Hyperion DeFi, Inc. ($HYPD)

Greetings, and welcome to the Hyperion DeFi Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Jason Assad, Director of Investor Relations. Thank you. You may begin.

Good morning, and welcome to Hyperion DeFi''s 2025 Fourth Quarter and Full Year Earnings Call. Joining me today are CEO, Hyunsu Jung; and CFO, David Knox. Before we get started, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. During this call, we may use words like anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions, which indicate forward-looking statements. For a more comprehensive discussion of these and other risks, please refer to our filings with the SEC available on sec.gov and in the IR section of our website at hyperiondefi.com. We also reference certain non-GAAP Financial measures today, please refer to our earnings release and earnings supplement on our website for a full reconciliation of these non-GAAP measures to the most comparable GAAP measures. We'll start this morning's call with prepared remarks from Hyunsu and David, followed by Q&A. I'll now turn the call over to our CEO, Hyunsu Jung.

Thank you, Jason, and good morning, everyone. Welcome to Hyperion DeFi''s Fourth Quarter and Full Year 2025 Earnings Call, our second full quarterly earnings call since completing our strategic transformation as the first U.S. publicly listed decentralized finance company building on the hyper-liquid blockchain. In our first earnings call Hyperion DeFi stated that we would set ourselves apart from other digital asset treasury companies with our comprehensive ecosystem engagement strategy. At the time, it may have been difficult for investors to understand the concept of DeFi let alone the idea of a public company using these strategies to generate revenue. The fact of the matter is a public company can successfully participate in DeFi, especially in the right blockchain ecosystem using appropriate meticulously designed on chain and architecture. We have worked with key protocols to develop first-of-its-kind infrastructure native to hyperliquid and have the potential to create long-term recurring value tier our partners and for our shareholders. We have executed on every strategy detailed in our previous report and are immensely proud to showcase the long-term possibilities of our unique strategies in today's call. It starts with what we view to be the most important digital asset type, the native token of the hyper-liquid blockchain. In these market conditions, copper asset selection is paramount. We've seen the impact it can have when looking at the relative performance of numerous companies in the DAT sector. However, our vision always in far beyond just buying the right asset. It is essential to be able to effectively deploy the assets to directly contribute to the growth of the underlying blockchain ecosystem. This is our DeFi flywheel and demonstrating how effectively we can compound returns on hike beyond just taking. DeFi monetization is 1 of our 4 strategies, which works by compounding returns on our state type by effectively retaking to unique proprietary strategies. In Q3, our Hype asset use service or house with the concept just starting to gain traction. In Q4, this business line grew substantially, especially with the main net launch of HIP 3 in October 2025, which allows for the creation of non-crypto asset exchanges on hyper liquid. I want to take a moment to acknowledge the incredible growth and global adoption at hyper-liquid and specifically HIP 3 have achieved over the past few months. HIP 3 enabled equities, FX and metals like gold and silver, key commodities, such as oil, all to trade permissionless, 24/7 on hyper-liquid opening up a universe of new tradable assets to users globally. The impact has been tremendous to save the least. In late January of this year, Hyperliquid captured almost 2% of total global primary silver trading volume, which comes out to around $2 billion to $3 billion of volume on its HIP 3 markets. Keep in mind that these markets have only been in operation for about 6 months and silver markets specifically had only been in operation for about 1 month before seeing such rapid utilization. More recently, with the rising conflict in Iran over the weekend of March 6, we saw price discovery on oil happened for the first time on a decentralized exchange in traditional venues such as ICE and CME were closed. Just last week, S&P Dow Jones Indices licensed its flagship index to enable the first official S&P 500 perpetual contract to be available exclusively on hyper liquid. This is an incredible institutional co-sign and the first of many products from traditional finance to move over to decentralized rails, specifically pecterliquid. Since the beginning, we have continued to emphasize hyperliquids critical role in the future of on chain financial services, and we are seeing this happen now in real time. Market-moving events are accelerating and markets themselves must now catch up to become available 24/7. Currently, this is only possible on hyper liquidity. Within this trend, Hyperion DP was the first and only public company to deploy 1 of these HIP3 markets on hyper-liquid in November 2025 in partnership with Felix protocol. Our priority has always been on positioning and agility. Having a view upon the digital asset space is evolving and preparing to capture value from that evolution. The Felix Exchange demonstrates the value of this focus and having the required infrastructure available. Gold and silver markets were listed in mid-December, just before the massive market attention to metals began a few weeks later. Oil markets were listed in January 9, months before the conflict in Iran. To date, Apelix Exchange has crossed over $2.8 billion in trading volume with over 14,000 unique traders on a product launched less than 6 months ago. More importantly, real dollar-denominated fee revenues were earned from trading volumes on this exchange, a share of which returned to Hyperion as revenue. This is a revenue stream agnostic to the price of hype and agnostic to the performance of crypto markets. And of course, all those revenues went to the purchase of additional Hype, a core component of our DP flywheel. As our efforts on chain became further socialized, we saw demand for house accelerate. We are proud to announce that we have launched House with silhouette Exchange, a privacy-focused front-end built on top of hyper-liquid -- due to the nature of unchanged transactions being public, traders often seek ways to place trades that are shielded from public view. Silhouette provides this solution, and we believe their products will see significant demand from traders. Through this deal, we will have the opportunity to earn additional revenues based on trading activity conducted via silhouette