Forum Markets, Incorporated (FRMM) Earnings Call Transcript

Hello, and welcome to Forum Markets First Quarter 2026 Earnings Conference Call. [Operator Instructions] This call is being recorded on May 14, 2026, and a replay will be made available on Forum's Investor Relations website later today. I will now turn the call over to John Kristoff, Senior Vice President, Corporate Communications and Investor Relations.

Thank you, Megan. Hello, and thank you all for joining Forum's First Quarter 2026 Financial Results Conference Call. Joining me on the call today are McAndrew Rudisill, Chairman and Chief Executive Officer; and John Saunders, Chief Financial Officer. We hope you've had an opportunity to review our first quarter financial results issued earlier this morning. We've also posted an earnings presentation to our Investor Relations website. As a reminder, some of the matters we'll be discussing on this morning's call are forward-looking in nature. Please keep in mind that actual results could differ materially from what is expressed in these forward-looking statements. Forum assumes no obligation to update the information, and we encourage you to refer to our most recent filings with the SEC for a discussion of factors that could cause actual results to differ materially from these statements. During our call, we will also reference certain non-GAAP financial measures, which we believe provide useful information for investors. A reconciliation of these non-GAAP measures to the corresponding GAAP measure can be found in our press release and presentation on our Investor Relations website. And with that, I'll turn the call over to McAndrew.

Thank you, John, and good morning, everyone. Since our last call, our team has remained focused on executing our strategy of originating, structuring and tokenizing institutional-grade cash flow generating assets to modernize capital markets. We've made meaningful progress across the platform, expanding our asset origination pipelines by entering the AI infrastructure financing space and making significant progress on establishing strategic co-investment partnerships with major financial investment firms. At the same time, we recognize there is a meaningful disconnect between the market's current valuation of the company and the progress we are making and the intrinsic value of the platform that we are building. We've taken deliberate steps to directly address that gap, including activity through our share repurchase program and initiating a formal strategic review aimed at preserving the long-term opportunity in front of us. On the share repurchase program, since our announcement in April, we repurchased approximately 5.8 million shares for an aggregate purchase price of approximately $24.9 million, representing approximately 28% of our shares outstanding. All shares under the program have been retired and canceled. Following these repurchases, we had approximately 14.5 million shares outstanding as of April 30, 2026. We view repurchasing shares at current levels as a highly accretive use of capital and a direct demonstration of our conviction in the intrinsic value of Forum. Our Board authorized the program with the flexibility to act programmatically and opportunistically as market conditions permit. In parallel, the Board has established a special committee comprised of independent directors to formally evaluate a full range of strategic alternatives with the objective of maximizing shareholder value. This includes engaging with parties that have already approached the company and proactively evaluating all available value creation pathways. These actions reinforce rather than alter our view of the business. We remain highly confident in our operating model, the long-term opportunity in tokenized real-world assets and in our ability to generate revenue and cash flow as a stand-alone company. This process reflects our disciplined commitment to ensuring the full value of the business is recognized. While that review is underway, we remain focused on executing on our core strategy and continuing to build and scale the platform. Turning to the platform. We have continued to expand our asset base and deploy capital into high-yield institutional-grade assets that generate income today and create future tokenization pipelines. Most recently, we announced our entry into AI infrastructure financing, specifically short-term bridge loans supporting the acquisition and deployment of NVIDIA GPUs. These loans finance the period between hardware purchase and long-term financing once the GPUs are operational, sourced through established partners with a clear path to repayment. We are targeting annualized returns in the mid-teens on these short duration loans. Critically, these are income-producing assets that generate yield from day 1, independent of tokenization. While we intend to tokenize a portion of each deal, this structure allows us to put capital to work immediately while building out the pipeline of assets we can ultimately bring on chain. Given the rapid expansion of demand for AI infrastructure, we view this as a repeatable, scalable opportunity set where we can deploy capital and earn yields, tokenize and recycle into new transactions. We've made significant progress in establishing relationships with established well-known institutional investment firms to deploy capital into our asset origination pipelines, particularly our AI infrastructure financing and commercial aircraft engine leasing verticals. We are confident in our ability to generate meaningful capital deployment opportunities into our asset pipelines, enabling Forum to earn revenue through origination and asset management fees as we source, structure and manage assets on behalf of our institutional counterparts with more details to be announced once capital has been actively deployed into our pipelines. We view the progress we have made establishing these relationships as validation of our sourcing and structuring capabilities and as an early demonstration of how Forum can scale beyond our own balance sheet and access constrained double-digit yielding asset classes. More broadly, it illustrates the 2 distinct but complementary distribution paths we are building, retail access through tokenized products and institutional access through co-investment agreements and distribution agreements where we can white label our products on existing institutional platforms. We continue to believe this is the right strategy and these opportunities are well-aligned with our model and position us to grow meaningfully as we bring more assets onto the platform. As we look ahead, our focus is on scaling the platform by expanding asset pipelines, increasing capital deployment and broadening distribution. Liquidity.io remains a core part of that strategy, enabling a broader set of investors to access institutional-grade opportunities and serving as our proof point for bringing real-world assets on chain. Importantly, Liquidity.io is currently undergoing a major platform upgrade that will significantly expand its capabilities. In addition to digital tokens, the enhanced platform will offer trading in stocks, bonds, cryptocurrency and private credit securities, a meaningfully broader product set that we expect to drive substantial growth in their user base. We anticipate the updated platform will launch late second quarter or early third quarter. For Forum, a larger and more diverse Liquidity.io user base directly expands the buyer pool for our tokens on their exchange, which we view as an important catalyst for driving token distribution at scale. Combined with the institutional co-investment channels we are building, we are creating a multichannel distribution model designed to serve both retail and institutional investors and to scale alongside our growing asset base. And as we noted previously, we will continue to evaluate potential capital raising opportunities with a focus on long-term value creation, balance sheet flexibility and shareholder alignment. Overall, these steps position Forum to build a durable income-generating platform that we can expand across asset classes and distribution channels as we continue to grow. The actions we have taken since our last call, aggressive share repurchases, a formal strategic review, developing institutional co-investment partnerships and continued expansion into high-yielding asset verticals reflect both our conviction in this platform and our commitment to ensuring shareholders benefit from the value we are building. As capital markets continue to evolve, we believe platforms with the ability to uniquely identify, originate and scale high-quality hard assets will emerge as leaders. We believe Forum is well positioned to be among them. With that, I'll turn the call over to John Saunders.

