PowerCompute, Inc. (LMFA) Earnings Call Transcript

Good day and thank you for standing by. Welcome to the Power Compute second quarter 2026 earnings conference call. [Operator Instructions] Please be advised, today's conference is being recorded. I would like to hand the conference over to your speaker today, [ Bill Carlson ]. Please go ahead.

Thank you, Operator, and thank you all for joining us on Power Compute's second quarter 2026 earnings conference call. Joining us today are Chairman and Chief Executive Officer Bruce Rodgers, Chief Financial Officer Richard Russell, and President of U.S. Digital Mining, Ryan Durand. The accompanying supplemental investor presentation has been posted under the Events section of our Investor Relations website. Before we begin, please note that today's remarks include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future results and are subject to risks and uncertainties that could cause actual results to differ materially. Important factors include, among others, our ability to retain the listing of our securities on the NASDAQ Capital Market, liquidity and our ability to obtain additional financing on acceptable terms, the short-dated nature of our credit facility and our ability to renew it, early stage of our AI infrastructure business and our lack of operating history in it, the volatility of Bitcoin prices and risks related to the use of Bitcoin as collateral, and our ability to secure customers and capital for any conversion of our power capacity. Any statements regarding the potential revenue opportunity from a full build-out of our power capacity are illustrative estimates only. They are not guidance, not a forecast for any period, and are subject to substantial execution, capital, and market risks. We will also reference certain non-GAAP financial measures. Please refer to our Form 10-Q for full reconciliation to the most comparable GAAP measures and to our SEC filings in the Investors section of our website at power-compute.com/investors for a more comprehensive discussion of these and other risks. I will now turn the call over to Chairman and Chief Executive Officer Bruce Rodgers. Bruce, please go ahead.

Thank you and good morning, everyone. This is a transformational time for our company. In July, we expanded our business to include hosting AI infrastructure and high-performance computing to take advantage of the 26 megawatts of power under our control. As of July 22nd, we trade on NASDAQ under our new name, Power Compute, and our new ticker, PWCM. The business you know as LM Funding America still exists, but the name we carried no longer captured where we were headed. Our own power is the foundation of this strategy. We control 26 megawatts across two sites, a 15-megawatt site in Calumet, Oklahoma, and an 11-megawatt site in Columbus, Mississippi, both energized, industrial zoned, and operating today. Power is priced at approximately 3.7 cents per kilowatt-hour in Oklahoma and 3.5 cents per kilowatt-hour in Mississippi, a blended average of 3.6 cents. Our power is priced at variable market rates and will fluctuate. Our roughly 22 megawatts currently power Bitcoin mining, and all or part of that capacity is addressable for AI and HPC. We're also in discussions with our Oklahoma power provider regarding potential expansion, and we continue to evaluate additional low-cost power sites. Those discussions are preliminary and we cannot predict whether they will result in an agreement. We believe the defining constraint in AI infrastructure has shifted from space and fiber to power. Greenfield grid connection and permitting can take years. Our sites are energized now. The same attributes that make a strong mining site, own power, low cost, operational infrastructure, and room to scale, are what AI compute customers are looking for. And we think that convergence creates a timely opportunity for us. Our first steps are deliberately small. In July, we acquired our first GPU and listed that capacity on the Vast AI compute marketplace. This is a proof of concept deployment. It generated no revenue in the second quarter, and revenue in the third quarter will be immaterial. Its purpose is to build operational experience and give us direct visibility into demand. In parallel, we are marketing approximately 4 megawatts of currently available energized capacity at our Columbus, Mississippi site for co-location and hosting. The full 11-megawatt site is convertible to HPC, and we would redeploy mining capacity there for the right customer commitment. We are also evaluating modular containerized data center solutions for converting power infrastructure to GPU compute and engaging vendors so that we can move quickly when we are ready. Over the long term, assuming a full build-out of our existing 26 megawatts, we have said we believe this could represent a $20 million to $50 million annual revenue opportunity. We want to be clear about what that is, an example estimate of the opportunity at full build-out, not guidance and not a forecast for any period, realizing it would require substantial additional capital, customer contracts we've not yet signed, and execution over multiple years. We have no assurance any of that will occur. But we value the opportunity to receive $20 million to $50 million in annual revenue potential by building on the assets we already own and operate. The second quarter marks the beginning of this work rather than the result of it. I'll now turn the call over to Rick to review the financial results.