in addition to future ecosystem rewards. In this quarter, we also saw the benefit of our first ecosystem reward, receiving around 0.2% of KMT Q, the native token of the kinetic protocol. Kinetic offers the leading liquid staking protocol on hyper EV and enables us to access high liquid stake in tokens, providing us with the flexibility to pursue volatility strategies on hype to generate additional income. Through the utilization of their protocol, Hyperion received kinetic points which converted into KMTC tokens during Kinetic's TOKIN Genesis event. MT2 grants governance writes the kinetic protocol and benefits from continued buybacks of K&TQ with revenues generated by Kinetics various products similar to hyper liquids assistance fund model. Kinetics products include their flagship liquid staking platform, which currently has almost $1 billion in height deposits as well as markets by kinetic, another HIP 3 market, which also crossed over $2 billion in trading volume just 4 months after launch. Haneda currently has a second ongoing points program in which we are participating. We have strong conviction in the long-term value of additional alpha generated from supporting the growth and adoption of key applications built on the hyper EVM. These opportunities are not forever. In the same way that there was a limited window to participate in the air drops of early protocols of Uni swap, optimism, Arbitron and Jupiter once the opportunity has passed, may become more challenging to find. Appearing D edge is the ability to find, coordinate and compound these opportunities, and we've continued to demonstrate this ability. Following the success of our ecosystem reward efforts in the fourth quarter. We've received substantial interest from other builders in ice liquid to partner and build institutional DFI infrastructure. In February 2026, we announced the institutional volatility income vault of developing partnership with risk protocol. Risk has recently surpassed over $60 million in total value lock and are working quickly to integrate additional liquidity providers and depositors onto the platform. These upgrades should ultimately enable risk to offer users the most competitive options premium on chain in a user-friendly format. As part of supporting this buildout, Hyperion DeFi will earn a share of Vault revenues in addition to earning risk points. Soon after, in March, we announced private lending pools built by hyper lend protocol. Hyper lend aims to be the credit layer on the hybrid VM and to date has surpassed over $17 billion in total deposits. By matching KYC lenders and borrowers using smart contract infrastructure, we have the opportunity to bring new capital to the hyper EVM. These products can provide safer, more efficient non-consolid infrastructure for accessing credit which can be used for various strategies, both on and off chain. We will provide more detail on these pools once they are fully live. In similar fashion, Hyperion DeFi will earn a share of the revenue on total capital allocated to these pools in addition to earning HPL tokens. Together, our partnerships with risk and HyperMed, unlock institutional primitives for yield and borrow lending on the hyper even in addition to new revenue streams for Hyperion. These also build upon the partnerships with Kinetic, native markets and Felix given that we use hype LFTs and US DH in the hyperem and can coordinate market listings for perpetuals via HIP 3. The value of early partnerships and directly participating in the growth of the DeFi application ecosystem being built on hyper-liquid cannot be understated. Our recent results are a tangible affirmation of what we have accomplished to date. We recognize that we are early in our journey, but it should be clear to those that have been following our story that Hyperion DeFi is about first principles and positioning. We'd be able to see what will come before it does and being agile enough to move first and aligning with the right teams to build the best long-term scalable products. This is ecosystem building at its finest. I've done it before, but the opportunity in hyper-liquid is fundamentally different. Hyper Core's continued success should serve as a powerful tailwind for the growth of the Hyper EVM. We introduced our D5 flywheel strategy last quarter, highlighting its ability to accelerate as we create synergies around diversified strategies. We ended the year with growth across all of our core strategies as well as establishing the infrastructure required to scale them. The past several weeks has demonstrated just the beginning of hyper-liquid truly breaking into the mainstream consciousness. It should be clear now why we have chosen to build our businesses on hyper liquid. I will again recognize that our innovations are possible because of the breakneck pace of innovation in the hyper-liquid labs team. In the beginning of March, the next hyper-liquid improvement proposal, HIP 4, which allows for outcome markets on hyper liquid went live on tested. Outcome markets are more follically known as prediction markets, create a new form of hedging instrument directly available on the hyper-liquid platform. This unlocks onetime cost hedging opportunities for assets, starting with digital assets like BTC and Hice. We believe that this product will quickly expand beyond digital assets and enable options like hedging for real-world assets, the same way we saw the dramatic adoption in IP. We are monitoring the situation closely and are keenly aware that this could be another avenue for Hyperion DeFi to expand our business lines. And what does this mean for our shareholders? It highlights something that we are calling the Hyperion triple debt, our unique ability to generate a multiple above the baseline return on height. This is only possible because of our management team's respective backgrounds that positioned us to be at the forefront of DeFi innovation. David Knox joined Hyperion from PayPal, managing multibillion-dollar loan books and was a pioneer in building some of the most unique and sophisticated structures and asset-backed finance, while Cana Fitzgerald Sofie Robert Rubenstein has a multi-decade background in the gaming and exchange-traded derivative markets. Altogether, we believe this positions Hype D as the de facto best solution for compounding high on hike returns, more so than any other debt or ETF. We are much more than just hype. Long term, we are positioned to generate more real revenue online, accelerating our ability to redeploy heiGHt to new strategies. So far, we have executed on every objective we set for ourselves, and we don't plan to stop anytime soon. With that, I'll hand it off to David to dive into the numbers and demonstrate how these strategies are starting to show their long-term potential.

