OpenWorld Q3 2026 Earnings Call and Webcast - OPENWORLD INC

Thank you for standing by and welcome to Open World's third quarter 2026 earnings conference call. Currently, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to Richard Land. Please go ahead. Thank you, operator, and good afternoon, everyone. I'm Richard Land of Alliance Advisors Investor Relations. On the call this afternoon are Open World Chairman and CEO Matt Shaw, CFO Gerard Hernandez, and President Ross McMeekin. Open World issued its 2026 third quarter earnings release earlier today, which is available on the company's Investor Relations website. let me read the safe harbor language and then we'll get right into the call all statements and comments made by management during this conference call other than statements of historical fact may be deemed forward-looking statements for purposes of the private securities litigation reform act of 1995. open world cautions that these forward-thinking statements are subject to risks and uncertainties that may cause actual results to differ materially from those reflected by the forward-lookings statements made during the call for additional details on these risks and uncertainties please see the company's annual report on form 10k for the year ended december 31st 2025 as filed with the securities and exchange commission and open world subsequent public filings with the sec open world undertakes no obligation to update or revise any forward looking statements whether as a result of new information future events or otherwise additionally we will reference various non-gap financial measures during this call Please refer to our earnings release for an explanation of these measures and how we use them and in the case of the non-GAAP financial measures, reconciliations to their nearest GAAP equivalents. With that, it's now my pleasure to turn the call over to Matt Shaw. Matt, please go ahead. Thank you, Richard, and good afternoon, everyone. Thank you for joining us. I'm Matt Shaw, Chairman and Chief Executive Officer of OpenWorld. This is our first earnings call as a combined company following the reverse acquisition that closed on 30th of September. I'd like to welcome all of our investors, those who have been with us through the Verify Me chapter, those who've joined us from the open world side, and our new shareholders who have come on board since the merger. We're happy to have all of you with us for what we expect will be a very bright future for the company and our shareholders. Before we get into the third quarter results and recent developments, let me set the stage for how we approach to building our platform. Since early this year, we have seen a clear and accelerating uptake in interest in real-world asset tokenization from some of the largest companies in the world. What began as initial exploratory conversations around how we can bring value to our partners is now starting to formalize into turn sheets and definitive agreements. That is exactly the progression we designed the business to capture. Our anchor deals, those we intend to scale from, are taking shape across the United States, the Middle East, and we expect soon in Southeast Asia. These are the geographies where we see the strongest near-term opportunity to move from signed term sheets into capital formation and platform deployment. With that context, I will now turn the call over to our Chief Financial Officer, Gerard Hernandez, who will walk you through the financial results for the third quarter. After Gerard, our president, Russ McMeakin, will take you through the build-out of our RWA pipeline from signed term sheets through the start of capital formation and give you a preview of what is coming next. Gerard. Over to you. Thank you, Matt. Good afternoon, everyone, and thank you for joining us. I'll review our third quarter results with particular focus on the substantial growth in our real-world asset business and the nature of certain non-recurring expenses we incurred in the period. The quarter's results clearly reflect open-world strategic priorities. We have been deliberately shifting the business from project-based token launch activity toward higher-value recurring long-term arrangement and platform-oriented real- world asset infrastructure and tokenization services. That strategic focus is visible in the third quarter numbers, which we believe are just the starting point for what our business model can deliver consistently going forward. For the three months ended September 30, 2026, total revenue was $7.4 million. Of that amount, real-world asset platform revenues contributed $6.4 million, or approximately 86% of quarterly revenue. There was no RWA revenue in Q3 2025 as our ramp-up of RWA only began in early 2026. We see significant opportunities to continue growing our RWA business over the coming quarters and years. The Q3 revenue performance represents major growth and is a direct reflection of the strategy we have been executing against. For the first nine months of 2026, RWA Revenue reached $9.1 million. As of September 30, approximately $21.2 million of transaction price remained allocated to unsatisfied or partially unsatisfied performance obligations under our RWA arrangements, providing