Bitfarms Ltd.

Excuse me, this is a conference operator. Thank you for your patience. The call begins shortly. Please continue to hold. Thank you. Thank you. Thank you. Good morning and welcome to the BITFARMS fourth quarter and full year 2023 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may 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 turn the conference over to Tracy Krumme, Senior Vice President, Head of Investor Relations at BitFarms. Please go ahead.

Thank you. Good morning, everyone, and welcome to BitFarms' fourth quarter and year-end 2023 conference call. With me on the call today is Jeff Morphy, President and Chief Executive Officer, Jeff Lucas, Chief Financial Officer, and Ben Gagnon, Chief Mining Officer. Before we begin, please note that this call is being webcast with an accompanying presentation. Today's press release and our presentation can be accessed at our website, bitfarms.com, under the Investor section. 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 the statement. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties, and I invite you to also consult Bitfarm's MD&A for a complete list of those. Please note that reference will be made to certain measures not recognized under IFRS and therefore may not be comparable to similar measures presented by other companies. We invite listeners to refer to today's press release and our MD&A for definitions of the aforementioned non-IFRS measures and the reconciliations to IFRS measures. Please note that all financial references are denominated in U.S. dollars unless otherwise noted. Turning to slide three, it is now my pleasure to turn the call over to Jeff Murphy. Jeff, please go ahead.

