Bitfarms Ltd.

Good day and thank you for standing by. Welcome to the Bitfarm's fourth quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. I would now like to hand the conference over to your speaker today. Tracy Krumme, SVP of Investor Relations and Corporate Communications.

Thank you. Good morning, everyone, and welcome to Bitfarm's fourth 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 that this call is being webcast with an accompanying slide 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. 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 us today. On today's call, I will be discussing our 2024 and year-to-date 2025 accomplishments and providing an overview of what the New Bed Farms is focused on in 2025 and beyond. Turning to slide four. BitFarms is a completely different company than we were at the beginning of 2024. Across nearly every dimension, we have rapidly transformed ourselves from the international Bitcoin miner to a North American energy and compute company. The improvements speak for themselves. In our Bitcoin compute portfolio since January 1, 2024, we've nearly tripled our hash rate to 18.6 exaHash under management. and improved our efficiency by 45%, reaching our Q2 2025 efficiency guidance of 19 watts per terahash three months ahead of schedule. Both of these improvements were driven by our fleet upgrade, which reduced the average age of our active miner fleet from approximately three years old to approximately one years old today. In our energy portfolio over the same period, We've increased our energy capacity by over 90% to 461 energized megawatts today. We've built an energy pipeline of over 1.4 gigawatts with nearly 80% based in the U.S. And we reduced our expected average price of power to 4.3 cents per kilowatt hour and achieved far greater control over our energy costs through our PJM portfolio. With higher efficiencies in our CompuPortfolio and lower energy costs in our Energy Portfolio, we have driven nearly a 50% reduction in our hash cost to roughly $22 per petahash. This largely de-risks our portfolio and provides a foundation of higher levels of profitability and cash flow through 2026 and beyond. While we focus the company and our capital on new growth opportunities in the US and with HPC, Importantly, BidForms is now a U.S.-focused company, with the vast majority of our pipeline in the U.S. for the first time in our eight-year history. The U.S. now represents 33% of the energized megawatts in our portfolio, and this is expected to increase to nearly 80% over the coming years as we execute on our growth pipeline, almost all of which is in the U.S. Our momentum has only accelerated during the first quarter. We've closed our transformative acquisition of Stronghold Digital Mining, the largest M&A deal between two public miners in our industry. We closed the strategic sale of our 200 megawatt Iguazu data center, our largest site ever constructed. We advanced our HPC and AI strategy with the engagement of two new advisors. We hired two new critical team members, an SVP of infrastructure and an SVP of HPC and AI, and we significantly improved our hash rate, reaching 18.6x of hash under management, which if ran at 100% 24-7, would be capable of producing over 10 Bitcoins a day with current mining economics, and which we expect to be competitive in generating free cash flow through 2026 and beyond. We are very different and a much stronger company today than when we started or even ended last year. And I would now like to spend some time discussing how our two most recent transactions were such big drivers in our transformation and why they have set us up so strongly for an exciting future in 2025 and beyond. Moving to slide five. Just last week, we announced both the close of our acquisition of Stronghold Digital Mining and the close of the strategic sale of our Equazoo site in Paraguay. While these are two separate transactions, They both fall under the same portfolio management strategy, and so it is helpful to view their impact together. Completing these two transactions have completely transformed our portfolio, and we are now bigger, better, and stronger as a result. First, our energy portfolio is both larger today and able to grow bigger and faster into the future. Inclusive of the sale of our largest ever-built Iguazu, we still increased our energized megawatts and secured a growth pipeline of energy assets that could scale our Pennsylvania infrastructure portfolio to over a gigawatt in the coming years. Second, we are driving stronger operating economics across our portfolio. By switching to more cost-effective American energy and by managing our energy costs through the use of PJM's robust power trading, curtailment, and demand response programs, we are able to reduce our number one operating expense, energy. Controlling our energy costs is critical to controlling our future, and we are now able to do so with much greater scale, precision, and flexibility with our growing PJM portfolio. Lastly, both of these accretive transactions have better capitalized us for 2025 and beyond for the following reasons. First, the sale of Iguazu reduced our planned CapEx requirements for 2025 to less than $100 million. 