Forward Industries, Inc. (FWDI) Q1 2026 Earnings Call Transcript

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Overview

The earnings call summary presents mixed signals. Financial performance shows a decrease in cash but solid SOL staking yields. Product updates highlight Solana's mainstream adoption, yet the market strategy lacks clarity on SG&A expenses. The Q&A reveals management's cautious approach to M&A and capital allocation, but also highlights unclear responses. Overall, while there are positive elements like SOL's adoption and yield outperformance, uncertainties in expenses and market strategy temper the outlook, leading to a neutral sentiment.

Key Financial Performance

Revenue $21.4 million in Q1 fiscal 2026, a more than 4x increase from $4.6 million in Q1 fiscal 2025. This increase was primarily driven by staking revenue generated through Forward's Solana treasury strategy.

Gross Margin 78.6% in Q1 fiscal 2026, up from 24.5% in Q1 fiscal 2025. The significant increase was primarily driven by staking revenue generated through Forward's Solana treasury strategy.

Selling, General and Administrative Expenses $7.2 million in Q1 fiscal 2026, up from $2 million in Q1 fiscal 2025. The increase was primarily driven by higher operational costs associated with Forward's transition to its Solana treasury strategy.

Net Loss $585.6 million in Q1 fiscal 2026, compared to a net loss of $0.7 million in Q1 fiscal 2025. This loss was primarily driven by the decline in fair value of SOL holdings and an impairment charge of approximately $33 million.

Cash $25.4 million as of December 31, 2025, compared to $38.2 million as of September 30, 2025.

SOL Holdings 6,962,501 Solana as of December 31, 2025, with more than 99% staked, generating native staking yield between approximately 6.5% and 7.2%. Over 112,000 Solana were generated in staking rewards during the quarter.

SOL Per Fully Diluted Share Compounded from 0.0604 as of September 2025 to 0.0624 as of December 31, 2025, representing an annualized growth of roughly 13% in Q1 fiscal 2026.

mNAV Approximately 0.85 as of December 31, 2025, calculated using the closing price of Solana ($125), total SOL holdings (6,962,501), Forward stock closing price ($6.61), and fully diluted outstanding share count (111,591,332).

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Operating Highlights

fwdSOL (Forward's proprietary liquid staking token): Forward launched fwdSOL in collaboration with Sanctum, representing 25% of SOL holdings. It allows earning native staking yields while maintaining liquidity and enables efficient deployment of staked SOL.

Prop AMM (Proprietary Automated Market Maker): Forward began testing Prop AMM, developed with Galaxy and Jump Crypto, to deploy proprietary capital into on-chain trading strategies, integrated into Solana aggregators.

Institutional Engagement: Institutional engagement expanded with examples like WisdomTree's tokenized funds on Solana, enabling access to real-world assets on-chain.

Consumer Financial Use Cases: Emergence of new use cases like Calshi's regulated prediction markets available through Solana wallets, extending financial products to crypto-native users.

Revenue Growth: Revenue increased over 4x to $21.4 million in Q1 FY2026 compared to $4.6 million in Q1 FY2025, driven by staking revenue.

Gross Margin: Gross margin rose to 78.6% in Q1 FY2026 from 24.5% in Q1 FY2025, attributed to the Solana treasury strategy.

SOL Holdings and Staking: Forward held approximately 6,962,501 Solana, with over 99% staked, generating yields between 6.5% and 7.2%, and earned over 112,000 Solana in staking rewards.

Transition to Solana Treasury Strategy: Forward transitioned to a Solana treasury strategy, focusing on compounding SOL per share and participating actively in the Solana ecosystem.

On-Chain Public Shares: Forward became one of the first public companies to issue SEC-registered shares on a public blockchain, enabling tokenized shares to be used as collateral in DeFi.

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Risk or Challenges

Market Volatility: Forward Industries' assets, including Solana, are not immune to wider market volatility, which could adversely impact the company's financial performance and strategic objectives.

Regulatory Challenges: The company's strategy involves bridging public equities with on-chain financial infrastructure, which is subject to evolving regulatory frameworks. This could pose compliance and operational risks.

Operational Costs: Selling, general, and administrative expenses increased significantly due to the transition to the Solana treasury strategy, which could strain financial resources.

Digital Asset Valuation: The company recognized a significant loss on digital assets and an impairment charge due to the decline in the fair value of SOL holdings, impacting net income.

Liquidity Risks: Cash reserves decreased from $38.2 million to $25.4 million within a quarter, which could limit operational flexibility.

