Q2 2026 Forum Markets Inc Earnings Call

August 13, 2026

Speaker #1: 26 earnings conference call. During today's discussion, all callers will be placed in a listen-only mode. Following management's prepared remarks, the call will be open for questions.

Operator: 2026 earnings conference call. During today's discussion, all callers will be placed in a listen-only mode. Following management's prepared remarks, the call will be open for questions. This call is being recorded on 13 August 2026, and a replay will be made available on Forum Investor Relations website later today. I will now turn the call over to John Kristoff, Senior Vice President, Corporate Communications and Investor Relations.

Speaker #1: This call is being recorded on August 13, 2026, and a replay will be made available on Form Investor Relations' website later today. I will now turn the call over to John Kristof, Senior Vice President, Corporate Communications and Investor Relations.

Speaker #2: Thank you, Megan. Hello, and thank you all for joining Forum's second quarter 2026 financial results conference call. Joining me on the call today are McAndrew Rudiceau, Chairman and Chief Executive Officer, and John Saunders, Chief Financial Officer.

John Kristoff: Thank you, Megan. Hello, and thank you all for joining Forum's Q2 2026 financial results conference call. Joining me on the call today are McAndrew Rudisill, Chairman and Chief Executive Officer, and John Saunders, Chief Financial Officer. We hope you've had the opportunity to review our Q2 financial results issued earlier this morning. We've also posted an earnings presentation to our investor relations website. As a reminder, some of the matters we'll be discussing on this morning's call are forward-looking in nature. Please keep in mind that actual results could differ materially from what is expressed in these forward-looking statements. Forum assumes no obligation to update the information, and we encourage you to refer to our most recent filings with the SEC for a discussion of factors that could cause actual results to differ materially from these statements.

Speaker #2: We hope you've had the opportunity to review our second quarter financial results issued earlier this morning. We've also posted an earnings presentation to our investor relations website.

Speaker #2: As a reminder, some of the matters we'll be discussing on this morning's call are forward-looking in nature. Please keep in mind that actual results could differ materially from what is expressed in these forward-looking statements.

Speaker #2: Forum assumes no obligation to update the information, and we encourage you to refer to our most recent filings with the SEC for a discussion of factors that could cause actual results to differ materially from these statements.

Speaker #2: During our call today, we may reference certain non-GAAP financial measures, which we believe provide meaningful information for investors. A reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found in our press release and presentation, both available on our investor relations website.

John Kristoff: During our call today, we may reference certain non-GAAP financial measures which we believe provide meaningful information for investors. A reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found in our press release and presentation, both available on our investor relations website. With that, I'll turn the call over to McAndrew.

Speaker #2: And with that, I'll turn the call over to McAndrew.

Speaker #3: Thank you, John, and good morning, everyone. Thank you for joining us. Since our last call, we have continued to execute against Forum's operational strategy while taking a disciplined approach to allocating shareholder capital.

McAndrew Rudisill: Thank you, John, and good morning, everyone. Thank you for joining us. Since our last call, we have continued to execute against Forum's operational strategy while taking a disciplined approach to allocating shareholder capital. We are building Forum by combining deep operating experience with disciplined capital allocation. Operationally, our focus is on acquiring and managing cash-flowing assets with attractive risk-adjusted returns in large scalable markets with moderate to high complexity and durable demand. Our assets are intended to generate cash flow first, with the option to tokenize on regulated digital infrastructure second, as the market for tokenized real-world assets grows over time. On the capital allocation side, we took decisive action in the quarter to return value to our fellow shareholders.

Speaker #3: We are building Forum by combining deep operating experience with disciplined capital allocation. Operationally, our focus is on acquiring, managing cash-flowing assets with attractive risk-adjusted returns, enlarged scalable markets, with moderate to high complexity and durable demand.

Speaker #3: Our assets are intended to generate cash flow first, with the option to tokenize on regulated digital infrastructure second, as the market for tokenized real-world assets grows over time.

Speaker #3: On the capital allocation side, we took decisive action in the quarter to return value to our fellow shareholders. Given the disconnect between Forum's market value and what we believe is the intrinsic value of the company, we determined that repurchasing a large percentage of our stock represented the most attractive use of capital available to us.

McAndrew Rudisill: Given the disconnect between Forum's market value and what we believe is the intrinsic value of the company, we determined that repurchasing a large percentage of our stock represented the most attractive use of capital available to us. During the quarter, we repurchased approximately 7.1 million shares, about 35% of our shares outstanding prior to those repurchases. All shares acquired under the program have been retired. Our Q2 results reflect a deliberate capital allocation decision. We chose to deploy a meaningful amount of capital allocated towards share repurchases rather than acquire additional revenue-producing assets based on our view of the value that was available in our shares. We evaluate capital allocation continuously, and we will keep directing it to where it earns the best risk-adjusted return for shareholders.

Speaker #3: During the quarter, we repurchased approximately $7.1 million shares, about 35% of our shares outstanding, prior to those repurchases. All shares acquired under the program have been retired.

Speaker #3: Our second quarter results reflect a deliberate capital allocation decision. We chose to deploy a meaningful amount of capital allocated toward share repurchases rather than acquire additional revenue-producing assets based on our view of the value that was available in our shares.

Speaker #3: We evaluate capital allocation continuously and will keep directing it to where it earns the best risk-adjusted return for shareholders. With that discipline in place, our near-term core focus is anchored on deploying capital into cash-generating assets and growing revenue in the second half of the year.

