Onfolio Holdings Inc. Common Stock 2026 Q2 Earnings Call

Please go ahead, sir. Thank you, and good morning, everyone.

We appreciate you joining us today. For anyone newer to the Onfolio story, we are an owner/operator of cash-generating digital businesses, primarily in B2B marketing agencies and B2C online education. Since our IPO in 2022, we have grown revenues from approximately $2 million to $10.7 million in full year 2025, roughly a five times increase, entirely through acquiring and operating real businesses that generate real cash flow. We remain at an important inflection point. We are not yet self-funding at the parent level, but once we get there, our options for capital allocation open up significantly, more acquisitions, paying down remaining obligations, or longer term, potentially returning capital to shareholders. I'll come back to that later in the call.

First, I want to touch directly on where things stand with our Nasdaq listing, since I know that's front of mind for a lot of you, and then I'll walk through the quarter. Nasdaq compliance update. The first issue is a stockholders' equity deficiency. Nasdaq requires companies listed to maintain stockholders' equity of at least $2.5 million, and we fell below that threshold. We submitted our plan to regain compliance to Nasdaq in July. Since then, our senior secured convertible note holder has converted the entirety of the note into equity, and as described in our August 4th blog post, those conversions add back more equity than the size of the deficit. So we believe this deficiency is more or less addressed, and we expect to have official confirmation from Nasdaq soon. The second issue is the minimum bid price requirement.

On August 10th, we executed a one-for-50 reverse stock split, which reduced our outstanding shares from approximately 42 million to approximately 850,000, and was specifically designed to bring our closing bid price back above the $1 minimum Nasdaq requires. This is actually the second time this year we've had to address this requirement. We regained compliance briefly back in May, but it didn't hold, which is part of why we moved to do a reverse split this time rather than simply waiting for the bid price to recover organically. Reflecting the note conversions Adam will walk through in a few minutes, we had approximately 2.45 million shares outstanding as of August 18th. Ultimately, we believe we've now taken the actions needed to address both deficiencies. With our listing secure, we can put our full attention back on returning to revenue growth through both our existing portfolio and acquisitions.

Now, turning to the quarter itself, I want to be direct. Our portfolio did not turn the corner in the second quarter the way we originally expected. Revenue was down both year-over-year and sequentially, and the core issue is cash. The parent company remains cash constrained, and that is directly tied to softer cash generation from the portfolio than we had planned for. To some extent, it is a circle where lack of cash being sent up to the parent by the portfolio leads to less cash to spend on portfolio growth. While we try to address this with organic growth and portfolio and parent-level expense reduction, we believe the solution is bringing additional funding to the company and completing new cash positive acquisitions. Let me walk through the Q2 performance of both segments.

Starting with B2B, Eastern Standard, our largest agency, is facing real disruption from AI in a way that's affecting how we sell. Clients are increasingly hesitant to commit to full project fees in a world where AI tools make parts of agency work look replaceable, even where our actual delivery still requires real expertise. That's made new sales harder to close, and it's the single biggest driver of the year-over-year decline in our B2B segment this quarter. We're responding on two fronts. First, our own AI services line, where we sell AI-powered marketing, content, and analytics services directly to clients is one answer to that hesitation. Instead of asking clients to pay for manual project work, we can offer them the AI-inclusive alternative ourselves.

Second, we're leaning further into the RevenueZen playbook I'll describe in a moment, so that even as deal sizes or timelines shift, our cost structure keeps pace. That AI services line is live, and we are seeing real engagement, but I want to be careful not to overstate where it is today. We have single-digit client engagements. It's a genuine proof point for the model, not yet a meaningful driver of revenue, and we won't treat it as one until it is. The RevenueZen consolidation under Eastern Standard, which I introduced last quarter, continues. Execution has been a bit slower than we'd hoped, but there are real green shoots. New sales hires are ramping, and we're continuing to see AI-driven traction on both the cost and revenue sides of that business. RevenueZen was a standout performer again this quarter, building on the operational turnaround we described publicly back in May.

Both RevenueZen and Eastern Standard management have reported seeing green shoots of growth in the last few weeks. We believe organic growth will return later in the year. In B2C, Proofread Anywhere remains profitable but is not growing. We further pulled back paid acquisition spend during the quarter to protect unit economics rather than chase revenue we didn't believe would hold up. Vital Reaction continued to be modestly profitable. I said on our last call that we believe the first quarter would be the trough for B2C revenue. I'd rather revise that call than repeat it. We're not going to put a specific quarter on the trough again. What I can tell you is what we're doing. Media buying, ad creatives, and email are consolidated across both B2C properties.

We're applying AI to these workflows the same way we have in B2B, and we will redeploy spend only as we see the unit economics hold. Growth here follows discipline. Before I hand it to Adam, I want to explicitly reset expectations on three things we've talked about before: gross margin, acquisition pacing, and profitability timing. On gross margin, we said last quarter we expected to trend into the mid 60% range in 2026. That hasn't happened, and Adam will walk through why when he covers the P&L. In short, our margin is highly sensitive to the mix between B2B and B2C revenue. As B2C has contracted faster than B2B, margin has stayed close to flat rather than expanding. As a result, we now expect gross margin to remain near current levels until B2C revenue stabilizes.

On acquisition pacing and profitability timing, I'll go through both in detail in the strategic priority section after Adam's remarks, including the specific pipeline updates from our August 4th blog post. We continue to believe that closing the remaining gap to parent-level profitability depends primarily on the acquisitions in our pipeline more than on organic portfolio improvement alone, and I'll walk through that in a few minutes. With that, I'll turn the call over to Adam to walk through our financial results for the second quarter. Adam, over to you. Thanks, Dom.

Good morning, everyone. Unless otherwise noted, all comparisons are second quarter 2026 versus second quarter 2025. Total revenue for the second quarter was $1.5 million, a decrease of 52% from $3.15 million in the second quarter of 2025, and down approximately 20% from $1.87 million in the first quarter of 2026. Revenue from services, primarily our B2B segment, was $1.22 million, down 41% from $2.06 million a year ago. As Dom described, this primarily reflects a slowdown in new sales at Eastern Standard that began late in the first quarter, along with lower revenue across several of our other agency subsidiaries, partially offset by new revenue from our Pace Generative subsidiary, which had no comparable revenue in last year's period. Revenue from product sales, primarily our B2C segment, was $279,000, down 74% from $1.09 million a year ago.

The decline reflects the deliberate advertising pullback at Proofread Anywhere that Dom described and the absence of revenue from businesses divested during 2026. At the segment level, B2B revenue declined 41% year-over-year to $1.22 million, and B2B swung to an operating loss of approximately $103,000 for the quarter, compared to an operating income of $70,000 in the prior year period. Primarily reflecting the Eastern Standard revenue decline, partially offset by improved results at RevenueZen. B2C generated operating income of approximately $43,000 for the quarter, down from $150,000 a year ago on the lower Proofread Anywhere revenue. Gross profit for the quarter was $732,000, and gross margin was approximately 49%, essentially flat compared to roughly 49% in Q1 this year. I want to address the mid 60% margin trajectory we flagged last quarter directly because it hasn't materialized to date.