Bitfarms Ltd.

Good day, and welcome to the BITFARM's third quarter 2024 conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would now like to turn the call over to Tracy Kroomy, Senior Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you. Good morning, everyone. and welcome to Bitfarm's third quarter 2024 conference call. With me on the call today is Ben Gagnon, Chief Executive Officer and Director, and Jeff Lucas, Chief Financial Officer. Before we begin, please note 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'd like to 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 BITFARM's MD&A for a complete list. Please note that references 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 their reconciliation to IFRS measures. Please note that all financial references are denominated in U.S. dollars unless otherwise noted. I would also like to add that we will be attending the following upcoming equity conferences. Tanner Fitzgerald's Crypto Digital Assets and AI Infrastructure Conference in Miami tomorrow, Rolf's Technology Conference in New York City on November 19th and 20th, B. Riley's Crypto and Energy Infrastructure Conference in New York City on December 4th, Northland's Virtual Growth Conference on December 12th, and lastly, Needham's Growth Conference in New York City on January 14th and 15th. If anyone would like to meet with us on those dates, please contact me or a sales representative from the firm. And now, turning to slide three, it is my pleasure to turn the call over to Ben Gagnon, Chief Executive Officer and Director. Ben, please go ahead.

Thanks, Tracy, and thank you, everyone, for joining today. On today's call, I will be discussing an overview of our year-to-date accomplishments our Q3 operational update and an overview of the strategic moves we've made in the quarter, and our 2024 and 2025 goals and guidance. I will then hand the call over to Jeff to discuss the Q3 financials. Turning to slide four. 12 months ago, we outlined our transformational fleet upgrade. This involved upgrading nearly our entire fleet of miners across, at the time, our 11 data centers. We had always planned for 2024 to be a transformational year, but we underestimated just how transformational it would be. Year to date so far in 2024, we've upgraded 10 data centers and added three new data centers to our portfolio, unracked over 50,000 older generation miners, and racked over 46,000 new miners, increased our hash rate by 83% to 11.9x a hash today, improved our efficiency 40% from 35 watts per terahash to 21 watts per terahash, reaching our year-end efficiency goal three months ahead of schedule, and most importantly, significantly grew our megawatt pipeline from 324 megawatts today to 950 by year-end 2025 with a multi-year growth potential up to 1.6 gigawatts. These numbers speak volumes to our accomplishments and the commitment of our global team to grow the company and drive improved performance. In addition to these tremendous quantitative improvements, we announced our acquisition of Stronghold Digital Mining, which is the largest acquisition between two public companies in the Bitcoin mining sector yet, and we significantly enhanced our board of directors and leadership team. Turning to slide five. On our Q2 earnings call in August, I outlined several goals and initiatives as Bitfarm's new CEO. These included, first, the continued diversification of our portfolio beyond Bitcoin mining. The aim here is to maximize utility of our strongest asset, our megawatts, in the most efficient and cost-effective way possible by expanding into high-growth and high-value geographies and into synergistic business lines. such as hosting, HPC and AI, heat recapture, recycling, and energy generation. Second, a strong focus on U.S. expansion, particularly in the PJM region, which we identified as the most attractive energy market in the U.S. And third, building out an even stronger bench of operators and introducing a new organizational structure in order to evaluate, plan, and execute on this significant opportunity with HBCAI and the upcoming anticipated Bitcoin bull run. I'm pleased to say that over the past three months, we've made significant progress on each of our goals and laid a strong foundation to execute our growth strategy. I'll now dive into the Q3 operational update and talk through several strategic actions we've taken this quarter with these goals in mind. Turning to slide six. in line with the first and second initiatives regarding continued diversification of our portfolio and expansion in the US. In Q3, we entered into an agreement to acquire Stronghold Visual Mining. This transformative combination ensures a multi-year strategic growth path that we are incredibly excited about. With this acquisition, we are integrating vertically by acquiring two strategically located power facilities in Pennsylvania, expanding and rebalancing our portfolio with over 300 megawatts of U.S. power capacity with the potential to increase our energy portfolio to over 950 megawatts by year in 2025 and 1.6 gigawatts in the next few years. creating energy trading and demand response opportunities to minimize energy prices, and lastly, creating an opportunity to cost-effectively integrate HPC and AI into our portfolio with a merged HPC AI and Bitcoin mining data center. Turning to slide seven. Upon closing, the expected 307 megawatts available at these two locations would drive a 47% increase in our 2025 year-end megawatts from 648 megawatts to over 950 megawatts. Including our Sharon, Pennsylvania site, the combination of these three sites creates a PJM portfolio of approximately 427 megawatts in 2025. which is larger