BitFuFu Inc.

Ladies and gentlemen, thank you for standing by for the BitFufu first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. After the management give their prepared remarks, there will be the question and answer session. As a reminder, today's conference has been recorded. I would now like to turn the meeting over to your host for today's call, Mr. Charlie Brady, Vice President of Investor Relations for BitFufu.

Please proceed, Mr. Brady. Thank you, Operator.

Good morning, ladies and gentlemen, and welcome to BitFufu's first quarter 2024 earnings call. The company's financial results were released earlier today and are available on the BitFufu Investor Relations website at ir.bitfufu.com, as well as on the globalnewswire.com website. Joining me today on the call are Mr. Leo Liu, Chairman and CEO, and Kyla Zhao, Financial Controller. who will both be available to take your questions in the Q&A session that follows our prepared remarks. Before we begin, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from management's current expectations. Potential risks and uncertainties include but are not limited to those outlined in the company's public filings with the SEC. The company does not undertake any obligation to provide any forward-looking statement except as required under applicable law. We will be discussing non-GAAP financial information on this call. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States, or GAAP. You can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation table provided in today's earnings release. I will now turn the call over to Leo Liu, the company's chairman and chief executive officer.

Thanks, Charlie, and welcome to BidFufu. Hello, everyone, and thank you for joining us today for our first quarter earnings call. First quarter total revenues grew significantly year over year, increasing 149% to a record $144 million. Additionally, as of March 31, 2024, Our hosting capacity increased to 644 megawatts across 29 sites on three continents, representing a 26% year-over-year increase from the first quarter of 2023. As you know, the most significant business lines for us are cloud mining solutions and self-mining operations. Let me start with cloud mining. As discussed in our last earnings call, Bitfufu's business model is differentiated from traditional self-mining companies due to our cloud mining solutions, which directly complement our self-mining operations. This business model provides several key advantages over a purely self-mining business. Cloud mining reduces the volatility of revenue created by sharp swings in the price of Bitcoin and greatly enhances our ability to generate cash flow. This is due to the fact that we pre-sell hash rate at a fixed price, thereby accelerating cash collection and providing upfront working capital to expand and scale up our operations, while also providing a hedge against the price volatility of Bitcoin by locking in revenue regardless where the price goes. according to recent data from frost and sullivan the global market for cloud mining solutions is highly concentrated with the top five players accounting for 75 of the market in terms of revenue in 2023 we believe bitfufu is the largest player in this segment with a third of the market in 2023 Bitfufu ranked first in terms of its four-year growth rate among the major global cloud mining players. Bitfufu has experienced significant growth over the past four years as the value proposition of our cloud mining services increasingly gains traction. The one-stop service we provided to customers is a more efficient and convenient way for customers to mine Bitcoin and a more profitable way for them to acquire Bitcoin at reasonable costs. During the first quarter, demand for cloud mining services continued to grow, driven in large part by the increase in the price of Bitcoin. According to Frost and Sullivan, the number of cryptocurrency holders globally has increased from 68 million in 2019 to 580 million in 2023, representing a compounded annual growth rate of over 70%. In the meantime, revenue from cloud mining solutions globally increased from $270 million in 2019 to $500 million in 2023, representing a compounded annual growth rate of almost 17%. Looking forward, the number of cryptocurrency holders globally is expected to reach 6.4 billion by 2028, representing a compounded annual growth rate of over 50% from 2023. At the same time, revenue from cloud mining solutions globally is expected to reach $1.2 billion by 2027, representing a compounded annual growth rate of around 19% from 2023. As the largest player in the global cloud mining solutions market, we are confident in our ability to continue growing revenue as we acquire more users and expand the number of miners with the strong support of our partner Bitmain. As of March 34, 2024, Bitfufu managed 28.6 exahash of mining capacity compared to 18.8 exahash on March 31, 2023, representing an increase of 52% year-over-year and accounting for 5% of the total network hash rate as of March 31, 2024. The average fleet efficiency of the miners under our management was 22.3 joules per