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

My name is Valter Pinto, Managing Director of KCSA Strategic Communications. I'm joined today by Allan Marshall, CEO; and Brian Rudick, Chief Strategy Officer. I'm really looking forward to this timely discussion with Allan and Brian. Cryptocurrency industry is becoming increasingly mainstream. It's no longer crypto, it's an idea. It's obviously globally recognized. We're coming out of the BTC Conference in Vegas just a few weeks ago, there were over 50,000 attendees, Vice President, J.D. Vance gave the keynote presentation. So it's obvious that a global shift is happening. We welcome Brian today who recently joined Upexi, has quickly become an integral part of the organization contributing valuable insights in helping drive key strategic initiatives forward in the company's crypto strategy. Before we get into our Q&A, let me quickly remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995 and federal securities laws. And that actual results may differ materially from what is contemplated by such forward-looking statements due to a variety of risks, uncertainties and other factors. For a detailed discussion of some of the ongoing risks and uncertainties, I refer you to the company's quarterly report on Form 10-Q as well as the company's investor presentation and other reports filed periodically with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless otherwise required by law. Again, I want to thank everyone for joining our call today. As many of you know, Upexi historically has been a brand owner. The company recently diversified its operations into the cryptocurrency space, being one of the first public companies to execute on a Solana treasury strategy. At the conclusion of our fireside chat today, we'll have a live Q&A. Please submit your questions via the Q&A function at any time. We'll do our best to get to each of your questions within the time frame allotted for today's call. If for any reason, we don't get to your question, it's okay, please e-mail us at [email protected]. This call is being recorded today, Thursday, June 26, 2025, at 11:00 a.m. Eastern. The recording will also be available on the company's Investor Relations website under the Events section at the conclusion of this call.

With that, I'd like to start the call off with a few questions for Allan and Brian before we open up the call for our audience. And Allan, if I may, just a few questions to start off with you. I give you a lot of credit for being the visionary of the Solana treasury strategy for Upexi. The mechanics to me, and I'm sure many in our audience, how this all came about seems quite complex. I'm curious, when did you start thinking about going down this path? And how did this all come together?

Well, as you know, in the past and currently, we are a brand company. Amazon, we aggregated a bunch of Amazon brands. We grew the company pretty substantially from 2020 into 2023. I think got from $20 million to close to $100 million run rate. The problem was that we always anticipated being able to refinance the debt. And over the last -- those 4 years, it was very difficult for microcap companies to execute on refinancing that debt. Fortunately, we had bought brands that had significant underlying value, and we were able to basically sell those off and get back to kind of starting from scratch again almost. I mean, the current business is estimated $15 million to $20 million in revenue. It contributes enough cash to finance operations. It should grow single digits, single -- low single digits. Well, we've got a team that runs that. It runs kind of on autopilot. And in February, management, myself and Andy started looking at, well, MicroStrategy is more in depth. And we've looked at some other companies initiating and expanding their Bitcoin strategies. The financial aspect around investing in the underlying crypto using equity and other financial instruments was very compelling. And we really decided if we were going to raise more capital, like would we raise more capital to buy more brands or would we raise more capital to expand on that kind of strategy. The opportunity was compelling for many reasons, and it's rare that so many things are set up to be the catalysts at the same time. So in February, we were looking at it. The recent election really lessen regulation, allowing the industry to flourish. The current administration seems to be outspoken proponent of crypto, as you mentioned in your opening remarks. So whenever those headwinds that crypto has faced over the last year became tailwinds, really made an easy decision for us to enter into this space instead of increasing our brand exposure.

Yes. And of course, Allan, in order to execute on the treasury strategy, you need to raise capital. You did so successfully. You raised $100 million. But not only did you raise $100 million, you raised $100 million led by several of the most prominent crypto venture capital firms in the country. And yourself and your family included, Brian included. I guess, when you think about how that investor group came together, they could invest in a lot of different securities. They invested in Upexi. I'm sure they have other investments, obviously. But why Upexi versus other other investments? And frankly, if you want exposure, why not Solana directly?

