Soluna Holdings, Inc. (SLNH) Earnings

Management highlights

- Core Business Model and Strategic Positioning * Saluna's core strategy is co-locating data centers directly behind-the-meter at existing renewable generation sites with stranded/curtailed power, bypassing long utility interconnection queues to deliver faster power access for AI and hosting customers. Power is framed as the primary constraint in the AI era, with Saluna controlling a 6.3 gigawatt pipeline of behind-the-meter power access. * The company is transitioning from Bitcoin hosting to AI high-performance computing as its long-term core growth area, maintaining four near-term corporate priorities: develop AI campuses, optimize operating projects for profitability, complete capital formation, and grow the power pipeline. - Q2 2026 Operational Milestones * Acquired the 150-megawatt Briscoe Wind Farm for $53 million, and bought out all joint venture partner interests in Dorothy 1A and 1B, achieving full vertical integration of generation and compute across the entire 50-megawatt Dorothy 1 campus. Completed all inherited wind farm turbine maintenance backlog during early Q3. * Advanced Cottey 2 (350+ megawatt planned AI campus): signed a definitive joint venture with Metro Blocks, completed design development, brought the general contractor on board, placed orders for long-lead electrical equipment, secured a letter of intent for a tenant and began lease negotiations, and began engineering for 100 megawatts of substation expansion. * Advanced Dorothy 3 (300+ megawatt planned AI campus): secured a definitive land purchase agreement for 397 acres, initiated preliminary master planning and environmental/utility/fiber studies, and began long-lead equipment procurement activities. * Completed substantial construction of Cottey 1 (83-megawatt operating campus): the final 14 megawatt phase is under construction and running ahead of schedule, and Cottey 1 delivered its first positive gross profit in Q2 2026, transitioning from capital consumption to cash generation. * Expanded the total power pipeline by 47% year-to-date to 6.3 gigawatts as of August 1 2026, with 300 megawatts of growth coming from expanded term sheets at four existing portfolio sites, which have now been designated for AI workloads. * Added to the Russell 2000 and Russell 3000 indices, and initiated new sell-side research coverage to improve institutional investor visibility. * Raised $159.4 million in capital during Q2, and an additional $23.6 million via the ATM program post-quarter-end, retired all outstanding Series B preferred stock, paid accumulated dividends, and ended the quarter with a strengthened balance sheet: $113 million in cash, 2.1 current ratio, and total debt of $33.1 million. - Capital Structure Strategy * Large AI campus development will be funded predominantly via 70-80% project-level debt (collateralized by contracted tenant cash flows), with the remaining 20-30% coming from Saluna equity or third-party project equity. Capital will be raised in the 8-12 week window following definitive lease signing. Cash on hand is used to complete pre-lease development work required to win tenant contracts.

Guidance

- Total operating capacity under management is expected to increase from 192 megawatts to 206 megawatts by the end of summer 2026, following completion of the final 14 megawatt phase of Cottey 1. - After a lease is signed for Cottey 2 Phase 1, initial ready-for-service is targeted for approximately 15 months post-contract signing. - Formal marketing for the Dorothy 3 AI campus is on track to begin in fall 2026, with ongoing inbound customer interest already accelerating development timelines. - No material changes to overall long-term pipeline or growth targets were announced in the call.

Segment performance

1. Data Hosting: Delivered $1.9 million in gross profit, the largest contributor to consolidated results. Revenue growth was driven by full quarter operation of Dorothy 2, contributions from Cottey 1, ramped operations at Dorothy 1A, and newly commenced hosting at Dorothy 1B. This segment is the current largest revenue driver for the firm. 2. Proprietary Bitcoin Mining: Posted a gross loss, with revenue declining $1.1 million (40% year-over-year) due to a 34% drop in Bitcoin hash price and deliberate conversion of Dorothy 1B capacity from proprietary mining to third-party hosting. 3. Grid Ancillary (Demand Response) Services: Contributed to profits at effectively full margin, with no reported absolute loss. 4. Saluna Wind (Renewable Generation): Added $366,000 of wind revenue (net of intercompany elimination) in the first quarter of ownership, but posted a gross loss of $787,000 due to $1.5 million in upfront turbine repair and maintenance work the firm chose to complete immediately after acquisition. Consolidated gross profit for Q2 2026 was $766,000, a 35% year-over-year decline from $1.2 million, driven by upfront new site costs and wind farm repairs. Consolidated revenue was $15.1 million, up 145% year-over-year (up 73% year-over-year excluding the accounting presentation change for pass-through electricity costs).