than our entire operational energy portfolio today. Importantly, these sites rebalance our portfolio back to the U.S. and North America, representing 47% and 65% of our year-end 2025 portfolio, respectively, while LATAM exposure will scale down to 35%, significantly improving the size, quality, and distribution of our energy portfolio. We have already begun maximizing the utility of the Stronghold sites with two hosting agreements, each for 10,000 miners. These 20,000 miners, initially scheduled for deployment in our Iguazu facility, are being deployed in Pennsylvania at Stronghold's Panther Creek and scrubgrass facilities, supporting approximately 4x a hash. Redirecting these miners reduces our logistics, duties, setup, and energy costs, driving a more optimal deployment, and providing a pathway for continued profitable growth. With these two hosting deals, we anticipate that nearly 75% of our hash rate will come from our North American data centers in the first half of next year. reaffirming our commitment to grow in the U.S. In addition, we continue to actively pursue other site acquisitions and growth opportunities in the U.S. Turning to slide eight, in line with our third initiative to strengthen our leadership team, we made significant progress by expanding our bench and reorganizing our operational structure in order to position ourselves for continued growth in 2025. Reflecting our commitment to operational excellence, we've recruited numerous industry experts with the following leadership appointments. Liam Wilson, as our Chief Operating Officer, a newly created role. Alex Brammer, who replaces me in mining operations as Senior Vice President. Benoit Gobay, promoted from EVP of Operations and Infrastructure to Chief Infrastructure Officer. and Rachel Silverstein as General Counsel, a newly created role as part of our emphasis on growing in the U.S. In addition, we reorganized our operations into two divisions, mining operations and infrastructure, with Alex and Benoit heading up the divisions respectively. These new divisions are already delivering greater scalability and accountability in data center construction, maintenance, and operations, and are laying the foundation for the establishment of HPC and AI operations. With these hires, we are laying an even stronger operational foundation, enabling us to execute our growth plan. Turning to slide nine. In addition, we enhanced our corporate governance and strengthened our board of directors. with the appointment of two new directors, including myself, and with former lead director Brian Howitt now serving as our board chair. Our board of directors now consists of five members, four of whom are independent. With the upcoming special shareholder meeting scheduled to take place next week on the 20th, the board is expected to increase to six board members with five independents subject to shareholder approval. On a related note, in Q3, we were able to reach a settlement agreement with Riot Platforms, which we believe is in the best interest of the company and her shareholders. Importantly, this mutually beneficial agreement allows us to move forward as an independent company and to execute our growth strategy, avoiding the costly and distracting proxy contest. Riot remains a shareholder of BitFarms with current ownership of just under 20%. Analysts have noted that Bitfarm shares provide good value and significant upside to Bitcoin price relative to tiers, and Riot remaining a top shareholder is a positive market signal underscoring the value and potential of our growth. Turning to slide 10. I will now take a few minutes to discuss our guidance. While we are now at 11.9x a hash, we are behind schedule on delivering our mid-year 12x hash target for the following reasons. First, we have some minor construction delays at several sites that have been overcome but delayed energization by weeks or a few months. Second, over the past few months, we've experienced shipping delays and extended minor warranty servicing that goes beyond the 2,700 miners replaced a few months ago. Despite improvements in recent minor shipments, continued warranty servicing has impeded the achievement of our hash rate target. We've been working closely with Bitmain to address these issues and are implementing an efficient solution. We will be upgrading the remaining 18,853 Bitmain T21 miners to be delivered by Bitmain as part of our fleet refresh announced last year. Bitmain will now be sending 18,853 more powerful and efficient S21 pro miners operating at 234 terahash and 15 watts per terahash. representing more than a 20% improvement from the T21 miners in both energy efficiency and cash rate. This capital efficient upgrade allows us to expeditiously upgrade the remaining miners to be delivered for better performance with minimal impact on the cash, while preserving the full upside of the Bitcoin. While all of the miners are scheduled to ship before the end of the year, This significant upgrade and continued RMA servicing will push our year-end target of 21 exahash into the first half of 2025. It will also improve our energy efficiency by an additional 10% from 21 watts per terahash to 19 watts per terahash. The majority of the upgraded miners will be deployed in Pennsylvania and Quebec. Amidst the backdrop of rapidly improving macro conditions, we believe this is a rare opportunity to upgrade miners for better performance before miner prices increase. Turning to slide 11. Looking ahead to 2025, demand for immediate capacity for both HPCAI and Bitcoin data centers is surging, and turnkey assets are highly sought after. Data center development continues to accelerate, driving more