Horizon Kinetics Holding Corporation ($HKHC)

Good afternoon everyone. Thank you for joining us for this call. My name is Mark Herndon, Chief Financial Officer of Horizon Kinetics. We're pleased to have you join us for our call that will cover our results for the fourth quarter and full year of 2025. But first, a reminder that today's presentation may include forward-looking statements. Reliance on forward-looking statements involve certain risks and uncertainties, including, but not limited to, uncertainty about the future security valuations or our performance. During the course of today's call, words such as expect, anticipate, believe, intend, may be used in our discussion of our goals or events in the future. Management cannot provide any assurance that future results will be described in our forward-looking statements. Furthermore, the statements made on this call apply only as of today. The information on this call should not be construed to be a recommendation to purchase or sell any particular security or investment fund. The opinions referenced on this call today are not intended to be a forecast of future events or a guarantee of future results. It should not be assumed that any of the security transactions referenced today have been or will be proved to be profitable, or that future investment decisions will be profitable or will equal or exceed the past performance of the investments. We encourage you to read our filings with the SEC on our Form 10-K as well as our other filings, which describe the risks and uncertainties associated with managing our business. The company does not assume any obligation to [ fund ] any forward-looking statements made today. These filings can be found at the OTC Markets website and our press releases or other information is at our corporate website at www.hkholdingco.com. Today's discussion will be led by Murray Stahl, Horizon Kinetics' Chairman and Chief Executive Officer. I will also be available to answer applicable questions and will moderate the questions. [Operator Instructions]. I'd also like to provide a reminder to you that our Form 10-Q -- excuse me, our Form 10-K continues the required GAAP presentation that includes certain proprietary funds as consolidated entities, and our press release continues to include a non-GAAP presentation supplement that presents our financial statements, excluding those funds, and we refer to that presentation as the adviser-only presentation. Consistent with what we have previously reported, this is a presentational matter that does not impact the company's earnings available to HKHC shareholders or the shareholders' equity of HKHC. And now just as a brief backdrop to our discussion. The company continues to perform favorably for our HKHC shareholders. The company recorded revenues of $17 million for the quarter and $72.8 million for the fourth -- for the full year of 2025. These results represented a 6% decrease for the quarter and a 30.5% increase for the full year. These results continued the company's revenue growth that experienced throughout 2025 based on higher overall average AUM during the period. Our mutual fund portfolio led the revenue growth, particularly at the Paradigm Fund, the Market Opportunity Fund and the Small Cap Fund. At the adviser-only level, as presented in our supplemental table with the press release, operating income was $5.3 million for the fourth quarter and $21.4 million for the full year. These results are lower than 2024 as we did not have the benefit of the 2024 incentive fee, which was $51.7 million, which impacts the comparability between the 2 years. Overall, the company recorded a net loss of $0.78 per share for the quarter and net income of $0.28 per share for the 2025 annual period. The quarter's net loss was the result of a negative swing in our investment results, particularly related to Bitcoin-linked investments. And I should emphasize again that our net income or loss will often be impacted by swings in unrealized gains or losses associated with these investments, including digital assets. For example, our fourth quarter included an aggregate of $29 million of unrealized losses related to investment securities in equity holdings in our proprietary funds. And those unrealized losses compared to the fourth quarter of 2024, which had unrealized gains aggregating $50.9 million. This is just an illustration of what we have previously noted for you and that we may continue to see volatility from quarter-to-quarter. From a balance sheet perspective, the company continues to have substantial cash and investments, including amounts outside of the consolidated investment products, and we have no third-party debt. Our long-term liabilities are limited to the various long-term office space leases. And lastly, I'll comment on dividends. The company paid a total of $0.395 per share in dividends during 2025, and the company's Board recently declared a $0.121 per share dividend to be paid in the first quarter of 2026. That dividend will be paid on March 31 for shareholders of record as of March 23. So with that backdrop, I'll turn it over to Murray for some opening comments.

