Title

Presentation

Operator: Good afternoon, everyone. Welcome to today’s Sol Strategies’ Fiscal Second Quarter 2026 Earnings Conference Call. [Operator Instructions] On the call with us today is Mr. Michael Hubbard, Chief Executive Officer; Mr. Doug Harris, Chief Financial Officer; and Mr. Steve Ehrlich, Chief Strategy Officer. At this time, I’d like to turn the conference over to Mr. John Ragozzino with ICR. Please go ahead, sir.

John Ragozzino: Thanks, Bob. Good afternoon, everyone, and thank you for joining Sol Strategies fiscal second quarter 2026 earnings conference call. Before we begin, I want to remind everyone that certain statements on this call contain forward-looking statements subject to risks and uncertainties. Actual results may differ materially from these statements. We refer you to our latest press release, MD&A and SEDAR+ filings for a detailed risk factors description and all assumptions. All dollar amounts are in Canadian dollars unless otherwise noted. The company assumes no significant events occur outside our normal course of business and that our current trends in digital assets continue. However, listeners should note that crypto markets are volatile, and that our business metrics can fluctuate significantly. With that, let me turn it over to Michael Hubbard, Sol Strategies CEO.

Michael Hubbard: Thanks, John. Good afternoon, everyone, and thank you for joining us. The first half of our fiscal year 2026 covered October through March, and a lot has happened during this period and in the weeks since. We cleaned up our capital structure, strengthened the Board and launched our liquid staking tokens, STKESOL. We acquired the Zyga zero-knowledge technology through the Darklake transaction and signed a definitive agreement to acquire Houdini Swap. We’re going to walk through all of it. On the Board and leadership side, we added crypto industry veteran Les Borsai and public company veteran Dennis Logan as Directors, and most recently named Jon Matonis as Chairman. Jon has been in the blockchain industry since the early 2010s and brings deep experience and relationships to the role.

I’m also glad to have the interim title behind me. The Board appointed me permanent CEO on March 31, and I’m focused on building from here. Alongside that, we formalized Steve Ehrlich as Chief Strategy Officer. Steve has been a meaningful contributor to our capital market strategy for some time and having him in a full-time leadership role is a real asset. Now let me talk through what we’ve actually been building. In January of this year, we launched STKESOL, our liquid staking token on the Solana blockchain. Here’s the problem it solves. Native staking on Solana requires users to lock up their Sol, wait up to 2 days to un-stake, and they have to choose between earning yield and deploying capital elsewhere. STKESOL changes this. When Sol holders stake through our protocol, they receive STKESOL, a receipt token representing their stake position that continues to earn accruing staking rewards.

That token can be held, traded, used as collateral in DeFi applications or deployed for additional yield, all while the underlying Sol keeps earning. What’s unique about STKESOL is that it allocates SOL across validators using our own Wiz Score methodology from stakewiz.com, which we own and operate. The Wiz Score intelligently ranks validators based on performance, security and decentralization metrics. There are up to 75 validators in our current set. At launch, we had integrations with Kamino, Orca, Loopscale, Squads and Sanctum. By the end of March, STKESOL had approximately 768,000 Sol deposited into the protocol, equivalent to roughly USD 61 million or CAD 83 million at the time. The company receives 5% of all stake and rewards accrued to the pool.

Receive real-time insider trading and news alerts

This is a new revenue line sitting alongside our treasury stake and delegated stake. Our broader validator network continues to perform well. We estimate that just over 5% of all the staking wallets on Solana are delegating to a Sol Strategies managed validator. On the technology side, we acquired the assets of Darklake Labs in April 2026, including the intellectual property behind Zyga, a zero-knowledge proof engine built natively for Solana. The team has joined us as well. Vitor Py Braga, who brings experience from Meta and IBM, joined us as Director of Engineering and takes over technical leadership. Amber Hales joins with strong compliance and operations background. Together, they add real depth. Zyga is designed for privacy-preserving execution with dynamic inputs.

On top of the engine, the team has built an application specifically for dynamic slippage protection that executes trades privately. We see significant potential here, and we’ll share more as the work develops. That technology connects directly to our next transaction. Earlier this month, we announced a definitive agreement to acquire Houdini Swap for USD 18 million. Houdini Swap is a noncustodial privacy-enabled cross chain swap aggregator, operating across more than 100 blockchains and more than 30 exchanges, both centralized and decentralized. More than half of it is — sorry, more than half of its trailing 12-month transaction volume touched Solana. We expect to close by the end of May. What we’ve really been doing over the past year is building up the stack.

Validators are the foundation, the infrastructure layer that the Solana network runs on. We established a significant foothold there early. With STKESOL, we moved up into user-facing products, inserting ourselves between end users and validators and creating deeper touch points across DeFi. With the Zyga technology, we step further up into product and technology development, adding privacy preserving execution capability that we believe has broad applications. And with Houdini Swap, we will move up again, adding a cross chain routing business with proven revenue, real distribution and significant Solana exposure. Each layer connects to the ones below it, that’s deliberate. What I’d say at a high level is this, the Solana blockchain is growing.