Thank you, Hyunsu, and good morning, everyone. On our first earnings call under the new DeFi strategy in November, we laid the groundwork for our core operating businesses and committed to our investors 31% to 43% quarter-over-quarter operating growth independent of the price of hype. We have exceeded our guidance with Q4 up 87% quarter-over-quarter. Our results show that we have transcended the strategy and capabilities of a simple buy-and-hold death and instead we are differentiated as the first publicly listed DeFi company building on the hyper-liquid blockchain. The financial investment thesis in Hyperion DeFi is clear. We are unique among digital asset treasuries with 5 diversified operating business lines. We earned about 3x base taking income in Q4. Our triple dip hype deployment where we deploy the same tokens into 3 income strategies at once is only possible because of our management's unique ability to build and innovate on the hyper-liquid blockchain. And we have strong earnings leverage with a low cost base built for scale and achieved 30% quarter-over-quarter decline in our core costs at a glance, thinking about us as a sum of parts. First, we have a growing treasury denominated in over 1.93 million height as well as hyper-liquid community tokens, such as 1.9 million K and TQ and 1 million HPL tokens as of March 23. Second, we have ramping business lines and anticipate $4 million to $6 million adjusted gross profit in 2026 or about 4x our 2025 full year results. And third, we are continuing to build out our third-party institutional DeFi capabilities Hans mentioned, including our top 10 dilator, commodities and equity partner markets, on chain secured lending and institutional vaults which will help bring more institutions onto hyperliquid while monetizing those outcomes. When you put it together, we believe our financial profile is a growth stage fintech with the growing hype and hyper-liquid community treasury and the premier gateway for retail and institutional investors to gain equity exposure to the growing DeFi and blockchain ecosystem. Before we go into detail on the business activities, I'd like to outline some important updates on GAAP presentment. In Q3 '25, 3 months in, our core DeFi businesses were primarily presented in revenue. In Q4 '25 as our strategies have expanded and evolved, they now appear in multiple places in the GAAP financial statements, including revenue, operating income and other income. In addition, on December 15, we fundamentally changed our joint validator structure, giving us more control of the combined operations. We became principal from a GAAP perspective. So on and after December 15, and we will now be presenting validator activities on a gross revenue basis with cost of revenue representing the amounts paid out to third parties. Therefore, our adjusted gross profit presents what we believe is the best singular way to view and compare all our core operating activities period-over-period. And that metric, adjusted gross profit increased 87% quarter-over-quarter, from $439,000 in Q3 to $821,000 in Q4 versus prior guidance of 31% to 43% quarter-over-quarter growth in our businesses. I will now go into detail on each DeFi income stream. Our first business activity is staking where we earned staking yield on our hype tokens at our Valder. In Q4, we earned 8,700 hype tokens from staking, up 17% quarter-over-quarter versus 7,400 in Q3. On a dollar basis, that translated to $305,000 in Q4 and versus $340,000 in Q3, a decline of 10%, given the effective average high price in period declined from 45.8% in Q3 to 35.2% in Q4. Now as opposed to other buy-and-hold dots who only take their tokens and don't have operating businesses, we next add 4 hype deployment strategies on top of staking which is how we generated approximately 3x base taking income in Q4. Our triple dip strategy is: first, stake our height; second, deploy the stake tokens into another business activity. our validator yield enhancement or define monetization; and third, position ourselves to receive air drops and ecosystem rewards. Our second business activity is running our validator in earning commissions. 