MindWalk's 2026Q2 Earnings Call: Contradictions Emerge on Funding Strategy, Share Buybacks, European Divestments, Oncology Monetization, and Cost Impact

Date of Call: December 15, 2025

Financials Results

• Revenue: $4.1M CAD, up 54% YOY and up 30% sequentially (record quarterly revenue from continuing operations)
• Gross Margin: 65% for continuing operations vs 51% prior year; gross profit $2.7M, up 94% YOY; 1,400 bps expansion

Guidance:

• Continue to invest in the HYFT/LensAI platform, commercial capabilities and R&D to advance internal assets.
• Expect to maintain ~65% gross margin near‑term with potential further increases over the next 9–18 months.
• Operating expenses to remain focused on platform and commercialization (no specific dollar targets provided).
• Formal update on asset/portfolio structure and lead programs to be released before the JP Morgan Healthcare Conference opening.

Business Commentary:

* Revenue Growth and Operational Performance: - MindWalk Holdings Corp reported revenue of $4.1 million for Q2 FY2026, up 54% year-over-year and 30% sequentially. - This growth was driven by improved project revenue and better utilization, reflecting increased operating leverage on fixed costs and a mix of higher-margin work.

• Gross Profit and Margin Expansion:
• MindWalk's gross profit for Q2 reached $2.7 million, representing a 65% gross margin, with a 94% year-over-year increase.

• The expansion in margin was primarily due to increased operating leverage on fixed costs and a shift towards higher-margin projects.

• Strong Financial Position:

• The company ended Q2 with $16.5 million in cash, including proceeds from the divestiture of Netherlands facilities.

• This strengthened liquidity position provides flexibility for executing strategic initiatives and investing in the platform and internal programs.

• AI and Biology Collaboration:

• MindWalk's BioNative AI platform leverages HYFT patterns to determine the best scoring design or shortlist for objectives, rather than generating a broad catalog of hits.

• This approach enhances experimental resource allocation and allows for targeted focus on candidates with strong pattern-level evidence.

• Strategic Divestiture and Rebranding:

• MindWalk divested noncore wet lab operations in the Netherlands, generating approximately $14.3 million in net proceeds.
• This divestiture strengthened the balance sheet and aligned the company with its BioNative AI thesis, removing a capital-intensive footprint that did not advance its strategic direction.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted '54% year‑over‑year revenue growth' and 'gross profit nearly doubled... 65% profit margin,' completed a noncore divestiture yielding ~$14.3M net proceeds and ended the quarter with $16.5M cash, framing execution as strengthening the platform and balance sheet.

Q&A:

• Question from Swayampakula Ramakanth (H.C. Wainwright & Co, LLC): The structured portfolio seems like an interesting way to set up ring‑fences around certain assets. But at the same time, I have a couple of questions on that part. I know you'll give more details later, but at a high level, at this point, what can you tell investors why this is a great thing for current shareholders? And what sort of protections would be placed so that current shareholders dilution would be prevented for them when obviously, the third party is interested in specific programs?
  Response: Cayman segregated portfolios will house individual AI‑generated assets with ring‑fenced IP, enabling third‑party investment directly into assets without diluting MindWalk Holdings equity.

• Question from Swayampakula Ramakanth (H.C. Wainwright & Co, LLC): Okay. Then in terms of -- so what sort of detail would you be able to give us during the J.P. Morgan investor conference day that you want -- what sort of details would we expect around this?
  Response: Company will provide asset updates at JPM but timing/detail is constrained by legal/IP considerations; the structure is similar to Talem and specifics depend on final legal/negotiation status.

• Question from Swayampakula Ramakanth (H.C. Wainwright & Co, LLC): In terms of the operations itself, obviously, your gross margin expanded impressively during the recent quarter. So what does it tell us in terms of what sort of projects you're taking upon these days? And also, should we assume the mid‑60s as the range for -- not only for the rest of the year, but also in the next couple of years?
  Response: Margin expansion stems from larger, higher‑margin scalable projects with fixed costs; management expects to maintain ~65% near‑term and anticipates possible further increases over 9–18 months.

• Question from Swayampakula Ramakanth (H.C. Wainwright & Co, LLC): And then regarding the use of proceeds from the Netherlands divestiture of about $14 million or so. At a high level, where are you spending or where are you placing that money in, in terms of your AI projects or you're trying to develop your footprint within the U.S. How should we think where the spend is happening from...
  Response: Proceeds (~$14.3M) strengthened the balance sheet and will fund LensAI commercial initiatives, Canadian lab operations and R&D to advance internal assets and platform features.

• Question from Swayampakula Ramakanth (H.C. Wainwright & Co, LLC): Along with Scott, you also brought in Dr. Lynch. So what's the mandate for Dr. Lynch? And how should we think about what sort of the business development projects that would be coming up from his desk?
  Response: Dr. Lynch will lead global commercialization and build a unified sales/BD organization to scale the SaaS/API LensAI offering, grow recurring revenue and pursue partnerships to monetize assets.