terahash as of March 31st, 2024, compared to 26.6 joules per terahash as of March 31, 2023, reflecting our flexibility to adjust and optimize mining equipment to maximize profitability with our asset-light strategy. The approval of digital asset ETF by the SEC and SFC has significantly expanded the addressable market for digital assets and resulted in a significant increase in the price of Bitcoin. This directly contributed to growth in our self-mining operations, both in revenue and in profit in the first quarter of 2024. We continue to focus on optimizing our cost structure and capital allocation strategy to improve profitability. We continued our strategy to reduce hosting and power costs by exploring opportunities to either acquire existing facilities or build new suitable mining infrastructure in the United States and other attractive geographies. We are currently in negotiations with operators of existing mining facilities on the potential for joint ventures or acquisitions. We are also considering greenfield projects Some of these projects have made meaningful progress and are in the final stages. We rigorously evaluate every potential opportunity, meticulously assessing the risks involved in the acquisition process and subsequent operations and its environmental impact and access to renewable energy sources. Proactive measures are taken in advance to mitigate identified risks and safeguard the interests of our shareholders. we will keep the market updated on our progress and will announce any significant progress we make In our pursuit of future power supply resources and renewable energy, we have adopted a comprehensive approach that aligns with our strategic vision of reducing operational costs. Increasing revenue streams, achieving carbon neutral operations, and vertical integration, we are exploring off-grid opportunities to hedge against grid dependency and the fluctuating cost of power, which we believe is crucial for stabilizing our operations. We are particularly focused on flare gas, which remains underutilized by the industry. In the United States, there is estimated to be between 400 and 500,000 million cubic feet per day of flare gas, translating to 1,200 to 1,400 megawatts of potential power that is currently being wasted The approach which we describe as turning waste into watts converts this flare gas into power, may reducing the energy costs of miners while enhancing profitability for natural gas suppliers. We are excited to announce the launch of our first small-scale flare gas deployment in Texas in partnership with one of the region's most proactive developers. Following a successful proof of concept, we expect the project to be fully operational by the end of 2024, where it will lower our mining costs and increase our gross margins. We look forward to providing additional details on this project in the coming quarters as we drive growth across our business. We are also looking at opportunities to offer additional products and services that are conducive to the development of the industry overall. For example, we developed a mining facility management system that was initially deployed on mining facilities operated and maintained by Bitfufu and other partners. Currently, this system manages over 50,000 mining rigs. This system helps us enhance and refine miner management, including the timely detection of mining rig failures, potential risks, and the ability to directly adjust the operating mode of the machines to optimize their profitability. In the future, by providing this system to more mining facilities and partners, we believe we can increase Bitfufu's brand recognition and expand our partnerships and resources. A lot has happened since the quarter ended. In particular, the fluctuation in the price of Bitcoin and the halving The recent Bitcoin halving is a pivotal event for the entire industry. While it impacts the overall output of Bitcoin mining by reducing block rewards, we have deep industry experience and have already factored the halving into our long-term business planning. Over 88% of the mining capacity we manage comes from the S19 XP model, with an average fleet efficiency of 22.3 joules per terahash, which has a low risk of being unprofitable in this environment. We continue to look for opportunities in many emerging regions, where electricity prices are relatively low and mining rigs can move freely. In addition, we also believe that halving reinforces Bitcoin scarcity. This scarcity factor has historically supported an increase in Bitcoin prices, which helps offset the impact on profitability from lower block rewards. In summary, Bitfufu had a very strong quarter. We are actively taking steps to reduce operational costs, increase margins, and decrease our carbon footprint. Our ability to generate cash and strengthen our balance sheet ideally positions us to capitalize on growth opportunities going forward. These factors combine to form what we believe is a compelling strategy that will create long-term sustainable shareholder value. Let me turn the call over to Kella, who will cover the financial details of the quarter.