visibility into future revenue recognition as these contractual performance obligations are satisfied. Digital assets and capital markets revenue was $0.4 million in the quarter, down from the $20 million in Q3 2025, most of which was one-time revenue associated with specific token generation events last year. Gross profit in the quarter was $6.3 million, producing a gross margin of 84% up from 77% a year ago, driven by those higher margin nicks from the RWA work. Turning to expenses, our third quarter results were significantly impacted by costs associated with a reverse takeover transaction, and one-time non-cash stock-based compensation. General and administrative expenses totaled $14.6 million. Within that amount, $6 million consisted of professional fees associated with RTO and public listing process, and $6.4 million was stock- based compensation from option and restricted share grants. These two items accounted for the majority of quarterly G&A expenses, were affecting significant transaction-related costs and non-cash stock-based compensation. Other operating expenses were modest, management technology of $0.9 million, research and development of $ 0.4 million, and sales and marketing of $1.5 million. As a result, we recorded a net loss of $10.2 million, or $0,93 per share. Absent the merger-related professional fees and non-cash stock-based compensation, the underlying operating result would look materially different. After adjusting for certain non-tash and non-recurring expenses, adjusted EBITDA for the third quarter was $2.2 million. On the balance sheet, cash at September 30 was $4.5 million. Contract assets were $9.5 million, primarily related to the unbilled RWA work pending contractual billing conditions. Subsequent to quarter end, we completed a registered direct offering that generated approximately $3.5 million in gross proceeds. Based on our current operating plans, we believe our existing cash, anticipated collections of receivables and contract assets, and proceeds from our recent financing will provide sufficient liquidity to meet our operating obligations at least for the next 12 months from the issuance of our financial statements. In summary, the quarter demonstrates some meaningful progress on our strategic priorities scaling the RWA platform business, while the elevated expenses are predominantly explained by RTO costs and one-time non-cash stock-based compensation. Our revenue growth, strong gross margins, and positive adjusted EBITDA demonstrate the potential of our business model as we continue to scale our RWA Platform. We remain focused on fulfilling our remaining RWA performance obligations and building the recurring platform economics that underpin our longer-term model. I'll now turn the call to Rush, who will walk you through our RWA growth roadmap. Thank you, Gerard. As Matt Shaw mentioned, I'll walk you Through the recent progress and carry us through to year end. First and foremost was one of the largest tokenized projects in the world, which was the deal we announced with Meridian, focused around Tesla Powerwalls, in which we will use existing homes and existing commercial buildings and leverage their existing infrastructure plus some solar size as needed to generate inference ai this is unique in that we don't need grid power we don t need water cooling and we have built-in off-take for each of these as we bring them online to satisfy this massive domestic and global demand for inference ai The Meridian partnership is very strategic in which we are able to capture the Powerwall assets on a very favorable tax basis, making the IRRs and the yields on these projects very attractive. The initial announcement was for up to $1 billion, but there's room to grow this quite considerably, and the agreement considers something significantly larger. Our second major deal was tokenized industrial IP. Our customers for this initiative is Beyond AI, a very iconic California-based AI company with investors such as Aramco, BP, G42, spin out of NASA. So very, very attractive IP with global use cases. We're in very close partnership with the customer as well as the Remco who's also an investor and a major customer for this intellectual property. We're targeting multiple global synergistic users of this IP. The on-chain tokenization structure will facilitate a lot of these added agreements and added IP to this mix. So this plays our business model very well leveraging the blockchain, fractionalized structures, high yields, and the ability to generate recurring revenue. So in summary, these agreements are now in definitive agreement phase. Capital formation is well underway. We saw an announcement this week where we've planned a launch on the Solana blockchain that will help with capital formation. There will be many other similar arrangements being announced throughout the month of November and December where capital formation, definitive agreements, and scale will be the primary theme. As Matt mentioned, we're very focused here in the United States, Middle East, and soon Southeast Asia where these exact structures, these types of use cases, and the capital formation associated with these will bring us to a global scale. I'll now turn the call back to the