Twenty One Capital Q3 2026 Earnings Call - $1.1 Billion Bitcoin Gain Masks a Company Still Searching for Its Business

Operator: Welcome to the Twenty One Capital Third Quarter 2026 Earnings Conference Call. My name is Holly, and I will be your operator for today’s call. Please note that this conference is being recorded. I will now turn the call over to David Shane, who will facilitate today’s presentation. David, you may begin.

David Shane, Facilitator, Twenty One Capital: Thank you, operator, and thanks to everyone participating in Twenty One Capital’s first quarterly earnings call. Joining me on the call today are Rapha Zagury, Chief Executive Officer, and Steve Meehan, Chief Financial Officer. Before turning the call over to Rapha, I would like to remind everyone that certain statements made during today’s call may be considered forward-looking within the meaning of federal securities laws. The statements are based on management’s current expectations and are subject to risks and uncertainties, including those outside of our control, that could cause actual results to differ materially. Please refer to our SEC filings for a discussion of these risk factors. Also, today’s discussion includes Bitcoin Per Share, which is one of our operating metrics. Please refer to the definitions and limitations in our SEC filings. I’d like to turn the call over to Rapha.

Rapha Zagury, Chief Executive Officer, Twenty One Capital: Thanks, David. Morning, everybody. Thanks for joining our first earnings call. In August, I said I’ll keep you updated on what we’re building and how we’re using your capital. Today’s letter that we just sent out and this call are part of that. I want to spend a few minutes on how we’re building the company and how I think about putting your capital to work. Then Steve will take you through the numbers, and we’ll get to your questions. Let me start with the quarter in context. The quarter’s result, they mostly reflect the increase in the fair value of Bitcoin that we already own. We welcome that, of course. Bitcoin is our long-term asset reserve. I’ve said this a lot this quarter, that owning Bitcoin is where we start, but now building earnings power is the job.

What we want is to own businesses that have cash left after they pay their bills, after they maintain equipment, meet their financing obligations. Ideally, they can do that even when Bitcoin goes sideways. Bitcoin is, and it will remain, a volatile asset, and we always say that volatility is a sign of price discovery in an asset that is still very nascent in our view. It means it’s early for Bitcoin. It’s a very positive thing. But we need to position our balance sheet to survive through bull and bear markets and sustain the volatility. What we want is that over time, the cash generated by our businesses will help to buy more Bitcoin and to invest in other business without us having to go back to the market every single time.

Let me go back to a few points we highlighted in August in the last shareholder letter that I shared with you. There were five priorities in that letter. Let me start with the first one, which was corporate structure and governance. On that front, we have added strategic hires in finance, technology, and communications. For our board, David Goldschmidt joined the board and the audit committee in September, and Paul Lalljie and Karl Olsoni also joined our board. Our board now is substantially enhanced with them joining as independent directors. The second vertical that we discussed was operating businesses, and in terms of operating businesses, we are looking in business in mining, lending, treasury, and energy as a few examples. Through the last few months, we have passed on a couple of opportunities where the numbers or the terms did not work for us.

We will be patient, and the Elektron transaction, which is another one we have mentioned, is in process and is ongoing. In terms of capital markets, which is the next one, we will consider raising capital when the timing and the terms make sense, and of course, that includes borrowing to buy more Bitcoin or an operating business. We need to be comfortable with what we own and how we will pay for it at the end. We will also consider buying back shares where liquidity approvals and trading restrictions permit. The next area was mergers and acquisitions. I already touched a little bit on this, but the reality is that at the end, every acquisition has to compete with holding Bitcoin. At the end, Bitcoin is our long-term benchmark. The final one was lending and credit, and we definitely want to build or buy this capability.

We know that people want liquidity without selling their Bitcoin, and the market around Bitcoin-backed lending will continue to be developed. I think Bitcoin is one of the best collaterals capital markets could ask for. It is transparent, it is liquid, trades 24/7, and we are actively evaluating a few opportunities on this front. Let me go a little bit deeper into how we think about your capital. You can hold Bitcoin yourself, and if we are going to buy a business with your capital, we need to have a good reason. Raising money and putting to work are two separate decisions at the end of the day. For raising money, we will, of course, use traditional capital market strategies in debt and equity, just like other Bitcoin companies have done. We may raise when the terms are right.