Okay. Thanks, Leo. We experienced significant growth and achieved record financial results in the first quarter of 2024. For the quarter ended March 31st, 2024, total revenue was $144 million. representing an increase of 149% from $58 million in the same period of 2023. Net income was $35.3 million, a significant increase when compared to $2.7 million in the same period of 2023. This resulted in earnings per share of 22 cents compared to 2 cents during the same period last year. Let's dig into the details. Revenue from Curve Mining Solutions was $81.5 million, an increase of 181% from $29 million in the same period of 2023. This growth was primarily due to an increase in the average selling price of cloud mining services and increase in repaid purchases from existing customers and new customers. Revenue from existing customers was $76 million and from new customers was $5.5 million, accounting for 93% and 7% of revenue from cloud mining solutions, respectively. Despite the impact from the halving in April, which will lower overall mining output going forward, we maintain a dynamic approach to our product mix to attract customers with different risk preferences in the past quarter. Another listing in early March and our commitment to upholding the highest standards of transparency and compliance significantly strengthen the trust that customers place in BitfuFu. This has directly supported our rapid acquisition of new users. Additionally, our VIP tiered management system has helped maintain a high repeat purchase rate among our existing customers. by providing customized services and marketing measures. Revenue from Bitcoin self-mining operations was $60 million, representing an increase of 117% from $27.7 million in the same period of 2023. The increase was primarily driven by the optimization of mining operations, and favorable market conditions. The average hash rate used for self-mining increased by 70% year-over-year, and the average price of Bitcoin increased by 134% year-over-year. However, growth in our self-mining capacity was partially offset by an increase in blockchain difficulty for Bitcoin mining, leading to a decrease in Bitcoin output per tera hash. Bitcoin production from our self-mining operations in the first quarter of 2024 decreased 11% to 1,106 Bitcoins from 1,239 Bitcoins in the same period of 2023. As of March 31st, 2024, total mining capacity and management was 28.6 XH, among which 26 XH were from least miners, 2.1 XH were from our self-owned miners, and 0.5 XH was from customer-hosted miners. In Q1 2024, 66% of the average daily mining capacity was used for our cloud mining solutions. with the remaining 34% used for self-mining operations. This is compared to the same period in 2023, in which 55% of the average daily mining capacity was used for our cloud mining solutions and 45% for self-mining operations. Our business strategy is to dynamically adjust and optimize the mix of cloud mining and self-mining operations over different cycles to enhance profitability, sustain growth, and increase long-term shareholder value. As a percentage of total revenue during the first quarter of 2024, cloud mining solutions accounted for approximately 56%. Bitcoin self-mining operations accounted for just under 42%. and housing services accounted for 2%. Total cost of revenue was $122.7 million, representing an increase of 121% from the same period of last year. The increase was in line with the expansion of car mining solutions and self-mining operations in the quarter. The average cost to mine Bitcoin from self-mining operations were around $39,000 per Bitcoin, representing a 76% increase from the $22,000 per Bitcoin during the same period last year. This increase was primarily due to the increase in the price of BTC, which led to higher costs for procuring hash rates or least miners. Additionally, increased blockchain difficulty also resulted in lower Bitcoin output per unit of hash rate. However, the increase in mining revenue due to the higher price of BTC more than offset increased BTC mining cost per unit. This resulted in self-mining growth margin increased to 27.6% in the first quarter of 2024. from 2.6% in the same period of 2023. Currently, we do not hold any mining facility assets and our self-owned mining equipment accounts for a relatively small proportion of the total equipment under management. As a result, around 90% of our costs during the quarter were rivaled and consisted primarily of electricity, housing, and leasing costs. This asset-like strategy typically implies higher profitability, quicker deployment, and lower costs to turn around. However, it also exposes us to risks, including increasing leasing costs due to BTC market fluctuations. and increasing electricity and hosting fee from our partner mining facilities. Going forward, we will focus on optimizing our core structure and striking the right balance between CAPEX and OPEX. The overall growth profit margin was 15%, compared with 4% in the same period of 2023. In 2023 and 2024, to attract cloud mining customers and expand our market share, we adopted a competitive pricing strategy. Due to the approval of BTC ETFs and improved market sentiment during the quarter, the price of BTC increased significantly, leading to an increase in the gross profit margin for self-mining business. to around 28%. Sales and marketing expenses were $0.4 million, flat compared to the same period in 2023. Despite the 181% year-over-year increase in revenue from Kauff Mining Solutions, the company did not increase spending on advertising and proportional activities during the quarter due to strong market demand. General and administrative expenses were $1.9 million, an increase of 111% from $0.9 million in the same period of 2023. This increase was mainly due to a $1.2 million increase in legal and other consulting expenses associated with our public listing on NASDAQ in March 2024, and other business development activities. Research and development expenses were $0.4 million, a decrease of 20% from $0.5 million in the same period of 2023, primarily due to lower payroll costs for technical and development employees. There were no impairment losses on digital assets during the quarter, compared to $1.7 million during the same period of 2023. That is because of the adoption of fair value accounting rules on digital assets. Starting from January 1, 2024, the company implemented the early adoption of FASB fair value accounting rules, ASU number 2023-8, and started to measure its digital assets by their fair value. The company recognized a revenue gain on Bitcoin of $11.8 million that has yet to realize as of March 31, 2024. Gains on sales of digital assets were $13.1 million. compared to 4.5 million during the same period of 2023. From memory, due to the increase in the warrant of Bitcoin sold and an increase in the difference between the selling price and the carrying value of Bitcoin sold in the first quarter of 2024. The remaining Bitcoin, we hope, will be retained for further potential capital appreciation reflecting the careful and strategic management of our digital asset portfolio and ability to capitalize on favorable market conditions. Net income was $35.3 million, a significant increase from $2.7 million in the same period of 2023. Adjusted EBITDA grew 431% to $49.9 million from $9.4 million in the same period of 2023. Now I'd like to discuss the strength of our balance sheet. As of March 31, 2024, we had cash, cash recurrence, and digital assets of $163.7 million. Compared with $76 million as of December 31, 2023, The increase in cash and cash occurrence were mainly due to the funds raised in connection with our business combination and listing on Nasdaq in March 2024. The increase in the balance of digital assets was due to the salary gain on Bitcoin. For the Bitcoin we obtained from our self-mining operations, we adjust our BTC holding strategy based on our working capital needs and market conditions. such as the Bitcoin price and short-term price outlook. Overall, we have adopted a relatively conservative approach. We sell a portion of our daily mining rewards on the same day to cover our hosting costs, including electricity costs. This approach ensures our cash flow remains healthy and secure. Additionally, selling daily also helps maintain an average selling price for the Bitcoin avoiding the need for sell large amounts at low Bitcoin prices to supplement cash flow. Beyond that, we hold the remaining mining profits in the form of Bitcoin, waiting for potential rise appreciation. However, we may fine-tune this strategy and could choose to purchase more Bitcoin or increase our Bitcoin sales when we have attractive financing or investment plans. Our debt-to-access ratio was 62% as of March 31, 2024. We continuously monitoring market conditions, liquidity requirements, and risk management strategies to optimize our holdings and protect the interest of our shareholders. With that, I would like to turn the call back over to the operator to begin the Q&A section.

