Bit Digital, Inc. Ordinary Shares 2026 Q2 Earnings Call

Joining me today are Sam Tabar, Chief Executive Officer, and Erke Huang, Chief Financial Officer. Before we begin, I would like to remind everyone that today's discussion contains forward-looking statements. These statements reflect management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of these risks, please refer to our annual report on Form 10-K and our quarterly reports. We assume no obligation to update these statements. Certain matters discussed today, including potential capital allocation initiatives, remain subject to board and shareholder approval, in accordance with Cayman Island law, where applicable. Throughout the call, we may also refer to non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in our earnings materials available on our website. Unless otherwise indicated, figures discussed during these remarks are rounded for readability.

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

Thank you, Daniel, and good morning. This quarter was about capital allocation. Every decision started with the same question: how do we create the most long-term value from the assets already on our balance sheet? Bit Digital is positioned to secure the infrastructure for what we believe are the two most important sectors in economic history, digital assets, which will settle on Ethereum, and artificial intelligence, which is powered by data centers. Ethereum is our position in the first, and WhiteFiber is our position in the second. Two distinct assets connected by 1 capital allocation model. Few companies offer meaningful exposure to both sides of that build-out, and fewer even still actively allocate capital between them. Our conviction on Ethereum has not changed. The price did. Ethereum spent most of the quarter below $2,000, and I am not going to pretend that was comfortable.

Bit Digital is one of the largest public corporate holders of Ethereum. That does not make us a digital asset treasury, and it is not what we are trying to be. The goal has never been to hold the most ETH. It is to get the most out of ETH that we hold. Neither purely AI infrastructure nor a digital asset treasury, neither, and yet, both. What we are building towards is the convergence of the two. Assets positioned for where the economy is going rather than where it is today. Our Ethereum treasury is managed the way a company manages cash-like reserves. It earns while we hold it, and it becomes capital that can be put to work when the right opportunity appears. Unlike a traditional reserve, it generates a protocol native return and also serves as a source of liquidity.

That is exactly what happened early in the quarter. WhiteFiber sought additional capital to bridge its investment in its flagship facility in North Carolina to permanent project financing and to support broader growth initiatives. Together, the companies evaluated a range of financing alternatives. They ultimately pursued a related party bridge facility. This provided WhiteFiber with efficient access to capital while preserving strategic flexibility and avoiding near-term dilution. Against a portion of our Ethereum, we raised $50 million of liquidity and then used our own balance sheet to originate a delayed draw term facility for WhiteFiber, commitments of up to $150 million guaranteed by the WhiteFiber parent. The transaction preserved our Ethereum position, avoided issuing equity at either company, and allowed us to maintain our ownership interest in WhiteFiber.

Independent committees at both companies reviewed it, and Needham and Seaport Global delivered fairness opinions to their respective boards. We chose to provide the facility because it offered an efficient way to support our investments in WhiteFiber while generating an attractive return above the staking yield available on Ethereum. The principal risk in a structure like this is, of course, margin call. That was considered as well, so an additional buffer of Ethereum is held against it, sized to withstand market moves well beyond what we consider reasonable. The facility was designed as a temporary bridge to permanent financing for the initial 40-megawatt build-out in our flagship facility in North Carolina. That facility is anchored by Enscale and its investment-grade offtaker. Upon permanent financing, our collateral is released and the guarantee terminates.

The facility is repaid with interest, more than the staking income that we gave up and without giving up any upside. One decision in one quarter, but it contains the essence of the strategy. We approach our assets differently than a buy and hold treasury because every dollar, every ETH, and every share should be maximally productive. And that is what we mean by a strategic asset company. The assets themselves are not the differentiator. It is how we deploy them. Erke will now take you through the details of the quarter.

