Upexi, Inc. (UPXI) Earnings Call Transcript & Summary

Good day, and welcome to the IAccess Alpha Virtual Best Ideas Summer Investment Conference 2025. The next presenting company is Upexi Inc. [Operator Instructions] I'd now like to turn the floor over to Mr. Brian Rudick, who is the Chief Strategy Officer for Upexi Inc. Sir, the floor is yours.

Thank you very much, and it is a pleasure to be with everybody today. My name is Brian Rudick. I am the Chief Strategy Officer of Upexi, the leading Solana treasury company. Here, you can see our background. So we are a consumer products brand owner. We currently own 3 different brands. We are putting up roughly $15 million to $20 million in annually recurring revenue, and we are roughly breakeven at this time. We actually announced in February our intention to move into the cryptocurrency space and have since honed that strategy to be one that is focused on acquiring and HODLing as much Solana as possible. We were fortunate to raise $100 million from 15 of the most prestigious crypto venture capital funds, deployed that quickly into the Solana treasury strategy, and that brings us to where we are today. We believe one big differentiator of ourselves is our management team. So we are led by our CEO, Allan Marshall. He is the founder of XPO Logistics, a $14 billion market cap company that is a leader in logistics globally. He's had many successful exits in the past as well. Our CFO is Andy Norstrud, who's been with Allan for most of their careers. And then I spent most of my time on Wall Street, mostly managing a book of bank stocks, always in the long/short construct for leading funds like Citadel and Millennium and then spent the last 4.5 years heading the research effort at GSR, which is one of the largest companies in all of crypto. So just as some background, a bit of a primer on digital asset treasury companies. Really, this all started with MicroStrategy back in August 2020. It was tired of seeing the value of its fiat erode due to inflation, and it decided to buy Bitcoin. Then the price of Bitcoin moved up, MicroStrategy stock price started to move up as well. It continued to buy more Bitcoin and pretty soon, it was actually accessing the capital markets to buy even more Bitcoins. After that, you saw a number of other companies starting to employ this MicroStrategy model. It's been mostly focused on Bitcoin. But as you can see, there are more and more companies coming out more recently focused on other tokens like Upexi and Solana, and this is predominantly due to a more open SEC. There are a number of wonderful shareholder benefits that you get with a digital asset treasury company that actually might make it a better investment than holding the native token itself or another instrument like an ETF. Number one, the digital asset treasury company shares can actually act as a proxy for that digital asset in the form of a familiar equity security. Number two, digital asset treasury company stock typically will trade with a beta to that underlying cryptocurrency. So if you believe that, that cryptocurrency will generally move higher over the medium term, you might want greater exposure to that. And then number three, digital asset treasury companies are much more than a levered equity play on a cryptocurrency. They can actually engage in multiple value accrual mechanisms most notably being intelligent capital markets issuance where a lot of the magic actually happens, and we'll get into this in much more detail shortly. There is something that I like to call triple action to where if the underlying digital asset move up, an investor could actually get 3 things that they see in the digital asset treasury company stock. So number one, the stock should move up with the cryptocurrency. Number two, the multiple that investors ascribe to that company, meaning the market cap over the value of that cryptocurrency can expand. And then number three, because that multiple is higher, the company can actually raise more capital and in a more accretive fashion. So there's actually 3 big benefits that you get from a digital asset treasury company. So here, you can see just how wildly successful that this model can actually be. I'd note that MicroStrategy has been the best performing stock of any stock in the U.S. since it moved to a Bitcoin treasury strategy in August 2020. It's more than doubled the performance of Bitcoin, and it wasn't fully levered. So there has to be something there beyond just being this levered play. And the other thing to note is that MicroStrategy actually holds as the second largest holder of Bitcoin behind only Satoshi himself. There could be some technical issues. I'm not sure if the next slide is up yet. Here we go. Okay. So what is Solana? There are a couple of different categories of digital assets. You could think of Bitcoin as being the store of value, and then you can think of high-performance smart contract blockchains as being almost as computer in the sky. Anybody can arbitrarily upload any code to it, and that code is processed in this trustless and decentralized fashion, and that emanates a lot of really great properties. Put simply, we believe that Solana is the leading smart contract blockchain. It has the best technology, and it has the most vibrant ecosystems of users, developers and decentralized applications. And this is leading to Solana putting up the best metrics of any smart contract blockchain relative to its peers. So our thesis is actually quite simple. So Upexi provides exposure to investors in the form of a familiar equity security, but it's actually much more than that. We can unlock significant value using proven capital market strategies. In addition, we can actually improve on MicroStrategy's playbook by staking our treasury to make it this productive asset or buying Locked SOL at this discount for built-in