Okay. Thank you, Mark, and thanks, everybody, for joining us. So with that backdrop, you'll see with the consolidation, it makes it difficult to understand what's going on. So I'll try to break it down very simply into a couple of components, make it easier to understand. So let's start in the year 2025, we have $21.4 million of operating income and operating income represents the business in a normalized basis, excluding performance fees, so that $21.4 million has a value and you can put any multiple you like on it. And there's also another piece of cash flow, interest and dividends. And that was $2.3 million because we have substantial liquidity in this company. So $21.4 million, of operating income, $2.3 million of interest and dividend income, apply whatever you think the tax rate is. That's the base business. And here's the second component. Second point is the assets that we have, almost all of which are liquid. They could be turned into cash very quickly. So we have $36 million in cash on the balance sheet. At year-end, we had $76 million of what we call fair value investments, meaning mark-to-market, another $220 million of what's called on the balance sheet, other investments. They are basically investments in our various funds, most of which are beginnery interest funds. It's a fancy way for saying they charge performance fees. And we had at least $12.5 million worth of digital assets, those are crypto currencies, primarily Bitcoin. And that has a value. It's fairly straightforward. You can add those numbers up. Now what's happening in the businesses. Well, there is, in addition to normal business, there's some new businesses, one of which is the ETF business. So you might have observed in the last several years we've been launching ETFs, the largest, which is the inflation EFT. We launched a couple of years ago a blockchain development ETF that has also a lot of exchanges. We have a Texas ETF that we launched at the end of -- January of this year, 2026. And there's a Japan ETF, there is an Energy Development ETF, there's ETF to invest in SPAQ, SPAQs or S-P-A-Q, special purpose acquisition companies. Altogether, the ETF business has -- and I didn't list all of the ETFs, we have over $1.5 billion worth of AUM. We're very, very interested in growing that business. Then something is relatively new. We've established private funds there. There are 2 dimensions to the private funds. I'm going to read some names. We have funds that are single-purpose funds that invest in certain security, they're private. And then these securities, the private ones will also find their way into various Horizon proprietary funds. So to mention some names, we have a fund that invested in a company called SandboxAQ. It's involved in high-performance mathematical models or computationally-intensive mathematical models is what I should say. We have a fund that invested in Bolt technology, the Bolt technology company is the company that joint ventured with Texas Pacific to build data centers in the Permian Basin. There is the Canadian Securities Exchange, which is the second security exchange in Canada, has all the rights and privileges of Toronto Stock Exchange, and it's growing fairly nicely, and something called Tetra Trust. Tetra Trust is a custodian of cryptocurrencies that is launching or I should say, has launched a stablecoin in Canadian dollars. It will be the first Canadian dollar stablecoin at the moment. Stablecoin market, which is growing very rapidly in the world is dollar-denominated. The best of my knowledge, there is no Canadian dollar stablecoin. If there is one, its size is fairly de minimis. It's -- Tetra is partnering with some very large institutions. So I'm very hopeful that going to be successful. We have a fund that invest in private royalties, although it has some public securities as well. So it's a mix. I count that among the private funds. And then there is MIAX. So MIAX is the outgrowth of some private investments we made years ago. We invested in MIAX directly, and we also invested in the Minneapolis Grain Exchange, of which we're the largest holder for a number of years, and we invested in the Bermuda Stock Exchange, private exchange in which we were your largest holder for a number of years. Those 2 changes merge with MIAX. We ended up with MIAX shares. MIAX in August 2025 became a publicly traded company. So we are entitled to a performance fee that we did not recognize in the fourth quarter of 2025, but we are highly likely to recognize in the first quarter of 2026. There is some verbiage in the 10-K about it. It's not easy to see, which is a better way of saying, it's very easy to miss. But in round numbers, you might think of a sum of the best estimate I can give you is $22 million of performance fees. You can see this performance fee is the size more or less of the operating income for the entirety of 2025. And you can see why the private investments are so important. And you can also see it in the 2024 performance fees except 2024 performance fees were made by publicly traded securities. We can still make those fees in 2026, but the difference between the private funds and the public funds are the public funds fluctuate and we can attain a high watermark, but we might not stay at that high watermark every year. And therefore, we might episodically miss a year or 2 in performance fees. Now in the private equity, you leave the predominant practices, you leave the investment at cost until you have a reason to change it, either positively, negatively. And if it's positive, you accrue performance fee, if there is a realization event, you collect the performance fee. So that's the way it is. So the potential to collect performance fees is greater than any time in our history. And one other thing I'd like to mention is a private investment, it's not in any fund, just made it to ourselves. We own the company called HashMaster sometimes we refer to as HMTech. It was involved in mining Bitcoin and we merged that with another private company called Synteq, S-Y-N-T-E-Q. And now we are a proud investor of this company, Synteq and we received a fair amount of compensation for that largely in Synteq equity. So we're carrying that at its cost value, meaning the value that we collected at a time, and we have high hopes for that as well. So there's a lot of asset power in this company, a lot of potential earnings power in this company, and tremendous amount of liquidity in this company. So that gives you an overview of what we're up to. And I think now is a great time to go to questions. If there are any questions, I'd be delighted to answer them.