20% lower than we laid out at the start of the year and frees up the invested capital and profits from the sale of our Iguazu site for reinvestment in U.S. infrastructure. Second, we've avoided the additional significant expenses that would have been required to both complete construction, energize, and fill the 200-megawatt Iguazu site with new miners. We estimate this to be a savings $325 million. And third, with Stronghold, we acquired two fully operating sites, both of which have been upgraded over the last four months with our hosting agreements. This transaction was primarily paid for in equity, and all Stronghold loans have been paid in full, saving significant interest expense and preserving our financial flexibility to work with strategic financing partners for potential HPC and AI projects. To summarize, The strategic rationale for both buying Stronghold and simultaneously selling Equazoo are two sides of the same coin. Through these transactions, we have rebalanced our portfolio to the U.S., where we expect to achieve greater yields per megawatt. We have reduced our average cost of power across our portfolio, we have minimized CapEx requirements while improving both liquidity and direct operating margins to help finance new infrastructure investments. And lastly, we have secured what we believe to be highly desirable sites for HPC that enable us to diversify beyond Bitcoin mining into energy generation, trading, and HPC and AI. This level of portfolio management is unheard of in our industry. Closing a large public M&A deal simultaneously with a large strategic sale was a heavy lift. And I'm incredibly proud of the Bitfarms team and what we have accomplished here in this quarter. We have transformed this company in short order, and it is truly a testament to how much stronger the new Bitfarms is today and what we can accomplish in the future. Turning to slide six. As we look towards our future, it now looks very different than it did a year ago today. With our vertical integration into power generation and having secured the largest growth pipeline in the company's history, we now need to think about our megawatts a little differently than we have in the past. I believe the simplest way to think about it is in three buckets. The first bucket consists of 461 energized megawatts and tracks megawatts currently being monetized. Today, this primarily means via Bitcoin mining, but as we diversify beyond Bitcoin mining, it will eventually include other use cases like HPC and AI. For investors who are interested in BidFarm's current operating footprint and current cash flow out of operations, this would be the most important metric. The second bucket consists of over 131 megawatts under development and measures megawatts that are secured for near to medium term growth. These are megawatts that are approved for development and don't require any further regulatory approvals or permits to begin development or energized. For investors who are interested in near-term growth potential, this metric best captures it. The third bucket consists of over 800 megawatts in the megawatt pipeline and measures the megawatts that are in process but still require more regulatory work, approvals, certainty, or clarity before they can be developed over a multi-year time frame. For long-term investors who are interested in our growth potential through 2028, This metric best represents the company's long-term potential, direction, and strategy. Turning to slide seven. This slide shows the path to over 1.4 gigawatts of power capacity and how our growth efforts transform our portfolio into one comprised of nearly 80% U.S. megawatts and 90% North American megawatts. As you will see, we have 461 megawatts energized today, growing to 500 megawatts by year-end, the results of planned megawatts under development at both Sharon and Panther Creek. Likewise, in 2026, we anticipate growth of 92 megawatts for a total of 592 megawatts coming from Sharon, Panther Creek, and Washington. Finally, growth from year-end 2026 through 2028 is anticipated to come from megawatts currently under study and application at Panther Creek and scrubgrass for a total of 1.4 gigawatts. As we look to this future and execute on our growth pipeline, we will continue to improve our portfolio composition by prioritizing the U.S., Canada, and those energy assets that have opportunities beyond Bitcoin. We expect this will drive both lower overall energy costs and better yields per megawatt, creating lasting value for shareholders. Turning to slide eight. The largest and most exciting part of our megawatt pipeline is the gigawatt of potential in the U.S. Our new focus on the U.S. and our American energy assets are attracting a lot of interest from investors. Through these assets, we are opening up exciting new opportunities for BitFarms in areas beyond Bitcoin mining, including energy generation, trading, and HBC and AI that weren't possible in Latin America and will define this