Bitfarms Ltd.

Good day. Thank you for standing by, and welcome to the Bitfarm's third quarter 2021 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero. Please note this event is being recorded. I would now like to turn the conference over to David Barnard of LHA Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to the BitFarms conference call for the third quarter of 2021. With me on the call today is Emiliano Grotsky, Chief Executive Officer of BitFarms, Jeff Morphy, President, and Jeff Lucas, Chief Financial Officer. Before we begin, please note this call is being webcast live with an accompanying presentation. To watch along with the slides, you can log on to our website under Investors, under Presentations. If you prefer to listen to the call on your smartphone, you can download the presentation from there as well. I would like to remind you that shortly after the market closed today or momentarily, Bitfarm's press release announcing its third quarter 2021 financial results. Turning to slide two, I'd like to remind you that certain statements that we make during the conference call may constitute forward-looking statements and These statements include Bitfarm's cautions and listeners that forward-looking information and statements are based on certain assumptions and risk factors that could cause actual results to differ materially from the expectations of the company. Listeners should not place undue reliance on forward-looking information or statements. Please see today's press release and refer to those risks set out in Bitfarm's public documents filed on www.cedar.com. and www.sdc.gov backslash Edgar. The company undertakes no obligation to revise or update any forward-looking information or statements other than as required by applicable securities laws. During this call, the company will refer to certain measures not recognized under IFRS, and these do not have a standardized meaning prescribed by IFRS, and therefore may not be comparable to similar measures presented by other companies. The company uses the following non-IFRS measures, gross mining profit, gross mining margin, EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin, as additional information to complement IFRS measures to provide a further understanding of the company's results of operations from management's perspective. Gross mining profit is defined as gross profit excluding depreciation and amortization and other minor items included in cost of sales for the mining equipment segment of the company. Gross mining margin is defined as the percentage obtained when dividing gross mining profit by revenues for the mining segment of the company. Direct cost of production represents the direct cost of Bitcoin based on the total electricity costs and hosting costs related to the mining of Bitcoin divided by the total of Bitcoin mined. We invite listeners to refer today's earnings release and the company's Q3 2021 management's discussion and analysis of for definitions of the aforementioned non-IFRS measures and their reconciliations to IFRS measures. Please note that all financial references are denominated in U.S. dollars unless otherwise noted. Today, Jeff Morphy will review our operations for the quarter, CFO Jeff Lucas will follow with a detailed financial review, and CEO Emiliano Grotsky will close with a review of our vision and expectations. We have requested investors to send questions in advance which I will read to management after we open the call to analysts interested in live Q&A. And now, turning to slide three, it's my pleasure to turn the call over to Jeff Morphy. Jeff, over to you.

Thank you, David. I'd like to extend a warm welcome to everyone on today's call. The third quarter of 2021 was a resounding success for bid farms, as demonstrated by growth in our operational and financial metrics, many of which were at record levels. We increased production across many of our facilities, which in turn increased our hash rate. And I'm excited to announce that we have now exceeded 2x a hash per second. During the third quarter, we mined 1,051 Bitcoin, a 38% sequential increase over the second quarter of 2021. And we lowered our average cost of production to approximately $6,900 per Bitcoin from $9,000 per Bitcoin in the second quarter of 2021. Well, on the topic of cost, just last week, we acquired a new facility in Washington State that has an even lower cost of production and is currently averaging about $4,000 per Bitcoin. These metrics are a true testament to our investment in growth and the dedication of the BitFarms team. This acquisition brings us to six farms in operation, five in Quebec and one in the United States, with another four farms under construction in Canada, Paraguay, and Argentina. As of today, we have created capacity of 106 megawatts, up from 69 megawatts on June 30th. We have also an additional 298 megawatts under development that are expected to come online in 2022. With our 10 farms operational and in development, our total plant capacity has reached 404 megawatts. Combined with our aggressive miner purchases and installations, we have increased our hash rate to over two hexahash per second, or about 2.4 times more than where it was 12 months ago, and increased our daily Bitcoin production to almost 12 Bitcoin per day. Jeff Lucas will provide more financial details in a moment. First, I will review some important highlights. During the third quarter, we grew our total revenues to a record $44.8 million, up 22% sequentially from the second quarter of 2021, and over 550% year-over-year from $6.8 million in the third quarter of 2020. Gross mining profit reached $35.4 million, another record. Our total liquidity, which includes cash and our Bitcoin inventory, rose to $144.5 million. Please turn to slide four. BitFarms continues to attract many new investors. As a reminder to new investors, BitFarms is one of the largest and most profitable Bitcoin miners in the world. Since our beginning in 2017, we have been vertically integrated, decentralized, global self-mining operation. Our strong in-house capabilities and infrastructure, including our repair center and our wholly owned electrical contractor subsidiary, with over 30 licensed electricians, help ensure that we remain as one of the lowest cost miners in the industry. Our strategy continues to be to diversify our mining portfolio by prioritizing locations with cost-effective electricity. Our decentralized farms reduce the risk of interruption while enabling further growth. We will take advantage of our investment and knowledge of these geographies to seize upon additional opportunities. As