IP Strategy Reports Third Quarter Financial Results

Rhea-AI Summary

IP Strategy (Nasdaq: IPST) reported $196.3M net income for Q3 2025, or $16.97 per share, versus a loss in Q3 2024. Net revenues rose 69.7% to $2.99M, driven by $1.91M in validator revenue earned after launching validator operations on September 18, 2025. EBITDA was $246.45M. Total assets increased to $482.78M largely from $455.65M in intangible digital assets ($IP tokens). The company completed a $223.8M PIPE, acquiring 53.2M $IP tokens and effected a 1-for-20 reverse split. Going concern reservations were removed. Management cautioned that token fair-value volatility and a $49.4M deferred tax liability tied to unrealized gains remain material risks.

Positive

• Net income of $196.3M in Q3 2025
• EBITDA of $246.45M for Q3 2025
• Total assets increased to $482.78M
• Completed $223.8M PIPE and acquired 53.2M $IP tokens
• Validator revenue $1.91M from 12 days of operations

Negative

• Estimated deferred tax liability of $49.4M
• Fair-value gains depend on volatile $IP token prices
• Spirits revenue declined by $693K in Q3 2025
• Most $IP tokens locked until August 2026 restricting sales

Insights

Financial Reporting Analyst

Q3 shows a large GAAP profit driven by mark-to-market token gains, with real cash revenues still small and token price risk key.

IP Strategy reported $196,263,893 net income for Q3 2025, driven primarily by a $245,841,410 fair‑value gain on intangible digital assets tied to the $IP token. Operating revenue remained modest at $2,989,001, with $1,908,544 from validator operations launched on September 18, 2025, and spirits sales declining versus prior year. The company removed prior going‑concern language and recorded EBITDA of $246,451,000, though management explicitly warns quarterly results will vary with token closing prices.

The balance sheet expanded to $482,778,372 largely from acquired tokens, and a $49,426,794 deferred tax liability was recorded based on the September 30 token price. Key dependencies include the market price of the $IP token at future reporting dates, the outcome of the Section 382 review affecting available NOLs, and the 12‑month lockup on many acquired tokens (sale earliest August 2026). If the token price falls by year‑end, the reported Q3 gain could reverse into a year‑end loss; management also expects continued operating losses if token value stays below acquisition cost.

Watch the December 31, 2025 token closing price, the finalized Section 382 NOL report (expected prior to year end), the expiration of token lockups in August 2026, and near‑term revenue traction from validator operations presented at the November 20, 2025 Investor Day. These items will determine whether the large GAAP profit translates into sustainable, cash‑realized value or remains a volatile accounting gain.

Company reports $196.3 million in net income for the third quarter 2025, or $16.97 per share; compared to a loss of $3.4 million, or ($160.41) per share for the same period of 2024.

Year to date 2025 net income of $185.6 million, compares to $5.4 million in net income for the same period of 2024, an increase of 3,337.0% year over year

Net revenues for the quarter increased 69.9% compared to Q3 2024, on $2.99 million in net revenue during Q3 2025 vs $1.76 million in net revenue for the same period of 2024

Net revenue year to date increased 1.7% compared to the same period of 2024, on $5.4 million in net revenue in 2025 vs $5.3 million for the same period of 2024

Third quarter validator revenue of $1.9 million was earned in just 12 days of operations, at 97.2% gross margin

Going Concern issues resolved

GIG HARBOR, Wash., Nov. 18, 2025 (GLOBE NEWSWIRE) -- IP Strategy (the “Company”) (Nasdaq: IPST), the first company to adopt a treasury reserve policy centered on the $IP token powered by the Story AI-native blockchain network, today announced its third quarter financial results for the period ended September 30, 2025.

“With $196.3 million in net income, the third quarter was a transformative period for IP Strategy. During the quarter we successfully completed our $223.8 million PIPE offering focused on the $IP token, from which we acquired 53.2 million $IP tokens, and then launched our industry-leading validator operations using those same tokens to increase net revenues by 69.9%, all while eliminating all secured debt and preparing our transition to becoming an asset light, high-margin enterprise,” said CEO, Justin Stiefel. He added, “Notable in this filing is the removal of past going concern reservations, which is attributable to our improved balance sheet, reduced expenses and the addition of the new high-margin revenue from our validator operations.”