That's a good question. I mean, I think first, Brian can talk more about Solana. He's more in tune to the crypto expert than I am. I mean, I understand why we chose Solana. I mean, our original idea was to be broad-based in the crypto industry. But really, we looked at -- when we met Brian, we met GSR through AGP, we really looked at Solana as an asset that was up and coming. And some of the things that made a difference in there was -- a few examples is that we're able to stake our treasury to earn about 8% yield. So that turns Solana into an asset that's producing yield for us, where Bitcoin is not producing yield and just sits on the balance sheet. Secondly, some of the things we looked at and some of the things we presented to investors was that there's a significant amount of locks sold out there that we've been able to buy at discounts. Currently, our total position is probably 60% locked SOL. That produces -- we were able to buy that at about a 15% discount. So that produces a great built-in gain for shareholders. And thirdly, over time, as we trade at that premium to NAV, we should be able to issue equity. And equity above NAV, obviously, is accretive to our shareholders, and it's a great value creator for us. But essentially, all will be doing is utilizing the capital markets for the benefit of shareholders. And that compounding thing and all of those levers are extremely powerful.

That's helpful. I appreciate that, Allan. And Brian, if I may, we did speak about GSR, very well-known and well-respected investor in the crypto space. It's where you led a lot of the research effort for 4 years. First, welcome to the team, Brian, a pleasant addition to the management team. But just curious why make the move from GSR to Upexi? Why did you invest in the company and believe in the vision of Upexi going forward?

Thanks, Valter. So I left GSR to help push on Upexi's Solana treasury strategy really for three reasons. The first is just a deep belief in the size of the opportunity. So if we are able to procure a similar percentage of SOL that MicroStrategy has done for Bitcoin, and we are awarded a similar multiple, that would make us a $4 billion company. And as we'll get into, you could actually argue the multiple should be a good amount higher. The second is my confidence in our ability to capture that opportunity. So we're currently the largest Solana treasury company by the number of SOL held. We are backed by 15 of the most prestigious digital asset venture capital firms. We do have top management. So Allan founded XPO Logistics, which is a $14 billion NYSE listed company. We have deep ties to traditional finance that we're hoping to leverage. And then, we're operating in a way that will maximize shareholder value, but also in the risk prudent fashion that we believe is a strategy that will resonate with both crypto and traditional investors alike. And then, lastly is a deep belief in all the benefits that we can provide shareholders. And so, Allan already talked about some of these multiple compounding value accrual mechanisms, and I'm sure we'll get into it much more. But I really do think that investing in a digital asset treasury company such as Upexi can be the best way to actually invest in crypto for many investors.

That's helpful, Brian. And we started to talk about it with Allan a little bit, but let's dig in a little bit further on the treasury strategy. Everybody is familiar with MicroStrategy or strategy as they're known now. They've been investing in Bitcoin for many years. There may be some investors on the call that don't frankly understand the difference between Solana and Bitcoin and other cryptocurrency. How do you simplify kind of the differences between both cryptocurrencies? And again, is there anything else you want to add as to why you chose Solana versus, frankly, investing in Bitcoin or any other cryptocurrency?

That is a great and key question. So what I'd say is Bitcoin was originally meant to be the electronic cash system. There were technical limitations in a fixed supply that saw it morph into the store of value. But you can really think of Bitcoin as a bunch of unrelated computers all around the world that keep this local copy of this Excel spreadsheet that simply keeps track of who paid what, whom and when. And then the network can actually just compare everybody's copy of that spreadsheet to figure out if anybody acted nefariously. And if so, they'll just throw out that local copy. And so it is able to come to this source of truth in this decentralized and permissionless manner. But at the end of the day, it is just simply the store of value. And then, smart contract blockchains by contrast, which is what Solana is, don't just keep track of this digital ledger, but they also actually process code. And so then they can simply compare the output of that code from each computer to ensure that the code was processed correctly, but also in this decentralized and permissionless manner. And this results in all these really amazing benefits that you can't get with any other technology. These are things like the removal of intermediaries, the democratization of value exchange, the new paradigms around ownership, governance and business models. And you can basically think of a smart contract blockchain as this computer in the sky. And the addressable market really is global compute. And so Bitcoin is really the store of value asset. Solana is this global computer. And we chose Solana quite simply, because Solana is the leading smart contract blockchain. We do believe it has by far the best chance to be the endgame winner in this category.