Thank you. Thank you, dear participants.

As a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star 11 again. Please stand by, we'll compile the Q&A roster.

This will take a few moments. And now we're going to take our first question for today.

And the question comes to the line of Kevin from HC Wainwright. Your line is open. Please ask your question.

Thank you very much for having me on the call. I'm curious to hear your view of the overall environment post-having. If you could give us some insight on how you've seen power and lease costs change, and what you think your target X to hash will be for 2024.

Hello, I'm Liu, and over 88% of the computing power managed by Bitfoom comes from the S19XP model, which has a pretty efficiency of 21.5 terahash. And this is a low risk of being shut down. On the carb computing power, we have already shown the risk of profitability from the carb mining operations is more However, please note that this doesn't mean customers will necessarily incur losses after the halving event, as we have already factored in the potential impact of halving in the pricing of our cloud computing power products.

Hey, Kevin, this is Charlie. What was the other part of your question?

Well, I was wondering what your target X to hash level would be this year, and maybe you could give us some insight on the mix. I understand how revenue broke down, but it's not clear how X to hash break down, the 28.6 cloud versus self, and where you think that number goes this year.

Yeah. Currently scale our mining capacity over the next few years to capture growth opportunities while maintaining balance share strength. We expect our mining capacity to grow in a double-digit annuality over the next three years.

Okay, thank you very much.

Thank you. Now we're going to take our next question. And the question comes from Hunter Diamond from Diamond Equity.

Your line is open. Please ask your question.

Hi. Firstly, congratulations on the very strong results. My question relates to how are you looking to balance growth and profitability versus, you know, you're a profitable company, but you also want to continue expanding facilities. So how are you looking to balance those two objectives at a high level?

Yeah.

Okay, so I will take the question.

