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.

Thank you, Jeff. In summary, we continue to have strong margins, healthy profitability, and a solid financial position. Let's discuss some highlights of our first quarter of 2022. We mined 961 Bitcoin at an average cost of $8,700 to Bitcoin, consistent with our low historical production cost levels. Overall, we continue to focus on being a low-cost producer, which offers competitive advantages and financial flexibility. Even with the significantly lower Bitcoin prices being experienced currently, we maintain healthy margins. During the first quarter of 2022, we generated quarterly revenues of $40 million, up 42% from the prior year period, reflecting largely the year-over-year increase in our hash rate in excess of the increase in network difficulty in even with a decrease in the average Bitcoin price. We were profitable and achieved net income of $4.5 million for the quarter versus a loss of $7.6 million in the year-ago period, and we achieved adjusted EBITDA of $32 million versus $20 million in the year-ago period. From a financing standpoint, we drew an additional $40 million available under our $100 million revolving credit facility, collateralized by a portion of our Bitcoin. fully utilizing its facility, and entered into a $32 million equipment collateralized loan facility. This latter financing speaks to our use of our equipment to generate non-dilutive financing sources to fund our continued growth. Turning to a detailed review of our bottom line. Our net income of $4.5 million in the first quarter, our two cents per fully diluted share, includes a loss of $3.7 million for the revaluation of our Bitcoin holdings at March 31st, 2022 as a result of the lower Bitcoin price at quarter end. Non-cash compensation expense of approximately $6.1 million, $4.1 million of net financing income reflecting the foreign exchange gain associated with our Argentinian expansion, and an income tax provision of $6.4 million. This compares to a net loss in the first quarter of 2021 of $7.6 million, or a net loss per share of 6 cents. As I mentioned a moment ago, first quarter 2022 adjusted EBITDA was $32 million. This increase has compared to $20 million in the first quarter of 2021 and decreased from $44 million in the fourth quarter of 2021. Our margins continue to be strong with adjusted EBITDA margin of 80% in the first quarter of 2022, up from 69% in the year ago period and 74% in the fourth quarter of 2021. During the slide 13, we'll review the balance sheet. We ended the first quarter with cash of $77 million and 5,244 Bitcoin valued as of March 31st at $239 million. As of today, we hold about 5,900 Bitcoin. Working capital on March 31st, 2021 stood at $181 million. This brings us to a discussion of our financing strategies. In today's environment, we are exercising prudent actions to maintain the strength of our balance sheet and protect our shareholders' investment, while supporting our key financial goals of funding our planned growth and to maintain sufficient flexibility to enable us to act quickly on opportunities that we identify, all at a relatively low overall cost of capital. Our $100 million Bitcoin-backed credit facility has been an attractive way to leverage the value of our Bitcoin holdings and with increasing holdings could be expected as our expanded, excuse me, as our digital assets accumulate. Our $32 million corporate financing agreement is yet another instrument in our financing toolbox. Similar arrangements have been explored as we seek to apply leverage judiciously and secure non-dilutive funding utilizing unencumbered mining in digital assets. Our equity ATM remains in effect and while our most flexible source of financing, FOIA is used very carefully in light of the depressed valuations being seen across the crypto sector. With robust mining production and our ongoing extension activities, the number of Bitcoin we mine daily and hold on our balance sheet continues to grow. Jeff noted that we are currently adding about 14.5 Bitcoin each day, which also adds to our financial strength and provides options to leverage this and other assets. While we continue to hold a lot of Bitcoin, excuse me, and have retained on our balance sheet about 96% of all the Bitcoin we have mined since the inception of this program in January of 2021, we continue to be flexible with our financing plans with a goal of minimizing our overall cost of capital. Even at recent lower Bitcoin prices, our growth margins are attractive, and a portion of daily Bitcoin production could be monetized to fund our ongoing operating expenses. While we remain steadfastly bullish in holding Bitcoin in the long term, our very low Bitcoin cost of production may provide the most attractive financing options in the short term. Overall, BitFunds is well capitalized and positioned to execute on the growth opportunities before us, and we look forward to building on its success throughout 2022. Before turning the call back over to Jeff, I'll mention that we are planning an Analyst and Institutional Investor Day on June 22nd in Montreal. The event will include a review of our global operations by our management teams, and a tour of our farms in Quebec. Analysts and institutional investors may contact LHA Investor Relations for more information about the event. We are also presenting at the H.T. Wainwright Global Investment Conference in Miami from May 23rd through May 26th, and at the D.A. Davidson Bitcoin and Blockchain Conference on June 2nd in New York City. Turning to slide 14, with that, I'll now turn the call back over to Jeff, who will close our prepared remarks before opening up the call to Q&A. Jeff?