gains for shareholders. And then lastly, we are capitalizing on crypto secular expansion and Solana as an end-game winner. So for any treasury company, there's really 2 key components. The first is external visibility. You want everybody to actually know about your company to where you can maximize demand for the stock. And here, you can see we have a bunch of different efforts afoot that span both the crypto side of things and the traditional investor side of things. We believe quite strongly that our expertise and our connectivity to both sides of the aisle position us well to really maximize our visibility externally. And then the second component is on intelligent capital issuance. This is where much of the value accretion for shareholders actually occurs, and we are hoping to be out there raising funds in an accretive way pretty soon. We feel that we've demonstrated this already by successfully executing a $100 million raise. It's -- we've raised the most of any Solana treasury company out there, and we'd like to do this again pretty quickly. MicroStrategy really gave the blueprint. This will likely come in the form of convertible debt or additional accretive equity issuances, though we are open to whatever is best for the shareholders at the time based on market conditions. So our strategy is really 3 parts. The first is to go big and fast. It is a bit of a race. We are currently the largest Solana treasury company by number of SOL held, and that was in part due to our large initial capital raise. We also deployed those funds quite quickly, which is exactly what you want to do when you think that the digital asset over the medium term will tend to move up. So go big and fast. The second is we like to say that we come with the Cryptosphere. We are backed by 15 of the leading digital asset venture capital funds. They are providing us with capital. They are providing us with connectivity. They're helping to maximize our visibility and some of them are even running validators for us. And then lastly, the thing that differentiates us is we are trying to act in a manner that we think is fitting of a public company. So we are not going to be too highly levered. We're not going to be doing a bunch of degen items on chain. We are only using qualified custodians, and we're diversifying amongst them. We think that these things provides 2 benefits. The first is it positions us well to withstand any market environment. And the second one is we believe that this is a strategy that will resonate with both crypto investors and traditional investors alike. The thing that gets me so excited is there are multiple value accrual mechanisms that all compound. This is actually why I decided to state my career on this because I believe so strongly just in the value creation for a digital asset treasury company and specifically one based on an endgame asset like Solana. And so the first here is staking. So we stake our Solana and earn a roughly 8% return. What this means is we are delegating our SOL to a validator who is using it and basically pledging not to act in a nefarious fashion. And then in return for that, we are making -- we are being compensated with this roughly 8% staking yield. And so we are turning our digital asset treasury into this productive asset. The second thing is we are buying locked Solana at a discount. And what this means is when Solana was created, it pre-mined a bunch of tokens, which is sold to investors that were all not liquid immediately and they vest it over time. And so there actually is this pretty liquid OTC market, but you just can't trade it on an exchange, and we're able to actually buy those locked tokens at a roughly mid-teens discount for built-in gains for shareholders. That discount moves to par over time. It's roughly a 1.4-year weighted duration. And importantly, we still get the 8% staking yield on it. So when you put this discount into any sort of yield equivalent fashion, we're roughly doubling that 8% staking yield in this risk prudent way that fully aligns with our buy and HODL strategy. Then we have the intelligent capital issuance. I'll get into this much more on the next slide because this is where much of the magic happens and it's deserving of its own deep dive. But just note that when you issue equity above book value, it is by definition, accretive. And then the last driver of our stock is really the change in the price of SOL. Here, I'd note that there's a lot of upside potential. SOL's market cap is only 4% out of BTCs and there are, in our minds, many more positive catalysts and risks for Solana from here. Here is our capital markets flywheel. So investors are currently awarding digital asset treasury companies a multiple in terms of its market cap relative to the value of the digital assets it holds. There's a number of reasons for this. I think it could be as simple as wanting access to crypto in the form of a familiar equity security. My bank's analyst brain tends to think of this in terms of a bank. So effectively, just like a bank, we're earning spread income. We're earning the difference between our cost of capital and the return on Solana. When investors think that, that spread is going to be positive, we earn it just not this year, but also in future years as well and the market will actually present value that, add it to the NAV, and that's where this turns into something that is positive. And then we can actually monetize that premium for the benefit of shareholders. So this is step 2 with intelligent issuance. And when we issue equity at, let's say, 2x book, we are effectively selling $1 for $2 or we are buying Solana half off. And this is exactly how MicroStrategy essentially created $13 billion worth of free Bitcoin for shareholders last year. The second component of this is convertible issuance, which is quite similar and can result in