McAndrew Rudisill: With that discipline in place, our near-term core focus is anchored on deploying capital into cash-generating assets and growing revenue in the H2 of the year, which John will cover in more detail. Turning to the board special committee, we believe the process has advanced meaningfully since our last call, and we are encouraged by the quality and level of engagement we have seen to date. The committee continues to evaluate each opportunity against a clear standard. Which path best maximizes long-term value for Forum shareholders? While we cannot comment on specific discussions, potential counterparties, or transaction timing, we expect to be in a position to provide shareholders with a meaningful update prior to our next earnings call. Management remains fully focused on operating the business and strengthening our fundamentals in the meantime.

Speaker #3: Which, John, we'll cover in more detail. Turning to the board's special committee, we believe the process has advanced meaningfully since our last call, and we encourage why the quality and level of engagement we have seen to date.

Speaker #3: The committee continues to evaluate each opportunity against a clear standard. Which path best maximizes long-term value for Forum's shareholders? While we cannot comment on specific discussions, potential counterparties, or transaction timing, we expect to be in a position to provide shareholders with a meaningful update prior to our next earnings call.

Speaker #3: Management remains fully focused on operating the business and strengthening our fundamentals in the meantime. On the asset side, even accounting for capital deployed toward repurchases, we continue to expand our portfolio of income-producing, real-world assets.

McAndrew Rudisill: On the asset side, even accounting for capital deployed towards repurchases, we continue to expand our portfolio of income-producing real-world assets and have done so at an accelerating pace since quarter end. Most recently, we acquired two additional commercial aircraft engines, bringing our aviation portfolio to five engines under long-term lease to two of the largest US airlines. Both engines were already on lease and generating contracted revenue at the time of purchase, and we are targeting double-digit annual returns on the pair. John will cover the financial specifics in his remarks. Commercial aircraft engines are representative of the types of high-quality real-world assets where proprietary deal flow, networks, and structuring create investment opportunities that are not broadly accessible through traditional public markets. Exactly the profile we look for.

Speaker #3: And have done so at an accelerating pace since quarter-end. Most recently, we acquired 2 additional commercial aircraft engines, bringing our aviation portfolio to 5 engines, under long-term lease to 2 of the largest U.S.

Speaker #3: airlines. Both engines were already on lease and generating contracted revenue at the time of purchase, and we are targeting double-digit annual returns on the pair.

Speaker #3: John, we'll cover the financial specifics in his remarks. Commercial aircraft engines are representative of the types of high-quality real-world assets where proprietary deal flow networks and structuring create investment opportunities that are not broadly accessible through traditional public markets, exactly the profile we look for.

Speaker #3: We also continue to advance our AI infrastructure vertical in access-constrained markets, where we see attractive opportunities to generate great returns and durable cash flow.

McAndrew Rudisill: We also continue to advance our AI infrastructure vertical and access constrained market where we see attractive opportunities to generate great returns and durable cash flow. Our initial work in short-term GPU financing helped surface adjacent opportunities within the same ecosystem, including the deployment and operation of AI equipment across data centers and inference compute locations, generating revenue from the compute. We are now close to deploying capital into AI infrastructure in the area of AI compute, which we expect to contribute meaningfully to the revenue in the H2 of the year. We also continue to evaluate opportunities in short-term GPU financing with partners that align with our operational compute models. We believe aviation and AI infrastructure are particularly attractive areas for near-term expansion because both combine substantial capital demand with specialized origination requirements and access-constrained investment opportunities.

Speaker #3: Our initial work in short-term GPU financing helped surface adjacent opportunities within the same ecosystem, including the deployment and operation of AI equipment across data centers and inference compute locations, generating revenue from the compute.

Speaker #3: We are now close to deploying capital into AI infrastructure in the area of AI compute, which we expect to contribute meaningfully to the revenue in the second half of the year.

Speaker #3: We also continue to evaluate opportunities in short-term GPU financing with partners that align with our operational compute model. We believe aviation and AI infrastructure are particularly attractive areas for near-term expansion, because both combine substantial capital demand with specialized origination requirements and access-constrained investment opportunities.

Speaker #3: At the same time, we have built origination capabilities across all four of our core verticals, and overall deal flow has accelerated meaningfully in 2026.

McAndrew Rudisill: At the same time, we have built origination capabilities across all four of our core verticals, and overall deal flow has accelerated meaningfully in 2026. That has broadened the range of opportunities available to us and allows us to be highly selective on structure, counterparties, and risk-adjusted returns. Manufactured housing and auto credit round out the platform by providing additional sources of secured cash-generating assets. These categories reflect prioritization of assets that generate attractive income, are backed by tangible collateral and strong off-take counterparties, and can create additional value through origination, management, and distribution over time. We will continue to deploy capital selectively where we see the strongest risk-adjusted returns, with a particular focus on markets where our capabilities can improve capital formation.

Speaker #3: That has broadened the range of opportunities available to us and allows us to be highly selective on structure, counterparties, and risk-adjusted returns. Manufactured housing and auto credit round out the platform by preventing additional sources of secured cash-generating assets.

Speaker #3: These categories reflect prioritization of assets that generate attractive income, are backed by tangible collateral and strong offtake counterparties, and can create additional value through origination, management, and distribution over time.

Speaker #3: We will continue to deploy capital selectively where we see the strongest risk-adjusted returns, with a particular focus on markets where our capabilities can improve capital formation.

Speaker #3: This multi-channel model supports several distinct sources of value, including yield on assets held by Forum, origination and structuring economics, asset management fees as third-party capital participates, and distribution or marketplace economics as those channels mature.