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Guidance & Outlook

Future growth of Solana ecosystem: Forward Industries anticipates significant growth in the Solana ecosystem, driven by its scalability, low transaction costs, and increasing adoption across payments, trading, DeFi, and emerging market applications. The company expects Solana to become the execution layer for internet capital markets.

Institutional engagement: Forward Industries projects increased institutional engagement with Solana, as evidenced by partnerships with large financial institutions and the expansion of tokenized financial products. This includes WisdomTree's regulated tokenized funds on Solana.

Liquid staking strategy: Forward Industries plans to expand its liquid staking strategy through its proprietary fwdSOL token, which allows for efficient deployment of staked SOL, including using it as collateral for borrowing and participating in on-chain strategies.

Proprietary automated market maker (Prop AMM): The company is testing its proprietary automated market maker (Prop AMM) to participate in Solana's growing trading activity, aiming to enhance value generation.

SOL per share growth: Forward Industries aims to compound SOL per share for shareholders by actively participating in the Solana ecosystem and leveraging its treasury strategy.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Could you share your perspective on the recent token price volatility?

A:Kyle explained that SOL is down approximately 70% from its all-time high, which is typical in the crypto market. He emphasized that Forward has maintained a clean balance sheet and avoided leveraging up, unlike competitors who are now at risk due to higher purchase prices of SOL.

Q:Can you share your thoughts on potential M&A? Do you have a specific framework that you are using to evaluate potential targets?

A:Ryan outlined a framework for M&A, distinguishing between debt and non-debt M&A. For debt M&A, they focus on acquiring businesses accretive on an enterprise value to NAV basis. For non-debt M&A, they target businesses with product market fit, scalable unit economics, durable moats, and those that push the Solana ecosystem forward.

Q:How should shareholders think about SOL per share as an important framework for evaluating Forward's performance?

A:Ryan stated that SOL per share growth is their North Star KPI. They aim to consistently generate returns greater than Solana's staking yield (6-7%) on a risk-adjusted basis. This quarter, they achieved 13% annualized returns, outperforming Solana staking yield by 2x.

Q:Is there a target growth rate or benchmark that investors should keep in mind?

A:Ryan mentioned that the SOL staking yield serves as their effective benchmark for yield generation. They aim for risk-adjusted returns above this benchmark and take a disciplined, long-term approach to M&A and other strategies to generate sustainable shareholder value.

Q:What are the most important catalysts that would signal Solana is moving from a high-growth ecosystem to mainstream financial rails?

A:Kyle highlighted Solana's adoption in payments by major companies like Visa, Mastercard, Stripe, and PayPal. He noted Visa's daily USDC settlements and Square Cash's rollout of USDC payments to 65 million users. On the trading side, he mentioned regulatory efforts to move U.S. securities markets on-chain, with Solana in a strong position due to its trading volumes.

Q:What does your capital allocation playbook look like across different environments, such as when trading at a premium versus a discount to implied NAV?

A:Ryan explained that during buoyant periods, they consider equity-linked securities like convertible notes. In dislocated markets, they focus on balance sheet quality and may pursue accretive acquisitions. They maintain a conservative approach to risk and financing.

Q:How do you expect staking yields to trend as Solana network usage grows and validator competition intensifies?

A:Kyle clarified that increased validators do not impact staking yields. He explained that Solana's inflation is decreasing annually and that increased network activity and volatility should boost yields through higher transaction fees and MEV rewards.

Q:Can you clarify the nature and expected recurrence of related party G&A expenses?

A:Kathleen explained that the $3.4 million in related party expenses were tied to launching their digital asset treasury strategy. These expenses are expected to decrease in the coming months, but no specific normalized SG&A run rate was provided.

Q:Can you dive into the aspects of Forward's 13% yield outperformance and the role of fwdSOL?

A:Ryan attributed the outperformance to staking yields and opportunistic share buybacks. He noted that fwdSOL's contribution to the yield was immaterial and that the strategy is driven by capital allocation and market conditions.

Q:What factors influence decisions on buybacks versus pursuing M&A opportunities?

A:Ryan stated that the decision depends on relative value. When Forward trades closer to 1x, buybacks are less attractive, and M&A becomes more appealing. They adapt based on market conditions and relative value creation.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the normalized SG&A run rate when asked about related party G&A expenses. Kathleen mentioned that expenses would decrease but did not provide concrete figures or guidance.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

FWDI Transcript

Forward Industries, Inc. (FWDI) Q1 2026 Earnings Call Transcript

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