scarcity and making access to power very valuable. KKR estimates that $250 billion will be spent annually on the data center boom. The US is the biggest developer of data centers, consuming about 16 to 18 gigawatts of power, compared to about six gigawatts each in Europe and Asia. KKR's global head of digital infrastructure believes over the next three to four years that the 18 gigawatts could double, if not triple. We have just over 500 megawatts of secured power and infrastructure for 2025, which represents one of the largest portfolios of flexible megawatts amongst any publicly traded miners. This gives us unparalleled flexibility to approach this bull market and take advantage of strategic opportunities. With this in mind, we've taken important steps to ensure we're getting the best value from our assets. First, we've changed our deployment plans by reallocating the miners from Iguazu to the U.S. with the Stronghold hosting agreements. In doing so, we have freed up the 200 megawatts at the Eagle Zoo site entirely and have applied for a delay in energization 60 days to March 1st, 2025 in line with the contract. With 200 megawatts of cost-effective, high uptime, renewable energy and new infrastructure, Iguazu is a marquee asset going into a Bitcoin bull market that is capable of producing approximately 15x a hash if filled with the latest S21 XT miners. Management is currently evaluating all strategic options to best monetize the site. Second, in Q3, we assumed control of our site in Sharon, Pennsylvania. This is a 120 megawatt site strategically located in the PJM interconnection market, providing access to low cost, flexible power. The site is very well suited for both Bitcoin mining and HPC and AI. We are currently evaluating the best way to monetize these megawatts. Third, and as discussed a few minutes ago, we acquired high value megawatts in Pennsylvania through Stronghold. Of the 307 megawatts available in 2025, these sites are currently contracted to utilize approximately 100 megawatts for hosting, and we are evaluating the best way to monetize the remaining 200 megawatts. We now have sufficient megawatt capacity to go well beyond the previously guided 35 exahash a year in 2025. However, as we continue to refine our 2025 plans and actively rework around Bitcoin mining and HPC and AI, we believe it would be premature to maintain the 35x hash guidance. We will issue updated guidance once these strategies are finalized. Turning to slide 12, we own and operate a portfolio of high-quality energy assets that are monetized through Bitcoin mining. At BitFarms, we are not growing hash rate at any cost. We are focused on getting the best utilization and driving the maximum value of our energy assets for our shareholders. When we take a step back and look at how we do this, we believe that a combination of self-mining, hosting, energy trading, and HPC and AI creates a more powerful and resilient portfolio. We're conducting a thorough evaluation of all of our energy assets, looking at a host of different metrics, both qualitative and quantitative, to determine which sites would be best suited for which activities. That said, we're pleased to announce that we have two different US sites for a 1 to 2 megawatt HVC and AI pilot. While still in early stages, we have the land and power secured at both sites. and are in active conversations with potential partners and suppliers discussing potential accelerated deployment in 2025 and are currently in the process of finalizing terms, equipment, plans, and budgets. We believe both of these sites are well-suited for development for a number of reasons. First, they are well located within a few hours from major metropolitan centers on major fiber trunk lines and are in or near data center clusters. Second, the power is secured and cost-effective with high uptime and no curtailment requirements. And third, the land is cleared and ready for accelerated construction. We believe that initiating work at a pilot site will allow us to prudently and cost-effectively evaluate this significant opportunity and to get a firm handle on the space, technology, and infrastructure before committing a significant amount of capital on a larger HPC and AI site. This pilot reinforces our commitment to diversifying beyond Bitcoin mining and is an important first step into an exciting new business line. We expect to provide an update on our progress in 2025. Turning to slide 13. Before I turn the call over to Jeff, I want to reiterate the significance of what we've accomplished over the past 10 months. We've refreshed nearly our entire fleet of miners, significantly improved our mining economics, built from the ground up a 70 megawatt state-of-the-art data center, acquired three new sites in the U.S., embarked on an HPC and AI strategy, and completely revamped our operational structure and strengthened our leadership team. We are now uniquely positioned with a strategic pipeline of over 950 megawatts in 2025 with nearly half a gigawatt of power infrastructure that is highly flexible, representing a massive, secured, and cost-effective growth opportunity as we enter into the anticipated 2025 Bitcoin bull cycle. We are now a stronger company with a significantly expanded energy portfolio with up to 1.6 gigawatts available over the coming years And we are well equipped to take advantage of the significant opportunities in front of us. It's an exciting time in the Bitcoin industry, on the heels of the election and with Bitcoin hitting new record highs. And I've never been more excited or confident in our growth prospects and our ability to execute. Turning to slide 14, I'll now turn the call over to Jeff.