Transaction volume is growing. The financial applications being built on Solana, trading, stablecoins, prediction markets, perpetuals are growing. We’ve spent the last year building infrastructure that sits across multiple layers of that stack. We believe we are well positioned for what comes next. With the Clarity Act advancing through U.S. legislation, we anticipate greater certainty around key regulatory questions, and that’s something we greatly look forward to. Healthy regulation that provides clarity, end user protection and protects innovation is essential for this industry to reach its full potential. With that, I’ll pass it to Steve.

Steve Ehrlich: Thanks, Michael. Good afternoon, everyone. Over 30 years in financial services, I’ve watched infrastructure reshape markets completely. On the trading side, we went from calling a broker to orders being electronically routed to the exchange floor to a 24/7 market running on the most efficient, scalable blockchain in existence, Solana. And the product categories keep expanding from equities, options and futures to prediction markets and perpetual futures. Volume keeps growing and so does the reliance on Solana. The same pattern is playing out in money movement and banking from bank teller to ATMs to stablecoin transfers. Where is that volume going? The Solana blockchain. That conviction in Solana is the dominant financial infrastructure layer and what’s driving our acquisition strategy.

The Darklake transaction and the pending Houdini Swap acquisition are the start of a deliberate build-out of assets that improve and enhance what we’ve already built. On Houdini Swap specifically, as Michael mentioned, more than 50% of the transactions touch Solana. What we see is the opportunity to own a cross chain API-based compliant transaction network with significant existing distribution across core wallets. The team has done a strong work building that distribution layer. We see real opportunity to expand the product suite into new traded markets and to connect it with our existing validator network and liquid staking products. Looking further out, Vault’s real-world asset tokenization, stablecoin infrastructure and RPC technology all remain interesting to us.

The goal is a suite of easily accessible APIs across the Solana economy infrastructure that lets any wallet or institution participate while benefiting from a relationship with a trusted compliant partner. I’ve been part of several businesses that grew significantly. I’m genuinely excited about where we’re headed. Closing Houdini Swap by the end of the month is the next milestone. With that, I’ll turn it over to Doug.

Douglas Harris: Thanks, Steve, and good afternoon, everyone. I’m going to start with a quick picture of our balance sheet. As of March 31, 2026, we had approximately $60.6 million of cryptocurrencies, $22 million of intangible assets and about $350,000 of cash on our balance sheet. During the period, we also reduced our liabilities by approximately $9 million as we paid off significant debt to our former chairman, which is part of our corporate initiatives to make the company more capital efficient. On the income statement, the 6-month numbers included a loss on the disposition of cryptocurrencies, which is for the most part an exchange of Solana for other cryptocurrency tokens mainly Solana liquid staking tokens to enhance yield rather than a pure sale of Solana for cash.

Under IFRS accounting rules, the exchange must be accounted for as a gain or loss based on the carrying cost at the time of the conversion. For the 6 months ended March 31, 2026, it was approximately a $22 million loss. And for the 3 months ended March 31, 2026, it was a $15 million loss. The majority of this amount is related to the launch of our liquid staking token in January 2026. If you exclude these amounts from our results, revenue from our own stake in third-party validators for the 6-month period was approximately $3.3 million and for the 3-month period, approximately $1.2 million. Also on the income statement, our 6-month numbers include some significant noncash expenses totaling approximately $77 million, which consists a $12.1 million write-down of our validators, $4.7 million of amortization expense on the validators, $2.2 million of share-based compensation expenses, $1.7 million of interest expense, mostly paid in stock and a $56.5 million revaluation loss on digital assets.

The latter reflecting the decline in price of Solana from approximately USD 208 at the beginning of October 2025 to approximately USD 83 at March 31, 2026. Analyzing our existing operating business shows that at lower Solana prices, our 6-month operating loss on the business is approximately $2.6 million. We continue to take steps to reduce our operating expenses including some onetime legal costs incurred during the 6-month period to ensure we can get closer to breakeven on our validator business in the current environment. We are excited about the Houdini Swap transaction and believe that upon closing, it will add significant revenue and profits to our business and materially change our future financial statements. With that, I will hand it back to Michael.

Michael Hubbard: Thank you, Doug and Steve, and thank you all for joining us today. We’re excited about the pending Houdini closing at the end of the month and the long-term value it brings to our business. The future of Sol Strategies is very exciting, and we look forward to sharing the results next quarter. We are thrilled to be positioned to capture the growth of the Solana and digital asset economies to be ready to service institutions and traders who need access, priority, privacy and execution quality. With that, we open it up to any questions listeners may have.

Operator: [Operator Instructions] We’ll go first this afternoon to Gareth Gacetta at Cantor Fitzgerald.

Gareth Gacetta: I wanted to touch on the kind of products and time lines for Darklake and Houdini. Could you maybe dive a little deeper on where you see kind of the greatest opportunity from a product perspective in the near term? And also which of those products you might see the greatest monetization opportunity from?