was the case late last year and this year, we continue to aggressively seek out attractive opportunities to expand our business in multiple geographies. Turning to slide five. As mentioned, we recently acquired a fully operational facility in Washington State. This means we now have our first wholly owned operation in the United States, the largest country for Bitcoin mining. This highly accretive transaction builds upon and terminates our only hosting agreement, which had been for 12 megawatts. This turnkey operation has 24 megawatts of capacity, 620 petahash, and 3.7 in daily Bitcoin production, as well as contracts for hydropower with rates of just 2.6 to 3.1 cents per kilowatt or 25% less in our Quebec farms. Prior to the change of control, we had already installed a number of new S19J pro miners. Now, as we are working with our previous hosting partner, the integration has been quite smooth. Also as part of this transaction, we enter into a memorandum of understanding to co-develop an expansion of a 75 megawatt substation. If completed, This would increase the total Washington State operations capacity to as much as 99 megawatts. I am proud that development efforts in multiple geographies continue on track and that we have made significant strides in all facets of operations. I will now summarize some other recent activities. Please turn to slide six. In Collinsville, Quebec, we completely rebuilt our original farm. We leveraged all our latest site development and design expertise from building five farms over the last four years. Some advantages we incorporated include adjusting the transformer placement to reduce wiring, improving the intake and exhaust airflow, and substantially reducing sound emissions. During the rebuild process, we took advantage of our contractual opportunity to boost our capacity from our original four megawatts to 17 megawatts. Turning to slide seven. In the city of Sherbrooke, Quebec, we reached an agreement with the city to cooperatively develop three new farms. And as part of our cooperation agreement signed in early September, we agreed to eventually retire the original farm located there. In doing so, we plan to increase our capacity by 78 megawatts to a total of 96 megawatts. And in addition, we utilized expertise using the latest in sound mitigation design and technology to update the original farm and substantially reduce its operating decibel levels and to apply the same expertise to reduce sound propagation at our other farms where residents are in close proximity. During the past 60 days, we initiated work on two new farms, which we refer to as Leger and the Bunker. During the past two weeks, I visited both sites. At the Leger site, the concrete for the footing has been poured. We expect the construction of this 30 megawatt farm to progress over the remainder of 2021 and operations to commence in the first and second quarters of 2022. The bunker, a substantial building, is being built in three phases. We expect to turn on 18 megawatts in the first quarter of 2022, another 18 megawatts in the second quarter of 2022, and the final 12 megawatts in the second half of 2022. Turning to slide eight. In Paraguay, we initiated construction of a 10 megawatt facility. This project is moving quickly. And as previously reported, we expect to complete the build out within the next month and start initial production on schedule by year end. In the slides, you can see the progress on the building located in Asuncion, the largest city in Paraguay. Turning to slide nine, in Argentina, the engineering, design, and development work are complete, and site preparation is underway. The 210-megawatt facility will consist of four megawatt-style buildings inside the gates of a private power company, which will utilize available and otherwise stranded power. As previously reported, we have contracted power at an attractive rate of just 2.2 US cents per kilowatt hour, which will substantially reduce our already low cost of mining Bitcoin. In October, we signed engineering contracts and commenced construction. The farm is expected to accommodate over 55,000 miners, including many of the 48,000 latest generation micro BT miners that Bitfarms purchased in early 2021. Talking about miners, please turn to slide 10. This summer, after the Chinese government's announcement to curtail Bitcoin mining, we took advantage of uncertain market conditions to renegotiate some of the terms of these purchase orders. We were able to fix the average purchase price of the 48,000 miners at about $38.50 per terahash. which is a considerable reduction from previous market prices and current prices of around $80 to $100 per terahash. In so doing, we reduced the overall cost of this order by an estimated $200 to $250 million. Based on current economics and gross costs, these miners have an expected ROI of approximately 125 days and have an economic and useful life which should surpass five years. This was a substantial accomplishment brought about by swift action during an unexpected market dynamics. The 48,000 miners we ordered are still scheduled to be delivered on an equal monthly basis through 2022. The initial monthly deliveries will all be deployed at our existing facilities and facilities currently under construction in Quebec. Regarding our 2021 miner deliveries, 1,290 were delivered prior to the end of the third quarter. So far in the fourth quarter of 2021, 3,670 miners have been delivered. They helped boost our hash rate to over 2x a hash per second this past weekend. Over the remaining two weeks in November, we are supposed to receive almost 3,200 additional miners. The flexible deployment of our mining assets is a key part of our ongoing fleet optimization strategy. We monitor and move miners to where they will be most efficient. Older miners, even those that are fully depreciated, can make economic sense to continue production when located in farms utilizing low-cost energy. Shortly, we will start to relocate a substantial number of older and less efficient miners to our new farm in Paraguay. And last, our average daily production now stands at about 12 Bitcoin per day. which based on recent prices of about $63,500 per Bitcoin, equates to approximately $762,000 per day in daily revenue. As construction of our new farms progresses, in the next few months, we will increase capacity, install new miners, and continue to grow our hash rate. Toward that end, we remain confident in achieving our goals of 3x a hash per second by March 31st, 2022, and 8x a hash per second by December 31, 2022. Please turn to slide 11. I will now hand the call over to Jeff Lucas.