AtlasClear Holdings, Inc. 2026 Q4 Earnings Call

Thank you, operator, and good morning, everyone. Before we begin, I'd like to remind everyone that today's discussion may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For more information, please refer to AtlasClear's annual report on Form 10-K for the fiscal year ended June 30, 2026, and the company's other filings with the SEC. Except as required by law, AtlasClear undertakes no obligation to update any forward-looking statements based on new information or future events. Management may also refer to certain non-GAAP or supplemental measures during today's call, including total revenues plus interest income. Reconciliations to the most directly comparable GAAP measures are included in the company's earnings press release and the Form 10-K.

With that, I'll turn the call over to John Schaible, Executive Chairman.

Thank you, Jeff, and good morning, everyone. Fiscal 2026 was a breakout year for AtlasClear. Revenues increased 85% to $20.1 million, and together with interest income, the business generated $21.9 million. Approximately 54% of total revenue came from sources other than commissions, led by the rapid expansion of our stock locate business. Importantly, we achieved that growth without using an at-the-market program or any equity line during the year. We ended fiscal 2026 with $15.4 million in cash, more than twice the amount at the beginning of the year, and stockholders' equity improved to $21.1 million from a deficit of $6.8 million. Atlas Clearing also increased its net capital to $14.4 million. These results show the platform we have been building is beginning to deliver meaningful scale. We also reported positive GAAP net income for the second consecutive year, with approximately $2 million in fiscal 2026.

As Sandip will explain, the GAAP result included a substantial non-cash fair value gain related to warrant earn-out and other derivative liabilities, most notably an $11.1 million gain associated with the earn-out liability. At the operating level, we recorded a loss of $9.8 million, compared with $4.9 million last year, as sharply higher activity drove increased variable compensation, data processing, clearing, and stock locate costs. We were investing to grow. The year also included $3.6 million of non-cash stock-based compensation. We believe it's important to give investors a clear view of both the reported results and the operating investments supporting the company's growth. We also signed six new correspondent broker-dealers whose contributions are not yet reflected in our results, and Craig will walk through their progress in more detail.

In addition, we are evaluating further strategic opportunities, including ARC Financial, the holding company of Dawson James, and the previously announced institutional digital asset transaction. Both remain subject to non-binding letters of intent, due diligence, board approvals, definitive agreements, and other closing conditions. With that, I will turn the call over to Craig Ridenhour to discuss our operating highlights.

Craig? Thank you, John. Fiscal 2026 was a year of strong execution at Atlas Clearing, particularly in the expansion of our stock locate business and our correspondent clearing pipeline.

Stock locate revenue grew to $6.8 million from approximately $300,000 a year earlier. It has also changed the composition of our business. Approximately 54% of total revenues now comes from sources other than commissions, up from 45% in fiscal 2025, which makes our results less dependent on trading volume in any single period. On the correspondent side, we signed five new broker-dealers during fiscal 2026 and recently signed a sixth. They are in various stages of onboarding and conversion. They contributed no meaningful revenue in fiscal 2026. Revenue from our existing correspondent grew approximately 67% to $1.4 million, which illustrates how a relationship can build once it's fully live.

As the new firms come online, we expect the additional customer assets and trading activity to support growth across stock loan, securities lending, and interest income. We built the team and infrastructure ahead of that growth, which is part of why expenses rose this year. We expect to support much of the next phase using the platform and team already in place with only incremental additional expense. That is where operating leverage comes from. Looking further ahead, settlement infrastructure is changing. Banks are now testing tokenized deposits and shared ledger settlement mostly on the cash side of a transaction. The security side, where clearing firms operate, is the next step, and a focused clearing firm can adopt new workflows more quickly than large incumbents within the same regulatory standards. That is how we view the digital asset opportunity we are evaluating.

Regarding Commercial Bancorp of Wyoming, as discussed in our Form 10-K, the parties withdrew the pending regulatory applications and expect to refile them at an appropriate time. We remain committed to the transaction and continue to view the combination of the bank and Atlas Clearing as an important part of our strategy to build an integrated trading, clearing, settlement, and banking platform. I will now turn the call over to Sandip Patel to review our financial results.

Thank you, Craig, and good morning, everyone. Total revenue for fiscal 2026 was $20.1 million, an increase of 85% from $10.9 million in fiscal 2025.

Commission revenue increased 56% to $9.3 million from $5.9 million. Stock locate fees increased to $6.8 million from roughly $300,000. Clearing fees were $2.1 million compared to $3.2 million in fiscal 2025. This line includes both the fees we charge our clearing correspondent and customer account service fees, and the prior year benefited from two unusually large months of service fee revenue. Importantly, revenue from our existing correspondent increased approximately 67% to $1.4 million, and the six new correspondents we have signed did not contribute meaningfully to fiscal 2026 results. Vetting fees were $1.4 million, broadly consistent with $1.5 million a year ago. Net gains on firm trading accounts increased to over $500,000 from under $7,000, and other revenue was approximately $65,000. Total expenses were at $29.8 million, compared with $15.8 million for fiscal 2025.

Compensation, payroll taxes, and benefits increased 91% to $11.7 million from $6.2 million, primarily because of higher variable compensation associated with revenue growth. Separately, we recorded $3.6 million in non-cash stock-based compensation related to executive employment agreements entered into in September 2025, with no comparable expense in fiscal 2025. Data processing and clearing costs increased 98% to $4.2 million from $2.1 million, generally in line with the higher level of activity. We also recorded $800,000 of stock locate expense and $700,000 of loan net expense, both new cost categories associated with the growth of the stock locate business. Regulatory, professional, and related expenses increased 17% to $4.9 million from $4.1 million, primarily reflecting professional fees related to the Commercial Bancorp negotiations and additional consulting support. The resulting loss from operations was $9.8 million, compared to $4.9 million in fiscal 2025.

The increase primarily reflected the variable costs associated with higher business activity and the $3.6 million non-cash stock-based compensation charge. These expenses supported a business that generated 85% revenue growth and rapidly expanded newer revenue lines during the year. Below the operating line, total other income was $11.5 million, compared to $10.4 million a year ago. The principal items included non-cash gains of $11.1 million from the change in fair value of our earn-out liability, $1.8 million related to the Winston & Strawn agreement, $1.7 million from the change in fair value of warrant liabilities, and $400,000 from the change in fair value of our convertible note derivative. These gains were partially offset by $5.1 million in interest expense and a $570,000 loss on settlement of the Winston & Strawn agreement. Income before taxes was $1.7 million.