Thank you, Sam. Good morning, everyone. Our results consolidate WhiteFiber, Inc. in full with a portion attributable to non-controlling interests. Second quarter revenue was $32.1 million, up 15% from $27.9 million in the first quarter. For the six months, revenue was $60 million, up 18% year-over-year. Gross profit for the second quarter was $18.6 million, a gross margin of 57.9%. Operating cash flow for six months was $46.8 million, up 33% from $35.1 million in the same period last year. Net loss attributable to Bit Digital shareholders was $107.2 million, or $0.31 per share. Taken together, the digital asset items, the derivative revaluation, and interest expense account for approximately $86 million of the loss. I will take each in turn. Turning to our operating segments. Cloud services revenue was $23.8 million, up 42% sequentially, driven by new contracts entering service and expansion of existing agreements.

For the six months, cloud revenue increased 29% year-over-year at a gross margin of 58%. Colocation services revenue for the second quarter was $4.7 million, essentially flat sequentially, with a 63% gross margin. For the first half, colocation revenue increased 182% year-over-year. NC1 is not yet reflected in those results and expected to begin contributing in this third quarter. Ethereum staking revenue was $0.9 million compared to $2.3 million in the first quarter. Though for the six months, staking revenue increased 246% year-over-year. We earned 440 ETH in staking rewards during the quarter against 949 in the first. The sequential decline reflects a decision to unstake a portion of Ethereum to collateralize the facility Sam described, as well as the decline in Ethereum price during this quarter.

Digital assets mining revenue was $2.4 million on 32.3 Bitcoin mined, compared to 48.1 Bitcoin in the first quarter. For the six months, mining revenue declined 58% year-over-year, as expected, as we continue to wind down that business. It remains solidly gross margin positive and 26% for the second quarter. Turning to the items that do not reflect operating performance. We recorded $28.8 million of loss on digital assets carried at fair value, reflecting market-to-market movement on our Ethereum and Bitcoin holdings. We also recorded a $46 million non-cash impairment on liquid staked ETH used in the WhiteFiber, Inc. financing transaction. That reflects the accounting treatment of the position and does not represent a realized loss. Separately, there was a $14 million loss from the change in fair value of the derivative liability associated with our convertible notes and $8.1 million interest expense. Neither reflects operating performance. Turning to the balance sheet and treasury.

On May 11th, we purchased 8,568 ETH for $20 million at an average cost of $2,334 per ETH, and so down during the quarter. Let me break down the positions as of June 30th. We held 75,757 ETH directly, carrying a fair value of $118.9 million. That includes Ethereum natively staked through our validator partner. In April, we liquid staked 73,235 Ethereum and received 66,192 lstETH tokens in exchange. We also hold Ethereum exposure through an externally managed bond carried at $47.9 million within investment securities. Liquid staked ETH is a separate asset from Ethereum for accounting purposes, which is why it sits on its own line under a different measurement basis. Our underlying economic exposure remains unchanged.

Cash and cash equivalents were approximately $83.6 million on a consolidated basis, of which approximately $27.5 million was held at Bit Digital and $56.1 million in WhiteFiber, Inc. Contract liabilities nearly doubled to $143.1 million from $79.6 million at year-end. That represents revenue already contracted and cash already collected for services we have yet to deliver. Finally, remaining performance obligations were approximately $1 billion at quarter end. We expect to recognize approximately $57.7 million across the balance of 2026, $136.7 million in 2027, and $105.1 million in 2028, with the remainder thereafter. To put that in context, the 2027 figure alone is more than we earned in all of 2025. None of it appeared in the revenue line today. With that, I'll turn the call back to Dan.

Thank you, Erke. We own Ethereum because we believe it will appreciate over time and generate attractive long-term returns for our shareholders. That has always been a part of our investment thesis. The second quarter was the third consecutive quarter Ethereum closed lower, but volatility is not new to us. We operated through multiple market cycles, and our approach has remained consistent throughout all of them. We also share the belief that the market price of ETH has yet to reflect the value of the network. In our view, it is undervalued relative to what it is becoming. The fundamentals moved in one direction this quarter, the price moved in the other. That disconnect has not gone unnoticed. Across the Ethereum ecosystem, there is growing recognition that the success of the network and the performance of the asset are closely linked. Price does matter. The bull case for ETH is not standing still.