Thank you, Tracy, and thank you everyone for joining us today. I am happy to present and discuss with you our Q4 and full year results at such an exciting time in the industry. Multiple converging catalysts are leading to a very bullish sentiment, which is sending the Bitcoin price soaring and the market cap of Bitcoin to over $1.3 trillion. The favorable industry tailwinds include an improving regulatory and macro backdrop, The recent Bitcoin ETF approvals by the SEC, which are leading to rapid retail and institutional adoption. The upcoming halving, which Ben will speak to more in a minute. The positive impact of Bitcoin supply constraints with current daily demand exceeding five to 10 times the daily supply of newly mined coins. And there's prospect of a lower global interest rate environment, which has historically been very favorable to the Bitcoin sector. Over the last two months, these catalysts have caused a surge in investment interest and investment in publicly traded Bitcoin miners and Bitcoin ETFs. The ETFs have charted unprecedented growth with net inflows exceeding 8 billion. This is not just an anomaly, but a paradigm shift for the industry. Partially as a result of this insatiable demand, earlier this week, Bitcoin achieved a new all-time high price which is exceptional as this is the first time Bitcoin has attained a new all-time high leading into a having. With this demand supply backdrop, 2024 looks to be a banner year for BitFarms. Turning to slide four. I want to start off today's call with a quick reminder of what Bitcoin is, why we mine it, and how BitFarms does it better. Bitcoin is a simple idea. flawlessly executed in code and organically adopted by people around the world at massive scale. This powerful technology is empowering individuals, entrepreneurs, corporations, and even countries and governments to participate in the world's most open, fair, and secure financial system on the planet. As shown in the chart on the left, Bitcoin's ongoing adoption and organic growth has made it the best performing financial asset of last year And over the last decade outperforming the S&P 500, NASDAQ 100, MSCI world index and gold. In our opinion, and according to others, Bitcoin is the hardest monetary asset on the planet. Bitfarms is a vertically integrated global Bitcoin mining company that provides investors with high quality exposure to Bitcoin. Through our publicly traded shares, we are democratizing and making available to investors exposure to some of the world's best built, best operated, and lowest cost Bitcoin mining operations and the operating cash flows they generate. What makes us a leveraged investment play is that every single day since BitFarms was founded in 2017, we have produced Bitcoin at materially lower costs than what people, institutions, and ETFs can purchase it for in the open market. We have earned over 24,000 Bitcoin since inception. I am thrilled to report that in 2023, Bitfarms was the best performing stock on the Toronto Stock Exchange and the eighth best performing stock on NASDAQ. A moment ago, I commented that our shares represent a high beta exposure to Bitcoin. As the chart on the right illustrates, in 2023, Bitfarms outperformed Bitcoin by 286% and outperformed the mining industry represented by the Valkyrie Bitcoin miners ETF by 95%. Bitfarms annual share price return of 592% compares to Bitcoin's annual price appreciation of 155%, which is a beta of approximately three times. So, How did we outperform Bitcoin in 2023? Let's turn to slide five. In 2023, we acted with strong discipline to dramatically transform our balance sheet by growing the company's hash rate 44%, improving our energy efficiency by 12.5%, thereby reducing our operating costs per terahash, paying down 85% of our debt, increasing our Bitcoin and treasury by 99%, ending the year with 118 million in liquidity. And in November, announcing our transformative fleet upgrade with a contract to purchase up to 63,888 Bitmain T21 miners. These powerful new miners combined with our new farms under development are a game changer and put Bitfarms on track to triple our hash rate to 21x a hash by year-end 2024 and improve energy efficiency up to 34% to 23 watts per terahash. Not only does this represent the greatest growth in our six-year history, but importantly, our integrated strategic growth plan will drive what we believe will be the biggest relative improvement in energy efficiency in our industry this year. Turning to slide six. I would like to elaborate on the impact of our transformative and accretive fleet upgrade program while speaking to our financial discipline and cost-focused approach. This month in Quebec, we will begin to upgrade our fleet, starting with the replacement of approximately 11,000 M31S and M31S Plus miners with the first batch of new T21 miners. As a testimonial to our highly efficient operating structure, It is important to note that while these M31S miners are least efficient and oldest miners, they were purchased around the time of the last having in 2020, they are still profitable due to our low cost energy and high operating efficiencies. During these four years, these group of miners have paid for themselves over five times, demonstrating solid ROI returns. On a unit basis, upgrading the M31S The new T21 miners will deliver a two times improvement in energy efficiency, driving a 50% reduction in our operating cost per terahash. They will also generate a nearly threefold increase in hash rate and mining revenue. All other things remaining constant. The relative improvements from upgrading these M31S miners will more than offset the impact of the upcoming halving on a per unit basis. Turning to slide 7. Approximately 68% of our T21s on order will be installed in our existing farms, with the lion's share going to our Quebec farms. By utilizing our existing infrastructure, the upgrade is effectively a plug-and-play operation, significantly reducing CAPEX requirements, risks, and complexity. This low-risk and low-cost growth strategy provides immediate, and tangible benefits to pit farms and our investors. With the first miners set to be upgraded this month, we are pleased to report that our transformative fleet upgrade is well underway on time and on budget. Turning to slide eight, I'll touch upon our progress in Paraguay where most of our new site development is happening and where we will plan to deploy over 26,000 new miners this year. In Paraguay, we have two new farms under development and on track for energization this year. The first miners at our Paso Pei facility are scheduled to go online this month, with more miners coming online in April. Paraguay is an important area of growth for us. Our two farms under development will generate many value-added corporate benefits, including favorable fixed power contracts at 3.9 cents per kilowatt hour before that, Power contracts with Andy that are not subject to inflation. No requirements for power curtailment, providing up to 100% uptime. 100% renewable energy. Fast development, construction and deployment times. Exceptionally low cost for construction and skilled labor. And lastly, first mover advantage. securing BitFarms with a meaningful amount of electricity allocated to the cryptocurrency sector, putting us on track to be the largest miner in Paraguay by year-end. My recent visit reinforced the merits of our decision to invest further in this country. There is abundant and low-priced hydropower, a skilled labour pool, support of cryptocurrency and Bitcoin mining from the public, and most importantly, from the primary electricity utility, ANDEI. And they understand how Bitcoin mining functions as a digital electricity line for exporting their excess hydropower to a global marketplace. By signing power contracts with BitFarms, they are able to monetize and make better use of their existing infrastructure assets. Additionally, they are able to use the revenues from Bitcoin miners to finance the rebuilding and expansion of a significant portion of their domestic power infrastructure which will bring benefits for generations to come and aligns the interests of Bitfarms, Ande, and Paraguay. Turning to slide nine. With minor upgrades underway and the near completion of the initial phase of development at Paso Pei, we are on track and on schedule to deliver 12 exahash by the end of June, 2024. Importantly, With Bitcoin price and spot miner prices rising, the 28,000 miner option that we purchased in November is in the money. Exercising this option is a key element towards achieving 17x a hash per second, and through this exercise, we plan to take delivery of T21 miners in the third and fourth quarters of this year, in line with the construction schedule at Iguazu. While these carefully constructed plans increase our hash rate to 17 exahash per second, we are targeting more than a threefold growth this year to 21 exahash per second. Should market conditions continue to be favorable, we are actively considering additional farm expansions, new developments, acquisitions, and further minor redeployments to achieve this 21 exahash target by the end of 2024. With numerous actionable opportunities in our pipeline, we are well prepared to seize upon accretive growth opportunities to fill the remaining Forex a hash this year. Turning to slide 10. Let's take a look at our pro forma portfolio based on the plans that I just discussed. After having successfully deployed 63,888 T20 minors through the transformative fleet upgrade plan and the new farm developments at Paso Pei and Iguazu, we will have completely rebalanced our portfolio, both geographically and economically. The expected result is, one, higher operating efficiencies with 79% of our miners operating at 22 watts per terahash and no miners operating above 30 watts per terahash. Two, a competitive blend of low-cost electricity with high uptime. Three, achieving greater geodiversification with no single country contributing more than 50% of our hash rate and revenue. And four, benefit from predominantly stable hydro power rates, which represent about 85% of our portfolio. If you take away nothing else from this update, our transformative fleet upgrade is unique, both in terms of its scope and its ability to drive meaningful improvements across three key performance indicators, hash rate, energy efficiency, and our direct cost of mine, also known as hash cost. These improvements will take place across all existing farms and farms under construction, ensuring we are ready for the halving and the widely anticipated subsequent bull market. I will now turn the call over to Ben Gagnon, our Chief Mining Officer, to talk about our operating and financial metrics and the various assumptions post halving.