Bitfarms Ltd.

Good morning. My name is MJ and I will be your conference operator today. At this time, I would like to welcome everyone to the BITFARM second 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 may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. As a reminder, this conference is being recorded, August 15, 2022. I will now turn the call over to David Barnard from LHA Investor Relations. David, you may begin your conference.

Thank you, MJ. Good morning, everyone, and welcome to Bitfarm's conference call for the second quarter of 2022. With me on the call today are 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've heard or listened to the call on your smartphone, you can download the presentation from there as well. I would like to remind you that this morning, Bitfarm's issued a press release announcing its second quarter 2022 financial results. Turning to slide two, I'll remind you that certain statements that we make during this call may constitute forward-looking information and statements. Bitfarm's cautions listeners that forward-looking information and statements are based on certain assumptions and risk factors that could lead to actual results that 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 SADAR as well as SEC.gov. The company undertakes no obligation to revise or update any forward-looking information or statements other than as required by applicable securities law. During this call, the company will refer to certain measures not recognized under IFRS and that do not have the standardized meaning prescribed by IFRS. and therefore may not be comparable to similar measures presented by other companies. The companies are following non-IFR 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 cost and hosting cost related to the mining of Bitcoin divided by the total number of Bitcoin mined EBITDA is earnings before interest taxes and 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 IFR 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 refer to today's earnings release in the company's second quarter 2022 management discussion and analysis for definitions of the aforementioned non-IFR measures and the 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 Murphy will review our operations for the quarter. CFO Jeff Lucas will follow with a detailed financial review, and Jeff Murphy will return for some closing remarks after the G&A. We requested investors to send questions in advance, which I will read to management before 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.