Thank you, Bruce. Total revenue for the second quarter of 2026 was $2.1 million, essentially flat compared with $2.1 million in the first quarter of 2026, an increase from $1.9 million in the second quarter of 2025. This represents a year-over-year increase of 9.8% for the quarter. This revenue growth reflects an increase in the number of miners actively mining and a decreased difficulty rate, partially offset by a lower average Bitcoin price. We mined 27.9 bitcoins in the second quarter of 2026, up from 26.1 bitcoins in the first quarter of 2026, and up from 18.4 bitcoins in the second quarter of 2025. On June 30, 2026, our 318 bitcoins were valued at approximately $18.6 million when Bitcoin was valued at $58,400. Our mining margin after including curtailment in energy sales was 29% in the second quarter of 2026, compared with 24.1% in the first quarter of 2026. The mining margin for the second quarter of 2025 was 41% when Bitcoin was much higher. The mining margin in the current quarter was supported by $145,000 in curtailment in energy sales, which was recognized as reduction of cost of revenues set against an average Bitcoin price that declined to $72,000 in the second quarter of 2026 from around $75,700 in the first quarter of 2026. The average Bitcoin price in the second quarter of 2025 was $98,000. Net loss for the second quarter of 2026 was around $4.6 million, while our Core EBITDA loss was $2.8 million. Compared with the second quarter of 2025 net income, $100,000, while core income was $2.6 million. The change from the prior year quarter primarily reflects a loss on fair value digital assets and digital asset receivables totaling $3 million versus a gain of around $3.8 million in the prior year quarter, together with $460,000 of increased interest costs, primarily attributed to the imputed interest costs of the Galaxy Digital loan, and $280,000 of increased digital mining costs of revenues from higher Bitcoin mines. On June 30, 2026, total assets were around $37.1 million, including 318 bitcoins, of which 174 were being held by Galaxy Digital as collateral. The total value of all Bitcoin was around $18.6 million, and cash was $900,000. Total liabilities were around $21.6 million, consisting primarily of $10.8 million on the Galaxy Digital [ Master Currency Loan ] and $8.5 million of other notes payable, of which $1.9 million is long-term. As a subsequent event update, we refinanced and consolidated our three existing debt facilities totaling $18 million with Arch Lending, secured by 307 bitcoins from our treasury. The Arch facility replaced an $11 million loan from Galaxy Digital and $7 million of loans from another lender used to purchase our Oklahoma and Mississippi facilities. We initially entered into a bridge loan with Arch to consolidate the three loans. Then, on August 3, 2026, we entered into a Bitcoin-backed facility with a revolving 30-day term carrying an interest rate of 2% APR. The debt we retired carried a blended annual rate of around 13%, $7 million of notes at 12% and an $11 million non-interest-bearing facility with Galaxy, but with imputed interest from the call feature. The Arch facility is shorter in duration than the debt that we replaced and its rate and availability are subject to renewal. The Arch structure lets us hold our Bitcoin at a low cash carrying cost rather than sell it. We retain participation in Bitcoin appreciation between the contractual floor and ceiling of the collar with the ability to reset those levels as the facility renews. I will now turn the call back to Bruce.

Thank you, Rick. So let me close with where we are focused. Our near-term priority is proving out the model, running our proof of concept at Oklahoma, learning what demand for this capacity actually looks like, and using what we learned to decide how quickly to convert additional owned megawatts in Oklahoma and Mississippi from mining to AI and HPC. This is a single GPU today. It is deliberately small because we would rather learn cheaply before we commit capital at scale. We are not starting from zero, though. We already own the power, the sites, and the operating experience this transition requires. We have real work ahead and we intend to do it deliberately. At the same time, managing liquidity remains a near-term priority. The refinancing we completed after quarter-end reduced our interest expense. That facility is shorter in duration than the debt it replaced, and substantially all of our Bitcoin is pledged as collateral. The structure lets us hold our Bitcoin rather than sell it, and we retain participation in Bitcoin appreciation between the contractual floor and the ceiling, with the ability to reset those levels as the facility renews. Between owned low-cost power infrastructure and a large and growing market for AI compute, believe Power Compute has an opportunity to convert this quarter's announcements into tangible results. We look forward to updating you on our progress. Thank you for your continued support. Operator, please open the line for questions.

[Operator Instructions] Our first question comes from Matthew Galenko with Maxim Group.

Maybe if we could start with, I think it's been a few weeks now since you announced the for hosting AI HPC at your infrastructure. Have you had any initial discussions with potential counterparties to provide a colo-style arrangement or can you just give us any color of how the beginnings of that process is going?