McAndrew Rudisill: This multi-channel model supports several distinct sources of value, including yield on assets held by Forum, origination and structuring economics, asset management fees as third-party capital participates, and distribution or marketplace economics as those channels mature. In addition, Liquidity.io remains a part of Forum's long-term tokenization strategy, and its platform upgrade is expected to significantly broaden its capabilities during the H2 of 2026. However, I want to reiterate that our first priority is to build a portfolio of high-quality operating businesses with cash-generating assets while maintaining the option to tokenize and distribute as market demand grows over time. We believe Forum has built a differentiated base of income-producing assets, proprietary origination relationships, and distribution capabilities, and we remain focused on increasing the value of that platform and ensuring that value is created for shareholders. With that, I'll turn the call over to John.

Speaker #3: In addition, liquidity.io remains a part of Forum's long-term tokenization strategy, and its platform upgrade is expected to significantly broaden its capabilities during the second half of 2026.

Speaker #3: However, I want to reiterate that our first priority is to build a portfolio of high-quality operating businesses with cash-generating assets, while maintaining the option to tokenize and distribute as market demand grows over time.

Speaker #3: We believe Forum has built a differentiated base of income-producing assets proprietary origination relationships and distribution capabilities, and we remain focused on increasing the value of that platform and ensuring that value is created for shareholders.

McAndrew Rudisill: We believe Forum has built a differentiated base of income-producing assets, proprietary origination relationships, and distribution capabilities, and we remain focused on increasing the value of that platform and ensuring that value is created for shareholders. With that, I'll turn the call over to John.

Speaker #3: With that, I'll turn the call over to John.

Speaker #2: Thank you, Nick Andrew. And good morning, everyone. Before reviewing the quarter, I want to briefly reiterate the financial framework we use to evaluate Forum's progress.

John Saunders: Thank you, McAndrew, and good morning, everyone. Before reviewing the quarter, I want to briefly reiterate the financial framework we use to evaluate Forum's progress. At this stage, the most relevant measures are the size and composition of our income-producing asset base, the yield and cash flow generated by those assets, our origination and management economics, and net asset value per share. Tokenization remains an additional distribution and liquidity option, but the underlying assets do not need to be tokenized to generate revenue or create value for Forum. Turning to the Q2, Forum generated revenue of approximately $1.4 million, compared with $2.9 million in the Q1 of 2026. Revenue during the quarter was driven primarily by aircraft lease revenue of approximately $1.4 million. Manufactured housing and auto credit interest income was approximately $0.38 million, and interest in other financing income of approximately $0.42 million.

Speaker #2: At this stage, the most relevant measures are the size and composition of our income-producing asset base, the yield and cash flow generated by those assets, our origination and management economics, and net asset value per share.

Speaker #2: Tokenization remains an additional distribution and liquidity option, but the underlying assets do not need to be tokenized to generate revenue or create value for Forum.

Speaker #2: Turning to the second quarter, Forum generated revenue of approximately $1.4 million, compared with $2.9 million in the first quarter of 2026. Revenue during the quarter was driven primarily by aircraft lease revenue of approximately $1.4 million.

Speaker #2: Manufactured housing and auto credit interest income was approximately $0.38 million, and interest and other financing income was approximately $0.42 million. The decline in revenue from Q1 was due to the elimination of $1.8 million in staking revenue, resulting from the strategic decision to sell the majority of our Ethereum holdings in March as we transitioned to our current operating model.

John Saunders: Manufactured housing and auto credit interest income was approximately $0.38 million, and interest in other financing income of approximately $0.42 million. The decline in revenue from Q1 was due to the elimination of $1.8 million in staking revenue resulting from the strategic decision to sell the majority of our Ethereum holdings in March as we transition to our current operating model. Results for the quarter also reflect, in part, our decision to allocate capital into share repurchases rather than additional revenue-generating assets. Our revenue mix is becoming increasingly representative of Forum's current operating model of contracted asset income, financing yield, and as the platform scales, origination, structuring, and management fees. General and administrative expenses were approximately $10.3 million for the quarter, compared with $7.5 million in the Q1.

John Saunders: The decline in revenue from Q1 was due to the elimination of $1.8 million in staking revenue resulting from the strategic decision to sell the majority of our Ethereum holdings in March as we transition to our current operating model. Results for the quarter also reflect, in part, our decision to allocate capital into share repurchases rather than additional revenue-generating assets. Our revenue mix is becoming increasingly representative of Forum's current operating model of contracted asset income, financing yield, and as the platform scales, origination, structuring, and management fees. General and administrative expenses were approximately $10.3 million for the quarter, compared with $7.5 million in the Q1.

Speaker #2: Results for the quarter also reflect, in part, our decision to allocate capital into share repurchases rather than additional revenue-generating assets. Our revenue mix is becoming increasingly representative of Forum's current operating model: contracted asset income, financing yield, and, as the platform scales, origination, structuring, and management fees.

Speaker #2: General and administrative expenses were approximately $10.3 million for the quarter, compared with $7.5 million in the first quarter. General and administrative costs included non-cash stock-based compensation expense of approximately $3.8 million, and one-time cash charges of $1.8 million, consisting of an early termination fee to exit our asset manager agreement, and taxes paid in the UK to settle a VAT repayment liability associated with exiting the legacy biotech business.