That's great insight, Brian. Here's another interesting topic. I get this asked a lot to me, as I'm sure you do, as well as Allan. Let's talk about valuation. So whether you're looking at strategy, Upexi, any other comp in the space, the common question amongst investors is what should these companies be trading at? All of them trade at a premium to net asset value or NAV, but the multiples vary quite a bit. I guess from your point of view, I guess, putting your investor hat on, how should investors look at valuations in the space for Upexi and all the other comps in the industry?

That is a key question. It's a very, very brief background. I spent a decade as a bank analyst, mostly managing a book of bank stocks for Citadel, Millennium, and Balyasny. And at the end of the day, all these digital asset treasury companies are just banks. They earn spread income in terms of the difference between the cost of capital and the return on the digital asset. And then like a bank, they will trade at a premium to book. So with that as context, I would say that digital asset treasury companies can trade at this premium to book for a couple of reasons. One is investors will simply pay to access digital assets in this form of a familiar equity security. Think about folks wanting to buy Solana in their Schwab account, which you can't do currently. But then the second is really for access to all these multiple value accrual mechanisms. And this is particularly around the capital market strategy that can really compound value for shareholders over time. And so you have MicroStrategy that is currently trading at 1.7x the value of its Bitcoin. And then, as you think about other companies and how they should be valued, in my opinion, when you move off MicroStrategy and move to smaller companies, there should be this embedded growth premium for those smaller companies. And this is just because similarly sized, similarly priced raises will lead to more accretion for shareholders. So if Upexi issues $100 million of equity at a material premium to book, that would be highly accretive, and our stock should move up in a similar fashion. But if MicroStrategy issued $100 million of equity, it really doesn't move the needle, because they're so big. And then the second thing is, as you start to move off of Bitcoin and to some Altcoins, as long as they are the right ones and will perform well in the future, those should also trade at higher premiums, because there's more potential upside in those assets, all else equal. So just quickly, Bitcoin is a $2 trillion asset. It's going to be hard for it to 5x from here. Solana is literally 4% the market cap of Bitcoin, could easily 5x over any sort of short period of time. And so, I kind of look at MSTR's 1.7x as the lower bound and that companies that are smaller and those underpinned by assets outside of Bitcoin can trade at much higher multiples, and that's what you're generally seeing in the market today.

That's really helpful and it makes total sense. And Allan alluded to this. So we are generating yields from our Solana portfolio via staking revenue. I want to take a step back. Some investors may not even realize what staking revenue is or how -- like what are the mechanics of how it works? Can you Brian, just kind of tell us exactly what staking revenue is, how it all works in the background?

So this gets into the consensus mechanism of a blockchain. So how all of these unrelated computers all around the world come to an agreement. But for a proof-of-stake blockchain, which is what Solana is, all the computers in the network are known as validators and they process the smart contract code, as I mentioned. And then, there needs to be a way to keep them honest. So they actually stake SOL by locking it up into the smart contract. And then if they misbehave, they can actually be penalized in what's known as slashing, so they can see some of that SOL go away. Solana actually hasn't implemented slashing yet, but this is in theory how it can and could work in the future. And then the validators actually earn staking rewards for performing their duties correctly and not behaving nefariously. And so staking and staking yield is a way to help compensate validators for processing that smart contract computation and it helps secure the network. So Upexi, we are not actually running validators ourselves. We are delegating our SOL to validators who stake on our behalf, and then we earn that roughly 8% yield on our SOL for doing that.

That's helpful. Thanks, Brian. And I appreciate we have a large audience today. I appreciate all the questions. And Allan, this is actually one of our audience questions that I was curious about. Obviously, we provided an update this morning into our portfolio. Can you give our audience just an update, what does our treasury holdings portfolio look like today?