operator. Thank you. As a reminder, to ask a question, you will need to press star 1 1 on your telephone. To remove yourself from the queue, you may press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jack van der aard of maxim your line is open jack okay good evening uh congrats on the open world merger um and three key results which seem to outperform the the preliminary expectations you put out there a few weeks ago so i have a couple questions uh first question maybe for for matt or russ you know with all these moving parts here some of these strategic opportunities in non-binding agreements. What's needed to move the goalposts here of these announcements so far to actually close them? Thanks. Yeah, Matt, I'll take that one. So, thanks, Jack. So as I said in the prior remarks is definitive agreements, which are underway. We have law firms on both sides of the deal, us as the originator and the customer. So that's proceeding very well. And capital formation. So these things come together and close. I'm actually here in the Middle East right now doing exactly that so uh in summary on on the deals we've announced and several deals we have not yet announced uh we're working on all those components so the the uh the closure occurs when the defensive agreement is signed and the initial capital formation begins some of these are long-term agreements so there'll be additional capital formation thereafter things that are a billion dollar plus like the powerwall example that one will have many tranches but structurally they all look the same. Okay, great. I appreciate the color there, Russ. Maybe a follow-up question on the Solana announcement. So, you know, help us understand, just given to those that are new to the story, also new to tokenization in general, as well as some Web3 trading, why is Solana and Backpack trading strategic, or why should that be viewed by investors as as so important for your company and maybe even the industry thanks yeah happy to take that one um jack um well i think obviously the first um the first point to make is it allows for 24 7 trading so trading outside normal trading hours um and accessing the deep liquidity in in d5 in decentralized finance um but i think you know as important though um you know open world we're in We're in the business of tokenizing real world assets, so I think it's very strategic and indeed crucial that we actually lead the way by tokenizing our own stock. The actual product I think is really great for investors. Investors can move seamlessly between the token and the stock. For instance, a holder of OPNW in tokenized form can request delivery from Backpack, which is the issuer, of the underlying QSIP stock directly to their brokerage account. So it has that sort of seamless two-way flow. And then in terms of why Solana, I think Solana is one of the major protocols. It has very broad distribution and deep liquidity. And Solana Foundation is very supportive of RWA's and tokenized stocks. And we believe that tokenizing our stock on Solana brings a new Web3 native, highly educated community to our stock. And lastly, perhaps, and very importantly, we also believe that Solana will be very helpful in capital formation for our RWA deals. Solana itself has actually shown huge growth in this area just this year, with RWAs on Solana now reaching over $5 billion, which actually is a six-fold increase since the beginning of the year. So, yeah, I think very, very, very strategic for us and a very exciting development, I think. Okay, got it. I appreciate all that, Collin. It's very helpful. I look forward to tracking that development as it plays out. If I may, maybe just one more question and then I'll hop back in the queue. One thing I had to point out with the recent results is that the margins, And both gross margin and adjusted EBITDA margin were fairly strong out of the gate for just over $7 million of revenue. Can you help us understand, help investors understand these margin levels and how these kind of evolve going forward? Are they sustainable? Is there more upside? Any kind would be helpful. Thanks. Yeah, absolutely, Jack. Thank you for the questions. You know, so as you've heard in our discussion this afternoon, we have a very attractive business model that is gaining momentum. Our RWA business combines specialized structuring, implementation, and tokenized services with ongoing platform and servicing fees. So therefore, initially, these engagements establish the infrastructure and then while recurring revenues can build on that foundation, well, with relatively limited incremental delivery costs. Now, so as we grow, we expect this combination of reasonable technology, specialized expertise, and recurring fees to support attractive margins and additional operating leverage. And our Q3 demonstrates that, right? The margin potential of this model, and we see the opportunities for a further upside as the business scales. Okay, great. Well, gentlemen, I appreciate all the color. Congrats again on the closing of the merger, and look forward to watching the story play out. Thanks. Thank you. Thank you. As there are no further questions in queue, this concludes today's conference call. Thank you for participating. You may now disconnect.