Thank you, McAndrew. Good morning, everyone, and thank you for joining us. Before I walk through the quarter, I want to briefly note how our financial framework is evolving as the platform matures. As McAndrew described, we have been active on multiple fronts since our last call, deploying capital into income-producing real-world assets, entering new high-yield verticals, including AI infrastructure financing, executing a significant share repurchase program and initiating a formal strategic review process. Each of these reflects deliberate capital allocation decisions made with a view towards growing the underlying value of the platform. The metrics we continue to focus on are assets under management, yield generated from the asset base, origination and structuring activity and token issuance volume, and over time, the fee revenue associated with managing and distributing those assets at scale. Turning to the first quarter. Forum generated revenue of approximately $2.9 million compared with $2.4 million in the fourth quarter of 2025. Revenue in the quarter was driven primarily by staking revenue of $1.8 million and aircraft engine revenue of $1.1 million. Results for the quarter reflect the timing of capital deployment and when assets begin contributing yield. As we noted last quarter, our revenue mix is continuing to shift away from legacy digital asset activity and increasingly towards income generated from real-world asset portfolios, financing activities, and over time, origination, structuring and asset management fees. Selling, general and administrative expenses were approximately $7.5 million in the first quarter. We continue to invest in the infrastructure, systems and partnerships required to support platform growth while maintaining a disciplined approach to operating expenses. Net loss for the quarter totaled approximately $77.5 million, which was primarily attributable to realized losses on disposition of digital assets. Adjusted EBITDA loss was $76 million as a result in price changes from digital assets. We anticipate this is the last quarter we will experience large mark-to-market adjustments associated with digital assets. Turning to the balance sheet. During the quarter and subsequent period, we continue to allocate capital toward platform growth while also executing the share repurchase program that McAndrew described, both reflecting our disciplined approach to deploying capital where we see the greatest value and addressing the gap between our market value and our view of intrinsic value. Given the significant share repurchases that have occurred since quarter end, I want to walk through where we stand as of April 30, 2026. We believe this provides the most current and relevant picture of the platform's asset base. As of April 30, Forum reported total assets of approximately $170.5 million, exclusive of prepaid assets, accrued expenses and accounts payable. And cash and cash equivalents totaled approximately $62.5 million. The asset base consisted of the following: We held $17.6 million in aircraft engine assets net of depreciation, which continue to generate contracted lease income from major commercial carriers. We held approximately $1.8 million in auto loans and warehouse facilities, $14.8 million in manufactured home loans and approximately $28 million in EV collateral, offset by our collateralized loan of approximately $26 million. We also held equity positions in our strategic partners, Satschel, Inc., Karus and Zippy valued at $13.7 million, $9.8 million and $22.3 million, respectively. In aggregate, these assets support a net asset value of approximately $144.5 million or approximately $9.93 per share based on approximately 14.5 million shares outstanding as of April 30, 2026. We view NAV per share as a useful reference point in evaluating the underlying value of the business, particularly given the strength and quality of the asset base we continue to build. Looking ahead, our capital allocation priorities remain focused on 3 areas: deploying capital into high-quality, cash-generating real-world assets, expanding origination and distribution capabilities across the platform and preserving balance sheet flexibility as we scale. With respect to guidance, we are adjusting our expectations for full year 2026 to reflect the capital allocated to share repurchases subsequent to our last call. We now expect to exit 2026 with between $100 million and $175 million in assets under management across our tokenized and pre-tokenization credit portfolios compared with our prior expectation of $125 million to $200 million. We also now expect full year 2026 revenue to be in the range of $18 million to $22 million compared with our prior expectation of $18 million to $26 million. The updated range reflects a slower pace of near-term deployment resulting from capital used for share repurchases while still capturing yield income from the existing asset base, financing activities and early-stage origination and structuring economics. We believe the business is building momentum across the drivers that matter most, yield generation today, growing origination and structuring economics as the platform scales and recurring asset management and distribution economics over time. The actions we took this quarter, expanding the asset base, repurchasing shares and developing new institutional co-investment opportunities reflects our conviction in the platform and our focus on compounding its underlying value. We look forward to providing further updates as the quarter progresses. And with that, I'll turn the call back over to the operator for questions.