Thank you, Jeff. Before we take your questions, I'd like to summarize how we are well positioned for continued success in the current environment. As of today, we are operating with 137 megawatts and at 3.4 exahash per second, up dramatically from less than 1 exahash per second a little more than one year ago. We have now production in three countries, Canada, the United States, and Paraguay. And we fully expect to begin operations in Argentina by year end. We continue to outpace the network growth. We are one of the largest public Bitcoin miners and estimate our market share of the network has grown to about 1.5%. Our production costs are amongst the lowest in the industry as evidenced by our direct cost to mine Bitcoin of $8,700 in the first quarter with sustainably priced low cost hydro power. Our order placed in early 2021 for 48,000 miners, which we are taking delivery on an equal monthly basis through 2022 is at a contracted low cost at $38.50 per terahash, well below current spot prices and a fraction of the cost several of our peers committed to in the fall of last year. Our adjusted EBITDA margin is amongst the highest of our peer companies in Q1 2022, achieving 80% of revenues. To reduce risk and maximize international opportunities, we enjoy a globally diversified footprint with operations in four countries built to around hydro and low-cost sourced energy. We have a portfolio of new opportunities that we are evaluating, some in advanced stage of discussions and are being seriously considered, some of which can add production in 2022 and others for 2023 and beyond. We have a strong balance sheet and financing resources, non-dilutive and otherwise, to fund our continued growth. Running world-class operations at industrial scale enables efficiencies that are delivering profitable results to our shareholders in volatile times. And lastly, we built a management team that brings operational expertise and capability to drive the most efficient and profitable operations in the industry today and for the future. Operator, we can now open up the call for questions. Please go ahead.

We will now begin the question and answer session. To ask a question, you may press star then one in your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Kevin Didi with HC Wainwright. You may now go ahead.

Good morning, Mr. Morphy. Mr. Lucas, thank you very much for taking my call. Hi, Kevin. Hi, Kevin. Yes, so, Jeff, you talked a little bit about Argentina and perhaps a shifting in light of gas prices. Would you mind just elaborating on that? What sort of reset? What happens to your PPA? What sort of price do you think

we should account for your uh power costs there okay well let me start into that uh kevin uh we're well aware of uh the changing climate everywhere right now in terms of uh um currency wars trade wars geopolitical wars uh market crashes and financial results all and supply chain um so We've always wanted to be absolutely transparent to our investors and the capital markets in terms of our operations. We think in these turbulent times, it's incredibly important that management be proactive and take the type of decisions to ensure the longevity of the company and its ultimate success. So Argentina is our only project that's affected by natural gas prices. And we've got a PPA there that's for eight years. The first four years, a portion of it is at two cents per kilowatt hour and the rest of it is at market prices. And then the final four years is completely at market prices. And Argentina is not immune to the much higher gas prices being experienced around the world. And so we decided that with costs going up there, that we would slow down our commitment there. So we are going ahead with two of the warehouses and the other two we will make a decision on later this year or next year when we have better visibility of natural gas prices. But in the current climate, we are committed to getting the first warehouse up and running. That's 50 megawatts in October. And then the second one finished up and activated in the first quarter of next year. The power purchase agreement hasn't changed at all. It's just that the world conditions have changed and we are reacting to that. And what we're also seeing is that we are seeing new opportunities in every other geography we're in, which is Washington State, Quebec, and in Paraguay with reliable hydroelectricity where the prices are stable and we know what we're getting. And that has been a major contributor to our low cost of mining Bitcoin. And it was a strategy we employed a long time ago. and it's paying dividends for us now. Does that answer the question, or do you want to follow up with a few aspects?