John Saunders: General and administrative costs included non-cash stock-based compensation expense of approximately $3.8 million and one-time cash charges of $1.8 million, consisting of an early termination fee to exit our asset manager agreement and taxes paid in the UK to settle a VAT repayment liability associated with exiting the legacy biotech business. We continue to invest in the personnel, systems, underwriting capabilities, and partnerships required to support platform growth while maintaining a disciplined approach to operating expenses. Net loss from continuing operations for the quarter was approximately $12.4 million, compared with a net loss of $77.5 million in Q1. Adjusted EBITDA loss for the quarter was approximately $7.4 million, compared with an adjusted EBITDA loss of approximately $76 million in Q1. The Q1 results included substantial digital asset-related losses associated with the final repositioning of the balance sheet.

Speaker #2: We continue to invest in the personnel, systems, underwriting capabilities, and partnerships required to support platform growth, while maintaining a disciplined approach to operating expenses.

Speaker #2: Net loss from continuing operations for the quarter was approximately $12.4 million, compared with a net loss of $77.5 million in the first quarter. Adjusted EBITDA loss for the quarter was approximately $7.4 million, compared with an adjusted EBITDA loss of approximately $76 million in the first quarter.

Speaker #2: The first quarter results included substantial digital asset-related losses associated with the final repositioning of the balance sheet. The second quarter results provide a meaningfully cleaner view of our operating expense structure, and the income generated by our real-world asset portfolio.

John Saunders: The Q2 results provide a meaningfully cleaner view of our operating expense structure and the income generated by our real-world asset portfolio. Turning to the balance sheet, as of 30 June 2026, Forum reported total assets of approximately $159.1 million, with cash and cash equivalents and marketable securities of approximately $48.4 million. Our quarter-end asset base included approximately $16.7 million of commercial aircraft engine assets, $14.7 million of manufactured housing loans, $2.5 million of auto loans and warehouse financing assets, and $45.7 million of strategic equity investments. Subsequent to quarter end, Forum deployed approximately $23.7 million in cash to acquire two additional commercial aircraft engines, both of which were already generating contracted lease revenue at the time of acquisition. Those assets are not reflected in the 30 June balance sheet.

Speaker #2: Turning to the balance sheet, as of June 30, 2026, Forum reported total assets of approximately $159.1 million, with cash and cash equivalents and marketable securities of approximately $48.4 million.

Speaker #2: Our quarter-end asset base included approximately $16.7 million of commercial aircraft engine assets, $14.7 million of manufactured housing loans, $2.5 million of auto loans and warehouse financing assets, and $45.7 million of strategic equity investments.

Speaker #2: Subsequent to quarter-end, Forum deployed approximately $23.7 million in cash to acquire 2 additional commercial aircraft engines, both of which were already generating contracted lease revenue at the time of acquisition.

Speaker #2: Those assets are not reflected in the June 30 balance sheet. Based on our quarter-end balance sheet, we estimate net asset value of approximately $127.8 million, or approximately $9.68 per share undiluted.

John Saunders: Based on our quarter-end balance sheet, we estimate net asset value of approximately $127.8 million or approximately $9.68 per share undiluted, based on approximately 13.2 million shares outstanding. We view NAV per share as a useful reference point given the current composition of our balance sheet, while recognizing that our objective is to scale our operating platform to extend our value well beyond the assets currently recorded on the balance sheet. As McAndrew mentioned, capital allocation was a central focus during the quarter. Forum used approximately $31.3 million to repurchase approximately 7.1 million shares at an average price of $4.42 per share inclusive of fees. Those repurchases reduced the number of outstanding shares to approximately 13.2 million. We concluded that the discount on our equity represented one of the most attractive opportunities available to create value for shareholders.

Speaker #2: Based on approximately $13.2 million shares outstanding. We view NAV per share as a useful reference point, given the current composition of our balance sheet, while recognizing that our objective is to scale our operating platform to extend our value well beyond the assets currently recorded on the balance sheet.

Speaker #2: As Nick Andrew mentioned, capital allocation was a central focus during the quarter. Forum used approximately $31.3 million to repurchase approximately $7.1 million shares at an average price of $4.42 per share, inclusive of fees.

Speaker #2: Those repurchases reduced the number of outstanding shares to approximately 13.2 million. We concluded that the discount on our equity represented one of the most attractive opportunities available to create value for shareholders.

Speaker #2: This choice reflected a disciplined capital allocation strategy, prioritizing high conviction shareholder value creation over near-term revenue expansion. The board subsequently extended the repurchase program through June 30, 2027, adjusting the aggregate authorization to $100 million, and authorized additional repurchase methods, including derivative transactions.

John Saunders: This choice reflected a disciplined capital allocation strategy, prioritizing high conviction shareholder value creation over near-term revenue expansion. The board subsequently extended the repurchase program through 30 June 2027, adjusting the aggregate authorization to 100 million, and authorized additional repurchase methods, including derivative transactions. Further activity remains discretionary and will be evaluated relative to our liquidity needs, available asset returns, and the market price of Fulcrum shares. With respect to guidance, our full year 2026 expectations remain unchanged. Since quarter end, we have acquired two additional aircraft engines, both of which are already generating contracted lease revenue. As McAndrew mentioned, we are also in the advanced stages of finalizing a phased AI compute transaction that we expect to complete and begin generating revenue from in Q4.

Speaker #2: Further activity remains discretionary and will be evaluated relative to our liquidity needs, available asset returns, and the market price of Forum shares. With respect to guidance, our full-year 2026 expectations remain unchanged.

Speaker #2: Since quarter-end, we have acquired two additional aircraft engines, both of which are already generating contracted lease revenue. As Nick Andrew mentioned, we are also in the advanced stages of finalizing a phased AI compute transaction that we expect to complete and begin generating revenue from in the fourth quarter.

