Phoenix Group Holdings plc

Good afternoon, everyone, and welcome to the Q2 2026 earnings call for Phoenix Group. I'm Suhaib Ghazali, head of investor relations, and it's a pleasure to have you all here as we wrap up the first half of the year. On behalf of Phoenix Group, I would like to thank you for your interest and continued support. You should have received the earnings call presentation by now. If you haven't, it is readily available on the IR section of our website. Before we begin, please take a moment to review the disclaimer displayed on the screen, highlighting the importance of being cautious when interpreting historical data and forward-looking statements. At the end of this call, we will have a Q&A session where we hope to address as many questions as possible. However, due to time constraints, if any of the questions remain unanswered, rest assured that we will contact you directly to respond post the earnings call. We are privileged to have Mr. Munaf Ali, Co-Founder and CEO and Mr. Sherry Armali, CFO with us today to provide insights into our financial and business performance for Q2 2026. Our discussion will cover various aspects of our business including Q2 results, strategic direction, AI pivot, key financial and operational matrices and investments. Additionally, we will examine the latest development in the sector. Following a comprehensive review of our financial position, we will conclude with what's ahead before moving into the Q&A session. With that, I will now hand it over to Mr. Munaf, our CEO, for his opening remark. Mr. Munaf, over to you.

Thank you. Good afternoon, everyone, and thank you for joining us. It is a privilege to be here to share the latest milestones from Phoenix Group. Global crypto markets remain highly volatile throughout the first half of 2026, shaped by shifting liquidity conditions, uneven institutional participation, and persistent geopolitical tensions across the Middle East. These forces contributed to short-term dislocations in risky assets, but they also reinforced the importance of disciplined balance sheet management and a long-term perspective on digital infrastructure cycles. Throughout the period, we maintained a prudent and optimized exposure profile, ensuring that our operations remained resilient despite external pressures. As we look ahead, Phoenix's mission is to scale into a global AI and HPC infrastructure platform. Our growth pipeline now exceeds over one gigawatt across Europe and the UAE Anchored by our partnership with DC Max, with whom we are building our first European AI data center in Lyon, France. We are targeting up to 300 megawatts of IT load co-location capacity by 2031, more than half of it already being positioned for hyperscalers supported by a world-class team of AI engineers and operators across our markets. At the same time, Our Bitcoin Mining Foundation continues to be optimized to become a self-sustaining business unit. This integrated model of energy, compute and site development under one execution framework is what allows us to pivot into AI infrastructure without compromising the fundamentals of our existing operations. On the crypto vertical front, We have started energization of our new 40 megawatt mining site in Texas. While crypto linked revenue remains the foundation that funds our operations today, AI infrastructure is where we are directing our growth capital and where we expect long-term value creation to come from. This is the shift that will define Phoenix over the next decade. Moving from cyclical exposure to a scalable, durable growth platform anchored in AI. As you can see, Phoenix's transformation is both deliberate and disciplined. Between 2017 and 2024, we built more than 550 megawatts of operational capacity focused on high efficiency, liquid-cooled Bitcoin, self-mining and hosting. Our perfected operational skills in large-scale power procurement, thermal management and site development are the same disciplines required whether you're running ASIC machines or GPUs. That is exactly what makes this evolution possible, not just aspirational. Since 2025, we have been assessing and converting a growing share of our physical site capacity to host GPU compute clusters. As we move forward, we are committed to positioning Phoenix as a leading AI and HPC data center infrastructure developer across Europe and the GCC. This work will continue through 2028 and beyond, unlocking long-term reoccurring revenue with hyperscalers and large-scale enterprise AI customers. I want to reiterate that the position we are building here does not depend on the price of Bitcoin. We are funding this expansion through the strengths of our mining businesses and this is evidenced by the construction of our Leon data center project breaking ground during this quarter. It is the first of several milestones you will see from us as our AI data center platform starts to scale and gain increased momentum. and we intend to deliver each one with the same discipline that has defined Phoenix since 2017. I will now hand it over to Sher to walk you through the numbers behind this quarter.