[Operator Instructions] Our first question will come from Brian Dobson with Clear Street.

So now that you've had tokens live, how are you seeing, call it, feedback from your products? And as you're looking through, call it, the next 2 years, which segments would you expect to see the most material growth?

Brian, this is McAndrew. Thank you for your question. I think that tokens based on feedback that we've gotten from communicating with a lot of institutional investors are going to receive the most focus primarily from the retail side at this point. From our conversations with institutions, they're a lot more interested in investing directly via sort of traditional structures in the assets that we're creating via like a large-scale structured product format, which ultimately could be tokenized. But I think where a lot of real-world asset tokenization is leading is being able to fractionalize these assets kind of into smaller increments that allow retail investors to access them. And that is why we commented on Liquidity.io and the platform build that they're undergoing right now. And to increase the aperture of that distribution, having stocks, bonds, options all in one place alongside tokens should create a much larger marketplace for individual investors to come buy these tokens. Where we've seen the most interest on the tokenization side, starting number one, aircraft engines because there's going to be a pretty nice tax benefit to investing in those directly that we figured out. Number two, the AI infrastructure finance, we've seen a lot of institutional interest in investing directly in that. And I think that will translate into token interest at the retail level. I'd say mortgages and auto loans, I would say, equal interest, very durable yields and kind of interestingly short duration on the auto loan warehouse product, which we think ultimately can slot into both stablecoin and money market products because of the really low capital duration and high yield that it generates. So that's a longer answer to your question, but I think you kind of have to bifurcate the market between institutional and retail from the work that we've done.

Yes. That's good color. I guess -- and then as a follow-up to tokenization, right, how do you think about the trade-off between continuing to make buybacks below NAV versus deploying that capital into something that can generate a yield? I guess how are you approaching that question?

