Bitfarms Ltd.

Good morning and welcome to the BITFARM's first quarter 2022 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 can press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded I would now like to hand the conference over to David Barnhorn with LHA Investor Relations. Please go ahead.

David Barnhorn Great. Thank you, Anthony. Good morning, everyone, and welcome to Bitfarm's conference call for the first quarter of 2022. With me on the call today is Emiliano Grotsky, Chief Executive Officer of Bitfarms, Jeff Morphy, President and Chief Operating Officer, 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 at www.bitfarms.com under Investors 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 this morning, BitFarms issued a press release announcing its first quarter 2022 financial results. Turning to slide two, I also want to remind you that certain statements we make today are forward-looking, and in that regard, BitFarm cautions 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.sadar.com and www.sec.gov-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 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 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 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 including equity compensation expense. These alternative IFRS measures have limitations as analytical tools and you should not consider such measures either in isolation or as substitutes for analyzing the company's results as reported under IFRS. We invite listeners to revert to today's earnings release and the company's first quarter 2022 management discussion and analysis for definitions of the aforementioned 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 and COO 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 have requested investors to send questions in advance, which I might read after we open the call to analysts interested in the live Q&A. With that, I'll turn the call over to Jeff Morphy.

Thank you, David. I would like to welcome everyone to today's call. Despite the price erosion in Bitcoin, we delivered another profitable quarter with revenues of $40 million, gross mining profit of $30 million, which represents a gross mining margin of 76%, and an adjusted EBITDA of $32 million, which is 80% of revenues. As we grow our hash rate, We had continued to grow faster than the Bitcoin network as our hash rate at quarter end was 2.7 exahash per second, up 22% from 2.2 exahash as at December 31st, 2021. As of today, our hash rate is 3.4 exahash, representing about 1.5% market share based on recent measurements of the Bitcoin network of about 224 exahash per second. We believe the current challenges facing the Bitcoin mining industry presents an opportunity for us to increase relative market share gains as we execute against our growth plans as capital, supply chain, and other constraints may slow overall growth of the network. During the first quarter, we mined 961 Bitcoin at an average cost of $8,700 per Bitcoin. Moving to more particulars concerning our Q1 achievements, We initiated production at both the bunker and our leisure sites in the city of Sherbrooke, Quebec. This, along with commencing production at our 10 megawatt facility in Villarica, Paraguay in January, increased our total farms in production to nine and our operational capacity to our current 137 megawatts. Also in Sherbrooke, we acquired an additional location known as Garlok, where we will develop an 18 megawatt facility intended to replace the existing de la Pointe facility scheduled to be retired in February 2023. In Q1 2022, we received and installed over 10,500 miners. And in April 2022, an additional 5,900 new miners were installed, which added more than 590 petahash per second to our online hash rate since the end of Q1. One of our core strengths is our operational experience and capabilities. To this end, we officially launched our internally developed second generation minor management system that has been in beta for the last nine months. I'll elaborate about that more in a moment. Slide four summarizes our current operating locations. We began the first quarter of 2022 with six farms in operations, five in Quebec and one in Washington state. Since then, with the three new farms I just highlighted, we have grown to nine operating locations as shown on this slide. Now I'd like to take a moment to detail the operations, plans and recent progress at some of these locations. Turning to slide five. We have contracted power with Hydro Sherbrooke within the city of Sherbrooke, Quebec for a total of 96 megawatts. Villa Pointe was our first location in Sherbrooke. This location operated at 30 megawatts and is planned to be partially moved offline at the end of Q2 2022 and is scheduled to be fully retired in February 2023 as our new facilities in Sherbrooke come online. The bunker, first activated in March 2022, is currently ramping up in its first phase of operations to 18 megawatts. As of today, we are currently drawing 12 megawatts. Under construction are phases two and three, which involve 18 megawatts and 12 megawatts respectively. And these phases remain 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 1.3 exahash per second. Another new location in Sherbrooke, located a short distance from the bunker, is called Leger, which we have completed construction of 16 megawatts of a total of 30 megawatts. This location started production on April 6th and is currently generating over 250 petahash per second. Upon full build out, this facility will be capable of delivering over 740 petahash per second. Our newest location in Sherbrooke is named Garlock, which we acquired in mid-March 2022. 