Bitfarms Ltd.

Good morning. My name is Gary, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bitfarm's third quarter 2021 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. As a reminder, this conference is being recorded March 28, 2022. I will now turn the call over to David Bernard from LHA Investor Relations. David, you may begin your conference.

Thank you, Gary. Good morning, everyone, and welcome to Bitfarm's conference call for the fourth quarter of 2021. With me on the call today is Emiliano Grotsky, Chief Executive Officer of BitFarms, Jeff Morphy, President and Chief Operating Officer, and Jeff Wood, 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 the website www.bitfarms.com under Investors, Presentations. If you prefer to listen to the call on your smartphone, you can also download the presentation from there as well. I would like to remind you that this morning that BitFarm's issued a press release announcing its fourth quarter 2021 financial results. Turning to slide two, just as a reminder, there are certain statements that we make during the conference call that may constitute forward-looking information and statements. BitFarm's 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 on SADAR.com as well as the SEC documents filed on 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 that do not have a standardized meaning prescribed by IFRS and therefore may 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 the cost of sales for the mining segment of the company. Gross mining margin is defined as the percentage obtained when divided by 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 cost and hosting costs related to mining of Bitcoin, divided by the total number of Bitcoin mined, EBITDA is earnings before interest, taxes, depreciation, and amortization. Adjusted EBITDA is EBITDA less changes in the value of our Bitcoin holdings and non-cash G&A charges included in equity compensation expense. These alternative IFRS measures, limitations of analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing the company results reported on IFRS. We invite listeners to refer to today's earnings release and the company's fourth quarter 2021 management discussion and analysis for definitions of the non-IFR measures and their reconciliations to IFR measures. Please note that all financial references are denominated in U.S. dollars unless otherwise noted. During today's call, President Jeff Morphy will review our operations for the quarter. CFO Jeff Lucas will follow with a detailed financial review. And CEO Emiliano Grotsky will have some closing remarks after the Q&A. We've requested investors to send the questions in advance, which I will read to management after we open the call to analysts in the live Q&A. Turning to slide three, it's now my pleasure to turn it over to Jeff Morphy.