• Question from Gary Purpura (Liberty Capital Investment Corporation): More a point of clarification. I read that your company has been buying back shares of stock, which is great. But yet on November 15, you showed a potential public offering of $30 million worth of common stock. Is that the case? Or could you give some clarification to that?
  Response: No share buybacks have been executed; a $30M ATM is registered but unused—management's priority is asset‑level third‑party funding to avoid diluting MindWalk.

• Question from Gary Purpura (Liberty Capital Investment Corporation): With your $16 million in cash, do you envision that something like that $30 million would be probably down the road versus sooner than later?
  Response: The ATM would be a down‑the‑road option only if needed; use depends on share price and liquidity and is not expected in the near term.

Contradiction Point 1

Funding Strategy and Shareholder Dilution

It involves the company's strategy to mitigate shareholder dilution and its approach to raising capital, which are crucial for investor confidence.

What can be expected from the structured portfolio strategy, and how will it protect existing shareholders from dilution? - Swayampakula Ramakanth (H.C. Wainwright & Co, LLC, Research Division)

2026Q2: This structure mitigates dilution risk as it provides an alternative funding mechanism. - Jennifer Bath(CEO)

What's the strategy moving forward with the dengue vaccine, particularly after initiating preclinical programs? - Swayampakula Ramakanth (H.C. Wainwright & Co, LLC, Research Division)

2026Q1: We did just receive a loan of $30 million. This loan will be due in two years. We expect to have sufficient cash flow to pay off this loan. - Jennifer Bath(CEO)

Contradiction Point 2

Share Buybacks and Public Offering

It involves the company's stance on share buybacks and potential public offerings, which are crucial for investor expectations regarding the company's capital management strategy.

What are the company's current plans for share buybacks and public offerings? - Gary Purpura (Liberty Capital Investment Corporation)

2026Q2: The $30 million registered for the at-the-market facility is a precautionary measure. - Jennifer Bath(CEO)

What's the strategy moving forward for the dengue vaccine, and what are the next steps after initiating preclinical programs? - Swayampakula Ramakanth (H.C. Wainwright & Co, LLC, Research Division)

2026Q1: The $30 million registered for the at-the-market facility is for a potential offering. - Jennifer Bath(CEO)

Contradiction Point 3

Divestment of European Facilities

It involves the status and timeline of the divestment of European facilities, impacting the company's operational and financial structure.

What impact will divesting the European facilities have on the Canadian facility's capability? - Swayampakula Ramakanth (H.C. Wainwright & Co, LLC, Research Division)

2026Q2: The divestment of European facilities is in the final stages, and the sale and purchase agreement is nearing completion. - Jennifer Bath(CEO)

What is the current status of the European facilities divestiture? How has resource reallocation impacted the Canadian facility's capabilities? - Swayampakula Ramakanth (H.C. Wainwright & Co, LLC, Research Division)

2025Q4: Divestment of European facilities is in the final stages, and the sale and purchase agreement is nearing completion. - Jennifer Lynne Bath(CEO)

Contradiction Point 4

Monetization Strategy for Oncology Assets

It involves the company's strategy for monetizing oncology assets, which is crucial for revenue generation and investor expectations.

Can you discuss potential dividends and share buybacks? Which is more significant in your outlook: potential share offerings or an IPO? Can you provide an update on your capital structure? - Gary Purpura (Liberty Capital Investment Corporation)

2026Q2: The company plans to monetize the oncology assets through strategic partnerships and licenses with pharmaceutical companies - Jennifer Bath(CEO)

What milestones are required to trigger initial payments under the $8 million oncology asset deal, and what is the payment schedule? - Swayampakula Ramakanth (H.C. Wainwright & Co, LLC, Research Division)

2025Q4: The $8 million deal does not involve a single lump sum payment. IPA anticipates a significant part of this revenue to be visible in the second quarter of the fiscal year. - Jennifer Lynne Bath(CEO)

Contradiction Point 5

Divestiture Impact on Costs

It directly impacts the company's financial performance and strategic direction by affecting costs and operational efficiencies.

Can you provide more details on the proceeds from the Netherlands divestiture? - Gary Purpura (Liberty Capital Investment Corporation)

2026Q2: The Netherlands divestiture is complete, providing net proceeds of approximately $110 million. This transaction is expected to be significantly accretive to financials in 2026, with restructuring in the first quarter and a significant reduction in operational costs thereafter. - Jennifer Bath(CEO)

How will the European divestiture affect costs compared to current structure? - Swayampakula Ramakanth (H.C. Wainwright)

2025Q3: Divesting the EU labs will significantly lower costs due to previous issues with location and repetitive work. The Boston and Austin facilities will offer lower operating costs and COGS, aligning with strategic focus on software and digital applications. - Jennifer Bath(CEO)