Yeah, no, that provides a lot of additional color, so thank you very much, Jeff. I appreciate it. I'm also curious about the juggling of financing options. I applaud the exploration of every alternative that can keep your cost of capital down. I guess I just a little tripped up on the amount of the hundred Bitcoin collateralized loan you've drawn down versus the machine financing arrangement. And maybe the associated interest rates associated with those. And I think Mr. Lucas, discuss perhaps expanding the collateralized loan arrangement. Maybe you could talk a little bit about that.

Sure, I'm glad to do so, Kevin. So first of all, the least expensive form of financing we have at this point in time is indeed the BTC collateralized facility where the stated interest rate is a little north of 10%. That is lower than the overall cost, the overall expense of our equipment finance facilities in place. So that's been attractive to us, and we are, you know, looking and exploring the opportunity of continuing to use that as a source of capital here. We have a lot of opportunities as well, though, with unencumbered miners and infrastructure assets, so we can also explore to supplement our existing equipment financing in place. A little more expensive than the BTC-backed facility, but a very attractive one nonetheless. But what's important here that we really want to be aware of during this environment, Kevin, is also while we are very comfortable with our financial position, our profitability and our high margins for the cost of mining Bitcoin, we do want to be sensitive to leverage. You know, these are uncertain times here, and we do want to be sensitive to that overall going forward here. That is leading us to give some consideration to the possibility of maybe utilizing some of the Bitcoin that we mine to meet our operating expenses. Now, one thing I do want to point out here is that when we entered into the BTC-backed facility, the goal of that facility at that point in time was we wanted to be able to hold on to a Bitcoin rather than selling it. And if we get the upside appreciation, you know, at the interest rate, that's relatively attractive to this BTC-backed facility. That is still in place, of course, but we are now assessing, you know, what is the upside potential of BTC over the near and longer term? And what are some of the other financing means we can put in place that may ultimately have a lower cost of capital? So that's kind of what's driving some of our thinking here. But overall, I do just want to say in closing, Kevin, at this comment here, you know, we've got a wealth of great opportunities that Jeff pointed out we're pursuing. There are other ones that may, you know, rear their head in the near future. And we always want to be positioned to take advantage of those that have the financing and the capital in place to really allow us to benefit from those opportunities.

Jeff, you didn't – Mr. Murphy, apologies. You didn't spend much time on Washington. U.S., Washington State. I was hoping you might just peel the onion back a little on that and let us know where you are, understand there might be two buildings there. Where do they stand and what's the potential in terms of power? What other avenues are exploring?

Of course, Kevin. Washington is an exciting place. place for us to have our operations. The Randolph site continues to be expanded. We have other discussions going on in other parts of the state and with the PUD in that area. So there's new doors to be opened there and we're not ready to really announce much yet. But like in our disclosures here, we did advise that we have a fresh six megawatts that we are working on and are hopeful to activate later this year pending the utility sort of providing the infrastructure needed. Another six we are hopeful for next year. Not ready to announce anything yet because it's not firm. And then we also announced that for the first time we are going to move into a a site that we acquired as part of the deal and do some immersion cooling for the first time a little bit later this year. Orders are in on the equipment and hopefully we'll be able to provide news about that in a little more detail in short order.

Okay, so what's your output there and how many megawatts do you have access to now?

We have 17 megawatts that are operating right now, which will grow to 24.

Okay. Okay. And then beyond. Understood. What prompted you to explore immersion for that location?