Speaker #2: Based on the expected contributions from those assets and our current pipeline, we continue to believe we are on track to achieve revenue within our full-year guidance range.

John Saunders: Based on the expected contributions from those assets and our current pipeline, we continue to believe we are on track to achieve revenue within our full year guidance range. We continue to expect full year 2026 revenue to be in the range of $18 million to $22 million. Revenue growth is expected to be uneven as it is dependent upon the timing of transactions and deployment of capital. We are also striving to become cash flow positive by early 2027. Our focus going forward remains disciplined capital allocation, revenue growth from income-producing assets, increasing origination and management economics, and continued improvement in NAV per share and long-term earning power. With that, I will turn the call back over to the operator for questions.

Speaker #2: We continue to expect full year 2026 revenue to be in the range of $18 million to $22 million. Revenue growth is expected to be uneven, as it is dependent upon the timing of transactions and deployment of capital.

Speaker #2: We are also striving to become cash flow positive by early 2027. Our focus going forward remains disciplined capital allocation, revenue growth from income-producing assets, increasing origination and management economics, and continued improvement in NAV per share and long-term earning power.

Speaker #2: With that, I'll turn the call back over to the operator for questions.

Speaker #1: We will now begin the question-and-answer session. If you would like to ask a question, please use the raise-hand icon, which can be found in the black bar at the bottom of the webinar application screen.

Operator: We will now begin the question and answer session. If you would like to ask a question, please use the raise hand icon, which can be found in the black bar at the bottom of the webinar application screen. When you hear your name called, you will be prompted to unmute your line and ask your question. We will now take a moment to allow the queue to form. Our first question will come from Mark Palmer with Benchmark-StoneX. Your line is open. Please go ahead.

Speaker #1: When you hear your name called, you will be prompted to unmute your line and ask your question. We'll now take a moment to allow the queue to form.

Speaker #1: Our first question will come from Mark Palmer with Benchmark Stone X. Your line is open. Please go ahead.

Speaker #3: Yes, good morning, and thank you for taking my questions. I wanted to dig into your reiterated revenue guidance for the year, and the fact that it implies a pretty healthy ramp-up in the second half of the year.

Mark Palmer: Yes. Good morning, and thank you for taking my questions. Wanted to dig into your reiterated revenue guidance for the year. The fact that that implies a pretty healthy ramp-up in H2 of the year. Can you walk us through the components of that bridge? Specifically, how much of the revenue would be derived from the five engines that are now on lease? How much from manufactured housing and auto? How much is contingent on the AI infrastructure deployment closing and contributing in Q4? Thank you.

Speaker #3: Can you walk us through the components of that bridge? And specifically, how much of the revenue would be derived from the five engines that are now on lease, how much from manufactured housing and auto, and how much is contingent on the AI infrastructure deployment closing and contributing in the fourth quarter?

Speaker #3: Thank you.

Speaker #4: Hey Mark, it's Nick Andrew. Thanks for your question. I'll start with the last bit of your question first, because it's probably the most impactful.

McAndrew Rudisill: Hey, Mark. It is McAndrew. Thanks for your question. I will start with the last bit of your question first because it is probably the most impactful. We have done a lot of work over the last few months in both the AI financing space on the short-term bridge loans that we have looked at, as well as looking at AI compute models. The conclusion that we have come to is that short-term bridge financing on GPUs is a highly attractive business to be in. But the real critical juncture that we are seeing in a lot of these transactions is the acute need for energy that is immediately available so that compute can be accessed.

Speaker #4: We've done a lot of work over the last few months in both the AI financing space on the short-term bridge loans that we've looked at, as well as looking at AI compute models. The conclusion that we've come to is that short-term bridge financing on GPUs is a highly attractive business to be in.

Speaker #4: But the real critical juncture that we're seeing in a lot of these transactions is the acute demand acute need for energy that's immediately available so that compute can be accessed.

Speaker #4: And so we've spent a lot of time working on that problem and we think that we found a couple of very interesting solutions where we can purchase GPUs and we can deploy them and they can immediately start generating revenue.

John Saunders: We've spent a lot of time working on that problem, and we think that we found a couple of very interesting solutions where we can purchase GPUs, and we can deploy them, and they can immediately start generating revenue, and we're very focused on doing that in the balance of the year. That will make up a pretty large percentage of our total revenue in the back half of the year. But it ramps at an incredibly fast rate because of the economics of the business model of deploying GPUs today into the compute market due to the demand structure that we're seeing.

McAndrew Rudisill: We've spent a lot of time working on that problem, and we think that we found a couple of very interesting solutions where we can purchase GPUs, and we can deploy them, and they can immediately start generating revenue, and we're very focused on doing that in the balance of the year. That will make up a pretty large percentage of our total revenue in the back half of the year. But it ramps at an incredibly fast rate because of the economics of the business model of deploying GPUs today into the compute market due to the demand structure that we're seeing.

Speaker #4: And we're very focused on doing that in the balance of the year, and that will make up a pretty large percentage of our total revenue in the back half of the year.

Speaker #4: But it ramps at an incredibly fast rate because of the economics of the business model, of deploying GPUs today into the compute market, due to the demand structure that we're seeing. So, on an absolute percentage basis, I'll let John comment on that.