Seung Yoon “SY” Lee, CEO and Co-Founder of PIP Labs and Chairman of the IP Strategy Advisory Board (and original creator of the Story Network), commented on the Company’s initial financial report following the August 15, 2025 closing of the $223.8 million PIPE transaction: “This quarterly report shows the strength upon which the Company is building a multi-pronged approach to channeling the power of AI and intellectual property, including the successful launch of the $IP validator business. With a solid financial foundation from which to build, IP Strategy is poised to take advantage of strategic opportunities during the remainder of 2025 and into 2026, leveraging the power of the Story AI blockchain and the growing demand to protect and monetize IP rights in the era of AI.”

Financial Highlights

• Net income: $196,263,893 for Q3 2025, resulting from a gain in Fair Value of Intangible Digital Assets of $245,841,410 (management cautioned that fair value gains and losses must be evaluated each period and could result in large swings of token valuations and resulting fair value gains or losses for any particular period);
• Net income per share: $16.97 per share in Q3 2025 compared to ($160.41) in Q3 2024;
• Revenue: $2,989,001, an increase of 69.7% compared to $1,761,434 for Q3 2024;
• EBITDA: $246,451,000 for Q3 2025 compared to $(2,442,000) for Q3 2024;
• Total Assets: Increased to $482,778,372 compared to $28,000,026 at year-end 2024;
• Gross profit: $1,832,003 for Q3 2025 compared to $629,743 for Q3 2024, an increase of 190.9%;
• Adjusted gross margin excluding unabsorbed overhead: 65.2% for Q3 2025 compared to 63.4% for Q3 2024; and
• Stock Split: Effected a 1-for-20 reverse stock split, to ensure Nasdaq Minimum Bid Price compliance

Net income of $196.3 million takes into account a liability of $49.4 million for estimated deferred future income taxes based on the unrealized gain in fair value of intangible digital assets during the period. Two important notes are made about this estimated tax liability:

First, it is important to note that no such tax would be paid until and if the Company were to actually sell any $IP tokens upon which a gain was actually realized. Currently, the vast majority of $IP tokens acquired by the Company in the August 2025 PIPE transaction have a minimum 12 month lockup restriction prohibiting their sale until August 2026 at the earliest and, as a result, no income tax is anticipated to be due in the near future related to these specific $IP tokens. Because the estimated tax was determined based on a particular fair value gain at September 30, 2025 based on a closing price of $IP tokens on such date, the fair value gain (or loss) of such intangible digital assets will likely change at the end of each reporting period, which will cause the reported estimated tax liability at the end of any such period to change according to such future estimated gain or loss. If the token price at December 31, 2025 remains well below the recorded price as of September 30, 2025, all fair value gains currently booked for Q3 would likely lead to a recorded loss for the year.

Second, the calculation of estimated future deferred income taxes in this Q3 report does not yet take into account any existing federal net operating loss (“NOL”) carryforwards that may be available to reduce net income for federal tax purposes. The Company noted in its 2024 annual report on Form 10-K that as of December 31, 2024, the Company had identified $61.2 million in federal NOL carryforwards, some or all of which could be used to offset future booked net income to reduce possible tax liabilities. The Company is awaiting the completion of a Section 382 NOL review to determine to what extent past NOLs can be used moving forward, and if so, how much and over what period of time they can be used. The need for the Section 382 review was triggered by the size of the August 15, 2025 PIPE, the total number of new shares issued in that offering relative to the Company’s previously outstanding shares of common stock and the ownership changes resulting therefrom. The Company anticipates the Section 382 report will be finalized prior to year end, which would allow for a full year tax and NOL reconciliation in the Company’s audited financial statements for fiscal 2025 taking into account the Company’s intangible digital asset value as of December 31, 2025 and any resulting gain or loss to be recognized based on the closing price of $IP tokens on such date. The use of any NOLs in the future would allow the Company to reduce future net income and any resulting income tax liabilities therefrom.