Yeah, in general, we remain confident in our growth. Yes, as mentioned, now we expect our mining capacity to grow in the double digits annually over the coming two or three years. And regarding the gross margin profit and actually affected by the fluctuation of Bitcoin prices and blockchain difficulties, which was similar to traditional miners. It's important to know that positive impact of our cloud mining solutions and our other business lines can reduce the volatility of the growth margin, especially when compared to the volatility of Bitcoin price. Our priority is to optimize the return on invested capital through prudent execution of our strategy roadmap, and we will maintain the best in adjusting our capacity expansion based on dynamic mine availability and economics.

Great. No, thank you. I appreciate the additional color and congratulations again on the results.

Thank you.

Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad. And now we're going to take our first question. The next question, my apologies. And the question comes from John Roy from Water Tower Research. Your line is open. Please ask your question.

great i wanted to talk about a little bit i know you're doing the flare effort which i commend you on out there you know galaxy is up there of course saying west texas is the best dirt for mining do you expand expect to expand significantly in west texas yes okay

Hold on, he's answering a little bit more.

A little bit more, yeah. Yes, we are venturing to flood gas operations. A strategy that they're converting to wasting to energy, aligned with our industry's move towards substantiality with initial developments planned in Texas. This initiative not only supports our environmental commitments, but also diversify our energy portfolio to ensure a stable upgrade power supply. Yeah, and by converting waste gas into valuable resources, we create additional revenue opportunities and move towards energy and self-sufficiency. Yeah, thank you.

Yeah, one more quick question.

On the broader double-digit growth over the next few years, do you expect to grow faster than the industry?

Sorry, can you repeat again?

Sure. You had mentioned double-digit growth over the next few years, and I believe you'd mentioned industry growth somewhere around 19%. Are you expecting to grow faster than the industry?

I don't think, Charlie, I don't think we want to get into specific growth rates. We said we're going to grow double digits, right? So you can factor that into whatever your market growth rate is based on that. All right, great. Thank you so much.

Excellent quarter. Thanks, guys. Thank you.

Thank you.

Now we're going to take our next question.

And the question comes from Kevin Didi from H.C. Wainwright. Your line is open. Please ask your question.

Yeah, thanks very much. Understand 29 facilities. I was wondering if you could give us sort of a range of their size from a megawatt perspective. How big are some of the large ones and how small are the small ones? And then... Maybe give us a view to the size of the flare gas pilot you're running and how large you think you could grow that to.

Yeah, we don't have information in front of us right now, but we can have Charlie follow up with you directly after the call to provide more details.

Wonderful. Thank you. Just specific to the flare gas project in Texas, it's a pilot phase program right now. So we're still in the process of collecting data. And I think we're probably putting out more information as we gather that data. So stay tuned in future quarters. And I'll circle back with you after the call to give you a more specific question about the range of the size of those various sites across the states.

Yeah. Also love to hear some insight on power costs, too. as you're digging around back there, Charlie. Appreciate it. Thank you very much, gentlemen.

Thank you.

Thank you. Dear participants, as a reminder, if you wish to ask a question today, please press star 11 on your telephone keypad.

Yes, speakers, there are no further questions for today. That does conclude our conference for today. Thank you for your participation. You may now all disconnect. Have a nice day. Thank you. Thank you. you

Ladies and gentlemen, thank you for standing by for the BitFufu first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. After the management give their prepared remarks, there will be the question and answer session. As a reminder, today's conference has been recorded. I would now like to turn the meeting over to your host for today's call, Mr. Charlie Brady, Vice President of Investor Relations for BitFufu.

Please proceed, Mr. Brady. Thank you, Operator.

Good morning, ladies and gentlemen, and welcome to BitFufu's first quarter 2024 earnings call. The company's financial results were released earlier today and are available on the BitFufu Investor Relations website at ir.bitfufu.com, as well as on the globalnewswire.com website. Joining me today on the call are Mr. Leo Liu, Chairman and CEO, and Kyla Zhao, Financial Controller. who will both be available to take your questions in the Q&A session that follows our prepared remarks. Before we begin, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from management's current expectations. Potential risks and uncertainties include but are not limited to those outlined in the company's public filings with the SEC. The company does not undertake any obligation to provide any forward-looking statement except as required under applicable law. We will be discussing non-GAAP financial information on this call. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States, or GAAP. You can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation table provided in today's earnings release. I will now turn the call over to Liu Liu, the company's chairman and chief executive officer.

