Bit Digital, Inc.

Hello, and welcome to the BIT Digital Third Quarter 2024 Earnings Conference Call. Good morning, good afternoon, and good evening, depending on where you are joining us from. Thank you for being here. We're just giving a few more moments for attendees to dial in, so thank you for your patience. While we wait, please note that during the call, all participant lines will be listen-only mode. Following the officer's update, we will be open the floor for a question and answer session. If you have a question at that time, please simply press star 1 on your telephone keypad. Also, as a reminder, today's conference is being recorded. I'll now hand the call over to your host, Cameron Schneier, Head of Investor Relations at BitDigital. Cameron, the floor is yours.

Thank you. Good morning and welcome to the BIT Digital third quarter 2024 earnings call. Joining us on the call today are Sam Tabar, Chief Executive Officer, and Eric Wong, Chief Financial Officer. Before we begin, I would like to remind all participants that some of the statements we will be making today are forward-looking. These matters involve risks and uncertainties that could cause the results to differ materially from those projected in these statements. I therefore refer you to our latest 20F filing, yesterday's 6-K filing and our other SEC filings. Our comments today may also include non-GAAP financial measures. Additional details and reconciliation in the most directly comparable GAAP financial measures can be found in our 20-F filing and today's 6-K filing, which are on our website. After our prepared remarks, we'll open the call up for questions. If you would like to ask a question, please hit star 1 on your keypad. With that important note covered, I will now turn the call over to Sam to discuss our performance. Sam?

Sam Rothman Thank you, Cam. Ladies and gentlemen, thank you for joining us on the call today. Today, I will dive into our third quarter results, discuss some ongoing strategic initiatives, and provide some color on what we envision as the future for BitDigital. Eric will then provide more detail on our financial results, and then we will open the line for your questions. The third quarter of 2024 and the last 12 months have evolved around laying the foundation for the future of BitDigital. We've embraced a completely different mindset than when we previously had when we were strictly a Bitcoin miner. We now make decisions that we think will bear fruit over a longer timeline. We prefer this mindset over the near-term fixation and macro sensitivity inherent to Bitcoin mining decisions. In October, we announced the acquisition of Enabem, an owner, operator, and developer of high-performance computing data centers for approximately $46 million. This was a transformational deal for BidDigital. Why? Because the transaction vertically integrated our HPC operations with an existing, fully operational, and fully leased Tier 3 data center in a major city. We added co-location as the new business and revenue line. We also added a strong mix of existing and prospective customers. Further, we gained a strong pipeline of expansion site opportunities and an extremely experienced team with a proven track record to lead the development process. The benefit of adding a highly experienced team cannot be understated. Developing Tier 3 data centers was not a skill we possessed in-house. We solved this gap through M&A and now we have what we believe to be one of the best data center teams in the world. This is a huge advantage in terms of accelerating our time to market. The Aniven team is adept at bringing new sites online in an accelerated timeline. We are pushing forward with our development pipeline and expect to be able to add 8 megawatts by 2Q 2025 and reach a total of 32 megawatts by the end of the year. We will likely dedicate a portion of the near-term megawatts to bit digital GPUs. Our pipeline remains strong. We are conducting diligence on a location that has the potential to reach 40 megawatts by mid-2025, and an additional 100 megawatts in around 18 months. We're currently evaluating the viability of being able to bring this site online to meet a specific customer's timeline, and we will only pursue this project with a firm customer commitment and our own assurance that we can satisfy the timeline. we have seen around 90 megawatts of incremental customer demand since our initial end of the announcement last month. The demand is spread across five to six clients with various timelines. Right now, we are seeing that deployment time is the key factor in turning indications of demand into firm commitments. We are in the final stages of securing the real estate for our 2Q25 deployment and beginning to place equipment orders to meet that timeline. I'll now move to our GPU cloud business. We announced a term sheet with Goosteroid, the third largest cloud gaming provider in the world, on our last earnings call. Since then, we've executed an MSA and we've placed an initial order for about 300 GPUs. These GPUs are in the process of being delivered to data centers in the U.S., and we expect revenue generation to begin by the end of this month. This is just the starting quantity of GPUs. It is smaller than the initial quantity that we outlined, as this deployment does not include the GPUs to be delivered to European data centers, though we expect that deployment to begin in the near term. Overall, we now expect our deployment with Boosteroid to reach around 10,000 GPUs through the course of 2025. The deployment cadence should be gradual, though there may be some lumpiness depending on the size of search and purchase orders. We are extremely proud to formally begin our relationship with Boosteroid, and we look forward to going alongside them in the years to come. Moving to what we refer to as our anchor customer, recall that we currently have a contract with this customer to deploy an additional 2,000 H100s, but we disclosed that our customer is considering upgrading the contract for newer generation NVIDIA chips. While nothing has yet been formalized, we expect our customer will likely upgrade the contract for Blackwells. Based on our conversations with NVIDIA and OEMs, we are confident in receiving a relatively early allocation of B200s and GB200s. At this stage, timing for starting the next tranche of the contract is subject to when we will be able to receive those chips. We don't have much greater visibility beyond publicly available information from NVIDIA. We do think that 2Q25 is a decent bet when we'd be able to receive the Blackwell chips. We made significant hires during the third quarter and beyond. Our GPU cloud business is now run by a world-class team. We hired an extremely experienced and proven head of revenue and an extremely experienced and proven CTO and multiple new hires on the engineering and business development side for the respective business and technology teams. Our collective intelligence in the HPC industry has gone up exponentially. This is particularly beneficial given that the GPU as a service market has become more competitive since the end of 2023 when we launched this business. In the current market, It's become increasingly difficult to pre-sell GPU capacity, similar to what we did with our first customer. The supply of H100s in the market has increased and it has become more challenging to win deals without an available inventory on hand. The sales cycle has compressed from months to weeks in some cases. We are evaluating pre-ordering more GPUs prior to having them contracted to better compete for the types of customers where deployment speed is the key determinant. However, we are more inclined to build inventories of the newest GPU models to reduce the risk of absolutes. We are currently in the queue for GB200s and B200s. Our pipeline has continued to grow in tandem with the institutionalization of our sales process. We are now actively vetting and negotiating anywhere between five to 10 deals at any given time. The pipeline is dynamic in the current market. We have passed on various deals based on pricing or certain customer nuances and missed out on different deals due to not being able to meet deployment timelines. We have several deals that are being finalized. Last week, we signed term sheets with two new customers and executed an MSA and purchase order with a third new customer. The MSA pertains to 64 GPU deployment that commenced last week on a month-to-month contract worth about $1.2 million of annualized revenue. We fulfilled that deployment using GPUs we had on inventory, having purchased 42 H200s or 336 GPU cards in October for around $9.7 million. And another new customer term sheet is for 576 H-200s for a 12-month period representing $10 million of revenue. And another term sheet provides yet another new customer that provides for 512 H-200s over a period of at least six months representing $5 million of revenue over the initial six-month term. The MSA has been executed with this client and an initial two-server purchase order was executed, and those units have begun earning revenue. The remainder of this deployment is expected prior to year end. We are also actively negotiating several other deals that have the potential... Pardon me. We are also actively negotiating several other deals that have the potential to begin generating revenue by year end. In aggregate, we remain confident in hitting our $100 million run rate revenue target for our HPC business by year end 2024.