Third Quarter Financial Results

The Company reported net sales of $2,989,001 and $1,761,434 for the quarters ended September 30, 2025, and 2024, respectively, an increase of approximately $1,227,567, or 69.7%, period over period. The increase in net sales resulted primarily from $1,908,544 in new revenue for the quarter tied to the Company’s $IP token validator service that was launched on September 18, 2025.

The Company reported a positive EBITDA of $246,451,000 for the third quarter 2025 compared to an EBITDA of $(2,442,000) for the same period 2024. The Company reported net income of approximately $196,263,893, or $16.97 per share, for the quarter ended September 30, 2025, compared to a net loss of $(3,432,931), or $(160.41) per share, for the quarter ended September 30, 2024.

Net income included a liability of $49,426,794 for estimated deferred federal taxes on the fair value gain of the Company’s intangible digital assets as of September 30, 2025. This deferred tax liability is not due at this time and is subject to change based on future net operating loss carryforwards the Company may apply in the future and future changes in the fair value gain or loss on the intangible digital assets at future period-end reporting dates. $245,841,410 of the third quarter 2025 net income was attributable to the change in fair value of the Company’s intangible digital assets based on the $IP token’s closing price as of September 30, 2025. The Company expects to incur operating losses and higher operating expenses for the foreseeable future if the value of the $IP token is lower than its acquisition price. Additionally, the Company expects to take certain charges as it continues to consolidate its spirits production capacity and its spirits segment operations, closes retail tasting rooms at the end of 2025, and invests in inventory and digital marketing to support its DtC spirits business.

Net revenue from spirits sales and operations for the quarter ended September 30, 2025 was $1,081,000 compared to $1,774,000 for the same period 2024, a decrease of $693,000 between the periods, due primarily to inventory shortages of key spirits products and reductions in marketing and sales expenditures during the period as the Company focused on closing its August 15, 2025 PIPE transaction. Cost of sales related to the spirits business for the quarter ended September 30, 2025 was $1,104,000 compared to $1,132,000 for the same period 2024, a reduction of $28,000.

The Company recorded total liabilities of $62,345,976 as of September 30, 2025, which included $49,426,794 in estimated deferred federal tax income liability, compared to $27,208,259 at the end of December 31, 2024. The Company noted that backing out the $49,426,794 in estimated deferred income tax liability would result in a net reduction in overall liabilities of nearly $14,289,077 at September 30, 2025 compared to December 31, 2024 as the estimated tax liability of $49,426,794 is subject to possible offsets from future net operation loss carryforwards and offsetting losses on changes in fair value if the market price of the $IP token is lower compared to fair value of such $IP token as reported on September 30, 2025. The Company reported total assets of $482,778,372 as of September 30, 2025 compared to $28,000,026 as of December 31, 2024, an increase of $454,778,346, led largely by the addition of $455,648,074 in intangible digital assets held by the Company during the period in the form of $IP tokens.

Past issues related to going concern have been lifted in this filing as a result of the Company’s improved balance sheet, reduced expenses and the addition of the new high-margin revenue from its validator operations.

Management cautioned investors not to rely on the Q3 token performance or closing price for any particular future quarter or reporting period given that the price of the $IP token is very volatile. The price of the token as of September 30, 2025 was considerably higher than the price in the market as of the filing of the Q3 10-Q, and that due to mark-to-market rules, the Company will be required to book a fair gain or loss each quarter based on the closing price of the token as of the last day of each reporting period. If the token price at December 31, 2025 remains well below the recorded price as of September 30, 2025, all fair value gains currently booked for Q3 would likely lead to a recorded loss for the year.

Financial Results

Additional information with respect to the Company’s business, operations and financial condition for the three and nine months ended September 30, 2025 and 2024 is contained in the Company’s Quarterly Report on Form 10-Q, which has been filed with the U.S. Securities and Exchange Commission (the “SEC”) at www.sec.gov.

Use of Non-GAAP Measures

IP Strategy’s management evaluates and makes operating decisions using various financial metrics. In addition to the Company's GAAP results, management also considers the non-GAAP measures of EBITDA, Adjusted EBITDA, Adjusted Gross Profit excluding unabsorbed overhead, Adjusted Gross Margin excluding unabsorbed overhead, Adjusted Gross Profit and Adjusted Gross Margin as supplements to GAAP results. Management believes these non-GAAP measures provide useful information about the Company's operating results and assists investors in comparing the Company's performance across reporting periods on a consistent basis by excluding items that it does not believe are indicative of its core operating performance.