The key difference for Twenty One is where and when we allocate that capital. At the end, every investment still has to make sense on its own. When you look at businesses, I would summarize there are four questions that we look at. The first one is, how much cash is left after we pay the bill, reinvestment, services, debt, and what is the expected return on capital in Bitcoin terms? That is a key question. The next one is there room to put more capital to work at good returns? How does it scale? Can it scale with more capital? Then, which is extremely important, is looking at the team and how strong the team is and what they can build from here. Finally, is how our capital financing or experience will make that business better.

And maybe even more important, a great business can be a terrible investment if you are doing it at the wrong price. What we pay, how we finance it, and how much we dilute shareholders can change this answer, obviously. When we find good operators, we want them to keep running the business. Our job is to oversee the investment, capital allocation, make sure they have what they need, and decide where the next dollar will go. Take mining for an example. Two operators can make the same revenue with the same computing power and ultimately have very different results. What they pay for power, what it costs to replace the machines, to service the machines, and how they finance the machines, they all show up at the cash at the end. Since we are talking about mining, let me say something else.

I think mining is at the center of one of the most interesting opportunities I have seen in my career, the combination between a monetary revolution with Bitcoin and an energy revolution. Miners can buy power when there is surplus, and they can switch off when the grid needs it. It is the most flexible load that we have ever seen. It is a buyer of last resort and a seller of first resort as well. On top of that, Bitcoin as an asset is a monetary revolution. We have never seen an asset with a fully predictable monetary policy. We know exactly how many Bitcoins we are going to see in total, and we have very good predictability on when they are going to be issued. In my view, in a world that is full of uncertainty, this should be an extremely valuable asset.

When I sent out a shareholder letter on August 11, there is one more thing that I mentioned, which is how we are going to be supporting Bitcoin development. Bitcoin is antifragile in nature, meaning that it is being tested and attacked time and time again. We want to continue to support independent Bitcoin development and security research, and we are evaluating how we can back the people doing the work so that they stay independent. One last thing I want to mention before turning over to Steve. Tether is, of course, our controlling shareholder, and I believe it is an important and key part of what differentiates Twenty One. First of all, we share a conviction in Bitcoin as our reserve asset and as a global asset, and even more important, a willingness to build around Bitcoin over many years.

Having that alignment behind us matters when we are making decisions whose value may take time to develop. Tether also brings deep relationships across the industry and experience in building and investing in business through different market conditions, bull and bear markets. That gives us a valuable network of operators, expertise, and potential opportunities as we build our portfolio. This relationship can only help us identify opportunities, understand business, and then build the relationships with the people that are running them. Our responsibility at Twenty One is to translate those advantages into business that generate cash and can create long-term value for our shareholders in Bitcoin terms. With that, I am going to pass it over to Steve.

Steve Meehan, Chief Financial Officer, Twenty One Capital: Thank you, Rafa, and good morning, everyone. I will now turn to our third quarter financial results. Our results continue to reflect our increasing and decreasing value from our 43,514 Bitcoin treasury and the costs supporting the company. Operating expenses were $4.8 million compared to $10.7 million in the second quarter. The decrease was primarily driven by lower stock-based compensation, which declined to $900,000 from $7 million in the second quarter. This essentially reflects the departure of our former CEO in July. For the first nine months of 2026, operating expenses totaled $26.1 million, which includes $13 million of stock-based compensation and approximately $13 million of cash expenses. Net cash used in operating activities was $1.7 million for the third quarter and $13.3 million for the first nine months of 2026.

We recorded an approximately $1.1 billion gain from the change in fair value of our Bitcoin holdings during the third quarter. Bitcoin was valued at approximately $83,700 per coin at September 30th, compared to approximately $58,600 on June 30th. For the first nine months of 2026, we recorded a $156.4 million loss from the change in Bitcoin’s fair value. These fair value movements do not themselves generate or use any cash to fund our operations. Net income for the quarter was approximately $1.1 billion, compared to a net loss of approximately $413 million for the second quarter. Cumulatively, for the first nine months of 2026, we recorded a net loss of $186.5 million. At September 30th, we held 43,514 Bitcoin. That is unchanged from June 30th, with a quarter-end fair value of approximately $3.6 billion.

