Bitfarms Ltd.

Good day and welcome to Bitfarm's third quarter 2022 financial results call. All participants will be in listen-only mode. If you need assistance, please signal conference by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the conference over to Mr. David Bernard, LHA Investor Relations. Please go ahead.

Thank you, Nick. Good morning, everyone, and welcome to BitFarm's conference call for the third quarter of 2022. With me on the call today is 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 the investor's presentation section. 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 this morning that BidFarms issued a press release announcing its third quarter 2022 financial results. Turning to slide two, I'll remind everyone that certain forward-looking statements will be made during the call and that future results could differ from those implied in this statement. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties, and I invite you to consult BidFarms MD&A for a complete list of these Also during the call, reference will be made to supporting slides. And again, you can find the presentation on our website under the investor relations section. The company will also refer to certain measures not recognized under IFRS and did not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. We invite listeners to refer to today's earnings release and the company's third quarter 2022 MD&A their 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 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 Q&A. And with that, it's now my pleasure to turn the call over to Jeff Murphy.

Good morning. Thank you for joining us today as we are excited to talk to you about our recent successes and why BitFarms is well positioned to manage this crypto winter and thrive in the long run. No one can control or predict the price of Bitcoin. It's a reality of this business. All miners margins have been compressed. However, BitFarms continues to differentiate itself operationally and financially with its low cost structure, efficient operations and fleet, along with stable energy pricing, resulting in superior mining profitability. We have worked hard to establish a consistent track record of execution against our stated goals and growth plan. In fact, we have doubled our hash rate to 4.4 exahash per second year to date. However, to be direct, in Argentina, while the construction of our farm in Rio Cuarto has moved along on plan and on budget, There are macro developments within the country that impedes importation of all foreign equipment, including our miners. We are working to resolve these issues and I'll provide more details in a moment. Turning to our highlights of our results. In Q3 2022, Bitfarms mined 1,515 Bitcoin, up 21% from Q2 2022. And we mined an additional 486 Bitcoin in October. Although the growth in Q3 2022 production was offset by weaker Bitcoin prices, we continued to deliver solid performance metrics and reduced both our direct costs and total cash costs of production. As a result, we generated a generated adjusted EBITDA of $10 million. In addition to consistently being one of the largest producers of Bitcoin, BitFarms remains one of the lowest cost producers. And for the last two years, we have kept our direct costs of production under $10,000 per Bitcoin and in fact lowered these costs by $500 in the most recent quarter. Our costs have remained relatively stable as we benefit from a portfolio of geographically diverse hydropower contracts providing low cost energy. As new production came online in both Canada and Argentina, we increased our corporate hash rate 17% from the end of Q2 to 4.2 exahash per second at the end of the third quarter. During the month of October, we were mining 15.7 Bitcoin per day in daily production and slightly over 115 Bitcoin per average exahash per second, which is the highest industry percentile in efficiency and performance. While the industry is facing challenges due to the sharp decline in the price of Bitcoin, we benefit from experience in managing through past industry cycles and we further benefit from stable electricity costs while rising energy prices have an outsized impact on those peers that rely on fossil fuel generated electricity. We continue to take decisive actions to maintain our financial flexibility and increase our liquidity. Jeff Lucas will cover details in a few moments. Slide four summarizes the overall status of our farms. We ended the quarter with 10 locations and 176 megawatts in capacity, an increase of 39 megawatts from nine locations and 137 megawatts in capacity as at June 30th, 2022. In October, we increased our total corporate capacity by six megawatts, bringing the total current capacity to 182 megawatts. Now I'll take a moment to detail the operations, plans and recent progress at some of these locations. Turning to slide five. We have power supply commitments with Hydro Sherbrooke for a total of 96 megawatts. The three facilities in our Sherbrooke campus are located in close proximity, which affords numerous efficiency advantages, and