Onfolio Holdings Inc. Releases Shareholder Letter

Rhea-AI Summary

Onfolio Holdings (Nasdaq: ONFO) released a shareholder letter highlighting significant achievements in 2024. The company acquired three businesses totaling $6M in revenue: RevenueZen ($1.4M revenue, $227K net profit), DDSRank ($500K revenue, $200K net profit), and Eastern Standard ($4MM revenue, $630K net profit).

The company implemented a hybrid operational model of 'centralized strategy, decentralized execution' and launched Special Purpose Vehicles (SPVs) for acquisition funding. Onfolio successfully quoted its preferred shares on OTCQB, offering $3 annual dividends per share. Since 2022, the company has raised $1.5M in preferred share financing and issued $3M of preferred shares for acquisitions.

The company reports approaching profitability in 2024 and expects sustained profitability in the near term, with plans to continue acquisitions and expand capital raising efforts in 2025.

Positive

• Acquired three profitable businesses adding $6M in total revenue
• Near breakeven point with trajectory toward profitability
• Successfully quoted preferred shares on OTCQB providing new liquidity channel
• Implemented capital-efficient acquisition strategy using SPVs and preferred shares
• Portfolio companies showing strong profit margins (RevenueZen 16.2%, DDSRank 40%, Eastern Standard 15.8%)

Negative

• Company still operating at a loss
• Higher capital costs due to SPV equity sharing structure
• Reliance on external funding for acquisitions

Insights

Financial Analyst

The 2024 shareholder letter unveils a compelling transformation in Onfolio Holdings' business model, marked by three strategic acquisitions that collectively add $6 million in revenue. The company's evolution demonstrates sophisticated deal structuring capabilities, utilizing a mix of financing instruments including SPVs, preferred shares, and seller notes to minimize upfront cash requirements.

The acquisition strategy reveals a clear pattern: targeting profitable online businesses with established revenue streams and healthy profit margins. RevenueZen's 16.2% net profit margin, DDSRank's impressive 40% margin, and Eastern Standard's 15.8% margin indicate careful target selection focused on operational efficiency.

The company's capital strategy warrants particular attention. The preferred shares, paying a $3 annual dividend with a 12% yield, represent a creative financing solution that balances growth capital needs with shareholder dilution concerns. The OTCQB listing of these preferred shares creates a potential virtuous cycle - improved liquidity could lower the cost of capital, enabling more accretive acquisitions.

However, investors should note several critical factors:

• The hybrid operational model ("centralized strategy, decentralized execution") will face scaling challenges as the portfolio grows
• The $3 million in preferred shares issued for acquisition financing creates fixed dividend obligations that impact cash flow
• While approaching profitability is positive, the sustainability of profits depends on successful integration and realization of cross-portfolio synergies

The company's transition toward profitability appears credible given the profitable nature of acquired businesses, but the speed and sustainability of this transition will depend on managing integration costs and optimizing operational efficiencies across the portfolio. The SPV funding model, while effective for near-term growth, may need refinement as the company scales, particularly if preferred share financing becomes more cost-effective.

WILMINGTON, Del., Feb. 18, 2025 (GLOBE NEWSWIRE) -- Onfolio Holdings Inc. (Nasdaq: ONFO, ONFOW) (OTC: ONFOP) (the "Company" or "Onfolio"), a company that acquires and manages a diversified portfolio of online businesses, today announced that its chairman and chief executive officer released the following letter to Onfolio shareholders.

A longer version as part of a “2024 In Review” piece has been posted on the Company’s corporate website at https://onfolio.com/2024-in-review.

Dear Shareholders,

What a difference a year makes.

Looking back on 2024, I’d like to reflect on our journey and progress in light of our original thesis. We started with four key beliefs:

1. There are hundreds or thousands of profitable online businesses undervalued due to idiosyncratic risks or suboptimal operations.
2. Aggregating these businesses reduces individual risk, strengthening the portfolio.
3. Our operational expertise enables us to run and grow these businesses more effectively than their previous management.
4. Our public company status allows us to access capital at costs lower than the returns generated by our acquisitions.

In 2024, we made significant strides in all these areas.

1. Strategic Acquisitions Strengthened Our Portfolio

We acquired three new businesses, adding eight revenue streams and $6M in revenue:

• RevenueZen (RZ) (January 2024): A content marketing agency with $1.4M revenue and $227K net profit. RZ retained its entire team post-acquisition, enhancing operational expertise across our portfolio. This acquisition demonstrated our ability to structure deals with minimal upfront cash, utilizing promissory notes, preferred shares, and seller financing.
• DDSRank (July 2024): A niche SEO agency for dentists ($500K revenue, $200K net profit). Funded via one of our our SPV funds, preferred shares, and seller notes, requiring minimal Onfolio cash.
• Eastern Standard (ES) (October 2024):  A digital marketing agency well known in the health and education industries, with $4MM revenue and $630K net profit. This was structured similarly to DDSRank, with SPV fund participation enabling us to secure a majority stake while preserving capital.