Bitcoin Per Share was 12,553 Satoshis, compared to 12,547 Satoshis at June 30th. Cash on hand was approximately $103 million at the end of the third quarter. That compares to approximately $106 million at June 30th. Convertible notes outstanding remained at $486.5 million at the end of the quarter. The convertible notes carry a 1% coupon and mature in 2030. Approximately 16,116 Bitcoin were pledged as collateral against those convertible notes at September 30th, which is unchanged from June 30th. Approximately 27,398 Bitcoin were unencumbered and unpledged at quarter end September 30th, which is unchanged from quarter end June 30th. When we think about deployable capital, we look beyond the Bitcoin outside the pledged Bitcoin. Debt obligations, liquidity requirements, and other commitments all affect what we can prudently deploy.

To summarize the quarter, we maintained 43,514 Bitcoin on the balance sheet and $102.8 million in cash as of September 30th. For our convertible bond, $486.5 million remain outstanding, which is exactly the same as the prior quarter. In addition, we have a growing finance team and control environment to support our next phase in growth. With that, I will turn the call back to Rafa.

Rapha Zagury, Chief Executive Officer, Twenty One Capital: Thanks, Steve. We closed this quarter with 43,514 Bitcoins in our balance sheet, and of course, that’s a great starting point. But looking ahead, what excites me is building now businesses that can pay their own way and give us cash to invest again. We are going to be patient about what we buy and how we pay, and I think shareholders should judge us on those decisions and what they produce. What I can tell you is that each quarter, I’ll tell you what we did, how we use our capital, and what’s still unfinished. Thank you very much, and we keep building. Now, let’s take some questions.

Operator: We will now be taking some of your pre-submitted questions. I’ll turn the call over to David Shane.

David Shane, Facilitator, Twenty One Capital: Thank you, operator. Our first question: Can management provide an update on the potential Elektron transaction? Specifically, how would Elektron be independently valued, and what safeguards will ensure Twenty One shareholders are not overpaying for the acquired mining assets?

Rapha Zagury, Chief Executive Officer, Twenty One Capital: Yeah, thank you. As of today, we haven’t signed a definite agreement to buy Elektron. Right now, the audit committee is carrying out independent review, and they brought legal financial advisors to help guide this process.

David Shane, Facilitator, Twenty One Capital: Second question: How would you value Elektron Energy on EBITDA, hashes, or megawatts? Would you pay in Twenty One stock below NAV, or only at or above NAV with minority approval?

Rapha Zagury, Chief Executive Officer, Twenty One Capital: Yeah, it’s unfortunately another question that we’re not in a position to talk too much about valuation metrics or structure just yet, as we haven’t signed definitive agreement.

David Shane, Facilitator, Twenty One Capital: Okay.

Rapha Zagury, Chief Executive Officer, Twenty One Capital: We will at the right time.

David Shane, Facilitator, Twenty One Capital: Third question: Can management explain its strategy for the $464 million in convertible notes due 2030? Under what circumstances would the company elect to settle conversions in shares versus cash, and what would be the expected impact on Bitcoin Per Share?

Rapha Zagury, Chief Executive Officer, Twenty One Capital: Thanks. Steve, can you take this one?

Steve Meehan, Chief Financial Officer, Twenty One Capital: Sure. Understanding that that decision is one that we have to make upon settlement, so we have some years to make that decision, but we would weigh the value preserving cash against the dilution for existing shareholders that they would bear if we issued the shares. Bitcoin Per Share, issuing shares increases the share count, reduces Bitcoin Per Share if our holdings stay the same, and paying entirely from cash leaves Bitcoin Per Share unchanged at settlement, but does use liquidity. Selling Bitcoin to fund the settlement would reduce our holdings of Bitcoin and would not be a preferred path, but again, that’s a decision for settlement of the convertible notes.

David Shane, Facilitator, Twenty One Capital: With the attractive returns available from capturing the NAV discount, shouldn’t we just be repurchasing shares?

Rapha Zagury, Chief Executive Officer, Twenty One Capital: Steve, a good one for you.

Steve Meehan, Chief Financial Officer, Twenty One Capital: Yeah. We have competing uses of capital, including buying Bitcoin, acquiring businesses, repurchasing shares, and preserving liquidity. Each has a price, a risk, and an opportunity, of course. When our shares trade below the value of the assets attributed to them, repurchases deserve serious consideration, and that’s something we are considering. It’s also subject to liquidity approvals and the applicable restrictions.

David Shane, Facilitator, Twenty One Capital: Our next question: If the marketplace has changed and made Bitcoin treasury companies less attractive, why not, given the extreme discount, liquidate the company or return Bitcoin to shareholders?

