our approach here will remain very disciplined. We'll pursue opportunities where we believe that we have a sustainable competitive advantage and where we see an attractive risk-adjusted return on capital. And staking as a service is certainly representative of the types of opportunities we will consider as we execute on that Advance pillar.

Alec Wilson: Thank you. That concludes the Q&A session for today's call. Kevin, I'll turn it back to you for your closing remarks.

Kevin Wilson: Yes, thank you, Alec, and thank you everyone who submitted questions. We entered the second half with a productive Gram treasury, a more focused operating structure, and a clear framework for allocating capital. We believe TON's technical progress and Telegram-enabled distribution advantage create a differentiated long-term opportunity. And TON Strategy is well-positioned to participate and enable that opportunity through the public markets. To our shareholders, thank you for your continued support. Operator, that concludes today's call.

Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

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