McAndrew Rudisill: On an absolute percentage basis, I'll let John comment on that, but I'd say that becomes greater than 50% of our revenue in the back half of the year, and we have ample capacity to continue to ramp the engine portfolio up as well. You saw that we added another two in July. We can easily continue to add. The pipeline of engines is very strong, but the returns on the AI compute are so much greater than anything else that sits in front of us. I think you'll see us focus most of our energy on that in ramping the revenue up. Yeah, this is John Saunders here. Just to chime in. We think that the aircraft engine revenue for the back half of the year will be somewhere in the USD 5 to 6 million based on those five engines operating.

Speaker #4: But I'd say that becomes greater than 50% of our revenue. In the back half of the year, and we have ample capacity to continue to ramp the engine portfolio up as well.

Speaker #4: You saw that we added another two in July. We can easily continue to add the pipeline of engines as very strong, but the returns on the AI compute are so much greater than anything else that sits in front of us.

Speaker #4: I think you'll see us focus most of our energy on that, in ramping the revenue up.

Speaker #2: Yeah, this is John Saunders here. Just to chime in, we think that the aircraft engine revenue for the back half of the year will be somewhere in the $5 to $6 million range, based on those five engines operating, as Nick Andrew alluded to.

John Saunders: Yeah, this is John Saunders here. Just to chime in. We think that the aircraft engine revenue for the back half of the year will be somewhere in the USD 5 to 6 million based on those five engines operating. As McAndrew alluded to, we may decide to acquire additional engines. The AI infrastructure project would probably account for approximately 50% of that guidance revenue coming online in Q4. The early indications are somewhere in the USD 8 to 12 million range, but it could be higher depending on the timing. We will provide more update on that as we close the deal, but that's sort of high level indications of how we would get to the revenue guidance.

John Saunders: As McAndrew alluded to, we may decide to acquire additional engines. The AI infrastructure project would probably account for approximately 50% of that guidance revenue coming online in Q4. The early indications are somewhere in the USD 8 to 12 million range, but it could be higher depending on the timing. We will provide more update on that as we close the deal, but that's sort of high level indications of how we would get to the revenue guidance.

Speaker #2: We may decide to acquire additional engines. The AI infrastructure project would probably account for approximately 50% of that guidance revenue coming online in Q4.

Speaker #2: The early indications are somewhere in the $8 to $12 million range, but it could be higher depending on timing. So we will provide more updates on that as we close the deal, but that's sort of high-level indications of how we would get to the revenue guidance.

Speaker #4: I'd also stress that the rate of incline on those revenues as GPUs is deployed goes up at a very high rate as you move into 2027.

McAndrew Rudisill: I'd also stress that the rate of incline on those revenues as GPUs is deployed goes up at a very high rate as you move into 2027. We're focused on sort of large shifts in revenue that can occur over the entire course of 2027 and 2028 by the deployment that we're starting on in the Q4 of this year.

Speaker #4: So we're focused on sort of large shifts in revenue that can occur over the entire course of '27 and '28 by the deployment that we're starting on in Q4 of this year.

Speaker #3: Thank you. And as a follow-up, I wanted to get your take on the current state of things at Liquidity.io and what your thoughts are at this point about distribution in general?

Mark Palmer: Thank you. As a follow-up, I wanted to get your take on the current state of things at Liquidity.io and what your thoughts are at this point about distribution, in general, how you expect distribution to evolve as the rest of the platform continues to evolve. Thank you.

Speaker #3: How you expect distribution to evolve as the rest of the platform continues to evolve. Thank you.

Speaker #4: Yeah, as we mentioned in the call, I think liquidity will come online in the back half of this year. They're actively working with Alpaca.

McAndrew Rudisill: Yeah. As we mentioned in the call, I think Liquidity will come online in the back half of this year. They're actively working with Alpaca on integrating their private market systems. I think they're ready to go on stock trading and crypto and options and fixed income, which has been relatively straightforward. I think the integration of the trading of the private assets is really the key to success of the platform, and they're working on that with Alpaca right now to make it an easy transference if you want to buy a stock versus you want to buy a token. Just being completely transparent about the token market, from what we've seen, there's not a large market for tokens yet globally. The one thing that's been tokenized the most is US Treasury securities.

Speaker #4: On integrating their private market systems, I think they're ready to go on stock trading, crypto, options, and fixed income, which has been, I think, relatively straightforward.

Speaker #4: I think the integration of the trading of private assets is really the key to the success of the platform, and they're working on that with Alpaca right now to make it an easy transference if you want to buy a stock versus if you want to buy a token.

Speaker #4: And just being completely transparent about the token market, from what we've seen, there's not a large market for tokens yet globally. The one thing that's been tokenized the most is U.S. Treasury securities, but the types of private assets that we've talked about tokenizing—the marketplace just isn't there yet.

McAndrew Rudisill: But the types of private assets that we've talked about tokenizing, the marketplace just isn't there yet. We do think it'll develop over time, but we're not spending any of our capital or time working on this very heavily right now because the revenue and capital opportunity is so great in the AI compute space. So it's really a call option for us on the future of tokenization and all the assets that we have on our balance sheet can easily be flipped into a tokenization model from a programming perspective when the marketplace develops.

Speaker #4: We do think it'll develop over time, but we're not spending any of our capital or time working on this very heavily right now because the revenue and cash flow opportunity is so great in the AI compute space.

Speaker #4: So it's really a call option for us on the future of tokenization. And all the assets that we have on our balance sheet can easily be flipped into a tokenization model from a programming perspective.

Speaker #4: When the marketplace develops.

Speaker #3: That makes sense. Thanks very much.

Mark Palmer: That makes sense. Thanks very much.

Speaker #4: Yep.

McAndrew Rudisill: Yep.