11.8 million hype tokens were delegated to our validator as of December 31, which is plus 43% versus $8.2 million as of September 30. In Q4, we earned 1,400 hype tokens as validated commissions, up 197% quarter-over-quarter versus roughly 500 tokens in Q3. On a dollar basis, this translates to $49,000 in Q4 versus $21,000 in Q3, which is up 127% quarter-over-quarter. As we mentioned on our last earnings call, in Q3, our validator receives a roughly 3 million hypetoken delegation from the hypeliquid foundation. In addition, as we scale our third-party DFI businesses, we expect more third-party tokens to be delegated to our validator over time. Our validator is a critical component of our defi flywheel we are creating a gateway for institutions to participate in our on chain activities while earning commissions along the way. Our third business activity is yield enhancement. We pursue off team and on chain accretive strategies to enhance yield earned on our assets. Yield enhancement activities generated $79,000 in Q4, plus 2% versus $78,000 in Q3. These strategies include, for example, selling covered call options on the price of hype to institutional counterparties collateralized by our LSTs so we continue to earn staking yield. In 2026, we have begun executing within our institutional volatility income Volt with our protocol partner risk and expect our yield enhancement to ramp throughout 2026. Our fourth business activity is DeFi monetization. We are just beginning to ramp all these strategies Hyunsu mentioned, which generated $102,000 in Q4 versus less than $1,000 in Q3. Fundamentally, these new businesses generate fees for us as trading volume grows on hyper-liquid and as more financial products and asset classes move on chain. Our fifth business activity and our last within digital assets is ecosystem rewards. Through our active participation in the hyper-liquid DeFi ecosystem including all of the other business activities I just mentioned. We position ourselves for the receipt of token in drops protocol incentives and other rewards throughout the ecosystem. Ecosystem rewards generated $285,000 in Q4 versus none in Q3 from the receipt of 1.9 million K and TQ tokens from Kinetic. In Q1, we received 1 million HPL tokens from Hyper lend as of March 23. While we expect there to be some quarterly variability in the magnitude of future tokens and rewards, we feel confident that we will receive more throughout 2026. Our final business activity is our legacy Life Sciences segment, which did not generate any adjusted gross profit in Q3 or Q4. In our Q3 earnings call, we detailed how we were still developing our proprietary Opthoget user field device or UFD our last remaining product within the Life Sciences segment and that we were continuing to incur ongoing costs, including personnel and IT maintenance while investing in some additional R&D. The goal was to get the product further along on this development and make it a more attractive asset to the market. Today, we are pleased to announce that in Q1, we executed a nonbinding letter of intent to monetize the Optejet. The transaction is subject to diligence currently underway as well as other customary closing conditions, but if successful, we expect the transaction to close in the second quarter of 2026. We expect our ongoing operational expenses to decline, and there is now a potential path for future monetization proceeds from the Optejet. Moving on to operating expenses. Our core operating expenses, R&D plus SG&A and excluding stock-based comp, declined 30% quarter-over-quarter from $4.3 million in Q3 and to $3.0 million in Q4. We expect our expenses to further decline throughout 2026, especially with the pending outcome of the OpaJetLOI. The next item I'd like to discuss is a new non-GAAP measure called treasury gains and losses, which is meant to capture all the value movements of our digital assets in period, including Hype, our LSTs any hyper-liquid ecosystem tokens such as KNCQ in the fourth quarter. It also aims to remove the GAAP nuance as it relates to LSTs, which I described further in our Q3 earnings call, where we have to carry those assets at the lower of cost basis or impaired value, which is the low water mark high price in the period. While we are strongly convicted in our point of view that Hype is the most attractive digital asset, and that the hyper-liquid blockchain is ripe for opportunities to deploy income-generating DFI businesses, we expect type to remain a volatile asset, i.e., going from about 45% as of September 30 to 25% as of December 31 to 38% as of March 23. This is exactly why we break out our operating businesses within adjusted gross profit. so that our DFI activities can be presented independent of the mark-to-market movement of our tokens. Treasury losses were $36.8 million in Q4 and versus positive $11.9 million treasury gains in Q3. Based on the March 23 price of hype of 38 and depending on where we end the quarter, we could have over $24 million of unrealized treasury gains in Q1 compared to our December 31 mark-to-market price of $25. This is how we think about our total income in the most simplified fashion. Start with our core DFI activities and adjusted gross profit, minus operating expenses ex stock-based comp plus treasury