Well, it was more site-specific. It's a smaller site. It's got buildings sort of commercial and residential around it. The site was good just in terms of size and location and sound and just to be able to put our first tanks in that location and get started. We want to start slow with immersion. We fortunately have locations around the world that don't really need immersion because of the cooler climate and some of the systems that we put in place to keep the miners cool. So we don't have to go to the extra capital of doing immersion, but we also know that the output from the miners is superior and the sound coming off of them is quieter and more controllable. So we've decided, given our commitment to Washington, our first immersion cooling would go in there.

Understood. Okay. Well, thank you very much, gentlemen, for, for entertaining my questions. I appreciate it.

Thanks, Kevin. Hopefully we'll see you in June.

Absolutely. Our next question will come from Chris Brumbler with DA Davidson. You may now go ahead.

Hey, thanks. Congrats on the results here. I'd like to just dive in a little bit. more into the current marketing conditions and how Bitfarms potentially could take advantage of what's going on in the market. I think obviously rig prices are coming down and it looks like you have some flexibility. So just talk to me about what potentially could be a positive as the market kind of resets here. And Jeff, I'd love to hear your comments on the overall network hash rate and how things may have changed there too.

Well, as I look into my crystal ball, yes, there's a lot of forces going on here that I think represents strategic opportunities for bit farms. A number of the IPOs and SPACs that we heard about late last year and early this year really haven't happened. I think they probably counted on considerable capital from the the public capital markets to fund their growth. We see Bitcoin that has fallen into the 20s. That is certainly causing us all to very seriously look at our operations and the effect of that and what we can do with that. We certainly have. We did a very deep dive on that and really understand our position. Fortunately, we have a very low cost of production as well. So that's positioning us well. And because we are completely in using hydroelectric power, we shouldn't get any surprises. We're not going to get carbon taxes, and we're not going to get commodity-based price increases. So we're confident about that. We also have a management team that we've built out over the last year that is a number of highly skilled people, and we can take advantage of that. If some of these type of opportunities, M&A opportunities, private and public, were to have surfaced last year, we would have been hard-stretched to really be able to do it in a good and safe manner. I think we have been positioning ourselves for this type of consolidation and market opportunity for many months. And I think we're in very good shape to look for those opportunities. I think the operational expertise that we have, I guess we look around at other people that really have not had five years of experience doing this, but maybe only months, or just trying it for the first time, I think are going to be challenged. We've got a worsening supply chain. We've got people that probably ordered miners last year and earlier this year at higher prices. That's going to constrain their margins. So I think we are very well positioned to look for opportunities. And as I've already detailed, in Washington, Paraguay, Argentina, we are looking at some very neat opportunities And good costs, some with some size, and to really play out our growth plans over the balance of this year and next. And that's why our guidance was more detailed. Like we've got a track towards 6x hash, miners coming in that'll take us to 7.2, but we still have a target of 8, which sort of should suggest to everybody that, we believe there's going to be new opportunities this year that we can capitalize and bring and bring online and more next year. And if the market opportunity, um, allows us to pick up some strategic assets from others or operations, we'd like to see them. Yeah.

You know, if I can add a point here, the stress of our, the stress of our operating team. Yeah. The stress of our operating team really can't be overstated. They're a bunch of very capable folks. And just to give an example, You know, in the past three months, we have among the eight major, you know, industrial-scale farms, we have the highest BTC per exit hash of any of them. And that speaks in large part because of our uptime. And with a keen focus that we have here on payback and return, you know, that really speaks to the, you know, the superlative performance these guys have achieved in helping improve our returns.

I guess along those lines, you know, I think equity capital is obviously extremely expensive here, so everyone seems to be looking at debt. And, you know, I think those alternatives have shrunk as well as some people have gotten a little more nervous about the environment. But I imagine, like, if you're an experienced operator with the kind of track record that BitFarms has, that you still may have access to that debt capital. And I guess is that the difference between your 6.0 and your 7.2 is just finding a little bit of additional financing or is there something else? that's causing that sort of like base rate versus what you're contracted for in terms of hash rate?