I mean we look at it from a mathematical perspective every day and is it better to buyback shares or deploy capital into generating revenue? And I think we have to strike the right balance between both. I mean we just gave you this new revised revenue guidance because of the share buybacks, and there's a direct correlation between the more shares we buyback, the less revenue that we generate. So we just have to take a balanced approach to it. And as I'll reiterate again, the buyback remains open.

Yes, very good. And then just one last one, if I may. Do you think you could walk us through your thought process on the credit underwriting for the GPU bridge and what gives you confidence in the takeout commitment?

Sure. Number one, most of the counterparties we are working with are very well capitalized, whether from a private equity or venture capital perspective or they are publicly traded entities that are pretty well capitalized in their own right. So that like step number one, we have to execute credit underwriting on the counterparty that we're working with on the data center build-out. Two, most of them have really large offtake contracts with hyperscalers on the other side to provide compute. And those contracts are included in the collateral package for the GPUs that we're providing. And then number three, the way we've set up the takeout on the first couple is going to be in partnership with USD.AI so that immediately after the bridge is complete, the long-term financing for the facility is taken out by a long-term loan that's put up by USD.AI's facility. And I think you're starting to see other players step into the marketplace for the long-term financing as well. And it's going to be interesting to see what happens just from a yield perspective on long-term versus short-term financing in GPU finance because the space we're playing is from point of purchase to completion of data center installation. And that's where there's a gap in the financing market right now.

Your next question will come from Brendan McCarthy with Sidoti.

McAndrew, you touched on the upgrade that the Liquidity.io platform is currently undergoing. Can you provide additional color on those upgrades and maybe how it will impact your business going forward?

Of course. So they have partnered with a new algorithmic trading system that's backed by some of the largest market makers in the United States. It's also backed by some very large VC firms that has an online marketplace for equities, options, and fixed income that tie into all the exchanges in the U.S. and many exchanges internationally. And then by doing this, it creates a hyper-liquid equity option in bond marketplace that people can trade all those securities on while simultaneously allowing co-listing of tokenized products right alongside the stocks. And they've got a whole team of programmers that they brought in, actually from one of the U.S. exchanges, and they have been working to integrate that exchange platform directly into Liquidity.io and the ultimate user interface on it, I think, is going to look a lot like what you see with some of the largest, like online brokerages today. And we're simultaneously working with those market makers to then drive traffic to the site once we take it live.

That makes sense. I appreciate the color there. How do you kind of expect the impact to be reflected in the secondary market liquidity? Do you see that as maybe a gradual increase over time? Or do you see this upgrade as driving more substantial secondary market trading in the tokens? I guess I'm just curious as to maybe how this will impact the liquidity in the tokens.

Yes. It's a great question. And I think we have to look at history as a guide on online exchanges as to how their user bases grew. And I would expect it to be gradual at first. I mean, I think we have to break it into user growth, absolute user growth and then token growth. And so I think user growth is a function of advertising and marketing, which is going to be on Liquidity.io shoulders. And then I do think you'll see a gradual growth in users and then it should start to quickly inflect as it compounds, which you've seen with a lot of the other online marketplaces. And then as that user growth start to accelerate, having the tokens front and center right next to stocks, we think it will be a slow ramp. And then at some point, there should be a breakthrough in people buying tokens in the same way that they buy stocks or they buy bonds. I just think the reality is in the token marketplace today in the United States, there are really not a lot of tokens that are available for people to buy that are outside of effectively money market/treasury bill-oriented tokens, and they have to be bought in really large increments, oftentimes in multimillion dollar increments. And the marketplace has just not yet developed for growth equity tokens or cash flow-oriented tokens. And I think it's we're right at the precipice right now where there's a lot of different token exchanges that are trying to increase their product load. And one of the things that we're working on with Liquidity.io is to cross-list across those other token exchanges so that you create more liquidity in the marketplace, the same way that the equity marketplace has built up liquidity by cross-listing assets across multiple regional exchanges. And I think that's the way you get the most eyeballs on it. So there's going to have to be a lot of kind of participation agreements with the other token exchanges, which we're actively working on. We're really creating the marketplace for these real-world asset tokens.