value gains and losses plus some small items and adjusted other income and expense, which weren't material in Q3 or Q4, and it gets us to our adjusted EBITDA of negative $38.9 million in Q4 versus positive $8.0 million in Q3 compared to GAAP net loss of $39.8 million in Q4 versus net income of $6.6 million in Q3. Moving on to the balance sheet. Our gross hype tokens increased from $1.72 million as of Q3 to $1.88 million as of Q4 to over $1.93 million as of March 23 or over a 50,000 hype increase quarter-to-date as we continue to buy more hype and earn staking and validated income in hype. We also currently have 1.9 million CQ received in Q4 and 1.0 million HPL received in Q1 as of March 23. We did not pay anything for those 2 tokens, but believe their value over time will be driven by each protocol's growth alongside the hyper-liquid ecosystem. Our net asset value, which adjusts for debt and working capital decreased from $74.5 million as of Q3 to $44.2 million as of Q4. Our $8 million of outstanding debt as of Q4 is at an 8% annual interest rate, it is in an interest-only period until Q1 2027, and half of that interest-only payment is cash and the other half pays in kind adding to the balance of the loan. In March, we announced a partnership with Hyperlend, whereby we can borrow at a 4.0% fixed rate secured against some of our high hype LSTs. We expect our first draw in the coming weeks and to partially pay down some of our legacy 8% debt with the proceeds. Regarding our cash flows. Net cash used in operating activities was approximately $4 million in Q4 versus $3 million in Q3. We -- in Q4, we had a $1.3 million reduction in current liabilities versus Q3 as we continue to streamline the balance sheet and legacy items. Our cash, cash equivalents and US DH stable claims totaled approximately $9.2 million as of March 23, giving us multiple quarters of runway. As our expenses decline and our businesses ramp, we continue to anticipate achieving positive net operating cash flows by the end of the year. Net cash used in investing activities to purchase hype was $6.3 million in Q4 versus $20.0 million in Q3. Q1 quarter-to-date as of March 23, we have bought another $1.5 million in height. We raised $9.4 million net proceeds from our at-the-market offering in Q4 versus $21.8 million in Q3. Quarter-to-date Q1 as of March 23, we have raised an additional $6.7 million net proceeds from the ATM. There's additional detail in our earnings content regarding full year results, comparisons to 2024 and per share metrics, many of which include to a large extent, our legacy biotech operations which the company began to scale back beginning in Q4 2024. Looking ahead to 2026, we expect continued growth in our adjusted gross profit, driven by our DeFi businesses. Staking and validated revenues are expected to continue to increase as the hyper-liquid network expands and our stakes in delegated positions grow. We expect our yield enhancement strategies to scale with our new Vault partnership with Risk and private lending pools with Hyperlend. Our pipeline for defimonetization and protocol partnerships is robust and we believe that the HIP 4 upgrade on prediction markets may unlock new opportunities for us in 2026. And we anticipate additional air drops and ecosystem rewards as we get rewarded by the hyper-liquid community for our triple dip strategy supporting its growth. 2025 is a remarkable year of first for the company. We already achieved about 3x base staking yield in Q4 with our strategies only 6 months old. And in 2026, we believe our flywheel effect to compound our treasury holdings is simply unparalleled. Now imagine this scenario. In a few years' time, hyper-liquid may become the dominant blockchain for financial transactions. After HIP 4 prediction markets may come HIP 5, 6, 7, further upgrades to create new infrastructure that we haven't even thought of yet. After already achieving scale on trading crypto, metals, oil and gas and the S&P 500, more and more institutional products and asset classes may become regularly traded on hypoliquid. Compounding fees permanently burn outstanding hype tokens, reducing the maximum supply and its scarcity versus demand may drive the price higher. Meanwhile, the infrastructure we've helped to build is producing recurring DFI revenues for our shareholders and our hyper-liquid community tokens may become more valuable as those protocols that we help support evolved into compelling platforms and businesses in their own right. This is the vision that we believe in at Hyperium DeFi, and every day, we are helping to build that vision into reality. With that, I'll turn it back over to the operator, and we look forward to answering your questions.