Okay. We don't have much, but I'll start with, what about recent developments in the Middle East. And the question is, have your long-term forecast for commodity prices or inflation in general changed in any meaningful way?

Well, it's not for me to comment on the Middle East. So I'll just give you some numbers and maybe that will answer all your questions. You might not know it, and you might not believe it, but there is a Tehran -- Tehran is capital of Iran. There is a Tehran Stock Change. You might not know it, and you might not believe it, but there actually is a Tehran Stock Exchange Index. By the way, there are index funds and ETFs in Tehran so it shows you how far things have gone. So with all war talk and everything else and before the war, it was all the unrest, it was all the civil unrest and what have you. So the civil unrest, you might recall, started in the summer. So I personally would date it, in August. So on August 19, 2025, the Tehran Stock Exchange Index traded an index price. Now this is not the way we calculate Dow Jones way of doing it, it's actually calculated in the millions but the index value such as it was on that day was -- I'm going to read this, so I don't want to get it wrong. Let's see if I can get this, here we go. Bear with me just 1 minute. I get the value right, the index value on August -- can't get August 19, maybe the market was close that day. Anyway, I'm going to have to give you August 10, but in any event August 10, 2025 index value was $2.562 million, August 10, 2025. The most recent index value I have is February 24, 2026. The reason -- most recent index value that I have is for reasons that I'm sure you will regard is self-evident. The Tehran Stock Change has not traded since February 24, 2026. In any event, on that day because there's no electric power and there's no Internet and a lot of other things, the reasons that are self evident. The index value on February 24, 2026, was $3.652 million, obviously, a much higher number. So at least the investment community of Iran, such as it is, they think things are going to get a lot better. What a lot better means to the investors, the Tehran Stock Exchange, I leave it to your sensible judgment. But I think oil business is going to have a favorable outcome. I don't look for a runaway in oil prices. I think matters will be resolved fairly shortly. I don't think it's going to be resolved tomorrow, but I think it's going to be resolved fairly shortly, and it's not a major factor in my -- in my investment considerations. If they weren't resolved that way, if we ended up with a permanent oil crisis, obviously, given our investments, that would be a positive element for us, even though it will be a negative development for other people. I don't expect the prolonged high oil price. So I hope that answers your question.

Okay. Great. Other question, different topic, is about AI agents that are scaling. And do you have a view on how this technology could be affecting the themes of blockchain exchanges and natural resource royalty companies?

Well, I think the question is you're seeing AI, meaning artificial intelligence, did I hear that properly?

Yes. Yes, the question uses the term AI agents, but you could extend that to bots or anything.

