Bit Digital, Inc.

Hello and welcome to the BitDigital first quarter 2025 earnings conference call. Good morning, good afternoon, and good evening, depending on where you are joining us from. Thank you for being here. We are just giving a few more moments for attendees to dial in, so thank you for your patience. While we wait, please note that during this call, all participant lines will be in listen-only mode. Following the officer's updates, we will open the floor for a question and answer session. If you have a question at that time, simply press star 1 on your telephone keypad. Also, as a reminder, today's conference is being recorded. I'll now hand it over to your host, Cameron Schneer, head of investor relations at BitDigital. Cameron, the floor is yours.

Thank you. Good morning and welcome to the BitDigital first quarter 2025 earnings call. Joining us on the call today are Sam Tabar, Chief Executive Officer, and Eric Long, 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 our results to differ materially from those projected in these statements. I therefore refer you to yesterday's 10-K filing and our other SEC filings. Our comments today may also include non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures can be found in our 10-K filing, which is on our website. After our prepared remarks, we will open the call up for questions. If you would like to ask a question, please hit star 1 on your keypad. With that covered, I will turn the call over to Sam to discuss our performance. Sam?

Sam Rothenberg Thank you, Cam. Ladies and gentlemen, thank you for joining us on the call today. Today, I'll walk through our first quarter results and provide key updates across the different business units at BitDigital. Let's start with the mining business. Our overall top line results were dragged down by our mining segment, where first quarter 2025 revenue decreased 64% year over year and 26% sequentially. This contrasts greatly with our HPC business lines, which demonstrated solid growth. Mining results were affected by the 2024 halving event and by our fleet redeployment program as we exited coinment facilities at the end of 2024. These factors contributed to an 80% year-over-year decline in production to 83 Bitcoins for the quarter. Despite the lower production, our mining operations remained gross margin positive. Mining margins expanded approximately 500 basis points sequentially to 21%, reflecting improvements in fleet efficiency and cost structure. Our active hash rate stood at approximately 1.5 exahash by the end of March 2025, and fleet efficiency was approximately 24.5 joules per terahash. We had a shipment of previously ordered S-21 miners from Southeast Asia that we paused amid tariff uncertainty, as the prescribed import duties would have significantly increased payback periods. But we have since begun taking delivery of those units and expect to return to approximately 2.5 exahash with fleet efficiency in the low 20s during June. Mining represented just 31% of our total revenue for the quarter, compared to 72% in the same period last year. This shift reflects both the growth of our HPC business and the reality that without heavy reinvestment, mining market share naturally declines. And we are fine with that. While our hash rate stands to rebound in the second quarter, our primary focus remains on investing in our data center build-out and cloud services business. Turning to cloud services. Revenue for the segment increased 84% year-over-year and 14% sequentially to $14.8 million. Gross margins rebounded, expanding approximately 700 bps sequentially to 59%. We continue to expect segment margins to improve over time as revenue scales and as the impact from operating lease costs tied to our anchor customer contract is spread across a broader base. Based on our current contracted deployments, we expect stronger sequential revenue growth in the second quarter and continued growth in the third quarter of 2025. Several deployments commenced midway through the first quarter, so we expect a recognition of full quarter of revenue contribution in the second quarter. Additionally, our initial deployment for a DNA fund, a 576 H200 cluster, began generating revenue in April and represents approximately $10 million in annualized revenue. In May, we expanded our relationship with DNA Fund through two new contracts totaling 616 H200 GPUs under two-year terms, representing approximately $10.8 million of additional annualized revenue. The expansion with this customer reflects our strategy of building trust through execution and using that as the foundation for expanding relationships over time. Our procurement strategy remains focused on aligning GPU purchases with contracted demand rather than taking speculative inventory risk. We are effectively sold out of H200 capacity and have prioritized deployments backed by secured contracts. While overall demand for B200 GPUs remains healthy, uptake through our on-demand distribution partnership with Shadeform has been impacted by hardware reliability issues. We believe the crux of that issue is tied to the early iterations of servers we received and we're working with the OEM to address that issue. We expect this dynamic to improve over time as early hardware issues are hopefully resolved. We are currently marketing this cluster to customers for a multi-year contract. Separately, our anchor customer exercised their right to adjust the start date on their 464 B200 deployment from June 30th to August 20th, the latest allowable date under the agreement. As a result, this contract represents approximately $15 million of annualized revenue for 18 months. If we don't secure an acceptable customer contract for our existing B200 cluster, we will likely use those GPUs to fulfill our anchor customer contract. We continue to prioritize securing multi-year deployments with creditworthy counterparties as the foundation for our growth strategy. Looking ahead, We're engaged in several large contract discussions with a focus on securing multi-year agreements that are financeable and aligned with our capital efficiency objectives. Currently, we are conducting diligence and negotiating on four separate deployments with credit worthy counterparties. Each opportunity carries an annualized revenue potential above 100 million and a three to five year contract term. these are the types of contracts that we believe would support attractive financing structures and we're working on those financing options in parallel with negotiations it's too early to say whether we'll ultimately win any of those deals but we're encouraged by the progress and the fact that we're increasingly included in these processes we believe this reflects the strength of the platform that we've built and are continuing to build through disciplined investment and execution. Finally, we are investing in proprietary software development to enhance our platform capabilities. A key milestone was the launch of our API layer for external provisioning of bare metal GPU servers, with Shadeform as our first integration partner. This development not only expands our ability to integrate with third-party platforms, but also streamlines operations for our direct customers. Over time, we expect that this will position WhiteFiber as a premium cloud infrastructure offering focused on maximum performance and reliability.