[Operator Instructions] Our first question comes from the line of Gareth Caseta with Cantor Fitzgerald.

I was wondering if you could go into more detail on the host agreements you guys have for hip 3 markets. and maybe how you're thinking about HIT 4 and if you might participate similarly to how you've done with hip 3.

Yes, sure thing. So high path service is our original proprietary design when we realized that there was a lot of utility behind Behiketoken and effectively being able to stake and restate it in the ecosystem. So for HIP 3, we saw the value of creating non-cryptoperpetual markets that are agnostic to the price of hype and agnostic to performance in crypto markets. It's a revenue stream that is denominated in dollars and basically lets us continue to scale with increasing volumes on our exchange in partnership with Felix. We earn a share of the revenue from that product design, and it's something that we will continue to use. We are seeing significant demand across a global client base as more and more users come to hyperliquid. And with regard to HIP 4, the only guidance that we have right now from the core team is that it will start canonical and could eventually become permissionless. And if there's an opportunity there, we will definitely be positioning and looking to participate given the hike that we have on the balance sheet.

And maybe just a quick follow-up. We really appreciate the kind of the increased description on all of these operating business lines. Could you maybe talk about where you might expect some of these to be more consistent for recurring in nature as compared to maybe some that might be less predictable.

Yes, absolutely. Thank you, Gareth, for the question. So thinking about the 5 business lines, and I'll go from the bottom up, staking yield should scale in proportion to the amount of hype that we own ourselves. Validator commissions will scale depending on the amount of tokens at our validator, which we believe could increase substantially to the extent that our defined monetization activities grow and to the extent that we are able to be successful in bringing others onto the hyper-liquid blockchain through the protocol partnerships that we have. monetization that can scale from a essentially a parabolic perspective to the extent that there's more trading activity on hyper-liquid to the extent that there's more financial products and to the extent that our infrastructure can be adopted by more users. Yield enhancements similarly, it's first-party strategies that we have, such as selling covered calls such as cash secured puts which do increase the yield on our assets while using staked hype as a collateral, our liquid saking tokens. So that could be linear somewhat from a first-party perspective but it also opens up third-party capabilities with the Vault partner that we have, which is risk. And then ecosystem rewards, it's inherently unpredictable to determine the timing of the air drops between hyper-liquid community tokens or potentially hype itself as well as the other sort of rewards that can exist. But the way that we position ourselves there we think is inherently unique and unlike any other public company, especially within the hyper-liquid ecosystem.

Our next question comes from the line of Brett Knoblauch with Cantor Fitzgerald.

On HIP 3, we're seeing obviously significant kind of volume growth month over month there. And I know hip 3 in general, has only really been around for maybe 5 months at this point. From my understanding, we're still kind of in gross mode or where it has growth mode activated, which kind of lowers the fees from those markets. At what point do you think gross mode kind of goes away and this fee potential of those markets starts to become more material for both you and the ecosystem from a buyback perspective?

Brett, thanks for the question. So we've had weeks or months where growth mode was not applied to certain assets on the exchange that we have with Felix and we saw the benefits pretty immediately. Right now, for context, growth mode reduces fees across HIP 3 markets by 90%. And However, when we talk to Trafi teams or prop firms that are using existing exchanges like CME and so forth, growth mode is necessary right now to be more competitive than the de facto solution. And so right now, we expect that if the leader of the HIP 3 markets, for example, trade XYZ, they are kind of setting the baseline rate. And so other markets must follow to be competitive. We expect that as the product base expands to various markets that are available on NII evolve. We do see that coming down over time. That's something that obviously depends upon the user growth and general activity and what is required for hyper-liquid to become more accessible and offerable to institutional players.

Awesome. And then maybe just -- I know we're kind of waiting for legislation in the U.S. and Clarity Act. Kind of a bit unclear on maybe what that means, if it means anything for hyperoliquid. Do you guys have any thoughts on that and maybe the potential where we see hyper-liquid eventually become allowed in the U.S. Is that something that you guys envision happening anytime soon?