company's future for many years to come. This gigawatt of potential is easiest to understand when separated into the tranches discussed on slide six and separating out the generation, as we have done here on this slide. At both Panther Creek and Scrubgrass, we have two operating power plants that are capable of producing power and selling power into the grid. They are also able to draw down and consume from the grid a similar quantum power that the power plants can produce. As of today, it's not possible to monetize 100% of the power generated from the power plants and the power from the grid simultaneously. To do so, we will need to make further investments into the data center infrastructure and get greater clarity from FERC. We have strong confidence that this regulatory clarity is coming and will support our site plans. And while this regulatory approval process is ongoing, we can choose to provide 142 megawatts of power for the existing data centers from either the power plants or the grid at our discretion. Currently, our data centers are being supplied by the power plants as the lower cost option. Beyond this, we also have six different power applications across the two sites that are well underway and at various stages in the approval process. but cumulatively have the potential to scale both of these sites between 400 and 500 megawatts by 2028. Lastly, with 120 megawatts of potential, Sharon is the smallest Pennsylvania site, but still bigger than any of our sites outside of Pennsylvania. Sharon has 12 megawatts operating today, increasing to 30 megawatts in the second quarter. Sharon also has 80 megawatts actively under development for 2026, and 10 megawatts in the pipeline that is subject to additional reviews, studies, and approvals for a total of 120 megawatts. The three sites add up to a cumulative one gigawatt of potential. Turning to slide nine, I'd like to take a minute now to touch on our HPC&AI strategy in more detail and discuss a few key strategic moves we've made in the last few weeks that have positioned us very well to capitalize on this massive growth opportunity. Just last week, seven members from our team participated in the annual NVIDIA GTC conference in San Jose. Our team was booked back-to-back with potential partners in the space from all angles, including financing, development, infrastructure, and end-use customers. Most of the interest was focused on three things, power, land, and fiber. And that's what we have in spades at all three Pennsylvania sites. Having met one-on-one with over a dozen respective counterparts in the space, the feedback was all incredibly positive and exciting. Each site has power availability in the short-term, long-term growth potential, and multiple sources of power, including on-site generation at Scrubgrass and Panther Creek. Having multiple sources of energy improves reliability and reduces anticipated CapEx and OpEx for HPC and makes these sites very appealing for potential HPC customers, especially hyperscalers. This message was reinforced in Jensen Huang's address to GTC as power opportunities are in short supply and are the primary bottleneck on growth. At BitFarms, we've known this for a long period of time and it's one of the many reasons why our team was so bullish on the Pennsylvania site. On the back of our pivot into HPC, we've also made two critical hires, James Bond, our new SVP of HPC, and Craig Hibbard, our new SVP of infrastructure. James is a subject matter expert in HPC and AI with over 20 years of experience and joins us from Hewlett Packard, where he spent 15 years leading the North American HPC and AI infrastructure platforms category, which grew to $2 billion in 2024, representing 160% year-over-year growth. At HPE North America, James was responsible for all HPC and AI go-to-market activities, and his experience implementing HPC solutions at scale make him the ideal candidate to lead this new chapter of BidFarms. Craig, our new SVP of infrastructure, has extensive experience leading large-scale digital infrastructure projects, and recently spearheaded the rapid design and construction of over 200 megawatts of digital infrastructure for a US firm specializing in digital assets in HPC and AI. Based in Pennsylvania, Craig will play a critical role in leading the development of our rapidly expanding PGM portfolio. James and Craig will be working intimately with our strategic partners, ASG and Worldwide Technology, to complete the comprehensive feasibility analyses on all of our North American sites and advise on our global HPC and AI strategy. In parallel, ASG and WWT will help build accelerated sales and development strategies and market our sites on behalf of BitFarms to potential customers. Both of these initiatives are well underway, and ASG has already delivered initial high-level feasibility reports for our three PGM sites. All three reports confirm that the Pennsylvania sites are both well-suited for HPC and AI conversion and high potential. All three are strategically located near other data center campuses and peering hubs, and they have the necessary