Okay. Well, as far as natural resources go, minimal to no effect. And the reason is, the easier to extract natural resources, have been extracted, and as a generalization, even though there are exceptions and even with improvements in technology, the natural resources are going to be progressively more difficult to extract. And therefore, as a generalization, becoming more expensive to extract, but that's not the primary consideration. So I'll ask you to turn your attention to gold. It depends on the company, but I would say as a generalization, most companies on an all-in sustaining cost basis can extract gold, let's say, somewhere between $1,500 an ounce and $1,600 an ounce. Gold is over $5,000 an ounce. So that differential, cost of extraction relative to price. Net profit margin is never -- as far as I have been able to see as far as data is published, ever been this big. So why is that big? In other words, let me rephrase my own question. Why is it not the case that the profit margins being so big, the companies, whether they're using artificial intelligence or not, why don't they just increase production? And the answer is, the critical variable is not technology. Critical variable is getting the permission of governments to extract natural resources. And in most places in the world, that permission is being denied, being denied because if you ever visited a gold mine or saw pictures of gold mine as an example, it does not make the environment any better, let's put it that way. It causes a host of environmental issues, which takes a lot of money and a lot of years to mitigate in some cases, can't really be entirely mitigated. So demand for the gold rises, but the production doesn't increase. As a matter of fact, the second largest gold company in the world, this might shock you, you might want to check this, but I assure you these numbers are accurate. Second largest gold company in the world, Barrick with all the increases in the price of gold. Barrick is not only this year, going to experience decreased production. But this is going to be the sixth year of decrease in production, supply is actually falling. And that's becoming more and more true of many commodities. It's just getting very difficult. There are many constraints, one constraint is water. It's a constraints on developed electric vehicles. I wrote about this many times. You really can't extract lithium from the earth without extracting groundwater that lowers the water table, which most countries won't tolerate. Therefore, you can never extract enough lithium and a reasonable enough price to have a worldwide fleet of electric vehicles. There are many other reasons to go with it, but I won't bore you with. But there are constraints in extracting things. So I don't think artificial intelligence is going to do much to resolve any of that. And one more thing, which I don't think you asked in your question, but I'll add it, just with my own commentary. A lot of people talk about the coming job replacements and all the people are going to be redundant because of artificial intelligence. And I really personally take great issue with that. I don't think it's true. I don't think that's going to happen. And it's a very lengthy discussion, and I'd be glad to discuss with people. But as a piece of evidence, I ask you to turn your attention to your 1,900 and think about how many jobs were available in 1,900, that are, a, not particularly skilled jobs, and b, skill or unskilled don't even exist today, because they're [indiscernible]. Nevertheless, the worldwide demand for unskilled labor is the highest it's ever been. And if it weren't high, you wouldn't have a problem with immigration over the world. People want to immigrate, a lot of them are either low skilled labors or non-skilled labors. They want to move countries, and there is demand for their labor. So I'm not making commentary on the pluses or minuses of immigration, I'm just talking about there's demand for unskilled labor, it's obviously unfulfilled, and it's greater at any time in history, which is one of the reasons why the migrations are greater any time in history. That's all the machinery and the computers and the automation and everything else. So I don't -- the higher standard living of a nation is, the more low skilled and unskilled labor demand there is. And I invite you consider any country in the world, it very much doesn't matter. So I don't think artificial intelligence is going to change that in any meaningful degree. So I hope that's a fulsome answer to your question.

Okay, thank you. A number of -- a handful of other questions have come in. So I'm going to try to compare -- combine a couple of these. On the topic of TPL, one person has noted, or is asking about TPL's proportion as part of our overall AUM? And while we haven't substantially changed, I guess, our aggregate exposure or investments in TPL dramatically. The mix as a percentage of AUM could change from period to period, as other investments may go up or down in value. But more specific than that, we've had a question about, a comment or has noted that TPL is up in 2026. And just for those that are listening, that's about -- it's up about 75% so far year-to-date. And he wanted us to elaborate on how that would flow through to the company via management fees and earnings. Obviously, a positive development.

Okay. Well, what it does is since we're not really trading it, so market value is higher. And therefore, all things being constant, which they usually are not, but in this case, our assets under management are higher. Our expenses are more or less the same, not exactly the same, but more or less the same. And it's more revenue on more or less the same expense base. Here and there an expense goes up. And here and there, we trim an expense, but the expenses are not radically different in any degree. And the revenue is higher. So that makes for higher operating income. That's a simplistic answer to it.

Yes. And again, obviously, a positive development for the company. Another couple of questions are related to the trading of HKHC stock in particular. So if we have any update or thoughts about the floats of the company or the liquidity of the shares themselves in the open market.