Thank you Munaf and good afternoon everybody and thank you for joining us. I will walk you through the business performance before I actually deep dive into the numbers. Some of the key things we have accomplished, of course, the most important, the flagship project, Project Leon, as Munaf has also touched on this. This is one of the most important milestones for Phoenix as our first key structural milestone, first AI data center in France. We are progressing as expected. We have secured the grid connection and we are expected to get the relevant permissions and permits through the next few months and hoping to commence construction within Q3 this year. Furthermore, on our crypto mining business, we have energized the new self-mining facility in Texas in this quarter, adding about 40 megawatts of capacity. equipped with the latest generation S21 hydro miners. We do expect the full site to be functional in Q3, 2026. Talking about our investments as we have spoken about BitZero in some of our earlier investor calls as well. BitZero is one of the companies that Phoenix holds Roughly about 13.5% of stake in. BitZero happens to be a Bitcoin miner that has successfully pivoted into AI. They have secured quite a bit of land and power in Norway and therefore have seen tremendous amount of rally in their stock, especially after their listing on Nasdaq. Our own stock or the percentage of stock that we hold currently is valued at approximately 56 million dollars and this is an important investment for us and we are tracking this quite closely as we believe that BitZero is on a track quite similar to others where they have pivoted at the right time into a space we all find very promising moving forward. In terms of our own network hash rate, there was a slight decline. There was a decline because of essentially from our peak period of Q4 2025. So it was down 18% from 1100 to 900 exahashes, but it's driven primarily by a shutdown of some of the unprofitable and higher cost miners. With reduced network competition, we are now capturing the largest share of the Bitcoin rewards, a benefit we do expect to continue as our more efficient operations gain market share. In terms of the investment portfolio gain that you see on our balance sheet that has been reported, 9.7 million gain that we have reflected through the P&L. Compared to a loss of Q1 2026, it's reflective of improved market conditions and a recovery in the value of digital and financial assets. Over to the next slide, please. In terms of our mining efficiency, and we'll talk about more detail, it improved to 18.81 joules per terahash in Q2 2026, down 4%. from 19.53 in Q1 2026, reflecting again the ongoing enhancement in our fleet performance and infrastructure optimization. Self-mining gross margins remain strong at 43% in Q2 2026, broadly consistent and comparable to Q1 2026, where we reported 42%. And this is despite continued volatility and competitive conditions across the mining sector, as you're well aware of. Revenue for the second quarter stood at 19 million down quarter by quarter and year on year with 18.4 and 34.7 reflecting our shift from the low margin trading to prioritized self-mining. And again, this is something we've talked about quite consistently in our previous earnings calls as well. Overall, we mined 354.8 Bitcoins in the second quarter of 2026, which includes 239.9 for self mining, supported by the higher utilization rates and expanded operational capacity. If we could please go to the next slide. In terms of our hashing share in the network, we retain a share of about 1.4%. with a mining efficiency of 22.84 megawatts per exahashes, mining approximately 3.9 bitcoins a day with a power consumption of about 296.66 megawatts and a blended power cost of about 4.72 cents. In terms of the sort of verticals, each of the verticals, We have achieved a hash rate of about 5.65 exahashes for self-mining, 1.77 on behalf of our customers, and about 5.57 as part of our JV investments, which, as you're all aware, refers to our Citadel site. In terms of hashing share, again, 0.61 for self-mining, 0.19 for hosting clients, and 0.6 from our Citadel site. Again, total bitcoins 3.9 divided by 2.64 in self-mining, 0.824 for our hosting customers and 0.44 per day through our JV investments. As you can also see, the power consumption split by 109 megawatts for our self-mining, 30.47 for hosting and about 160 megawatts currently being consumed on the Citadel side. mining efficiency 18.81 megawatts for exahashes for the self mining and about 17.18 for our customers portfolio if we could move to the next slide please in terms of the operational um or rather financial metrics um we have had um We've talked about the revenue, but the way it split is 14.69 million in self-mining and about 4.31 in hosting. As we have spoken time and again, we have categorically moved away from trading business, which also of course means that we're not necessarily looking to increase our hosting revenue. And all of that capacity is being used for our self-mining operations or self-mining business, which has seen Significant increase from inception to date, of course, with variances in between due to the market conditions, particularly pertaining to the Bitcoin price. Our blended gross margins stand at a solid 38% with self mining at a very high 43%, precisely why this has been the more recent focus of the business in our legacy space. and hosting margins at 21%. Overall hash rate, 13 exahashes per second. And as I mentioned before, with the contribution of 1.4% to the overall global hash, so about 1.4% of the total global hash rate. If you could please move on to the next slide. In terms of the balance sheet total assets, They stand at around $592.6 million for the second quarter, down about 3% quarter on quarter, primarily because of the digital asset holding and fair value movements, and also the impact of movements from the market during the quarter. Total digital assets decreased by 13% quarter on quarter to $197.5 million. I think everybody's privy to the second quarter valuations when it comes to