Thank you, David. I would like to welcome everyone to today's call. In Q2 2022, Bitfarms mined 1,257 Bitcoin, up 31% sequentially from Q1 2022. Building on our momentum in production, we mined 500 Bitcoin in July. The strong Q2 2022 production completely offset weaker Bitcoin prices such that we also grew revenue sequentially to 42 million and still generated cash from mining operations as defined by adjusted EBITDA of $19 million. As evidenced by the results of our publicly traded Bitcoin mining peers, These are not just solid, but superior operating results. 2022 has been one of the most challenging periods in the history of the Bitcoin mining industry, due to the sharp decline in the price of Bitcoin since November 2021, and the more severe depression in prices starting in early May 2022. Yet, even in this environment, we continued our growth trajectory and expanded operations. In March, we commenced production at the bunker, phase one, and then Leger in April. We also increased our corporate hash rate 33% from the end of Q1 to 3.6x a hash per second at the end of the second quarter. Now, our corporate hash rate is just shy of 4x a hash per second, which means we continue to gain market share. We estimate we now represent approximately 2% of the network hash rate, which is a company record. In June and July, we took decisive actions to maintain our financial flexibility and increase our liquidity. In doing so, we reduced the balance of our Bitcoin backed loan facility from 100 million to 23 million as at the end of July and secured new equipment financing of 37 million. Jeff Lucas will detail the financials in a moment. Regarding operations, some key achievements include. In Q2, we brought online the bunker phase two in the city of Sherbrooke, Quebec, representing 18 megawatts of new capacity, installed 10,300 miners and mined 1,257 Bitcoin, validating our superior operating performance. Since quarter end, we increased total electrical capacity across all locations by 29 megawatts, 266 megawatts. Today, we are approaching 18 Bitcoin per day in daily production, and 135 Bitcoin per average EXA hash per second in July, which is top quartile efficiency and performance. Slide four summarizes the status of our farms. We ended the quarter with nine locations and 137 megawatts in capacity, up from eight locations and 121 megawatts in capacity at March 31, 2022. Leger started production in April, initially adding 16 megawatts of capacity which has since expanded to its full capacity of 30 megawatts. And in conjunction with the bunker phase two, increased our total corporate capacity to 166 megawatts as of August 15th, 2022. Construction continues on two facilities in Canada and the first of two warehouses in Argentina. Now I'll take a moment to detail the operations, plans and recent progress at some of these locations. Turning to slide five. As you recall, we have contracted power with Hydro Sherbrooke within the City of Sherbrooke, Quebec for a total of 96 megawatts. With the creation of the Bunker, Loge, and Garlock, we expect to be fully operational at these farms by the end of December, a full two months ahead of schedule. These three facilities are located in close proximity, which affords numerous efficiency advantages. We are shifting to new state-of-the-art farms from an older site, Dillapoint, our first location in Sherbrooke. Dillapoint is presently operating at 18 megawatts and is planned to go offline by the end of 2022. Again, two months ahead of schedule. With its earlier than expected termination, we can begin the sale process for this property and we expect to convert this unencumbered real estate into cash in early 2023. The bunker. first activated in March 2022, is currently drawing 36 megawatts and running 9,000 miners from its first two phases. Phase three, which is targeted for completion in the fourth quarter of this year, will add another 12 megawatts. Upon full build out, the bunker is slated to be a 48 megawatt farm, housing 13,000 miners and anticipated to contribute a total of 1.3 exahash per second, as noted. Leger contributes 30 megawatts and is operating 7,400 miners, delivering over 740 petahash per second. As you may recall, in mid-March 2022, we acquired our newest site, Garlok, in Sherbrooke. We own this asset outright. We have completed the warehouse cleanup and building improvements with electrical infrastructure, louvers, fans, racks, and miners the following September. we expect Garlok to be fully operational by year end. Each of these locations on our Sherbrooke campus benefit from advanced design and sound reduction monitoring systems. With 18 megawatts at Garlok, 48 megawatts at the bunker, and 30 megawatts at Leger, we will fully utilize our 96 megawatt power contract in the city of Sherbrooke. Please turn to slide six. 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. We are building out warehouses number one and two, and warehouses number three and four remain under consideration for future expansion. During the quarter, we made significant progress on construction of our first two 50 megawatt warehouses and associated infrastructure. The initial electrical supply line is nearing completion with a connection expected to take place within the next 30 days. So far, we've imported over 4,800 miners. The installation of racking, miners, servers and data cabling in the first warehouse is underway with miners expected to be installed starting in mid-September. Significantly, We continue to expect to begin production at the first 50 megawatt warehouse in the fourth quarter of 2022 and expect to complete construction at the second 50 megawatt warehouse in the first quarter of 2023. Last week, to better align our capital plan with our production schedule, we successfully renegotiated the timing of some minor deliveries for our second 50 megawatt warehouse. The net effect shifted 39 million in scheduled capex from Q4 2022 to the first nine months of 2023. Please move on to slide seven. The LATAM team also is responsible for our current operations in Paraguay, and this slide shows our 10 megawatt farm in Visarica. Like our farms in Canada and the United States, this farm is run on low cost and abundant hydropower. The economics here are quite positive, and we are able to productively utilize some of the older miners in our fleet in this location to optimize assets, performance, and capital deployment. In Paraguay, we are building on our experience from constructing eight farms in North America. As stated in our last earnings call, we continue to believe Paraguay is ripe with opportunities for expansion. We started building the core LATAM team to support our growth and development in this critical and opportunity rich region in early 2021, and now have 15 people on board in both Argentina and Paraguay. We started the process to hire technicians for the first Rio Cuarto warehouse. Turning to slide eight. In summary, at the end of the quarter, we have nine farms in production in three countries and are drawing power from five hydroelectric providers. Today we have capacity of 166 megawatts and an additional 63 megawatts under development that are expected to come online this year for total planned capacity of 229 megawatts by the end of the year, representing 89% growth in nine months. Moving to slide nine. One of our tools for continuous improvement is our recently revamped proprietary miner management system called MGMT2. which enable us to manage at the individual miner level, hundreds of thousands of miners across our global decentralized farms with a focus on maximizing uptime. MGMT2 features improved controls, tracking, sensors, alarms, visualizations, and performance metrics, enabling increased efficiency in operations. As noted earlier, we are at 135 Bitcoin per average exahash per second in July. which is top quartile efficiency and performance. Another measure of efficiency, joules per terahash, is realizing steady improvement. At the end of July 2022, we were at 40.6, improving 17% compared to 49.1 at June 30th, 2021. Looking ahead, we plan to further optimize the performance of our fleet by prioritizing the most economic repairs first, making sure that we are focusing on cash flow. Additional features such as variable load, hash rate control, and underclocking are under development. In addition to integrating Bitcoin mining economics, we also will be incorporating external data to better optimize our operation, such as grid load balancing and market pricing, taking our operation control to the next level. Regarding fleet activity, during the quarter, we installed 10,300 latest generation miners. Additionally, the first 4,800 were imported into Argentina and are being held for our first 50 megawatt warehouse and will be made operational in the coming months. Year to date, we have installed over 25,000 miners, bringing our total installed base to over 44,000 active miners. With another 4,000 miners currently in transit, in addition to what we already have received, accounts for approximately 80% of our expected miner deliveries for 2022. Please turn to slide 10. For discussion of our updated quarterly hash rate goals, based on our current infrastructure construction and miner delivery schedules, we are targeting 4.2 exahash per second as of September 30th, 2022, and six exahash per second as of December 31st, 2022. In addition, with the contracted minor delivery scheduled, we expect to add 1.2 exahash per second when fully operational in the first half of 2023. Please turn to slide 11. With that, I will now hand over the call over to Jeff Lucas.