Thank you, Brett, for the question. So taking a step back here, I think it's important to believe fundamentally that industry regulators and consumers are aligned with the long-term goal, which is fair, transparent and efficient markets. And that will be driven by the fundamentals of what is available. And we believe that hyper-liquid will be of increased demand and of increased importance and that the long-term regulatory arc will be supportive of its access and of its growth. But that being said, we do not have a crystal ball. We do not know what comes next at what point in time and the various incremental steps that will happen. But sitting where we are today, exactly where we are, the business opportunity for Hyperion DFI is extremely robust. So we will continue to operate in the environment where we are, which is the only thing that we know and be responsible, be diligent, believing that we have a duty as an innovator within DFI to be very, very thoughtful on all the activities that we do. However, I do believe there will be long-term upside to us when the regulatory tailwinds continue to accelerate.

Our next question comes from the line of Jim McIlree with Chardan Capital Markets.

David, could you comment on operating cash flow breakeven for the year. And then secondly, the adjusted gross profit expectation that you have for the year, it kind of sounds like it's back-end loaded I mean not too much, but it does kind of sound back-end loaded. Is that correct?

Thank you, Jim, for the question. So fundamentally, we had about $3 million of core operating expenses, excluding stock-based compensation in Q4 versus our adjusted gross profit of about $821,000 and essentially, we expect those 2 elements to converge and flip at some point this year in 2026. Some of our operating profiles and businesses are in cash. Some of them are in type. Some of our expenses, obviously, are denominated in cash and some are not. But the way that we get there is by ramping DeFi business lines, it is by partially the outcome of the OptoJet LOI, which should reduce our cost and it's from further cleanup of the balance sheet and a few legacy items that we continue to process through day by day. But we made that commitment in our earnings call in November that continues to be the main target for us as a company and it's critical to proving that we are more than just a digital asset treasury, that we are a defi company of fintech. And when we get to that level, we believe that will be a fundamental inflection point for our growth.

Okay. And as far as the adjusted gross profit outlook, it does ramp during the year. I mean, it would be reasonable to think that it's up every quarter. And I know you've got some onetime things that are going to impact that like the hyper len air drop. But for the most part, the DP businesses are going to ramp quarter-to-quarter.

That's correct. We are not giving individual quarter guidance, and we are not giving guidance on each of the 5 businesses individually. But what's important to note is that we have the ability to navigate and be fluid with the ecosystem. And as opportunities present ourselves, we will adapt. To the extent that there is an actionable opportunity for us in HIP 4, for example, that could change how we're allocated among our different businesses. However, throughout the year, we believe that they should all ramp there will be some variability. And that, yes, we will end at the end of the year in levels and run rates greater than we were entering into the year.

Great. And then lastly, on the silhouette announcement that you had yesterday, the day before, is that a similar -- is that a similar revenue and earnings opportunity for you that you've had with the others that there's going to be a revenue share and maybe something else attached to it. And then when do you think that, that would become operational for you?

Yes. Thanks for the question, Jim. So high base use service, all of the deals that we write under that structure are revenue share based in addition to being able to receive ecosystem awards, which are often reflected in the form of tokens native to each of the counterparties -- this is -- silhouette is interesting because it is more of a platform built on built on top of hyper liquid that offers privacy for traders. And so those that are using sophisticated strategies are able to do them without -- with them being shielded from public view. And so we expect there to be a lot of volume being done through the platform and the traders received the benefit of significantly reduced fees. And so the model is where increasing volumes will result in more fee savings, which return back to the company in terms of revenue, and that is something that is also scalable with increasing volumes. We've actually seen the amount of assets in the silhouette trading accounts rise over a duration of the day after the deal was signed, and so we expect that to continue to ramp up as they also initiate a growth campaign shortly.

And so that's operational for you right now. Is that correct?

That's correct. Yes. They are live now. .

[Operator Instructions] Our next question comes from the line of Brian Vieten with Sebit Financial.

Great. Just can we just talk about the pipeline of capital as a service agreements, your house agreements, talk about what we were typically looking for in a partner? And maybe how much capital you have ready to deploy into those, that would be like your total type treasury less what you've already deployed in terms of hype tokens. And I guess, is that the bottleneck? Are there maybe 5 or 10 of these ready to go once you guys have more tokens? And I just had a follow-up.