power, land, and fiber infrastructure to support HPC. The cooler climate in Pennsylvania should also be expected to improve power efficiency and cost, which for HPC makes Pennsylvania megawatts more valuable per unit than the same megawatts in Texas. These three maps show the fiber connectivity at our three Pennsylvania sites, Panther Creek, Scrubgrass, and Sharon. Each site has robust fiber infrastructure, within 10 miles of each facility. Fiber infrastructure is one of, if not the first question asked when meeting with hyperscalers and other potential partners. Scrubgrass has seven metro networks. Panther Creek has eight, and Sharon has nine in close proximity. It's also important to note the proximity of these PJM facilities to metro areas and long-haul infrastructure like peering and interconnection hubs. Scrubgrass and Sharon are both approximately one hour from Pittsburgh and Panther Creek is just two hours away from both New York City and Philadelphia. We expect to receive full, detailed feasibility studies from our partners in Q2 for our remaining North American sites, at which point we will provide an update regarding our plans with HPC and AI. With these recent actions, we now have the properties, the internal team, and the strategic engineering and marketing advisors in place, taking a holistic approach to advancing our HPC and AI business. Turning to slide 10. Shifting gears a bit, we'll now discuss a new strategy we recently initiated, Bitcoin One. This is a continuation with a few strategic changes of our synthetic HODL program, which was launched as a pilot program in Q4 of 2023. As a reminder, that strategy involves selling Bitcoin to fund OpEx and CapEx while preserving upside to Bitcoin through long-dated Bitcoin call options for between 10 and 20% of each Bitcoin sold. This program enabled us to utilize excess Bitcoin generated each month to fund our growth at a far lower cost of capital than external or diluted funding sources while maintaining upside to Bitcoin. This program was a key source of low-cost capital, enabling superior returns and outperformance to Bitcoin. Since the program's inception in Q4 of 2023 through December 31st of 2024, it outperformed Bitcoin price, and we achieved 135% return in US dollar terms, generating a trading profit of approximately 18 million. Building off this proven success, we developed a more robust program, which we initiated in Q1, Bitcoin One. This is a quantitative investment multi-strategy program that employs a disciplined approach to Bitcoin accumulation through diversification, strategic leverage, and market timing. Bitcoin One focuses on active Bitcoin treasury management through discretionary and rules-based trading algorithms and an active managed volatility targeting program that trades crypto volatility as an asset class and harvests the risk premium that arises from that volatility. This program is positioned for the ongoing maturation of the digital asset ecosystem, providing a scalable and risk-managed solution for Bitfarms to monetize Bitcoin's volatilities. We believe that the combination of Bitcoin One and the predictable cash flow of Bitcoin from our mining operations gives us a unique advantage in both markets that enable us to drive better probabilistic returns and accumulate more Bitcoin faster and cheaper. Turning to slide 11. In summary, we've made significant progress here today and expect this momentum to continue throughout the rest of 2025. All of the strategic moves we've made in the last few months have been carefully considered and made with two main goals in mind. To grow our operations in the U.S. and to utilize our megawatts in the most value-add and cost-effective way possible, whether that be through Bitcoin mining or HPC and AI. Our key strength is acquiring and managing valuable property assets and maximizing the value of those assets through our operational excellence. I'd now like to highlight four main takeaways before I pass the call over to Jeff. First, we are now in an extremely strong position. We've completely transformed our growth pipeline over the past 15 months from Latin American energy to a cheaper, bigger, and better US-based pipeline. Second, our Bitcoin business is strong, and we remain bullish on mining economics for the mining fleet that we have. With our lower hash costs derived from our competitive energy prices and greatly improved efficiency from the fleet upgrade program, we anticipate that our Bitcoin Compute Portfolio largely de-risk the business through 2026 and should provide a strong cash flow and low capex foundation for the company as we look to diversify beyond Bitcoin mining. Importantly, with this new competitive fleet that we now operate, we have no need nor plans for a large miner purchase in 2025 or 2026, and will instead focus our efforts and capital on developing U.S. energy and HPC infrastructure. Third, we are taking a long-term view on how to best manage our energy assets. While we remain bullish on Bitcoin mining and are confident in our core business, especially in the near term, in the long term we believe