Avax One Technology Ltd. (AVX) Earnings Call Transcript

Good afternoon, everyone, and thank you for participating in today's conference call to discuss AVAX One's financial and operating results for the third quarter ended September 30, 2026. Joining us today are AVAX One's Interim Chief Executive Officer and Chief Operating Officer, Pete Wylie, and Chief Accounting Officer, Stephanie Brady. By now, everyone should have access to AVAX One's third quarter 2026 earnings press release, which was issued earlier this afternoon at approximately 4:05 p.m. Eastern Time. The release is available in the investor relations section of the company's website at www.avax-one.com. A webcast replay of this call will also be available on the company's website. Following management remarks, we'll open up the call for your questions. Please be advised this conference call will contain statements that are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. You are urged to not place undue reliance on any forward-looking statements which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements. For important risks and assumptions associated with such forward-looking statements, please refer to the company's SEC filings. I will now turn the call over to Pete Wylie, AVAX One's Interim Chief Executive Officer and Chief Operating Officer. Pete.

Thank you, Operator, and good afternoon, everyone. I'd like to begin with the update on the Avalanche ecosystem before discussing our operational progress and strategic priorities at AVAX One. We continue to see encouraging momentum across Avalanche, particularly as the network expands its role in institutional financial infrastructure, real-world asset tokenization, decentralized finance, and consumer applications. In our view, these developments demonstrate the growing utility of the Avalanche blockchain and reinforce its ability to support a broad range of commercial applications at scale. One of the most significant developments during the third quarter was the completion of Progmat's migration of more than 452 billion Japanese yen, or approximately $2.7 billion, in regulated digital securities to Avalanche. Progmat is Japan's leading security token platform, supporting the issuance and management of tokenized financial assets, including real estate securities and corporate bonds. The migration demonstrates Avalanche's ability to support institutional-grade financial infrastructure and regulated assets at a meaningful scale. We also saw additional progress in the tokenization of traditional financial assets. During the quarter, POSCO International completed a transaction involving the tokenization of trade receivables on an Avalanche-based network, while New York Life Investment Management expanded the availability of a tokenized high-yield corporate bond strategy to Avalanche through Centrifuge. Lastly, earlier this week, the New York Stock Exchange announced that it has selected Avalanche as the core settlement infrastructure for its upcoming tokenized securities trading platform. NYSE selected Avalanche following an extensive evaluation of its speed, scalability, predictable transaction costs, and ability to support a controlled network that meets institutional regulatory and compliance requirements. The platform is targeting a fourth quarter launch subject to regulatory approval and is designed to enable 24/7 trading, near-instant settlement, and stablecoin-based funding. These developments highlight how established financial institutions and corporations are exploring blockchain technology to improve the efficiency, transparency, and accessibility of traditional financial products. Avalanche also saw continued growth in financial applications. In July, Aave, one of the industry's leading decentralized lending protocols, launched Aave v4 on Avalanche, marking its first expansion beyond Ethereum. The deployment introduced new liquidity infrastructure and lending markets with plans for a dedicated institutional market designed to support lending against tokenized real-world assets. We believe these capabilities are particularly important as traditional financial assets increasingly move on-chain and create demand for new forms of financing and liquidity. Beyond institutional finance, Avalanche is also gaining traction in consumer-facing applications. In September, Athena launched Athena Pay, a digital payments and savings application built on Avalanche, representing another example of how the network can serve as the underlying infrastructure for financial applications that reach consumers directly. We are also seeing growing adoption across the public sector. During the quarter, Kenya implemented blockchain-based infrastructure to secure and verify more than 15 million academic records. The United Arab Emirates announced plans to migrate its national digital identity document vault to Avalanche. These initiatives further demonstrate the network's versatility and its ability to support large-scale applications beyond traditional cryptocurrency use cases. Collectively, these developments reflect Avalanche's expanding role in the infrastructure supporting on-chain financial markets. The growing number of institutional and commercial applications reinforces our conviction in the network's long-term potential and the value of AVAX One's position within its ecosystem. Turning to AVAX One, over the past several months, we have evaluated our operations and capital allocation priorities to determine where we see the greatest opportunity to generate long-term shareholder value. Following this review, we have decided not to proceed with our previously announced AI and high-performance computing data center initiatives, including the proposed project with Blue Flare Energy Solutions. While we continue to recognize the opportunity in AI infrastructure, we believe our capital and resources are better directed toward expanding our Avalanche digital asset treasury strategy, where we have established a meaningful position and differentiated capabilities. As the first publicly traded digital asset treasury focused on Avalanche, our goal is to increase AVAX ownership on a per-share basis through disciplined capital allocation, active treasury management, and recurring yield generation. We do this through native staking, selective opportunities within decentralized finance, and capital markets transactions where we believe value can be accreted to shareholders. Moving on to our treasury operations, as of September 30, 2026, we hold approximately 14,170,184 AVAX tokens and equivalents, including 858,075 deployed into Treehouse, with approximately 99.7% actively staked to generate protocol-native rewards and support the Avalanche network. During the quarter, our staking activities generated approximately 141,112 AVAX in rewards, representing an annualized yield of approximately 5.85%. Since launching our treasury strategy in November of 2025, we have generated approximately 376,066 AVAX in cumulative staking rewards. We continue to operate our own Avalanche validator and maintain our participation in liquid staking through Treehouse. We are also evaluating additional opportunities to enhance risk-adjusted returns and improve the capital efficiency of our treasury while maintaining appropriate liquidity and risk management practices. One important aspect of our staking program is our laddered approach to managing token commitments and reward distributions. We generally target nine-month staking periods with portions of our holdings maturing at different intervals. This structure enables us to capture attractive staking yields while providing periodic access to our tokens for redeployment. As the program has matured, we've established a more consistent schedule of staking maturities. Although the timing of rewards received can vary from quarter to quarter, the underlying reward rates are established when each staking commitment is made. We expect this structure to provide greater consistency in reward distributions going forward. We also operate our digital asset treasury with strict security and custody protocols. Our asset manager, Hivemind, follows a standard set of operating procedures that have been reviewed by the company and deemed appropriate for the management of digital assets. This framework involves a stringent approval process with multi-party authorization for significant transfers of digital assets. Only authorized executives of the asset manager and management can initiate or approve such operations. Turning to our balance sheet and capital allocation, during the third quarter, we made significant progress simplifying our capital structure, eliminating more than $14.9 million of outstanding convertible debt through a combination of repayments, conversions, and redemptions. These transactions included approximately $7.4 million of debt repaid, $7.1 million converted into common shares, and an additional $400,000 redeemed into common shares. Subsequent to quarter end, we eliminated the remaining approximately $970,000 in convertible debt. Reduction in our debt obligations has strengthened our balance sheet, reduced potential financing overhangs, and provided greater financial flexibility as we continue executing our treasury strategy. We also continued repurchasing shares under our previously announced $40 million authorization. During September, we repurchased 333,500 shares at an average price of $5.36 per share. In October, we repurchased an additional 710,000 shares at an average price of $5.46 per share, bringing our cumulative repurchases since November 2025 to 1,496,761 shares. Approximately $30.4 million remains available under the company's $40 million share repurchase program. We believe repurchasing shares when they trade at a meaningful discount to the underlying value of our assets represents an attractive use of capital. We will continue evaluating repurchases alongside other opportunities to increase AVAX per share and generate long-term value for shareholders. Lastly, on our Bitcoin mining operations, our Bitcoin mining business continues to generate revenue during the quarter through our existing operations in Alberta and Ohio. We are managing these operations with an emphasis on cost efficiency and maximizing the value of our existing assets while evaluating their longer-term role within the business. Looking ahead, we are focused on growing our AVAX treasury, optimizing staking yields, and pursuing capital allocation opportunities that enhance shareholder value. With the significant reduction in our convertible debt and continued execution of our share repurchase program, we have made meaningful progress strengthening our financial foundation. With that, I'll turn the call over to review our third quarter financial results and balance sheet. Stephanie?