Michael Hubbard: Yes, absolutely. Thanks, Gareth, for your question. So Darklake is really exciting for their Zyga privacy engine, and that unlocks multiple different use cases. And when we look at Houdini, there are essentially 2 or 3 core products under the hood. So they have the routing infrastructure across 100-plus blockchain networks and over 1 million supported tokens, which is available both for public and private swaps. Then they have the private swap optionality, and then they have the API product, which allows third-party integrations into this infrastructure. The real opportunity that we see is when we start combining these things, where we can use some of the Zyga zero-knowledge technology to potentially offer enhanced private swap opportunities on the Houdini APIs and provide value-added services to those swap users and essentially building out the B2B APIs for third-party partners that are using the Houdini APIs currently, and who might be using them in the future.

And giving them a more controlled environment for that private swap experience. So the specifics there aren’t something we can speak to in too much detail just yet, but there’s definitely a lot of opportunity for integration between those technologies, and we think there’s a lot of potential, particularly on the Solana blockchain.

Gareth Gacetta: Great. That’s super helpful. And then maybe could you just touch on the potential synergies that might exist between your existing validator business in these two new acquisitions? How might you think of a potential uplift to maybe block level fee capture or staking yields after the integration?

Michael Hubbard: Yes, absolutely. That’s a great question as well. I don’t want to get too technical here, but essentially, at the moment, we’re sitting at effectively two layers here. With the validators, we’re sitting at the core of the Solana network, which means that we are processing transactions, not just our own, but of the entire network whenever we have leader slots. So about 1% of the network we’re processing blocks, and that gives us a first look at those transactions and those blocks and the ability to include transactions there. And with that comes the ability to provide priority to transaction inclusion and transaction landing. The second is that through our staking services, both native and liquid, we’re providing users access to yield through the Solana blockchain staking layer.

So the opportunities there with Houdini are really in how we can bring in more users into that staking ecosystem and offer them access to our staking products as well as potentially combining some of those products to give them better opportunities for swapping on Houdini and cross-selling or loyalty systems. Those are things we haven’t fully developed just yet, but there’s a few different opportunities that we’re thinking about.

Operator: [Operator Instructions] We’ll go next now to John Roy with Water Tower Research.

John Marc Roy: Yes. These two acquisitions are pretty significant. You’re really changing the company to more of an infrastructure middleware company. Am I reading that right? Is that where you guys are headed?

Michael Hubbard: Yes. Thanks, John. That’s exactly right. Essentially, the way we’re looking at it is we’re working our way up the stack. So we started with the validated infrastructure, which is really the scaffold or the foundation that the entire blockchain network operates on. That gets us into the transaction execution layer of the blockchain. With the liquid staking token, we’re stepping up more into the user-facing side, where we’re offering a more enhanced staking product to users, where they have the ability to use it as collateral to use it in DeFi to maintain liquidity. And with Houdini, we’re taking that step further where we’re now looking at cross chain. And the importance there is the ability for liquidity to move between blockchain ecosystems, that’s a very, very important aspect of the blockchain economies and also offering those additional services of swapping between over 1 million supported tokens, swapping within the same blockchain, swapping between different blockchains and then adding on to that the privacy products, which are important both to end users, but also to institutions.

So for us, really, we’re seeing this as a vertical expansion and integration of all these layers.

John Marc Roy: Okay. Excellent. And you’re looking to do this without too much of a significant investment. I mean, is this going to be positive to the P&L in not too long a time?

Steve Ehrlich: Yes, I’ll take that one.

Michael Hubbard: Do you want to speak to that?

Steve Ehrlich: Yes, I’ll take that one. And John, yes, the idea when we executed this transaction and again set to close by the end of the month is to add significant revenue to our business and the profits to go with that. And so the transaction details as set out were $18 million, with $4 million of stock and set up in multiple payments over time with revenue that we expect on this business to be $12 million, $13 million a year. And we set up an earn-out on this business, too, where the earn-out — the floor of the earn-out is $2.5 million a year. So we definitely believe that this business is going to be profitable and revenue generating for the business. And another piece that I want to touch on — in addition to what $2.5 million of EBITDA, let me clarify that.

Another piece I want to just add on to some of the synergies, Michael said, is the existing Houdini Pay business and the Zyga technology to combine with the privacy aspect of sending money between wallet is an important aspect of this too. We see a tremendous opportunity to expand the Houdini Pay business as well.

Operator: [Operator Instructions] And gentlemen, it appears we have no further questions today. Mr. Hubbard, I’d like to turn things back to you for any closing comments.

Michael Hubbard: Thank you, Bob. Thank you, everyone, for dialing in. We’re very excited about what’s to come for this company and the upcoming closing of the Houdini transaction. We are incredibly excited about the potential for this company going forward and look forward to providing a further update for our next quarterly earnings. Thank you.

Operator: Thank you, Mr. Hubbard. Again, ladies and gentlemen, thank you for joining the Sol Strategies fiscal second quarter earnings call. Again, thanks so much for joining us. We wish you all a great afternoon. Goodbye.

Receive real-time insider trading and news alerts