The Company defines EBITDA as earnings before interest, taxes, depreciation and amortization. The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, expenses related to equity-based compensation and other one-time items. The Company defines Adjusted Gross Profit and Adjusted Gross Margin as GAAP gross profit or margin adjusted for any nonrecurring gains or losses. The Company defines Adjusted Gross Profit excluding unabsorbed overhead and Adjusted Gross Margin excluding unabsorbed overhead as GAAP gross profit or margin adjusted for (excluding) unabsorbed overhead.

Story IP Ecosystem Highlights

The Story ecosystem is driving the shift of intellectual property onto the blockchain, transforming it into programmable on-chain assets. As an AI native network, Story allows IP to be registered, licensed, and monetized in real time, forming the foundation of a programmable IP economy valued at roughly $80 trillion. Each new integration demonstrates growing adoption of the $IP token as the bridge between creative and capital markets. As the only public company aligned with Story’s $IP token, IP Strategy (Nasdaq: IPST) provides investors with regulated, first mover exposure to this expanding asset class.

• IP STRATEGY ANNOUNCES FIRST INVESTOR DAY TO BE HELD ON THURSDAY, NOVEMBER 20, 2025: The company will host its inaugural Investor Day to be held virtually on Thursday, November 20, 2025, at 11:00 a.m. ET / 8:00 a.m. PT. The 60-minute event will feature presentations from IP Strategy’s executive team and Story’s leadership discussing IP Strategy’s evolution, growth strategy, and alignment with Story’s programmable intellectual property ecosystem, followed by a Panel session. A live webcast of the event, replay, and presentation materials will be available on IP Strategy’s website at ipstrategy.co/investor-day. Interested parties can register to attend here: https://form.typeform.com/to/knSo3TYw
  
• IP Strategy Hails Aria Token launch on the Story IP Blockchain: Aria is a platform built on the Story IP blockchain that turns income-producing music catalogs and entertainment rights into tokenized IP assets, giving investors the right to fractional ownership of music catalogues, access to recurring royalty streams, and transparent on-chain tracking. The protocol brings a traditionally illiquid IP category into a programmable, investable format for the first time.

• Seoul Exchange Selects Story for RWA Infrastructure: Seoul Exchange, one of only two licensed platforms in South Korea for unlisted securities, has committed to exclusively use Story’s Layer 1 blockchain for settling tokenized real-world assets over the next three years. This partnership opens access to Korea’s $450 billion crypto market and enables fully on-chain trading of cultural assets like K-pop royalties, games, webtoons, and patents, with transactions powered by $IP tokens.
• Grayscale Adds $IP Tokens to AI Fund via Portfolio Rebalance: In alignment with its AI Fund methodology, Grayscale sold existing fund components proportionally and used the proceeds to purchase $IP tokens, thereby adding Story to its fund lineup. As of October 3, 2025, the AI Fund’s portfolio now includes $IP tokens among its basket of AI-linked assets. This further validates Story’s programmable $IP token as a core infrastructure asset in the AI economy by significantly expanding institutional access to the ecosystem.
• Barunson Studio Launches nPLUG IP Platform on Story: Barunson, the studio behind the award-winning movie Parasite, is launching nPLUG, an intellectual property remixing and creative platform on Story, and will place its flagship intellectual properties on-chain. This marks a notable convergence of mainstream film/media with the programmable intellectual property ecosystem.
• Origin Summit in Seoul Delivered Cross-Industry Momentum: Held last month in Korea, the Origin Summit convened TradFi firms, entertainment executives, K-pop icons, and blockchain builders under one roof to explore the future of tokenized intellectual property and digital assets. The event underscored growing institutional interest in licensing, intellectual property monetization, and AI/digital rights frameworks.
• Verse8 Beta Gains Traction: Verse8 brings verified royalties and AI-driven creativity on-chain with Story. Verse8 hosts thousands of creators and logs over 800,000 monthly active users (MAU) – and will soon support two iconic Web3 IPs (Moonbirds and Azuki), both of which will be registered on Story’s chain.
  