Yes. So I would say there's a substantial pipeline for high base use. The more that this product becomes socialized and people are able to see the benefits, we are the de facto solution for a lot of new products and services, HIP-3, increased trading fees and on HIP 4 potentially becomes potential permissionless, we expect that to be another avenue of opportunity. As we mentioned in the call, we have a little over 1.3 million hike. We are at pretty high utilization across our strategies. And as David mentioned, we have the flexibility to migrate or utilize high 4 different strategies depending on the opportunity available. So we are always focused on optimizing the return and being able to generate the highest hype on hype or dollar on high return across the balance sheet assets. And so our focus is to continue to strategically utilize the ATM to generate revenue and roll that into increasingly high position so that we can continue to scale and compound these deals. And the benefit of that, obviously, is we expect the tailwinds behind Hype 2 continue to persist, which also generates more revenues to the validator and delegation operations in addition to the growth of general ecosystem products as we are seeing hyper-liquid really start to break into the mainstream.

That's great. And then -- and kind of in the same vein, but could you just talk about the return profile of some of those agreements. So like for hip 3 you're locking up 500,000 tokens. Others might require fewer tokens or maybe more. Could you just talk about those high-op returns of some of the agreements you've made so far? And maybe just for fun, we could think of the hip business as if growth mode worked to end at some point or maybe volumes sustained.

Yes, sure thing. So Hyatt use are actually mostly denominated in dollar-based revenue. So as mentioned earlier, silhouette is trading fee reduction. So as more volumes are deployed through that platform. that will result in more fee savings and a larger percentage of that will return to Hyperion as revenue. So we actually find that as more of an in-demand product because we are seeing more market makers and teams from traditional finance start to come over to hyper liquid. And when these teams are doing $300 million, $400 million, $500 million of volume a day, the fees that they're paying to hydro liquid are prices substantially. So that is a product that we see a lot of opportunity from. With regard to HIP 3, like I mentioned earlier, if there wasn't growth mode, the model and projections that we've had prior to HIP 3 deployment were quite accurate. It is purely a volume-based product, whereas more trading activity is done through hyper-liquid front end and also through the builder codes, which are effectively mobile applications for distribution. We are seeing substantial growth across the user base, and we are working specifically with our partner at Felix to figure out which regionals, which regions, which markets and which ways are the most effective mechanisms to bring more users and sustainable trading volume to the HIP 3 exchange.

That concludes our question-and-answer session. I'll turn the floor back to Mr. Jung for any final comments.

Great. Thank you. So as we conclude today's call, I want to highlight how rapidly Hyperion DFI has differentiated itself from other companies that are still operating under the Digital Asset Treasury or DAT moniker. In 6 short months, we have been able to demonstrate the possibilities from a revenue perspective as these unique strategies start to gain momentum. This is rooted in our ability to work together with teams in the hyper-liquid ecosystem to accomplish the ambitious objectives set for ourselves. In many ways, we see these partnerships and the associated products becoming our moat, building upon each other, ultimately accelerating our DeFi flywheel. . At the same time, in a space is dynamic as crypto, it is also paramount that we remain flexible and positioned quickly for new developments in hydro liquid. In my shareholder letter published in January, I talked about 2 megatrends for the year. tokenization and artificial intelligence. We are already seeing the impact of these technologies playing out. Real-world assets like oil and silver seeing price discovery during off hours in addition to increasing experimentation and utilization of AI agents to execute trading strategies on chain. This comes at a time when we are seeing large-scale institutional adoption across key components of finance, payments and Frontier tech. It is imperative that we continue to operate for the long term and design on chain products for a future that is highly financialized and autonomous. The regulatory environment for crypto is also advancing positively with the recent announcement of the CFTC working jointly to provide classification and clarity for digital assets. It is encouraging to see the newly founded Hyperliquid Policy Center represent hyper-liquid at the White House, ensuring that our ecosystem's efforts are brought to the attention of key decision makers. We firmly believe that the future is bright for hyper-liquid with increasing regulatory clarity and maturing institutional infrastructure, the performance advantages of platforms like hyper-liquid should continue to break into mainstream adoption. This positioning is Hyperion DeFi's positions to win. In 2026, our priorities remain focused on 3 key areas: continuing to strategically build our high position strengthening our partnerships within the hyper-liquid ecosystem and scaling our portfolio of DeFi services, developing the institutional infrastructure necessary to bring traditional finance onto the hyper-liquid blockchain. We are so sincerely grateful for the continued support of our shareholders and of course, to our ecosystem partners as we continue to build and scale our on-train infrastructure directly on hyper liquid. Hyperion DeFi is building for the future of finance. This is more than just hype. Thank you.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.