Risks & headwinds

- Texas ERCOT Interconnection Audit Risk: The new Texas audit of all new data center interconnection requests targets new studied loads, but Saluna's Cottey 2 and Dorothy 3 projects build off adjacent already energized interconnections, limiting direct exposure. Saluna is cooperating fully with the audit, but the outcome of the process and timing approval for new development remains uncertain. - Execution Risk: The firm's largest self-identified risk over the next 18 months is building out sufficient execution expertise and team capacity to transition from a Bitcoin hosting business to a large-scale AI infrastructure developer. This risk is being mitigated via hiring experienced leadership (such as Chief Development Officer Ryan Carver, previously of Microsoft) and building out specialized in-house teams. - Long-Lead Equipment Supply Chain Risk: Extended lead times for critical electrical equipment remain an industry-wide risk, which Saluna is mitigating by placing orders for long-lead items early in the development process, ahead of definitive lease signing. - Capital Raising Risk: Securing sufficient equity and project-level debt to fund the large 1.6 gigawatts of AI pipeline is a key risk, though Saluna's project-level funding structure is a proven model in the data center industry. - Hash Price Volatility Risk: The existing proprietary Bitcoin mining segment is exposed to declines in Bitcoin hash prices, which have already driven reduced revenue and gross losses for the segment in Q2 2026.

Analyst Q&A

• Q: An analyst asked for an update on Cottey 2 lease negotiations, and for details on Saluna's power access for Cottey 2 and Dorothy 3 amid the new ERCOT audit. /

  A: Management confirmed negotiations are progressing well for the signed LOI, but cannot share a specific timing for a definitive lease. They noted the company is already completing all pre-construction work (design, contractor selection, long-lead orders) while negotiating. For power access, both AI campuses use existing energized interconnections from adjacent operating Saluna renewable assets, so they are not the new studied loads targeted by the audit. The behind-the-meter model already aligns with the state's screening criteria, and additional natural gas firming is being added to both sites to guarantee 24/7 power availability.

• Q: An analyst asked to characterize the Cottey 2 LOI tenant and inbound interest at Dorothy 3, plus the timeline for marketing Dorothy 3 and expected RFS after lease signing. /

  A: Management declined to specify if the Cottey 2 tenant is a hyperscaler or neocloud, noting the LOI remains in negotiation. They confirmed inbound interest for Dorothy 3 is very strong, which has pulled forward development work; formal marketing will begin in fall 2026 as planned, with unsolicited inbound inquiries already being received. RFS for Cottey 2 Phase 1 is targeted for 15 months after lease signing. Supply chain risk is mitigated by ordering key long-lead equipment early, and water usage is managed via closed-loop systems with sufficient aquifer access identified.

• Q: An analyst asked how Saluna will allocate capital and manage potential partnerships given the size of its pipeline relative to the company's current scale. /

  A: Management plans to grow incrementally, focusing first on executing the first two large AI campuses (Cottey 2 and Dorothy 3, totaling 650 megawatts) to prove the model, which will open access to larger pools of capital. The company actively pursues joint venture and strategic partnerships to gain access to additional capital and expertise for scaling, and will expand to the rest of the 1.6 gigawatt AI pipeline after delivering proof of concept on the first two projects.

• Q: An analyst asked what management sees as the single biggest risk to Saluna's 18-month plan. /

  A: Management identified building sufficient execution capability to transition to large-scale AI development as the top risk, which is being mitigated by hiring experienced industry leadership (like Ryan Carver from Microsoft) and building out a specialized in-house team. Secondary risks are long-lead equipment availability (mitigated by early ordering) and securing sufficient project-level capital (mitigated by the proven 70-80% project-level debt model, with equity partnerships for the remaining balance).