Thanks, Charlie, and welcome to BidFufu. Hello, everyone, and thank you for joining us today for our first quarter earnings call. First quarter total revenues grew significantly year over year, increasing 149% to a record $144 million. Additionally, as of March 31, 2024, Our hosting capacity increased to 644 megawatts across 29 sites on three continents, representing a 26% year-over-year increase from the first quarter of 2023. As you know, the most significant business lines for us are cloud mining solutions and self-mining operations. Let me start with cloud mining. As discussed in our last earnings call, Bitfufu's business model is differentiated from traditional self-mining companies due to our cloud mining solutions, which directly complement our self-mining operations. This business model provides several key advantages over a purely self-mining business. Cloud mining reduces the volatility of revenue created by sharp swings in the price of Bitcoin and greatly enhances our ability to generate cash flow. This is due to the fact that we pre-sell hash rate at a fixed price, thereby accelerating cash collection and providing upfront working capital to expand and scale up our operations, while also providing a hedge against the price volatility of Bitcoin by locking in revenue regardless where the price goes. According to recent data from Frost and Sullivan, the global market for cloud mining solutions is highly concentrated, with the top five players accounting for 75% of the market in terms of revenue in 2023. We believe Bitfufu is the largest player in this segment, with a third of the market. In 2023, Bitfufu ranked first in terms of its four-year growth rate among the major global cloud mining players. Bitfufu has experienced significant growth over the past four years, as the value proposition of our cloud mining services increasingly gains traction. The one-stop service we provided to customers is a more efficient and convenient way for customers to mine Bitcoin and a more profitable way for them to acquire Bitcoin at reasonable costs. During the first quarter, demand for cloud mining services continued to grow, driven in large part by the increase in the price of Bitcoin. According to Frost and Sullivan, the number of cryptocurrency holders globally has increased from 68 million in 2019 to 580 million in 2023, representing a compounded annual growth rate of over 70%. In the meantime, revenue from cloud mining solutions globally increased from $270 million in 2019 to $500 million in 2023, representing a compounded annual growth rate of almost 17%. Looking forward, the number of cryptocurrency holders globally is expected to reach $6.4 billion by 2028, representing a compounded annual growth rate of over 50% from 2023. At the same time, revenue from cloud mining solutions globally is expected to reach $1.2 billion by 2027, representing a compounded annual growth rate of around 19%, from 2023 as the largest player in the global cloud mining solutions market we are confident in our ability to continue growing revenue as we acquire more users and expand the number of miners with the strong support of our partner bitmain As of March 34, 2024, Bitfufu managed 28.6 exahash of mining capacity compared to 18.8 exahash on March 31, 2023, representing an increase of 52% year-over-year and accounting for 5% of the total network hash rate as of March 31, 2024. The average fleet efficiency of the miners under our management was 22.3 joules per terahash as of March 31st, 2024, compared to 26.6 joules per terahash as of March 31, 2023, reflecting our flexibility to adjust and optimize mining equipment to maximize profitability with our asset-light strategy. The approval of digital asset ETF by the SEC and SFC has significantly expanded the addressable market for digital assets and resulted in a significant increase in the price of Bitcoin. This directly contributed to growth in our self-mining operations, both in revenue and in profit in the first quarter of 2024. We continue to focus on optimizing our cost structure and capital allocation strategy to improve profitability. We continued our strategy to reduce hosting and power costs by exploring opportunities to either acquire existing facilities or build new suitable mining infrastructure in the United States and other attractive geographies. We are currently in negotiations with operators of existing mining facilities on the potential for joint ventures or acquisitions. We are also considering greenfield projects Some of these projects have made meaningful progress and are in the final stages. We rigorously evaluate every potential opportunity, meticulously assessing the risks involved in the acquisition process and subsequent operations and its environmental impact and access to renewable energy sources. Proactive measures are taken in advance to mitigate identified risks and safeguard the interests of our shareholders. we will keep the market updated on our progress and will announce any significant progress we make In our pursuit of future power supply resources and renewable energy, we have adopted a comprehensive approach that aligns with our strategic vision of reducing operational costs. Increasing revenue streams, achieving carbon neutral operations, and vertical integration, we are exploring off-grid opportunities to hedge against grid dependency and the fluctuating cost of power, which we believe is crucial for stabilizing our operations. We are particularly focused on flare gas, which remains underutilized by the industry. In the United States, there is estimated to be between 400 and 500,000 million cubic feet per day of flare gas, translating to 1,200 to 1,400 megawatts of potential power that is currently being wasted The approach which we describe as turning waste into watts converts this flare gas into power, may reducing the energy costs of miners while enhancing profitability for natural gas suppliers. We are excited to announce the launch of our first small-scale flare gas deployment in Texas in partnership with one of the region's most proactive developers. Following a successful proof of concept, we expect the project to be fully operational by the end of 2024, where it will lower our mining costs and increase our gross margins. We look forward to providing additional details on this project in the coming quarters as we drive growth across our business. We are also looking at opportunities to offer additional products and services that are conducive to the development of the industry overall. For example, we developed a mining facility management system that was initially deployed on mining facilities operated and maintained by Bitfufu and other partners. Currently, this system manages over 50,000 mining rigs. This system helps us enhance and refine miner management, including the timely detection of mining rig failures, potential risks, and the ability to directly adjust the operating mode of the machines to optimize their profitability. In the future, by providing this system to more mining facilities and partners, we believe we can increase Bitfufu's brand recognition and expand our partnerships and resources. A lot has happened since the quarter ended. In particular, the fluctuation in the price of Bitcoin and the halving The recent Bitcoin halving is a pivotal event for the entire industry. While it impacts the overall output of Bitcoin mining by reducing block rewards, we have deep industry experience and have already factored the halving into our long-term business planning. Over 88% of the mining capacity we manage comes from the S19 XP model, with an average fleet efficiency of 22.3 joules per terahash, which has a low risk of being unprofitable in this environment. We continue to look for opportunities in many emerging regions, where electricity prices are relatively low and mining rigs can move freely. In addition, we also believe that halving reinforces Bitcoin scarcity. This scarcity factor has historically supported an increase in Bitcoin prices, which helps offset the impact on profitability from lower block rewards. In summary, Bitfufu had a very strong quarter. We are actively taking steps to reduce operational costs, increase margins, and decrease our carbon footprint. Our ability to generate cash and strengthen our balance sheet ideally positions us to capitalize on growth opportunities going forward. These factors combine to form what we believe is a compelling strategy that will create long-term sustainable shareholder value. Let me turn the call over to Kella, who will cover the financial details of the quarter.

