PowerCompute's 3Q 2026 Earnings Call - POWERCOMPUTE INC

Financial Performance:

• Third quarter 2026 total revenue was $1.9 million, down 13.3% year-over-year (vs. $2.2 million in Q3 2025) and down 9.5% sequentially (vs. $2.1 million in Q2 2026).
• Digital mining revenue was $1.7 million, driven by a 35.8% increase in production (23.9 BTC vs. 17.6 BTC) offset by a 37.5% decline in average Bitcoin price ($71,000 vs. $114,000).
• Mining margin reached 50.7% (vs. 29% in Q2 2026 and 49% in Q3 2025), supported by an average cost to mine of ~$35,000 per Bitcoin.
• Curtailment and energy sales reduced cost of revenues by $304,000, more than doubling the year-over-year figure of $152,000.
• Operating expenses fell to $2.8 million (from $5.7 million in Q3 2025), driven by a $1.5 million drop in staff costs and a $1.2 million decrease in depreciation (due to prior year impairments).
• Net income was $400,000 (20 cents/share), a significant turnaround from a $3.7 million net loss in Q3 2025.
• Core EBITDA turned positive at $2.3 million, compared to a $1.4 million loss in Q3 2025 and a $2.8 million loss in Q2 2026.
• Balance sheet cleanup reduced total liabilities to $3.7 million (from $22.6 million in June 2026) and secured debt to $1.25 million (down 94% since June 2026).
• Liquidity stood at $6 million (including ~$5.3 million in Bitcoin and $650,000 in cash), with no Bitcoin pledged against debt.
• One-time GAAP gains of $28 million related to the Arch Loan Facility settlement were excluded from recurring operational metrics.

Guidance and Future Outlook:

• Hash rate is projected to reach approximately 880 PH/s by mid-December following the deployment of 600 new AntMiner S21++ units, adding ~10% capacity without new power infrastructure.
• Management expects mining margins to normalize in Q4 as curtailment benefits decrease, potentially raising energy costs per kWh, though newer miner efficiency will offset some costs.
• Strategic priority is to utilize the remaining 3.5 megawatts in Mississippi for high-performance computing (HPC) or further mining once the current miner refresh is complete.
• Long-term goal is to allocate capital to the use of power (mining vs. HPC) that delivers the highest return per megawatt.
• No specific revenue or earnings guidance provided for 2027, pending capital allocation decisions and market conditions.

Business Segments and Product Lines:

• Bitcoin Mining: Operates two sites totaling 26 megawatts (15 MW in Calumet, OK; 11 MW in Columbus, MS) with a blended net energy cost of $0.024/kWh.
• Miner Refresh: Deployed 600 AntMiner S21++ units in October, replacing ~600 older S19/S19J models to improve efficiency; expected to add 80-85 PH/s.
• High-Performance Computing (HPC): Early-stage pilot operating GPU capacity listed on Vast AI; reports utilization rates exceeding expectations and generates ancillary revenue through data storage fees.
• Power Position: Successfully transitioned the Mississippi site to TVA rates prior to October 1, 2026, increasing contracted demand to 11 MW without incurring the ~$1.5 million/MW capacity commitment charge.

Market and Competitive Landscape:

• Industry trend of replacing older mining hardware with next-generation units (S21++) to maintain hash rate efficiency on existing power contracts.
• Emerging shift in the region where data center rate structures (e.g., TVA capacity charges) favor early movers who have secured power before rate hikes.
• HPC market showing strong demand for GPU instances, potentially offering higher revenue per kilowatt than traditional mining.

Risks and Challenges:

• Bitcoin price volatility remains a primary risk, with the quarter's revenue decline attributed almost entirely to price drops.
• Liquidity and going concern risks highlighted in Form 10-Q, stemming from low cash balances relative to operational needs and the remaining $1.25 million secured note.
• Potential for increased energy costs in Q4 as curtailment levels decrease and variable market rates apply.
• Dependency on external capital for future expansion and HPC infrastructure deployment.
• Nasdaq listing maintenance risks related to liquidity and financial performance.

Management Commentary and Tone:

• Management tone was confident regarding the strategic execution of the balance sheet cleanup and miner refresh, emphasizing a focus on "earning the best return on every megawatt."
• Emphasis placed on operational discipline, specifically the reduction of secured debt to $1.25 million and the elimination of Bitcoin-collateralized borrowing.
• Leadership acknowledged the early stage of the HPC segment but expressed surprise and satisfaction with demand and utilization rates.
• The narrative shifted from survival (debt reduction) to optimization (hash rate growth and HPC exploration).

Analyst Questions and Answers:

• Matthew Galinko (Maxim Group) asked about future mining margins and HPC learnings.
• Response: Management noted that while new miners improve production, curtailment levels are expected to drop in Q4, potentially raising the cost per kWh; margins are difficult to predict due to Bitcoin price volatility but incremental efficiency is expected.
• HPC Update: Management reported anecdotal evidence of utilization exceeding expectations and identified an untapped revenue stream from data storage fees paid by users leaving data on rented instances.
• Capital Allocation: Regarding future growth, management indicated the 3.5 MW in Mississippi is the next low-hanging fruit, with final decisions on allocating that capacity to HPC vs. mining pending further capital review.

Other Key Points:

• The Arch Lending facility was fully repaid and terminated in late September; the settlement involved selling 267.4 BTC to satisfy the debt while returning 39.6 BTC (~$3.3 million) to the company.
• The remaining secured promissory note maturity was extended from December 31, 2026, to December 30, 2027.
• The company raised approximately $2.8 million through a share offering in the quarter to fund miner purchases and working capital.
• Total Bitcoin holdings increased to 65.7 BTC as of October 31, 2026, valued at approximately $5.1 million.
• No Bitcoin is currently pledged as collateral for any debt.