Bitcoin and some of the other tier one assets, some of which we hold on a balance sheet such as Solana. If you could move on to the next slide, please. This is again a pictorial view of the P&L. Gross revenues stood at 19 million and the company has reported and adjusted a bit a loss of 0.27 million for q2 2026 uh reflecting uh again the the the bitcoin pricing uh we did expect this a bit to be positive but unfortunately the market just on 30 June itself was very volatile across a lot of the asset classes that we hold, including crypto and the investments that we hold in BitZero. So I guess with the whole geopolitical situation, not just the crypto markets, but also the equity markets have been fairly volatile. And of course, we've seen that across our own share price as well. In terms of the comprehensive loss narrowed to 10 million in Q2, 2026, It is essentially down 87.7 quarter on quarter from 81.2 in Q1, a quarter impacted by one of unrealized digital asset losses and down 46.4 year on year. The improvement was primarily driven by 9.7 million gain in the investment portfolio, which is what we've talked about earlier on in this presentation. if you could move on to the next slide please so what this slide shows you is essentially how are we doing from a overall operational metrics now these are typically what our drivers which are in our control whether that's the margins and how we manage our cost whether it's about the mining efficiency or whether it's about the power costs and how we optimize our contracts. We obviously cannot control the Bitcoin price but what we can control is to make sure that we keep our margins strong by keeping fierce checks on the costs, making sure that we are deploying as latest as possible or efficient as possible the fleet for miners and overall infrastructure and of course making sure that we keep the power cost low. So if you look at all three graphs, we've done quite consistently well. If you look at Q2 2025 as a starting point and if you look at Q2 2026, the self-mining gross margins have consistently improved. We obviously see slight variations in between, but that's because of primarily driven by the BTC price. Mining efficiency down from 23.08 joules per terahash down to 18.81 and our average power cost at about 4.7 cents. At one point it was at 5.5 cents and at Q2 2025, it was at 5.2 cents. So there's a significant improvement on that front as well. If we can please move on to the next slide. So I think coming back to the primary focus and where we are being asked a lot of questions and rightfully so by both our investors, analysts across the space, the most important question is where are you on Project Leon and how far have you come? So this chart basically shows you some of the key It is located in Lyon. The construction is expected to start in Q3. We have, as I mentioned before, secured the grid connection and we are in the process of getting all the other relevant permissions and making sure that we have all the paperwork clear before we start digging the ground. And we do expect the completion to be In 2028 now we're very optimistic and hopeful that it'll be done through the first quarter of 2028 but we are of course cognizant of the fact that data center world is a very competitive space and a lot of our competitors in this space have seen delays in their projects but we are quite committed to making sure that this delivers in the timelines we have anticipated So what you see below now is that the site and platform is established. So that phase is now complete. We are on our track to commence the first site. Power and permitting is in process. Design and procurement as we speak is in process. We have engaged top tier third parties who are helping us in this phase of the development. And then we expect the construction and development to begin in Q3 and hopefully moving to the energization phase and eventually customer ramp up and scale. That is a summary of where we are today. And with that, we'd be happy to go into any questions that our attendees may have today. Okay, so I see quite a few questions coming in. I'll read out the first question so it is could you share more insight into BitZero investment and the gains that were booked so as I mentioned BitZero is an investment we have had or we've made since I believe 2022 and this is a Bitcoin mining company that has now pivoted into AI and are developing and have managed to secure a lot of Thank you for joining us today. The second question is, what is your plan for your existing Bitcoin mining sites now that the company is pivoting towards AI as a core focus? Will you continue operating those mining sites or are you considering winding them down? No, Bitcoin mining will continue to be an important part of the business, at least for the time being. We are not expecting to put in any additional CapEx into it. Of course, we will deploy CapEx wherever we need to maintain or upkeep the sites. but a lot of our sites are good to go for for the next few years and so we definitely want to make sure that we run them efficiently and we manage to recoup our investment and also the revenues from these sites until we feel that these miners are redundant and either required There is a question, kindly advise if there are plans underway to renew the Abu Dhabi mining site. Well, to be honest, it's definitely something that has been under discussion, but no concrete decision has yet been taken. We do have plans to continue to mine, at least for the foreseeable future, but if something changes, of course, we'll inform the market. The site is cash positive for us. So we do not have any plans to pause at the moment. But of course, in terms of the extension that will come as a result of decision from all our other partners in that joint venture. There is a question, could you provide us with your strategic plan and execution roadmap for Project Leon as well as visibility for any additional initiatives, items scheduled for the balance of 2026? I think we've talked in quite a bit of detail on Project Leon. Mr. Monarch has touched on it. I've