cheap or free funding for the company, delayed dilution and actually selling equity at an even higher premium versus the current market price. And then all that results in an increasing SOL per share for us, which should result in a stock price moving up and supporting the multiple and then this capital markets flywheel can just continue. As far as valuation, this is really what enables this capital markets flywheel. So you see MicroStrategy, I think last I looked at it, it was at 1.7, let's just call it 2x to make the math easy. And what you see is when you move to smaller companies, there's actually this embedded growth premium. And the reason for this is if a smaller company issues $100 million of equity at 2x book, it's going to be highly accretive versus if MicroStrategy issued $100 million at any multiple, it really won't move the needle because they're so big. So smaller companies should trade at this embedded growth premium. And then similarly, as you move off of BTC toward an altcoin, all else equal, there is more potential upside in that altcoin. And so investors will tend to pay a higher premium for non-BTC treasury companies as well. As far as our Solana treasury, we are the leading holder of Solana for any public company. As of our last update, we had nearly 700,000 Solana at the time was valued at over $120 million. 60% of that is in the form of Locked SOL for those built-in gains for shareholders. You can see more information here on some of our purchases and our staking and the last that we guided was to generate roughly 8% or 48,000 tokens per year via staking income. And then here is our slide on why we believe so strongly that crypto will be ubiquitous. The short answer is there are many use cases and benefits that you can get with crypto that you can't get with any other technology. These are things like the removal of intermediaries, the democratization of value exchange and new paradigms and constructs around ownership, governance and business models. It will take time, just like any technology. You saw the Internet invented in the '80s, and it wasn't until the mid-2000s that we got the Internet as we know it today with social networks and user-generated content, but it is happening. And that brings me to the second section. Crypto prices will ebb and flow based on speculation because it is such a nascent asset and subsector. But if you actually look under the hood, we are in secular expansion. And so all of these underlying fundamental metrics like number of global crypto users, number of developers, number of daily transactions are all up and to the right. And then the last thing I'd say is I personally think that we could be on the mother of all crypto bull markets. And this is really because the biggest thing always holding crypto back was unclear rules and regulations in the U.S. We are likely to get market structure legislation next year. If that happens, institutions will have to come in, in a big way. They really haven't been doing too much, but they will kind of be forced to do so. Otherwise, they'll be disintermediated by those who do. And if you think about it, it's actually the institutions that have billions of customers. They have billions of dollars to put at it. They've got built-in trust. They have top devs. And so if you can imagine Google Chrome actually adding a crypto wallet and Amazon accepting a stablecoin like USDC, we could be on the precipice of onboarding the masses, and this should lead to a step change in functionality and usage and Solana and Upexi will be big beneficiaries of that. Then as far as why we chose Solana. So we view Bitcoin as the best monetary asset. We view Solana as the best high-performance blockchain. It really is that simple. There are roughly 20 other companies employing the MicroStrategy model. We didn't want to be #21. We'd rather be the canonical Solana treasury company. And then also, two, Bitcoin is already a $2 trillion asset. It will probably take immense sovereign buying for it to 5x from here versus something like Solana, which could potentially 5x by year-end. So much more potential upside for us. And then lastly, there's a bunch of Solana specific reasons, which really get into the nitty-gritty on what makes it the leading Solana or the leading smart contract blockchain. But the TLDR is it does have the best performance. It has the most vibrant ecosystems of users, developers and DAPs and is putting up the best metrics of any chain. And then as far as why Upexi hit on most of these points, but we believe that we have a top management team with great connectivity across both the Cryptosphere and traditional finance. We are backed by leading firms, 15 of the most prestigious crypto VCs that are adding a lot of value. We are a first mover. So we're one of the first Solana treasury companies in the United States. We have extensive capital markets expertise, both at this company and in prior companies as well. We do have leading connectivity to folks, both in traditional finance and in the Cryptosphere. And then we are doing things in a very professional manner that we think will resonate with all kinds of investors. And then there are a bunch of characteristics of our consumer brand company that we think make this a great opportunity. It's rightsized. So investors actually don't have to worry about all the details about the consumer brand operating company. It's roughly breakeven. So when we do raise funds, that goes to buying Solana, not to support operating company losses, and then we have a very pristine capital stack. And that is it. So we believe quite strongly that there are multiple value accrual mechanisms at play here and that Upexi for some investors could make a better investment than buying the underlying asset or an asset or an instrument like an ETF because of that. And with that, I will move over to Q&A.