Thank you, Pete. As a quick reminder, as we review our third quarter 2026 financial results, all comparisons and variance commentary refer to the prior year quarters unless otherwise specified. Total revenue for the third quarter of 2026 increased more than 4x to $2.4 million compared to $526,000 in the third quarter of 2025. This increase primarily reflects our transition to the Avalanche Digital Asset Treasury Strategy in Q4 of 2025. Our revenue in the third quarter of 2026 consisted of $1.8 million from staking rewards and $0.7 million from our Bitcoin mining operations. Our total operating expenses in the third quarter of 2026 were a positive $50 million compared to $3.1 million in the third quarter of 2025. Q3 2026 operating expenses included a $55.1 million unrealized gain on the change in market value of our digital assets, and a $483,000 realized loss on digital asset transactions. Excluding these non-cash items, adjusted operating expenses for the third quarter of 2026 were approximately $4.7 million. Net income for the third quarter of 2026 increased materially to $49.9 million, or $6.11 per diluted share, compared to a net loss of $8.4 million, or $66.81 per diluted share, in the third quarter of 2025. Cash and cash equivalents as of September 30, 2026, were $8.5 million compared to $22.1 million as of December 31, 2025. As of September 30, 2026, AVAX One held approximately 13,312,102 AVAX tokens. In addition to the AVAX tokens, we also held approximately 659,000 TAVAX tokens through our deployment with Treehouse. This concludes our prepared remarks. We will now open it up for questions from those participating in the call. Operator, back to you.

Thank you. There are no questions at this time. I will turn the call back to Pete Wylie for closing remarks.

Thank you, operator. We appreciate everyone tuning in this evening, and I'm excited about the opportunity ahead for AVAX One as we build upon our position within the growing Avalanche ecosystem. With a stronger balance sheet, an experienced leadership team, and a disciplined approach to capital allocation, I believe we have a compelling opportunity to scale our digital asset treasury and continue to create meaningful long-term value for shareholders. We appreciate your continued support and look forward to updating you on our progress in the quarters ahead. Thank you, everyone.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect. This live transcript is auto-generated without human intervention or review.