talked about it in various places in the presentation. But as I said, I mean, that is our primary focus and we are working quite diligently There's a lot of effort going into making sure that we deliver as promised. There are, of course, a number of pipeline sites, as I have also mentioned, and again, was mentioned by Mr. Munaf. We have about a gigawatt of pipeline. There are obviously a lot of attractive opportunities, but we have to be mindful of what we're doing, where we're doing, and what sort of customers are we attracting. So it's a bunch of important elements that go into that decision making. We will make the announcements through the course of 2026 and into 2027. At the moment we do not want to give out any specifics but we can tell you there's quite a few pipeline projects both in the region and in Europe. So there is a question, given the current share price and valuation, can you help us understand why a share buyback is not currently being considered? How does management assess intrinsic value versus alternate use of capital? I think it's a great question. We obviously can, to be honest, if we look at it from half perspective, we find the share price very, very attractive. We think it's a great opportunity. Yes. We also feel that it's unfortunate that the whole Investment universe has been upside down since we have seen the conflict. But we also see this as a great opportunity, even for Phoenix to buy the shares back. However, ultimately, we have to decide between using our capital to buy the shares back or to create value for our shareholders, where we truly believe that perhaps a bit more patience may be required. But ultimately, the upside is significantly more than any short-term buyback. So if we must use our cash we would use it to create AI sites which we know will add considerable amount of multiples as opposed to any short-term relief to shareholders by buying back our shares. We feel the most sensible way forward is to continue propelling into the AI space which we know is going to be the future, is the future and is where there is tremendous upside for the investors. There is a question. Management demonstrated strong confidence by purchasing Phoenix shares in the open market during 2025. Today, the stock's around 70% below its peak, despite companies stated progress in operational efficiency and AI infrastructure. Can management explain why we have not seen similar confidence in 2026? I think, again, it's back to perhaps more to do with the macro elements than micro at Phoenix level. But again, we're trying to do a better job at explaining to the market where we are headed. We obviously are cognizant of the share price. There are initiatives we are taking and some of them are being contemplated as we speak. There will be more announcements coming to the market in due course however we feel that for us what's extremely important is that we deliver on our promises we continue to deliver the results sooner or later the market will catch up with the reality and it will begin to reflect in our share price if as much as share price is important shareholder value is important to us we do not want to panic and we do not want to throw you know important We believe that ultimately the shareholders will see all the hard work that's being put into taking Phoenix to the next stage of growth and it's just a matter of time when the market catches up with that reality. There's one more question. Why did average hash rate fall from 17.2 to 13 exahashes? It's a combination of factors, but predominantly it's seasonal. One of our largest sites, which is Citadel, which is, as you know, is in Abu Dhabi. During the summer months, we have curtailments there for four months. So it's partially because of that. I think that's the significant reason. We did have some short-term disruptions in one of our sites in Texas, but that's been up and running now. So hopefully now that we have the Texas, that we have new capacity that's coming on, plus once the curtailment of the Abu Dhabi side is gone, at the end of the summer, you will see us recovering to the same levels. There is a question, does management expect the AIP way to deliver structurally higher and more stable margins than self-mining Bitcoin, even under scenarios of higher Bitcoin prices? I think it's again an excellent question. Look, we feel that Bitcoin mining is and has been historically a very rewarding business. But unfortunately, it comes with its biggest, you know, the biggest offset to it is the volatility. When Bitcoin price is high, everybody's talking about getting into mining, everybody's making great money. but when the markets are in a state which they are in now, only those that have structured way of approaching Bitcoin mining operations in an institutional way survive through these volatility times or volatile times. So yes, the Bitcoin prices do, yeah, sorry. Yeah, so they have Bitcoin prices Once they recover, Bitcoin mining will still be a very profitable business. However, for us, as you've also asked or alluded to in the question, we believe that AI will be a lot more stable and certainly consistent in terms of the margins. Yes, those margins could be somewhat lower to Bitcoin mining, but then they are a lot more stable in nature. and I think the upside for shareholders in terms of the value of the company would be significantly more than what we see in Bitcoin mining. And let's be honest here, AI business is a very bankable business. The scale that you can achieve by leveraging against your assets is significantly more compared to what was there in the Bitcoin mining business. So we feel Yes, while the returns might be more stabilized with relatively lesser margins, these are returns which still manage to create a significantly higher value of the company, which of course in turn benefits our shareholders. I do not believe there are any more questions. If I could please request the Lumi team to confirm if I've answered all questions. Yes, we can confirm that all questions have been answered. Thank you very much. With that, over to you, Mr. Munaf.