TON Strategy Co. (TONX) Earnings

Management highlights

### Staking & Treasury Performance - Q2 2026 staking rewards were 9.4 million GRAM, up from 2.2 million GRAM in Q1 2026, generating $15 million in staking revenue. Cumulative staking revenue since staking launched in August 2025 is $22 million on 13.8 million total GRAM earned. - The increase in staking rewards was driven by the April 2026 TAN network consensus upgrade, which increased validation frequency, alongside a larger amount of GRAM deployed throughout the quarter. The annualized growth staking yield for Q2 was 17%. - All staked GRAM is unlevered, held through institutional-grade segregated nominator pools for security. Compounding from earned staking rewards increases GRAM holdings without additional capital investment, generating future staking returns. ### Network and Ecosystem Developments - Multiple technical upgrades were deployed on TAN in Q2 2026: the CatChain 2.0 upgrade reduced block times to 400 milliseconds and transaction finality to 1 second; a validator software update cut average transaction costs to a fraction of a cent; a new networking layer reduced network traffic by 2-4x; new APIs and data indexing improvements improved dApp and infrastructure performance. - The TAN community approved a rebrand of the native token from TON Coin to GRAM (original name from the first TAN white paper), effective June 8, 2026. The rebrand does not change underlying blockchain functionality. - The company largely completed winding down inherited legacy VERB operations in Q2, cutting vendor, personnel, and low-margin service contracts. The wind-down is expected to eliminate $4-5 million in annual operating costs. - The company terminated its advisory agreement with Kingsway Capital Partners in August 2026, after stopping monthly payments in March 2026. ### Capital Allocation Framework - Management introduced a new 3-pillar capital allocation framework: *Own* (maintain a strategically significant GRAM position, focus on growing GRAM per share), *Advance* (selectively invest/acquire/partner in TAN ecosystem businesses including payments, developer infrastructure, AI, custody, and digital identity), *Compound* (evaluate all capital uses based on whether they increase long-term value per share, including GRAM purchases, share repurchases, holding liquidity, and ecosystem investments). - Management will remain selective: only pursue opportunities that deliver attractive standalone returns or strengthen GRAM adoption/utility, ideally both. Liquidity retention is acceptable if no opportunities meet return hurdles.

Guidance

- Full annual operating cost savings from the VERB legacy wind-down will not be fully visible until Q4 2026, as limited transition wind-down costs continue through the end of the year. Limited residual legacy obligations will continue into 2027, but at substantially lower levels than historical costs. - Management does not assume current 17% annualized staking yields will continue indefinitely. Staking yields are expected to evolve as the TAN network matures, dependent on community governance decisions, changes to block rewards, and validator participation trends. The company takes a conservative planning approach to staking economics. - Core priorities for the second half of 2026 are: managing and compounding the GRAM treasury, maintaining appropriate U.S. dollar liquidity (all operating costs are denominated in USD, while revenue is generated in GRAM), improving investor access to TAN, and evaluating selective ecosystem opportunities under the new capital allocation framework.

Segment performance

The company reports only one core continuing operating segment: staking of GRAM (the native token of the TAN blockchain). In Q2 2026, total continuing revenue was $15 million, 100% of which came from staking operations. Gross profit was $14.3 million (95% of revenue), and operating income from continuing operations was $0.5 million. Net income from continuing operations before income taxes was $83.5 million, which included an $82.8 million non-cash net gain from fair value changes to GRAM holdings. The company's legacy VERB operations are classified as discontinued operations, and were substantially wound down in Q2 2026. The company's total GRAM holdings at quarter end were 230.5 million tokens, with 229.9 million deployed in staking, at a total fair value of $369.5 million, up from $272 million at the end of Q1 2026.

Risks & headwinds

- Staking economics and yields are entirely controlled by TAN network governance and protocol rules, which management cannot predict or control. Changes to block rewards, network parameters, or validator requirements could reduce future staking returns. - GRAM holdings are marked to fair value each quarter, so volatility in GRAM market prices will create large non-cash gains or losses in net income between reporting periods. - The long-term value of the company's GRAM position is dependent on widespread TAN ecosystem adoption, which remains uncertain and depends on third-party developers building useful, adopted applications on the network. - Limited residual legal and administrative obligations from the legacy VERB business will continue into 2027, though they are expected to be immaterial relative to historical operating costs.

Analyst Q&A

• Q: When will the full annual cost savings from the VERB legacy wind-down be visible, and what residual costs remain? /

  A: The wind-down is expected to cut annual operating expenses by $4-5 million. Most savings will not be visible until Q4 2026 due to ongoing one-time transition costs. Limited residual obligations for legal and administrative wind-down activities will continue into 2027, but these costs will be far lower than the historical legacy cost base. Beyond financial savings, the wind-down also lets the team focus full attention on the core GRAM and TAN strategy.

• Q: What adoption indicators does management track for TAN, and how does that translate to shareholder value? /

  A: Management tracks three core areas of adoption: real user usage of TAN-powered applications for everyday transactions (payments, digital goods, creator monetization), growth and health of the developer ecosystem, and core network metrics (active wallet growth, transaction volumes, validator participation). Improved market structure (more exchange listings, deeper liquidity, institutional custodial support) also supports adoption. For the company, broader adoption increases GRAM utility and demand, lifting the value of the company's large treasury position, improves staking revenue, and creates more high-quality ecosystem investment opportunities.

• Q: What factors could change current staking economics, and how should investors expect yields to trend going forward? /

  A: Management has no unique insight into future network governance changes beyond public information. The April upgrade materially improved yields due to higher block production, but management does not assume current yields will continue long-term. Yields will evolve as the network matures, impacted by governance changes to block rewards, validator participation levels, and broader network dynamics. The company plans conservatively, and notes staking is only one part of the investment thesis — long-term value is driven by broader ecosystem adoption, not just staking yields.

• Q: Is staking-as-a-service for external GRAM holders a business opportunity the company is considering? /

  A: The company is not currently pursuing staking-as-a-service, but it is the type of opportunity management will evaluate in the future. As the largest GRAM holder and largest TAN validator outside of Telegram, the company has unique operating experience and insight into the ecosystem. Management will only pursue opportunities that leverage this existing advantage, deliver attractive risk-adjusted returns, and benefit both the TAN ecosystem and shareholders, aligned with the company's "Advance" strategic pillar.