Thank you, David. Greetings from Argentina. I'd like to welcome everyone to today's call. Building on our success in the third quarter of 2021, we delivered another profitable quarter with revenues of $60 million, gross mining profit of $49 million, or 84% gross mining margin, and adjusted EBITDA of $44 million, which represents a 74% adjusted EBITDA margin. Our hash rate as of December 31st was 2.2x a hash per second, up 47% from 1.5 exahash per second at the beginning of Q4, and up 166% from 965 petahash at the beginning of 2021. As of today, our hash rate is 2.7 exahash per second and is expected to exceed 3 exahash per second within the next 7 to 10 days. As we grow our hash rate, it is significant to point out that we are growing faster than the Bitcoin network. which was recently measured at 205 exahash per second. As such, our market share is now about 1.3% and is anticipated to increase. We continue to focus on both absolute growth and achieving relative market share gains as we execute against our global expansion plan. During the fourth quarter, we mined 1,045 Bitcoin, about the same level as achieved in the third quarter of 2021. However, from a global network perspective, the third quarter was unusual as the entire sector benefited from the network mining disruptions that occurred last summer in China. Costs of mining in the fourth quarter were $8,000 per Bitcoin and generally consistent with historical levels, except for in Q3 2021, which has mentioned benefited from the macro developments. Moving to more particulars concerning our Q4 achievements, we completed construction of a new 10 megawatt facility in Paraguay and acquired a facility in Washington State, which is currently operating at 17 megawatts and has a defined path forward to increase to its full potential of 24 megawatts. Turning to slide four, I want to highlight Washington for a moment. It is our lowest cost facility and the majority of our miners in Washington are Bitmain S19J Pros, among the most efficient and profitable class of miners on the market today. With its combination of low-cost energy and miner efficiency, this farm delivers our highest gross mining margins. We generated nearly $8 million in revenue over the 52 days from the date of acquisition on November 9, 2021, through quarter-end. And we expect payback on this acquisition to be realized by mid 2022. Slide five summarizes our current operating locations. To elaborate, we began the fourth quarter of 2021 with five farms in operation, all in Quebec. We then added the previously mentioned Washington State Farm during the quarter, bringing the total to six at year end. Since then, we have grown to eight operating locations as shown on this slide. and our global expansion plan continues. Accordingly, here are some of the highlights since the quarter end. Let's move on to slide six. We began production at our 10 megawatt farm in Paraguay during January. This is a picture of our completed building located near Asuncion, the largest city in Paraguay. This farm is presently operating at 6 megawatts, and we expect it will ramp to its full capacity of 10 megawatts within the next few weeks as the final tranche of miners are installed and the remaining capacity is turned on. As part of our fleet optimization strategy, miners in this facility include the relocation of less efficient miners located previously in some of our farms in Quebec to greater effectiveness here with Paraguay's lower cost of energy. Turning to slide seven. Two weeks ago, we began production at one of our new farms in the city of Sherbrooke, Quebec, called The Bunker. The first phase of The Bunker involves 18 megawatts, of which we are currently drawing 12 megawatts. Under construction are phases two and three, which involve 18 megawatts and 12 megawatts, respectively. They are targeted for completion in the second and third quarters of 2022. Upon full build-out, The Bunker, is slated to be a 48-megawatt facility housing 13,000 miners and anticipated to deliver almost 1.3 exahash per second. Another location in Sherbrooke and located a short distance from the bunker is called Leger. It is planned to start production within the next 10 days and will ultimately be a 30-megawatt facility capable of delivering over 740 petahash per second. Also in Sherbrooke, and located a short distance from the Bunker and Leger Farms, is our newly purchased site named Garlock. The Garlock property, combined with the Bunker and Leger facilities, are intended to replace the De La Pointe facility and fully utilize the company's power contracts in the municipality, in accordance with the company's previously announced agreement with the City of Sherbrooke reached in September 2021. All in, Sherbrooke is lined up to be a multi-location farming campus operating at 96 megawatts. Please turn to slide eight. In Rio Cuarto, Argentina, we have contracted plans for up to 210 megawatts consisting of four warehouse-style buildings inside gates of a private power company which will utilize available capacity and otherwise stranded power. Embarking on a four-phase approach to this, project 105 megawatts of capacity are under construction present in the initial two phases in these phases we plan to install 27 500 of the 48 000 latest generation micro bt miners being delivered this year and we expect production to begin sequentially by year end 2022. Our power is secured under an eight-year agreement, which involves fixed pricing on a portion of the contract for the first four years, after which the agreement calls for repricing for the remaining four years. Under full development, the Argentina farm is expected to accommodate over 55,000 miners. As we assess the impact of rising natural gas prices globally, our Rio Cuarto farm is expected to comprise a smaller portion of our previous 2022 plan for achieving our goal of eight exahash per second. And we have adjusted our plan development and fleet allocation accordingly. More about that in just a moment. Turning to slide nine. In summary, total farms in production now stand at eight, which is up from six at the beginning of 2022. This includes two operating farms in Canada, one in Washington and another in Paraguay, which are currently operational and being expanded. As of today, we have capacity of 121 megawatts, up from 69 megawatts on September 30th. We have an additional 118 megawatts under development that are expected to come online in 2022. For total plant capacity of 289 megawatts, and are assessing additional megawatt opportunities to bring our production capacity to our 8-exahash target and beyond. To maintain our low-cost mining structure amidst the current changing energy environment, including the dramatic increase in natural gas prices during the past three months, we are revisiting our existing production plans and considering other opportunities that are more insulated from the risk of dramatic swings in energy pricing, which could see higher prices enduring over many years. Executing to our plan, we expect will bring us to 7.2x a hash at year end. In addition, we are actively exploring and in discussions about expansion opportunities in Canada, Paraguay, and the United States to bring us to 8x a hash by year end and higher in 2023. primarily with green hydro energy. Turning to slide 10. BitFarms remains one of the largest and most profitable Bitcoin miners in the world. Since our beginning in 2017, we have been a vertically integrated, decentralized, global self-mining operation. Our strong in-house capabilities and infrastructure, including our authorized repair center, and wholly owned electrical contractors with over 30 licensed electricians helps 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. With proven expertise, expanded infrastructure, and a strong management team, we are better positioned than ever to execute on our growth plans for 2022 and beyond. For a review of miners and fleet activity, please turn to slide 11. Deliveries and installation in Q4 2021 from MicroBT and Bitmain numbered over 7,000 latest generation miners. For the full year 2021, we received and installed approximately 12,000 miners, and we exited the year with approximately 27,000 miners online. As of today, our total installed fleet is approximately 30,800 miners. Significantly, our fleet is comprised of the most reliable miners made, and we pride ourselves in running our operations to maximize uptime, drive productivity from this key asset. The 48,000 miners ordered in 2021 commence deliveries this January, with 27,500 planned for Argentina, and 20,500 to be installed in Quebec. As of 2022, year to date, we have received or have in transit nearly 11,000 miners, which have been and are in process of being installed at several farms, including our recently opened facility at the bunker, as well as other locations to optimize our mining fleet. Apart from a pause for the Chinese New Year in the first half of February and recent COVID lockdowns in that country, Deliveries have been as scheduled and continue to run at about 4,000 miners per month. Regarding these miners, we emphasize they are highly cost-effective, which in part was from our successful negotiation in mid-2021 to reprice these 48,000 miners to an average cost per terahash of $38.50, well below current market prices per terahash for these type of miners. Our average daily production now stands at about 12.5 Bitcoin per day, which based on recent prices, above 47,000 per Bitcoin, equates to approximately $590,000 in daily revenue. With the exception of the macro conditions that boosted productivity production, atypically higher in the third quarter of 2021, This marks our highest production level since before the last halving event in May 2020. Leading into Jeff Lucas' portion of the presentation, I want to emphasize, despite volatility in the price of Bitcoin, we came through the year with profitable results and reported net income of $10 million in the fourth quarter of 2021. Please turn to slide 12. With that, I will now hand over the call to Jeff Lucas.