Speaker #1: Your next question will come from Brendan McCarthy with Sidoti. Your line is open. Please go ahead.

Operator: Your next question will come from Brendan McCarthy with Sidoti. Your line is open. Please go ahead.

Speaker #5: Great. Good morning, everybody. I appreciate you taking my questions here. I just wanted to follow up on the regulatory environment of tokenization. Nick, Andrew, I know you've cited the potential passing of the Clarity Act as maybe a key catalyst.

Brendan McCarthy: Great. Good morning, everybody. Appreciate you taking my questions here. Just wanted to follow up on the regulatory environment of tokenization. Mackinder, I know you've cited the potential passing of the CLARITY Act as maybe a key catalyst. Can you just talk about some of the regulatory hurdles you're seeing at the moment, and what might ultimately kickstart tokenization activity?

Speaker #5: Can you just talk about some of the regulatory hurdles you're seeing at the moment, and what might ultimately kickstart tokenization activity?

Speaker #4: Yeah, good to hear from you, Brendan. I had actually pointed you to look at what the odds are on Polymarket or Kalshi for what the Clarity Act passage.

McAndrew Rudisill: Yeah. Good to hear from you, Brendan. I'd actually point you to look at what the odds are on Polymarket or Kalshi for what the CLARITY Act passage, and that's probably the best probability matrix that I can give you as to what's going to happen with that. Without the passage of the CLARITY Act and defined regulation about how tokens can be distributed and who can be the buyer, I think all the tokens really are effectively fund offerings wrapped in a digital wrapper and put on an exchange that are just Reg D or Reg CF fund offerings. So it's no different than selling a mutual fund. Until you can get it into a more regulated framework that's packaged and allows people internationally to trade it, we might as well just sell an ETF.

Speaker #4: And that's probably the best probability matrix that I can give you as to what's going to happen with that. But without the passage of the Clarity Act and defined regulation about how tokens can be distributed and who can be the buyer, I think all the tokens really are effectively fund offerings wrapped in a digital wrapper and put on an exchange that are just Reg D.

Speaker #4: Reg CF. Fund offerings. So it's no different than selling a mutual fund. So until you can get it into a more regulated framework that's packaged and allows people internationally to trade it, it's we might as well just sell an ETF.

Speaker #5: That makes sense. I appreciate the detail there. And then just on the capital allocation front, so including the call 24 million that you've spent on the recent aircraft engines that kind of takes cash down to roughly 25 million currently.

Brendan McCarthy: That makes sense. I appreciate the detail there. Then just on the capital allocation front. So including the USD 24 million that you've spent on the recent aircraft engines, that kind of takes cash down to roughly USD 25 million currently. I guess, do you anticipate that being ample capital to deploy into the AI opportunity as well as other aircraft opportunities to really reach that 2026 revenue guidance range?

Speaker #5: Do you anticipate that being ample capital to deploy into the AI opportunity, as well as other aircraft opportunities, to really reach that 2026 revenue guidance range?

Speaker #4: Yeah, so that's a great question. First of all, in the AI compute, the financing market is pretty interesting, and we've made a lot of inroads with the equipment providers.

McAndrew Rudisill: Yeah, so that's a great question. First of all, on the AI compute, the financing market is pretty interesting, and we've made a lot of inroads with the equipment providers and the distributors. We can buy a lot of equipment in that market at a very high LTV because the offtake on the compute is contracted on a forward basis and a high percentage of the cash for that compute is actually received upfront. So we can use the vendor programs like you recently saw Nvidia put together, I think, a $500 billion program with a bunch of banks and funds. The vendors are actually putting together programs to allow people who have access to power and offtake on the compute side to purchase the equipment upfront. We're going to gain access to that, number one, for capital deployment.

Speaker #4: And the distributors. And we can buy a lot of equipment in that market at a very high LTV, because the offtake on the compute is contracted on a forward basis, and a high percentage of the cash for that compute is actually received up front.

Speaker #4: So, we can use the vendor programs like you recently saw NVIDIA put together—I think a $500 billion program with a bunch of banks and funds. The vendors are actually putting together programs to allow people who have access to the power and offtake on the compute side to purchase the equipment up front.

Speaker #4: And so we're going to gain access to that, number one, for capital deployment. I'd say number two is, we've developed some pretty good partners in the private markets that I think can participate with us from an equity perspective if we want to ramp that capital deployment up for the right types of opportunities.

McAndrew Rudisill: I'd say number two is we've developed some pretty good partners in the private markets that I think can participate with us from an equity perspective if we want to ramp that capital deployment up for the right types of opportunities. The third point I'll make is we have absolutely zero leverage on our balance sheet. It's purposeful. The aircraft engines are call contracted. They can carry some leverage. I think we've kind of got three very distinct levers to pull in terms of capital allocation, and we're going to just be very prudent about how we go about doing that.

Speaker #4: And then the third point I'll make is we have absolutely zero leverage on our balance sheet. It's purposeful. The aircraft engines are all contracted.

Speaker #4: They can carry some leverage, and I think we've kind of got three very distinct levers to pull in terms of capital allocation. And we're going to just be very prudent about how we go about doing that.

Speaker #4: And we have to put the three pieces in place with the AI compute, which are the power, the offtake, and then the financing to pull the trigger on the opportunities that are in front of us.

McAndrew Rudisill: We have to put the three pieces in place on the AI compute, which is the power, the offtake, and then the financing to pull the trigger on the opportunities that are in front of us, and I think we've done that on all three fronts.

Speaker #4: And I think we've done that on all three fronts.