About IP Strategy
IP Strategy (Nasdaq: IPST) is the first Nasdaq-listed company to hold $IP tokens as a primary reserve asset and to operate a validator for the Story Protocol. The Company provides public market investors broad exposure to the $80 trillion programmable intellectual property economy in a regulated equity format. IP Strategy’s treasury reserve of $IP tokens provides direct participation in the Story ecosystem, which enables on-chain registration, licensing, and monetization of intellectual property.

Heritage Distilling Holding Company, Inc. is the registered corporate name of IP Strategy.

About Story
Story is the AI-native blockchain network powering the $IP token and making intellectual property programmable, traceable, and monetizable in real time. Backed by $136 million from a16z crypto, Polychain Capital, and Samsung Ventures, Story launched its mainnet in February 2025 and has rapidly become a leading infrastructure for tokenized intellectual property. Story allows creators and enterprises to turn media, data, and AI-generated content into legally enforceable digital assets with embedded rights, enabling automated licensing and new markets for intellectual property across AI and entertainment.

Forward-Looking Statements

This press release contains forward-looking statements, including statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements may be identified by words such as “aims,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “plans,” “possible,” “potential,” “seeks,” “will,” and variations of these words or similar expressions that are intended to identify forward-looking statements. Any such statements in this press release that are not statements of historical fact may be deemed to be forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding current or anticipated results, anticipated growth, benefits anticipated from the Company’s plans or results, gains or losses associated with future market pricing of the Company’ intangible digital assets at any particular point in time, estimated federal tax liabilities, the amount of or potential use of any NOLs to offset net income or taxes the Company’s position as both a participant in and supporter of the programmable IP economy, the Company’s ability to maintain complete control over security and performance of its $IP tokens, the potential for the Company’s validator business to be a source of recurring revenue, the expected profitability and gross margins for the Company’s validator business, the expected yield for the Company’s staked $IP tokens, the illustrative potential annualized revenues and estimated fixed cost basis for the Company's validator business, the Company’s balance sheet and growth prospects, pending and future arrangements with third parties that may stake their $IP tokens on IP Strategy’s validator and any commissions to be earned thereon, the future expansion of the Company’s validator and staking activities, the Company’s plans to provide regular updates as additional $IP tokens and revenues are earned through its validator infrastructure and the estimated size of Korea’s crypto market.

Any forward-looking statements in this press release are based on the Company’s current expectations, estimates and projections only as of the date of this release and are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from those set forth in or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the risks of the closing price at any point in time of the Company’s intangible digital assets, future value of the $IP token on the Company’s balance sheet, future liabilities associate with estimated federal income taxes or NOLs, and the ability of the Company to continue its transition to third party production for its spirits brands. These and other risks concerning the Company's programs and operations are described in additional detail in its registration statement on Form S-1, and its quarterly 10-Q and annual 10-K filings, which are on file with the SEC. The Company explicitly disclaims any obligation to update any forward-looking statements except to the extent required by law.

Investor Contact
(800) 595-3550
ir@ipstrategy.co

FAQ

What Q3 2025 net income did IP Strategy (IPST) report?

IP Strategy reported $196.3M net income for Q3 2025, or $16.97 per share.

How much did IP Strategy (IPST) revenue grow in Q3 2025 and why?

Net revenue rose 69.7% to $2.99M, primarily from $1.91M in validator revenue after Sept 18, 2025.

What is the size and outcome of IP Strategy’s PIPE transaction (IPST)?

The company completed a $223.8M PIPE on Aug 15, 2025 and acquired 53.2M $IP tokens.

Why did IP Strategy (IPST) record a large asset increase in Q3 2025?

Total assets rose to $482.78M largely due to $455.65M in intangible digital assets (acquired $IP tokens).

Does IP Strategy (IPST) face tax or liquidity risks from Q3 2025 results?

Yes — a $49.4M deferred tax liability was recorded on unrealized token gains and most tokens are locked until Aug 2026.

Will IP Strategy (IPST) continue to rely on token fair-value gains?

Management warned token fair-value gains are volatile and could produce large swings in future net income.