Ionic Digital Inc. Class A Common Stock 2026 Q2 Earnings Call

Please go ahead. Good afternoon, and welcome to Ionic Digital's second quarter 2026 earnings call.

With me today, we have Chief Executive Officer, Andy Stewart, and Chief Financial Officer, Chris Hickman. Before we begin, a brief reminder. Statements made on today's call, in our presentation, and in our press release contain forward-looking statements, including statements about our contracted revenue, growth pipeline, and capital plans. Actual results may differ materially. These statements are subject to the risks described in the Risk Factors section of our prospectus, which you should read in full. We undertake no obligation to update these forward-looking statements except as required by law. For additional information on non-GAAP financial measures discussed on today's call, please refer to the reconciliations to the most directly comparable GAAP measures. These reconciliations are available in today's earnings release and investor presentation, both of which can be found on the Investor Relations section of our website.

With that, I will turn the call over to Andy.

Thanks, Anna, and good afternoon, everyone. We are excited to be here on our first earnings call after completing our direct listing last month. We have also recently achieved two important milestones. We energized the first data center and cash rent has commenced on the Ward County lease. Most of what you will hear from me this afternoon was also discussed at our Investor Day in July. That webcast and presentation are both on our website. If this is your first time listening to us, that is a great place to start. Chris will take you through the quarter in a few minutes, so I will start with the recent developments at ERCOT and their Batch Zero process, then come back to a few of the highlights from our Investor Day. Ward County is our flagship site, located on 136 acres that we own in West Texas.

Our facility extension agreement with our interconnecting utility, Texas New Mexico Power, or TNMP, was executed in 2021 for 700 megawatts. The initial 234-megawatt phase was energized in 2023. The 466-megawatt expansion has been planned around two transmission and substation upgrades, a 138 kV system with TNMP and a 345 kV system with Oncor, with energization expected by the end of 2027. Notably, these are separate from the 765 kV system being planned elsewhere in the state. Our path to the incremental 466 megawatts is not a new project and we are not seeking a new interconnection. Rather, it advances an agreement that has been in place for five years. Additionally, the site has already achieved initial energization, and it has an existing operating load at the point of interconnection. These facts allowed TNMP to file the site as base load with ERCOT in July.

Now, turning to the recent pause in ERCOT's Batch Zero announcement. On August 3rd, Governor Abbott directed ERCOT to verify the large load projects in its interconnection queue. ERCOT then paused the Batch Zero process. We expect ERCOT to provide additional details on their next steps at the commission's open meeting on August 20th. ERCOT has said the verification will focus on roughly 250 to 300 projects, totaling approximately 200 gigawatts out of a large load queue of approximately 474 gigawatts. This exercise is to substantiate what was already filed. ERCOT will send us requests for information through the utilities, which means ours will come through TNMP, and we will respond promptly and completely. The substance of our filing does not change with the calendar. If anything, we believe a longer and more rigorous review favors sites that can document real operating history, such as ours.

What we do not have is a date, and we are not going to speculate on one. Let me say a word about the broader environment in Texas. Ionic supports Governor Abbott's efforts to promote responsible data center development in the state, and we have committed to comply with the applicable state requirements and to participate fully in the PUCT and ERCOT verification and audit process. We believe a transparent, rules-based process works in our favor, and we intend to be a constructive participant in it. There are three reasons why we believe our request is well-positioned. First, the facility extension agreement covering all 700 megawatts was executed in 2021. TNMP filed the interconnection studies with ERCOT in 2022, and ERCOT approved the first phase that same year. The full 700 megawatts has been carried in TNMP's transmission planning since 2023. Second, our request is not speculative.

We've been drawing power at this point of interconnection since 2023 with a contracted tenant behind it. Third, the work on our side is funded and moving. We've executed our EPC contract, and we've ordered the long lead time transformers required for the substation upgrade, with delivery expected in early 2027. That positions us to begin development late this year. As a result, we continue to believe we are well-positioned to receive approval from ERCOT and energization by the end of 2027 following completion of the two utility infrastructure projects that are under construction. The regulatory time isn't ours to set. Being ready for it is. Starting with page 3, our total pipeline includes utility capacity totaling 822 megawatts concentrated in the high-demand West Texas market.

Our anchor contract is the Nscale lease, initially contracted at 234 megawatts, totaling $1.9 billion of contracted revenue, amended earlier this year for an additional 89 megawatts, bringing the total to 323 megawatts and $2.6 billion of contracted revenue. NVIDIA guarantees the first five years of rent on the initial contracted capacity. Nscale has granted Microsoft an option on additional power that they secure at the site. We are also operating from a position of real financial strength, with a debt-free balance sheet and nearly $600 million of liquidity. Put it together, contracted revenue, embedded growth from an existing footprint, an experienced management team, a strong balance sheet, and a clear forward strategy. Page six shows you our executive team.

The five of us, brought together over the past year to complete Ionic Digital's transition into a data center-first company, each of us with decades of experience building and operating infrastructure at scale. Page seven shows you our existing footprint. In addition to our Ward County asset, we control 112 megawatts of grid power across four sites in Midland. These sites are mining Bitcoin today while we complete the pre-development work required to convert them into HPC and AI data centers. Pre-development across all four sites is underway. We are already fielding inbound interest from prospective tenants. Turning to page eight, this shows you how our existing footprint gets to 822 megawatts of grid power. Start on the left with where we are today, 234 megawatts energized and under contract at Ward County.

From there, the incremental 89 megawatts, then the remaining 377 that takes Ward County to its full 700 megawatts. 112 megawatts across our four Midland sites, expanding to 122 next year. When combined, you arrive at 822 megawatts of total utility power. This comprises two of our three growth pillars. The first is our contracted base, the second is our embedded growth, and grid capacity inside a footprint we already control. The third, on page 10, is what we believe will be the next wave of AI demand, inference and agentic workloads. An inference site is not a training campus in a smaller size. It is a different product, always on, sub 100 megawatt, and latency sensitive, so it has to sit close to the enterprise rather than in a remote area.

The demand we are targeting in and around major metros is a natural extension of what this team has done for decades. We are certainly excited for where we are today, but even more excited for what is ahead. With that, I will turn the call over to Chris.

Thanks, Andy. Good afternoon, everyone. Starting with our second quarter results back on page 4, total revenue was $48.6 million, of which 90% came from digital infrastructure leasing, compared to $37.2 million in the second quarter of 2025, which was comprised entirely of Bitcoin mining. The change in mix is most pronounced in the margins. Adjusted gross margin was 93% in the second quarter 2026, compared to 40% in the same period last year. Mining generated adjusted gross margin of 36% in the second quarter, while our digital infrastructure segment achieved 99%. As we have discussed, that difference is a function of the lease structure. The Nscale lease is triple net, meaning the tenant is responsible for the operating costs, taxes, insurance, and maintenance. One point on the timing of our revenue. The $43.8 million of digital infrastructure revenue in the second quarter was entirely straight-line non-cash revenue.