Speaker #5: Understood. I appreciate the detail. On the capital allocation front, I know you prioritized buybacks in the second quarter. Is it fair to say that the capital allocation priorities have kind of shifted toward acquiring RWAs now over the buybacks?

Brendan McCarthy: Understood. Appreciate the detail. On the capital allocation front, I know you prioritize buybacks in Q2. Is it fair to say that the capital allocation priorities have shifted towards acquiring RWAs now over the buybacks, or is it still opportunistic at this point?

Speaker #5: Or is it still opportunistic at this point?

Speaker #4: I mean, the buyback is still very much at the front and center of my mind, as well as the board's mind. It just comes down to the equity price.

McAndrew Rudisill: The buyback is still very much in the front and center of my mind as well as the board's mind. It just comes down to equity price. We do want to ramp revenue. To your earlier questions, how do you get to the Q4 revenue guidance? Well, you have to deploy capital into things that generate revenue. But if the stock is just providing us with an opportunity to continue to take down shares, then we will. These are just the decisions that we have to make, and they are relative to one another.

Speaker #4: So, we do want to ramp revenue—to your earlier question, how do you get to Q4 revenue guidance? Well, you have to deploy capital into things that generate revenue.

Speaker #4: But if the stock is just providing us with an opportunity to continue to take down shares, then we will. I mean, these are just the decisions that we have to make.

Speaker #4: And they're relative to one another.

Brendan McCarthy: Makes sense. Do you have an update on how much is left on the buyback authorization?

Speaker #5: Makes sense. And do you have an update on how much is left on the buyback authorization?

Speaker #4: I don't think we have touched the new buyback authorization, because we were previously working off the old $250 million buyback authorization program. So the new one, I believe, probably has like $90-something million plus available on it.

McAndrew Rudisill: I don't think we have touched the new buyback authorization because we were previously working off the old quarter-billion-dollar buyback authorization program. The new one, I believe, probably has like 90-something million-plus dollars available on it.

Speaker #5: Got it. Thanks, McAndrew. That's all from me.

Brendan McCarthy: Got it. Thanks, Mick. That's all for me.

Speaker #4: All right. Thank you.

McAndrew Rudisill: All right. Thank you.

Speaker #1: Your next question will come from Brian Dobson with ClearStreet. Your line is open. Please go ahead.

Operator: Your next question will come from Brian Dobson with Clear Street. Your line is open. Please go ahead.

Speaker #3: Hey, thanks very much. So, for the airline or the airplane engines that you purchased, those both came through already, at least generating double-digit returns.

Brian Dobson: Hey, thanks very much. For the airplane engines that you purchased, those both came through already leased, generating double-digit returns. Is that the type of hurdle rate that we should expect when you are committing capital or rather putting capital to work, either via share repurchases or the purchase of new earning assets?

Speaker #3: Is that the type of hurdle rate that we should expect when you're committing capital, or rather, putting capital to work either via share repurchases or the purchase of new earning assets?

McAndrew Rudisill: Yeah, Brian, our threshold is baseline high teens to even think about doing something right now. On the AI compute, it is meaningfully higher than that in the structures that we are putting in place. On the buyback, you can see based on where we bought back the shares, what the percentage return was. That was the highest rate of return capital that we could have put to work in this quarter. That is how we are thinking about the world, is where do you get the best rate of return relative to the risk that you are taking.

Speaker #4: Yeah, Brian, our threshold is baseline, high teens, to even think about doing something right now. And on the AI compute, it's meaningfully higher than that.

Speaker #4: In the structures that we're putting in place, and then on the buyback, you can see, based on where we've bought back the shares, what the percentage return was.

Speaker #4: I mean, that was the highest rate of return on capital that we could have put to work in this quarter. And so that's how we're thinking about the world—where do you get the best rate of return relative to the risk that you're taking.

Speaker #3: And then as you're contemplating, call it AI infrastructure assets, what size of purchase are you looking at? And who would be your competitors in going after those assets?

Brian Dobson: And then as you are contemplating, call it AI infrastructure assets, what size of purchase are you looking at, and who would be your competitors in going after those assets?

McAndrew Rudisill: We are thinking quite large in terms of the scale of deployment, and I am not able to say total quantum. But we are focused on access to large amounts of power capacity in the United States and varying geographies where you can immediately get compute assets online. I think to play in this game, you need to play at large scale, and that is how we are approaching it. We are approaching it with partners that can play at very large scale, too.

Speaker #4: We are thinking quite large in terms of the scale of deployment. I'm not able to say the total quantum, but we are focused on access to large amounts of power capacity in the United States and varying geographies where you can immediately get compute assets online.

Speaker #4: And I think to play in this game, you need to play at large scale. That's how we're approaching it, and we're approaching it with partners that can play at very large scale too.

Speaker #3: Excellent. Thanks very much for the color.

Brian Dobson: Excellent. Thanks very much for the color.

Speaker #4: Yeah.

McAndrew Rudisill: Yeah.

Speaker #1: There are no further questions at this time. I will now turn the call back over to John Kristoff for closing remarks.

Operator: There are no further questions at this time. I will now turn the call back over to John Kristoff for closing remarks.

Speaker #3: Thank you, everyone, for joining us this morning. As always, if you have any follow-up questions, please feel free to reach out to me directly. Thank you.

John Kristoff: Thank you, everyone, for joining us this morning. As always, with any follow-up questions, please feel free to reach out to me directly. Thank you.

Operator: The call has concluded. Thank you for joining. You may now disconnect.