Onfolio (NASDAQ:ONFO) reported a sharp year-over-year revenue decline for the first quarter of 2026, but management said the drop reflected deliberate moves to exit lower-return revenue and improve operating efficiency across its portfolio of digital businesses.
Chief Executive Officer Dominic Wells said Onfolio, which owns and operates cash-generating digital businesses primarily in B2B marketing agencies and B2C online education, spent 2025 working to bring its existing portfolio closer to funding parent company costs. He said the company has now resumed a more active acquisition strategy while continuing to optimize its current businesses.
Revenue Falls as Company Repositions Portfolio
Interim Chief Financial Officer and Chief Operating Officer Adam Trainor said total revenue for the first quarter was $1.9 million, down 34% from $2.8 million in the prior-year period.
Services revenue, primarily from Onfolio’s B2B segment, was $1.6 million, down about 10% from $1.8 million a year earlier. Trainor said the decline was mainly tied to the restructuring of RevenueZen, partly offset by continued growth at Eastern Standard and a new contribution from Pace Generative, which was not in the comparable period.
Product sales revenue, primarily from the B2C segment, fell to $307,000 from $1 million. Management attributed the decline to a deliberate reduction in advertising spend at Proofread Anywhere that began in the second half of 2025, along with lower contribution from Vital Reaction.
Gross profit was $900,000, compared with $1.7 million a year earlier. Gross margin declined to about 49% from 61%. Trainor said the margin decline reflected a mix shift, as higher-margin digital product sales became a smaller share of revenue. In response to a question during the call, Trainor said digital products carry margins close to 90%, while services margins generally range from 50% to 60%, depending on the business.
Trainor said Onfolio still expects gross margin to trend toward the mid-60% range over the course of 2026 as B2C revenue normalizes and the agency platform benefits from operating leverage.
AI Restructuring Drives Cost Cuts at RevenueZen
Wells said Onfolio has begun treating its agency businesses as a unified platform, with centralized fulfillment, shared sales and marketing infrastructure and clearer accountability. He said the approach is intended to make the agency portfolio more durable as artificial intelligence changes agency work.
The most detailed example was RevenueZen, which Wells said was operating at roughly 8% margins before restructuring began in late 2025. Onfolio consolidated RevenueZen’s operational overhead under Eastern Standard and did not replace two senior leaders who departed. Instead, Wells said the team rebuilt core processes using AI, including content production, client reporting and campaign management.
As a result, Wells said RevenueZen’s operating expenses dropped by more than 40%, and the business is now operating at about 15% margins while maintaining service quality. He said Onfolio is deploying that operating playbook across other portfolio companies.
Wells also said RevenueZen had its strongest quarter in the past year on the sales side, closing five new clients representing $38,000 in new monthly recurring revenue.
B2C Segment Pulls Back Advertising
In the B2C segment, Wells said Onfolio reduced advertising spend at Proofread Anywhere by more than 80% year over year after returns began to compress. He said the business retained most of its prior-year operating profit on about one-third of the prior-year revenue, while net operating margin expanded by roughly 800 basis points.
Vital Reaction, Onfolio’s other B2C property, was modestly profitable in the quarter after losses in the prior-year period, Wells said. The company is consolidating media buying, ad creative production and email marketing across the two B2C properties and applying AI to those workflows. Wells said management believes the first quarter was the trough for B2C revenue and that the company has begun rebuilding from that base.
Net Loss Widens on Non-Cash Items
Total operating expenses were $1.8 million, down 30% from $2.5 million in the prior-year quarter. Selling, general and administrative expenses declined 41% to $1.32 million, driven primarily by lower advertising and marketing costs, with additional reductions across compensation, contractor and other G&A categories. Professional fees rose to $431,000, largely due to higher legal and audit fees tied to recent capital markets activity.
Loss from operations was $833,000, essentially flat with the prior-year period despite the revenue decline. Net loss widened to $1.9 million from $900,000. Trainor said the quarter included about $365,000 in non-cash expenses, a $674,000 non-cash loss on the change in fair value of digital assets and a $71,000 non-cash loss on the change in fair value of derivative liabilities. He also cited about $218,000 of additional interest expense year over year due to higher note balances.
On a trailing 12-month basis, portfolio operating profit, a non-GAAP metric used by the company, was a loss of about $1.6 million, compared with a loss of about $1.2 million in the prior trailing 12-month period. Trainor said the comparison included about $440,000 of non-cash impairments recorded in 2025 on legacy joint venture investments.
Acquisition Strategy Back in Focus
Onfolio ended the quarter with $842,000 in cash, down from $2.2 million at year-end 2025. Trainor said the decline reflected normal operating uses, payment of accrued preferred dividends, scheduled debt service and no financing inflows during the quarter.
After quarter-end, Onfolio secured a $100 million equity facility. Wells described the facility as discretionary, saying the company is not obligated to draw on it and will only issue equity when there is a specific accretive use of capital, primarily acquisitions that immediately add cash flow. He said a smaller portion could be allocated to growing the company’s digital asset reserve.
Wells said Onfolio’s acquisition pipeline currently targets deals totaling $5 million to $10 million in annual adjusted EBITDA at an average multiple of 2 to 4 times trailing 12-month adjusted EBITDA before year-end. He said management believes those acquisitions could approximately double the company’s revenue run rate and bring the portfolio to profitability on a consolidated basis.
During the Q&A session, Wells said the company is generally targeting businesses with at least $1 million in EBITDA, while also evaluating businesses with $2 million to $3 million in EBITDA. He said Onfolio could acquire “maybe 6” companies if it finds businesses it is confident it can operate at valuations that make sense.
Onfolio also regained compliance with Nasdaq’s minimum bid price requirement on May 1, 2026, Wells said. He called the Nasdaq listing “foundational” to the company’s strategy.
As of March 31, Onfolio’s digital asset holdings had a fair value of about $1.6 million, down from $2.3 million at year-end, largely due to mark-to-market price movements. Trainor said holdings consisted of 5.32 Bitcoin, about 320 Ethereum, about 288 of which were staked, and about 6,888 Solana, all of which were staked. The company received about $15,000 in staking rewards during the quarter.
Wells said Onfolio’s priorities for 2026 remain to increase cash flow from the existing portfolio, resume acquisitions that add cash flow and close the gap between portfolio distributions and parent company costs.
About Onfolio (NASDAQ:ONFO)
Onfolio Holdings, Inc acquires and develops internet businesses. It provides website management, digital, advertising, and content placement services on its websites; and product sales on various sites. The company was founded in 2019 and is based in Wilmington, Delaware.