Well, let me answer initially, then Jeff, you can step in. The financing is not what's driving what we're achieving here in terms of direct to hash goals in our objectives here. But to answer your question, the initially posited, we haven't seen any diminution in financing opportunities. And I think the benefit for us, given that we have a very low and effective cost structure here, that people are still very interested in playing ball with us. And what I find interesting here, not only do we continue to have interest in our exploring interest from financing sources within our sector, but even more than that is that we're seeing others outside of it continue to have an interest in what's happening in crypto, particularly among the better-performing companies such as ourselves. And almost at this stage, you're still seeing this challenge that we're having in the environment overall right now as an opportunity for these guys to get in.

okay now so now it's my turn so uh the the reduction in in our year-end target largely is because of the second warehouse in argentina the 50 megawatts and it was previously slotted for completion and some activation in december we've had some supply chain sort of issues. We are dealing with Argentina. There is more bureaucracy. There is more time involved with shipping and that and other aspects. And we just thought we would our investors would appreciate knowing what we can do as opposed to still thinking that it might be possible. So instead of being finished in sort of the second half of December and we actually talking about it, we feel a lot more comfortable giving guidance that The construction and initial activation of that second warehouse will be in the first quarter of next year. And it just happens to slide over a year end. So it involves the resetting of guidance accordingly. But it's not because of finances. It's more logistics and supply chain. And it hasn't slipped by very much. But we just wanted to allow people within the market to know what we're doing. And not have any surprises. So that's what we're trying to deliver everything we said we're going to do.

That makes a ton of sense, and I think it's the right approach. Thanks so much for taking my questions. I look forward to seeing you in a couple weeks.

Yeah, great.

Again, if you have a question, please press star then 1. Our next question will come from Stuart Sklar, private investor. You may now go ahead.

Thank you for taking my question. You guys are very, very good at execution when it comes to hash rate. My question has more to do with capital management and balance sheet management. And I've seen a company like Hive, for example, who also are great at execution, but they've diluted their shareholders into oblivion. And what I want to know is, what are your capital needs? How much of this year's hash rate is paid for, how much of the capital expenditures that you're doing for the build-outs for the data centers is paid for, and what are you going to need to finish to get to where you want to be this year?

Sure. So let me answer that question. If you take a look at our financial statements, you'll see that the biggest commitment we have for the balance of the year is about $93 million for the remainder of the 48,000 miners that we're taking on. On top of that, we probably have expenditures of anywhere from roughly $20 million or so for the additional infrastructure build-out. Our plan in terms of financing that really is to be as non-dilutive as possible here. And that really would encompass, you know, doing more equipment finance facilities in place here. Secondly, we'll begin utilizing, you know, the BTC-backed facility here to a greater degree. And thirdly, you know, selectively, as appropriate and as it makes sense to us, selling our Bitcoins to meet our operational needs going forward. We may continue to use the ATM on a very, very selective basis, but that's something we watch really on a daily basis to make that assessment very, very careful because we do recognize just how dilutive impact at these price levels that can have. So that kind of speaks to what our needs are. We feel that we're very well positioned for our capital requirements going for the balance of this year and even leading into 2023.

That's great information and I appreciate it because As a shareholder, and I am an investor, I'm not a day trader, I've been with you guys for a while, and obviously the share price has cratered. One month's Bitcoin production could take right now 5% of the float off the table. So I think it's really important that you're careful going forward with dilution, and I appreciate your answer. Thank you. Sure.

There are no further questions. This concludes our question and answer session. I would like to turn the conference back over to Emiliano Grobski, CEO, for any closing remarks.

Thank you all for attending today's conference calls. We continue our strong growth in the first quarter, and with a current hash rate of 3.4 exahash per second, BitFunds now represent about 1.5% of the Bitcoin network. Multiple projects are underway, and as a low-cost and profitable miner, we expect there will increase development opportunities. We are now a five-year-old company with a proven operating history of managing diverse facilities at increased scale. We remain focused on behind one of the largest and most profitable Bitcoin miners. and are positively positioned for growth this year and in the future. We look forward to updating you about our progress. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.