ETHZilla Corporation (FRMM) Earnings

Management highlights

Capital Allocation: • The company deployed $31.3 million to repurchase 7.1 million shares (35% of pre-repurchase outstanding shares) at an average price of $4.42 per share, with all shares retired. This decision was driven by the large disconnect between the firm's market value and its estimated intrinsic net asset value, which management determined offered the highest risk-adjusted return for shareholders in the quarter. • The Board extended the share repurchase program through June 30, 2027, increased the total authorization to $100 million, and added authorization for derivative repurchase methods. Future repurchase activity will remain discretionary, based on liquidity needs, alternative asset returns, and current share price. Portfolio & Operational Activity: • Post-quarter end, the firm acquired two additional pre-leased commercial aircraft engines, expanding its aviation portfolio to five engines leased to major U.S. airlines, targeting double-digit annual returns. These assets fit the firm's strategy of acquiring high-quality, access-constrained real-world cash-flowing assets not broadly available through traditional public markets. • The firm is in advanced stages of deploying capital into AI infrastructure (AI compute), with a transaction expected to close and begin generating revenue in Q4 2026. This opportunity emerged from the firm's initial work in short-term GPU financing; the firm continues to evaluate additional short-term GPU financing opportunities that align with its operational compute model. Management expects AI infrastructure to become the highest return segment for the firm, and a major driver of back half 2026 revenue. • The remaining core verticals (manufactured housing and auto credit) provide additional secured, cash-generating asset sources, and overall deal flow across all four verticals accelerated meaningfully in 2026, allowing the firm to remain highly selective on transactions. • Liquidity.io, the firm's tokenization platform, is undergoing a platform upgrade expected to be completed in the second half of 2026, with integration work ongoing for private asset token trading. The platform remains a long-term call option, as there is currently limited market demand for tokenized assets, and the firm's existing assets can be converted to a tokenized model if the market develops. Board Special Committee Update: • The special committee's strategic evaluation process has advanced meaningfully, with strong engagement from potential counterparties. The committee evaluates all opportunities based on the standard of maximizing long-term shareholder value. Management expects to provide a meaningful update to shareholders before the next earnings call, while management remains focused on operating and strengthening core business fundamentals in the interim.

Guidance

- Full year 2026 revenue guidance is maintained at $18 million to $22 million, with revenue growth expected to be concentrated in the second half of the year and uneven due to variable transaction closing timing. - Management remains on track to meet the full year guidance, with expected contributions of $5 million to $6 million in aircraft engine revenue from the five currently owned engines in the second half of 2026, and AI infrastructure expected to contribute approximately 50% of full year guidance revenue (estimated $8 million to $12 million) beginning in Q4 2026, with potential for higher contributions if the transaction closes earlier than expected. - The firm's target of achieving cash flow positive operations by early 2027 is maintained.

Segment performance

Forum reported total Q2 2026 revenue of $1.4 million, down from $2.9 million in Q1 2026, driven by the elimination of $1.8 million in Ethereum staking revenue after the sale of most holdings in Q1 2026. Segment performance breakdown: 1. Commercial Aviation: $1.4 million in aircraft lease revenue, accounting for 100% of total core Q2 revenue (the overall net revenue decline is due to the elimination of legacy staking revenue). As of Q2 end, the segment held $16.7 million in aircraft engine assets on the balance sheet; two additional engines acquired post-quarter for $23.7 million are not yet reflected. 2. Manufactured Housing: $0.38 million in interest income, with $14.7 million in manufactured housing loans on the balance sheet as of Q2 end. 3. Auto Credit & Warehouse Financing: $0.38 million in interest income (included in the $0.38 million of other interest income alongside auto credit) with $2.5 million in auto loans and warehouse financing assets on the balance sheet as of Q2 end. 4. Other: $0.42 million in interest and other financing income, plus $45.7 million in strategic equity investments held on the balance sheet.

Risks & headwinds

- Revenue growth is dependent on the timing of transaction closings, particularly the planned AI infrastructure transaction in Q4 2026; delays in closing could lead to lower near-term revenue than guidance. - Tokenization market development is stalled due to unclear U.S. regulation; meaningful growth of the Liquidity.io platform will not occur until clear regulatory frameworks (such as the proposed Clarity Act) are enacted. - The AI compute deployment requires coordination of three critical components: access to sufficient power capacity, contracted revenue offtake, and third-party financing, and any disruption to these components could delay or prevent the transaction from generating expected revenue.

Analyst Q&A

• Q: The reiterated full year 2026 guidance implies a large second half revenue ramp. Can you break down how much of this revenue will come from aircraft engines, existing asset segments, and the planned AI infrastructure deployment? /

  A: Management expects AI infrastructure to make up over 50% of second half 2026 revenue, because it offers far higher returns than other segments and will ramp very quickly after deployment in Q4. Aircraft engines from the current five-engine portfolio are expected to generate $5 million to $6 million in second half revenue. AI infrastructure is expected to contribute $8 million to $12 million to full year 2026 revenue, with potential for higher contributions if deployment accelerates, with rapid additional growth in 2027 and 2028.

• Q: What is the current status of Liquidity.io and the firm's tokenization distribution strategy, as the core platform scales? /

  A: Liquidity.io's platform upgrade and integration with Alpaca for private asset trading is expected to be completed in the second half of 2026, with public market and crypto trading integration already complete. Currently, there is limited market demand for tokenized private assets, so the platform remains a long-term call option on future tokenization market development, and all existing Forum assets can be converted to a tokenized model when the market matures.

• Q: What regulatory hurdles currently limit tokenization growth, and what catalyst would kickstart activity? /

  A: Without passage of the Clarity Act to create clear regulatory frameworks for token distribution and trading, tokenized assets are effectively just existing private fund offerings wrapped in a digital wrapper under existing Reg D/Reg CF rules. Clear regulation that allows broader international retail trading is required for meaningful tokenization market growth, otherwise it is more efficient to issue assets through traditional structures like ETFs.

• Q: Is the firm's capital allocation priority shifted from share buybacks to real-world asset acquisition now, or is it still opportunistic? What is the current hurdle rate for capital deployment across all uses? /

  A: Capital allocation remains opportunistic, with decisions based on relative risk-adjusted returns. Buybacks remain a priority if the share price continues to trade at a large discount to NAV, but deploying capital to revenue-generating assets is required to hit full year guidance. The minimum hurdle rate for new assets is high teens annual returns; AI compute offers meaningfully higher returns, and the Q2 2026 buyback offered the highest available return for the quarter.