Okay. Well, I get this question a lot. So about approximately half of Horizon Kinetics shares is owned by a private company called Horizon Common. That company is not selling any of stock. So that's half right there. Various people that work in the company of whom one is me, I'm a big holder of Horizon Common as well. I'm a buyer of the stock. Last time it was open window, I bought some shares. Horizon Common bought some shares. FRMO Corporation bought some shares, a fund that the principals of Horizon, a whole jointly called HK Hard Assets bought some shares. So the only way the float is going to go up is meaningfully, if the other shareholders sell some shares. Your shareholders are not disposed to sell very many shares. The only other thing we can do to get the float up is, now some people think that's a horrifically bad thing if the float is not enough because a higher float some people associate that with a more robust share price. Well, but in order to get there, you have to have people who would like to sell the company, and I think it's a pretty good thing that the shareholders don't want to sell the company, and they want to hang on to it. But in any event, the only other way we can do it is we would have to issue stock to shareholders that would be inclined to sell it. And what we get in exchange for that is, we get cash. We reviewed balance sheet, we reviewed our liquidity. We don't really need cash, more cash for any pressing need. So we could do an offering and get ourselves a primary listing if we were so inclined but then we'd be diluting everybody. So the question is, is it worth it to issue some shares and put some more cash on the balance sheet with the view to making a stock more -- those are the only 2 ways it can happen. Now some of these shareholders are older, and I suspect for estate planning purposes or the reasons they will sell some shares. So matter of fact, I'm aware of one estate that's in the process of being sold that probably want to sell some shares at some point in time, but time is not going to be tomorrow. What day is it going to be? I don't have the slightest idea. So eventually, some shares will come out. I myself, as I said last time, I myself was a buyer of shares. So no windows, my history has been, I've been a buyer. So beyond that, there's no other information to relate. So I hope that's an adequately answers your question. If everybody wanted to do a stock offering for purpose of liquidity and they had a good reason, and we had a good use of proceeds, I would consider it. But right now, I just don't have a good use of proceeds. So anyway, that's the best answer I can give.

Okay. We've had another one come in. We're going to go back to the topic of TPL and Bolt. The questioner has indicated that TPL stated it acquired approximately 1/3 of Bolt's and that we've also disclosed an ownership position in Bolt through certain funds. And the questioner is asking approximately how much exposure to Bolt does HK have across its funds? And can you share any thoughts just in general about the Bolt opportunity?

Yes. Well, just as a round number. So I don't have the exact number in front of me. But in round numbers, we own about 10% in Bolt. That's in various funds and of course, HK is investor in the funds. So we get that -- it's roughly 10%. What I can tell you about Bolt is that it's making great progress. And in due course, Bolt itself will make some announcements and just an opinion, I think you'll be favorably impressed with how it's coming along. But I really don't want to speak for Bolt. I think Bolt should speak for Bolt. So I'm going to -- other than saying Bolt, I personally I'm very impressed with what Bolt is doing. But beyond that, I'm going to leave it for Bolt to talk about Bolt, which I suspect they will do in the not too distant future.

Okay. That brings us to a close of questions. I have no other questions in the queue. And I'll just turn it back over to you if you say anything in closing, and we can call it a short call.

Okay. Well, as you know, when we have these calls, I'm available to answer questions, it sometimes happens that a question occurs to one, after the call has concluded, if that happens and it's happened very frequently. Don't hesitate to contact us. We will get you an answer. We don't really have any great secrets at Horizon itself. We're involved with other companies. And we don't like to speak for our investments other than to say that we're -- we're very impressed with the progress they're making, but we think our investments or the management of our investments should speak for themselves. But if there are questions, we can answer about Horizon or anything that's of interest, that's permissible to talk about, be delighted to answer it, so don't hesitate to contact us. And of course, normally, I say we're going to reprise this in about 90 days. But I think in this particular case, given the date, I think we're going to reprise this in less than 90 days. Is that accurate Mark?

That is correct. That is correct. It will be the early to mid-May that investors should expect to see our 10-Q and this call.

Okay. So at that time, we're going to have a 10-Q. And shortly thereafter, we're going to have Q&A. And I hope to see all of you then, and I'll be delighted to answer any questions in the interim. And failing that, I'll be available on the next call. So thanks for your interest, and thanks for attending. I'm going to sign off and just say good afternoon. Thanks again.