Each acquisition reinforced our ability to execute capital-efficient deals while improving operational efficiency.

2. Evolving Our Operating Model

Effective post-acquisition management is key to our success. While we initially operated as a centralized entity and later decentralized entirely, in 2024, we adopted a hybrid model;“centralized strategy, decentralized execution.” This allows portfolio company leaders to focus on their strengths while benefiting from Onfolio’s shared expertise, strategic oversight, and best practices.

This approach enhances operational efficiency, accelerates growth, and enables acquired businesses to maintain and expand profitability. It also allows us to actively participate in strategic hiring, key decision-making, and resource allocation, maximizing value creation across our holdings.

3. Expanding Our Capital Strategy with SPVs

In March 2024, we launched SPVs (Special Purpose Vehicles), allowing accredited investors to co-invest in acquisitions. This proved instrumental in funding DDSRank and ES, enabling us to secure valuable businesses while preserving Onfolio’s cash. While SPVs involve higher capital costs due to equity sharing, they provide an effective solution for funding accretive deals without reliance on traditional debt markets.

For SPV investors, this offers exposure to specific online businesses with a clear return profile, albeit with higher risk and less diversification than Onfolio itself. While not a long-term strategy, SPVs will remain part of our acquisition playbook in 2025, alongside preferred shares.

4. Quoting Our Preferred Shares on OTCQB

A major milestone was quoting our preferred shares on OTCQB, providing liquidity for early investors and expanding access for new ones. Each share pays a $3 annual dividend, appealing to income-focused investors. Since 2022, we’ve raised $1.5M in preferred share financing and issued $3M of preferred shares as part of acquisition financing.

This liquidity should drive demand, potentially allowing us to raise capital more efficiently in 2025 at a lower cost (12%) than SPVs. We anticipate growing this funding channel, unlocking further acquisition opportunities with minimal dilution.

On the Verge of Profitability

Throughout 2024, we have significantly reduced our losses and we now appear to be essentially at profitability. We’ve reached a position where we can continue operations without requiring additional fundraising or acquisitions to achieve profitability, yet we will continue to pursue both because they accelerate our growth and long-term value creation. With this foundation, we expect to move firmly into sustained profitability in the near term.

Looking Ahead to 2025

With our acquisition model validated, capital access expanded, and operational efficiencies improving, 2025 promises even greater momentum. Our roadmap is clear:

• Continue acquiring high-quality businesses, where synergies create exponential value.
• Expand capital raising efforts, leveraging preferred shares and SPVs.
• Further optimize operations, scaling our playbook for sustained growth.
  

If we execute well, we anticipate achieving significant profitability in the near term, reinforcing our ability to deliver compounded returns for our shareholders.

Onward to an even stronger 2025.

About Onfolio Holdings

Onfolio acquires and manages a diversified portfolio of online businesses. Onfolio acquires business that meet its investment criteria, being that such businesses operate in sectors with long-term growth opportunities, have positive and stable cash flows, face minimal threats of technological or competitive obsolescence and can be managed by our existing team or have strong management teams largely in place. The Company excels at finding acquisition opportunities where the seller has not fully optimized their business, and Onfolio's experience and skillset allows it to add increased value to these existing businesses. Visit www.onfolio.com for more information.

Safe Harbor Statement

The information posted in this release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements by use of the words "may," "will," "should," "plans," "explores," "expects," "anticipates," "continues," "estimates," "projects," "intends," and similar expressions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. These risks and uncertainties include, but are not limited to, general economic and business conditions, effects of continued geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in completing new customer offerings, changes in customer order patterns, changes in customer offering mix, continued success in technological advances and delivering technological innovations, delays due to issues with outsourced service providers, those events and factors described by us in Item 1.A "Risk Factors" in our most recent Form 10-K and Form 10-Q; other risks to which our Company is subject; other factors beyond the Company's control. Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Investor Contact

investors@onfolio.com

FAQ

What acquisitions did Onfolio (ONFO) make in 2024?

In 2024, Onfolio acquired three businesses: RevenueZen in January ($1.4M revenue), DDSRank in July ($500K revenue), and Eastern Standard in October ($4MM revenue), totaling $6M in additional revenue.

How much profit do Onfolio's (ONFO) 2024 acquisitions generate?

The 2024 acquisitions generate combined net profits of approximately $1.057M: RevenueZen ($227K), DDSRank ($200K), and Eastern Standard ($630K).

What is the dividend rate for Onfolio's (ONFO) preferred shares?

Onfolio's preferred shares pay a $3 annual dividend per share.

How much has Onfolio (ONFO) raised through preferred share financing since 2022?

Since 2022, Onfolio has raised $1.5M in preferred share financing and issued $3M of preferred shares as part of acquisition financing.

What is Onfolio's (ONFO) new operational model implemented in 2024?

In 2024, Onfolio implemented a hybrid operational model called 'centralized strategy, decentralized execution,' allowing portfolio companies to maintain operational independence while benefiting from centralized strategic oversight.