Rapha Zagury, Chief Executive Officer, Twenty One Capital: Yeah, I agree with the first part of the question, that the market has changed, but not necessarily with the second. As Steve mentioned, we do take the discount very seriously, but we believe that the long-term use of our balance sheet is to build and acquire business that can generate cash. That’s what we’re contributing. The discount, I think it’s partially because of the bear market that we’re witnessing, and it’s industry-related. I would say that the flip side of that is that it also opens potential acquisition opportunities for us, right? Steve, you want to add anything else?

Steve Meehan, Chief Financial Officer, Twenty One Capital: Sure. Yeah, absolutely. In a liquidation scenario, a Bitcoin distribution also depends on our obligations, and approximately a third of our Bitcoin is secured underneath the convertible notes. We need to account for those claims and the company’s other liabilities, determine what the shareholders would receive, but that’s a scenario that we wouldn’t necessarily want to contemplate.

David Shane, Facilitator, Twenty One Capital: Our next question: What would make a business a better use of shareholder capital than buying Bitcoin directly?

Rapha Zagury, Chief Executive Officer, Twenty One Capital: That is a good question. I think, when we look at business, we are looking at business that can perform even when Bitcoin price is flat or ideally down. So, if you think about after it pays its operating costs, replaces equipment, meets all the financial obligations, how much cash is actually left after all of that? The other thing when we are looking at business, right, to beat that, is looking for a team that can run the business in a specific way that Twenty One could help it grow.

If we provide capital to a company, how our capital can impact that company, right? And we are always with the idea in looking to beat Bitcoin as a benchmark, which is extremely hard to do, but on a risk-adjusted basis, I think it is something that we can target, sure. And I believe that the benefit to our shareholders comes from what we can do with the earning power that we are going to get in time from these companies, right? The cash from operations, it could fund more Bitcoin purchases, it could fund another investment. And finally, one thing that we have mentioned before, at the purchase price, financing costs, dilution, all of that counts when we are judging if that is going to create the value for Bitcoin as we have been discussing.

David Shane, Facilitator, Twenty One Capital: Of the five priorities you laid out in July, where have you made the most progress, and what should shareholders look for next?

Rapha Zagury, Chief Executive Officer, Twenty One Capital: Yeah. There’s few areas that I highlighted on the previous shareholder letter that we released on August 11th, right? I would say in terms of progress, the most visible progress that we have has been in governance and building the team. In governance, our board has been strengthened significantly from where we were. We’ve got three very good independent board members. David Goldschmidt was the last one to join the board in September. Then internally, we’ve added support in accounting, reporting, communications, technologies, and those are capabilities that we will need as we take responsibility for operating the business, the foundation that we’re going to be building upon. On acquisitions, it’s another point that we’ve mentioned.

I think we’ve evaluated opportunities, I would say, across mining, lending, treasury, energy, and so far we’ve passed on some because of the economics or the terms just didn’t work out. That’s part of how we put our capital allocation discipline in practice. When we bring an investment to shareholders, the goal is that we provide a very clear explanation of what that business is earning, how we’re paying for it, how we’re funding for it, and ultimately what it means per share. Each quarter, what we continue to do is that we continue to explain how we put the capital to work, the progress we’ve made, and what remains unfinished.

David Shane, Facilitator, Twenty One Capital: Our last question, how do you see the business a year from now?

Rapha Zagury, Chief Executive Officer, Twenty One Capital: Yeah. Listen, I expect Twenty One to look very different a year from now than it is right now. I think we started with one of the largest corporate Bitcoin treasuries in the world, which is a very good foundation, but at the end of the day, a balance sheet is not a business. Our focus now is on building the operating business that are going to generate cash flow and develop our capital markets operations, lending capabilities, and ultimately allocating capital intelligently. I expect that we’re going to see meaningful progress across all of these fronts through the next 12 months. One thing is that, of course, we have no idea where Bitcoin price is going to be a year from now, as we discussed during the earnings call, and we’re not building the company around a price forecast.

What’s going to really matter a year from now is that we have a stronger business, more sources of cash flow, and more ways to compound value to our shareholders. Bitcoin is our foundation. Now building a great business around it is going to be our job.

David Shane, Facilitator, Twenty One Capital: Now we’ll turn the call back over to the operator.

Operator: This concludes today’s call. Thank you for attending. You may now disconnect.