The first question is, would you ever add any other digital assets besides Solana? So the short answer is no. We have said that we are a buy and HODL strategy for Solana only. We really truly do believe that it is the endgame winning smart contract blockchain and will be the best-performing token. What I noted there are -- you're seeing a plethora of digital asset treasury companies to market, and we feel quite strongly that there will only be 3 to 4 that a model such as this can work on, Solana obviously being one of them. The big reason here is because the biggest determinant of any digital asset treasuries company's success is the token that it's built on. It doesn't matter what you do if the token moves down 95% over 5 years. And so you, a, have to be sure that, that token will be around in 5 years. I can say that confidently about Solana, but for most other assets, I cannot. And then b, you have to be fairly confident that it will generally perform quite well over those 5 years. And I can say the same thing about Solana, not for a lot of other tokens. So all that said, I never say never, but we are kind of all in on Solana. Next question is, why did Solana -- Upexi's stock price drop? I actually can't comment on our stock prices, but what I can say is that the -- when we went out and we raised $100 million via a private placement, we had registered those shares, but that registration statement hadn't actually gone effective yet. And so what this means is all of the investors that invested in our pipe can now actually trade their shares if they wish. And so I think that is the event that has caused our stock price to fall today, but I can't really comment on it outside of that. And then, yes, I believe that is all of our questions. Can you talk about some of the Solana use cases for the blockchain. There are so many use cases for Solana. And one thing that we really like about it is its strong performance. So Solana is actually not the first high-performance blockchain. That is probably Ethereum. And what I'd say there is Ethereum was the leader, and it is constrained by its original design decisions. So because it came out over a decade ago, it processes transactions one at a time. There are all these other details about how the chain was designed that you just can't really get around for backwards compatibility reasons. And so what Ethereum ended up doing is it pushed out execution of transactions to other blockchains called Layer 2s. And now there's this whole big debate as to whether L2s are parasitic to Ethereum value capture itself versus something like Solana, which is a monolith and has high performance and can keep all of that activity on its own chain. And it's just a big, big benefit for Solana versus others. But the TLDR is almost anything you can think of you can do on Solana. So obviously, one of the big benefits, as I mentioned, is the removal of intermediaries. There are a lot of intermediaries in finance. And so Solana is very focused on decentralized finance, and you're seeing basically everything that you see in traditional finance replicated on chain. Another area is called DPIN. So Decentralized Physical Infrastructure Networks. You're seeing folks replicate these very cost-intensive, capital-intensive constructs with things like Helium Mobile that is providing for 5G networks for cell phones by using these DPIN constructs. You're seeing people trade meme coins. You're seeing gaming, you're seeing social networks. Anything that you can think of, anything that you can do on a normal computer, you can do on Solana. And just checking the queue. And that is it. So with that, we're almost at time anyway. I will turn it back over to the operator. So thanks, everybody, for your interest and support.

Thank you, ladies and gentlemen. That concludes the Upexi Inc., presentation. You may now disconnect. And please consult the conference agenda for the next presenting company.