we are in the final stages of completing our 2022 expansion plan. Leger continues to operate smoothly at its 30 megawatt capacity delivering 740 petahash per second from 7,400 miners. On November 10th we energized our first six megawatts in the 18,000 square foot garlock farm with the full 18 megawatts expected to be in production in early December. Phase three of the bunker is progressing as planned with six megawatts energized in late October and the remaining six megawatts expected to be online also in early December. The bunker, first activated in March 2022, is currently drawing 42 megawatts and running 9,400 miners. In December, at full build out, the bunker will be a 48 megawatt farm, housing 12,400 latest generation miners and contributing over 1.2 exahash per second. We expect to retire our De La Pointe farm by the end of this month and anticipate completing its sale by the end of December, which results in cash proceeds of $3.5 million to fund growth. The permanent closure of this facility and replacement and full build out of our Sherbrooke campus in an industrial area is running three months ahead of schedule. When completed shortly at 96 megawatts, up from 30 megawatts in 2021, The local community benefits from increased tax and other revenues as well as higher employment. As we stated in our press release on November 4th, our hydroelectric energy agreements in Quebec remain in place and we are excited about continuing to partner with local communities for future growth. Please turn to slide six. In Rio Cuarto, Argentina, As we announced on November 1st, we have adjusted our plans for our Argentina build out. We completed construction of warehouse number one during the past week, and we are continuing the process of commissioning. More specifically, the initial 10 megawatt module of the first 50 megawatt warehouse was completed in September, and the final four 10 megawatt modules were completed in October and early November. At present, we are operating almost 9 megawatts capacity with 2,300 miners delivering 237 petahash. Earlier this month, we adjusted our year-end guidance from 6 exahash per second to 5 exahash per second. Argentina's macroeconomic environment has impacted our ability to import miners. We are working with the regulatory authorities and our logistic providers to remedy this matter. The country is wrestling with high inflation, currency devaluation, and a significant debt burden. Importation approval for mining and IT equipment has been delayed, which has adversely affected our ability to bring in the additional 12,000 miners we need to operate the first warehouse at its full capacity. In addition, our private power producer in Rio Cuarto is still awaiting approval of its final operating permit to provide power to us. In the meantime, our farm is drawing power during the startup and commissioning phase from the provincial electrical utility at a higher cost than our agreement with the power producer. We continue to evaluate operations and these higher than anticipated energy costs on a daily basis. At around 4% of total production, this temporary variance has limited impact on our total direct cost of production. Power producer expects the necessary permit to be forthcoming before the end of 2022. We expect higher cost production at that facility until we can draw at least 26 megawatts. Please move on to slide seven. Since launching in January, Paraguay operations continue to run smoothly, consistently contributing about 125 petahash with its extensive hydropower infrastructure we continue to look for new opportunities in the country. Turning to slide eight. In summary, at the end of the quarter, we had 10 farms in production in four countries and are predominantly drawing power from three hydroelectric utilities that are geographically diverse. We now have capacity of 182 megawatts, which is operating at 4.4 exahash per second, and we have a clear path to ending the year at 188 megawatts running at five exahash per second with considerable future upside from Argentina. At BitFarms, we pride ourselves on our efficient operations, which is measured in a few ways. First, uptime. We consistently achieve uptimes of 98 to 99% in our farms. This high utilization rate is a key revenue driver as Bitcoin miners are not paid for downtime. Second, Bitcoin per average exahash. This is a measure of operating and production efficiency. In October, we recorded 115.7 Bitcoin mined per average exahash, which several analysts have noted being market leading and a figure in which we consistently rank high. Third, joules per terahash. which is the measure of energy efficiency for Bitcoin miners, and our corporate average continues to show steady improvements. For Q3 2022, we had an average of 40, improving 12% compared to 45.5 during Q3 2021. For more information on our mining fleet, I encourage you to visit our website, bitfarms.com, to learn more about the miners we operate and how they are deployed. Please turn to slide nine. Moving on from metrics to financials, I will now hand the call over to Jeff Lucas.