So we released an update this morning that even we hold currently 735,692 SOL. It's an 8% increase over our last update in May and current value -- well SOL price was all up, this morning was like $107 million.

That's helpful. And as I mentioned, there was a press release that went out this morning that has that information in it. And Allan, as you look longer term, obviously, we're in the early innings. All of this has come together in the last couple of months. But as you look longer term, what's the long-term vision of the company? I imagine the company will continue to raise capital in an accretive way for shareholders to invest in its Solana portfolio. Are there other currencies you're looking at? What are some other initiatives that you may be looking at for the future?

Well, I mean, really, we're solely focused on Solana at this point in time. We have a buy-and-hold strategy, and there's no current plan to switch from that strategy. I think, one of the things we discussed in the very beginning was sticking to the story, keeping it very clean. I think, MicroStrategy has proven very successful how that model can work, right? They don't mine Bitcoin, they just buy Bitcoin, and they've created a huge amount of value over the last 4 years. So sticking to a single strategy is where we're really focused at this moment in time. And as we talked all through this, the different ways to drive value by issuing equity that's accretive in an accretive fashion when we're trading above NAV. Taking that staking revenue, building the balance sheet, increasing ways that we can increase that staking revenue using locked SOL purchases. I think all of those are the mechanisms that we're going to use to create as much value as we can and then just stick to a really clean single story at this moment in time.

And Brian, this is a question that I'm curious about. I mean, obviously, today, there's so many ways that you can invest in cryptocurrencies. You can buy the tokens outright. You can invest in ETFs, you can invest in multiple public companies. How do you look at the benefits of all of these different mechanisms for investors that want exposure to the cryptocurrency space. They have a lot of options. But how do you look at the differences between all of the different options that investors have today?

Yes. So I believe strongly that investing in a digital asset treasury company like Upexi can be the best way to invest in digital assets over something like owning the tokens natively or investing in other instruments like an ETF. And it mostly revolves around having these additional value accrual mechanisms that we've been talking about that are not available with other assets. And so, this is the ability to take on prudent leverage. This is the ability to buy locked SOL at a discount for built-in gains for shareholders. And then, this is the ability to engage in intelligent capital issuance and really monetize that premium to book that the market is awarding us. And so, I actually think there's three ways an investor can benefit if the digital asset will rise, and it's something that we like to call triple action. So if Solana rises, you could see Upexi stock rise with the price of SOL and then the multiple that the market ascribes to our stock, relative to our NAV can actually increase. And then, because our multiple is higher, we can actually engage in more and more accretive equity issuance. And so there are these three big benefits that you can get with a digital asset treasury company like Upexi that you can't get with other instruments or native tokens. And so for anybody that has this positive medium-term view of Solana, I actually really think -- believe strongly that Upexi could be the best way potentially for some investors to invest in digital assets.

Thanks, Brian. And thanks, Allan, as well for answering those questions. That was really helpful. As I mentioned, we have a ton of questions from our audience, which is great. And one of our questions, I guess, for you, Brian, you started to talk about leverage. How do you think about leverage as part of your treasury strategy? What is the right amount of leverage when continuing to accumulate Solana?

That is a great question and a key question. So I'd actually take it out a little bit wider than just like a leverage question. And I think, it's much more about instituting best-in-class risk management practices, which includes leverage. And what I'd say is like not all of our peers are doing this. So it's a key thing for investors to really understand the risk that they could be taking on. And so we will only take on a prudent amount of leverage. Just for context, MicroStrategy limits its leverage to 20% of NAV. And we think like, this is appropriate, because we're dealing with a highly volatile asset, and you have to make sure that you are well positioned to weather any market environment. But the second thing is, we're not doing a lot of on-chain degen activity, which we think will limit smart contract risk and really limit regulatory risk as well. So we need to see much more regulatory clarity. We do, do things that we can get comfortable around that supports Solana's ultimate vision. Like you saw, this morning, we announced plans to tokenize our equity, but we're not going to be doing a bunch of things that could heighten risk for our investors on chain. And then, we are only using qualified custodians. We're diversifying amongst them. So all in, we do feel we have best-in-class risk management practices that can maximize value for shareholders, but do it in this prudent fashion. And so we believe that this is a strategy that will keep us here for the long term and will resonate with both crypto and traditional investors alike.