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 this municipality in accordance with the company's previously announced cooperation agreement with the City of Sherbrooke reached in September 2021. Each of the new locations in Sherbrooke will benefit from advanced design and sound reduction systems that your company professionally developed with the help of third-party sound engineers and hardware suppliers in 2020 and 2021. Please move on to slide six. Turning to the southern hemisphere, we began production at our 10 megawatt farm in Villarica, Paraguay, during January. This is a picture of the facility. Like our farms in Canada and the United States, this farm is run on low-cost hydropower. And having established a foothold in the country and gained experience working there, we are increasingly optimistic about further and larger development opportunities within the country. Please turn to slide seven. In Rio Cuarto, Argentina, we have contracted plans for up to 210 megawatts consisting of four warehouse-style buildings inside the gates of a private power company, which will utilize available capacity and otherwise stranded power. With a four phase approach to this project, 100 megawatts of capacity are under construction at present in the initial two phases. Phase one, which is for a 50 megawatt facility, we anticipate completing in October 2022. Phase two, which is another 50 megawatt facility, is also under construction and our revised timing for building completion and initial production is in Q1 2023. The deployment of 27,500 miners is planned for these two facilities. Given the adverse impact of recent geopolitical events on natural gas prices, we are reassessing the timing and scale of the potential full build out of the Rio Cuarto farm. However, to be clear, Argentina still remains an attractive area for new development opportunities. We are active in the region and ultimately anticipate developing a diverse mix of farms within the country. Turning to slide eight. In summary, total farms in production now stands at nine, which is up from six at the beginning of 2022. This includes the addition of two operating farms in Canada and another in Paraguay. As of today, we have capacity of 137 megawatts, up from 106 megawatts on December 31st. We have an additional 92 megawatts under development that are expected to come online in 2022. for total plant capacity of 229 megawatts by December 31st, 2022. Turning to slide nine. 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 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 and reliable 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. Illustrating our continuous drive for improvements, we recently launched our revamped internal miner management system that has been beta for the last nine months. This second generation management software has been upgraded to enable the company to manage hundreds of thousands of miners across its global decentralized mining farms with a focus on maximizing uptime. The software features improved features improved controls, tracking, sensors, alarms, visualizations, and performance metrics, enabling increased efficiency in operations. One of our strengths is in operations, and we are proud of our uptime statistics. In fact, our mining equipment is clean, well maintained, consistently achieves high uptime metrics, and the type of miners we now utilize are capable of having a usable and economic lifespan of five years and sometimes beyond. Our mining management system is one contributor to these results and our latest generation of miners and even greater contributor. Also contributing to our productivity and efficiency are our repair center and our wholly owned electrical subsidiary, which perform scheduled maintenance and substantially limit unscheduled downtime while at the same time constantly seeking design improvements to improve efficiencies. For a review of miners and fleet activity, turn to slide 10. Deliveries and installations in Q1 2022 from MicroBT and Bitmain numbered approximately 10,500 latest generation miners. As of today, our total installed fleet is approximately 36,700 miners. The 48,000 miners ordered in April 2021 commenced deliveries of approximately 4,000 per month this past January with 27,500 planned for Argentina and 20,500 to be installed in Quebec during the whole of 2022. As of 2022 to date, we have received or have in transit nearly 17,500 of these miners. Installations have been made at several farms. The bunker is presently running 2,970 miners. and Leger is operating 7,425. Deliveries are being made as scheduled and run at about 4,000 miners per month. I would also like to remind you that these 48,000 miners were purchased at an average of $38.50 per terahash, which is considered to be very attractive price, even with the current reduction in prices of miners. Our current daily production now stands at about 14 and a half Bitcoin per day, which based on recent prices of about $30,000 per Bitcoin equates to approximately $435,000 in daily revenue. This builds on the gains we reported in our last call and marks our highest production level since before the last halving event in May 2020. Further, with our low cash costs of production, mining Bitcoin remains highly profitable and offers a short payback on investments in miners and the related operating infrastructure. Leading into Jeff Lucas's portion of the presentation, I want to emphasize, despite the decline in the price of Bitcoin, we came through the first quarter of 2022 with profitable results, with reported net income of 5 million and a healthy balance sheet. Please turn to slide 11 for discussion of our updated 2022 plan and goals. Our existing infrastructure construction contracts are projected to provide capacity for six exahash of miners by year-end 2022, reflecting adjustments to our Argentina construction plan, as discussed earlier, as well as expansion underway in Canada and Paraguay. Our 2022 quarterly hash rate targets, based on current infrastructure construction and minor delivery schedules, are to achieve 4.0 exahash per second as of June 30, 2022, 4.2 exahash per second as of September 30, 2022, and 6.0 exahash per second as of December 31, 2022. We expect miners and orders from miners with delivery scheduled in 2022 will be capable of producing up to 7.2 exahash when operational. And last, opportunities are being evaluated and others will continue to be assessed that will provide the additional infrastructure and mining hardware to reach and exceed the company's eight exahash goal by the end of 2022. Please turn to slide 12. With that, I will now hand the call over to Jeff Lucas.