Well said, thanks, Brian. And just another question from our audience. This is more industry related, and I'm actually curious, Brian, to your thoughts. In the next 3 to 5 years, do you expect multiple blockchains to be big winners or one will emerge as a clear leader? And why or why not may Solana be that winning blockchain?

This is a key question and a key question, especially when you're investing in a digital asset treasury company, because at the end of the day, for any digital asset treasury company, the performance of it will largely be determined by the token ecosystem that underpins it. It's hard to say whether or not there's going to be one winner take all or whether there's going to be thousands and thousands of blockchains. It's probably somewhere in between. We do think that Solana has the best chance at being the winning smart contract blockchain. This is for a few reasons. The first is that, it is the first second-generation smart contract blockchain. So ETH was a first mover and a big fan of ETH, and it is a bit constrained by its original design decisions. It's had to push out execution to other blockchains called Layer 2s. And now folks are talking about that execution by these other chains being parasitic to Ethereum value capture. You don't get that with Solana. It's just monolith, all built on the same platform. But in addition, like it does have these big technical upgrades, so it can process transactions in parallel, which is where a lot of this best-in-class speed emanates from. And so all said, Solana is the most performant blockchain out there. It's resulting in this large and growing ecosystem of users, developers and decentralized applications, and that's resulting in Solana putting up the best metrics of any chain. And this includes things like daily average users, decentralized application revenues, tax volumes and kind of almost across the board, it's leading the pack. And so we think that Solana will only continue to widen this lead going forward.

Thanks, Brian. And we just have a few minutes left. Maybe one more question, I guess, for Allan and Brian, if you want to add to it. What is the biggest -- and we talked a little bit about this, but what is the biggest differentiator for Upexi as compared to other public companies in the crypto treasury strategy?

I mean, I don't know what the biggest differentiators. I think,each person and each company is kind of doing it their own. We raised all equity, so we didn't take on a lot of leverage on our balance sheet. We really did that, because of the volatility around the underlying asset, and we wanted to be able to add that when it made sense. But I think we have a really solid team here. Bringing Brian on from the crypto industry, and then my kind of expertise in the public markets and years of financing and building larger companies. One of the hardest things to do is go from a small company to a big company. And revenue-wise, that's not that difficult, but building a team around that, and I think adding Brian and as we continue to build that team to make really good decisions going forward, that will be -- that should help us be more successful. We did bring in and are backed by a lot of the 15 leading digital asset companies. So we'll be able to hopefully leverage those relationships. We've been able to leverage those right now, like increasing our staking revenue, working with really solid partners. I think all of those things will enable us to capture a little additional upside over time and hopefully make a little difference for our shareholders.

Thanks, Allan. And Brian, anything to add?

Not particularly. What I'd say is for any digital asset treasury company, there's really two components. One is external visibility and making sure everyone knows about you, so you can maximize demand for your stock. And then, second is intelligent capital issuance, which is where a lot of the magic happens. And what I'd say is like we believe very strongly that our expertise and our connections will allow us to do this in a big way and execute on our plan quite successfully.

Well said. Thanks, Brian. And we're just at the conclusion of our call. There were some questions that we didn't get to, but please e-mail us at [email protected]. Allan, Brian, I really appreciate the time today. I think it was very helpful and educational. Before we conclude today's call, any last thoughts?

No, just thank everybody for the call. Thank you, Valter, for setting it up, and thanks, Brian, for all the help he's doing for the company, and we wanted to welcome him on board publicly, because it's been a great addition for us.

This is great. I really appreciate it, guys. Again, we had a big audience, and I really appreciate everybody's participation. This is not the first or the last that we're going to do. We're going to do many of these, and we look forward to speaking with everyone in the future. Thank you, everyone. Bye.

Thanks, everyone.