Okay. Thanks, Leo. We experienced significant growth and achieved record financial results in the first quarter of 2024. For the quarter ended March 31st, 2024, total revenue was $144 million. representing an increase of 149% from $58 million in the same period of 2023. Net income was $35.3 million, a significant increase when compared to $2.7 million in the same period of 2023. This resulted in earnings per share of 22 cents compared to 2 cents during the same period last year. Let's dig into the details. Revenue from Curve Mining Solutions was $81.5 million, an increase of 181% from $29 million in the same period of 2023. This growth was primarily due to an increase in the average selling price of cloud mining services and increase in repaid purchases from existing customers and new customers. Revenue from existing customers was $76 million and from new customers was $5.5 million, accounting for 93% and 7% of revenue from cloud mining solutions, respectively. Despite the impact from the halving in April, which will lower overall mining output going forward, we maintain a dynamic approach to our product mix to attract customers with different risk preferences in the past quarter. Another listing in early March and our commitment to upholding the highest standards of transparency and compliance significantly strengthen the trust that customers place in BitfuFu. This has directly supported our rapid acquisition of new users. Additionally, our VIP tiered management system has helped maintain a high repeat purchase rate among our existing customers. by providing customized services and marketing measures. Revenue from Bitcoin self-mining operations was $60 million, representing an increase of 117% from $27.7 million in the same period of 2023. The increase was primarily driven by the optimization of mining operations, and favorable market conditions. The average hash rate used for self-mining increased by 70% year-over-year, and the average price of Bitcoin increased by 134% year-over-year. However, growth in our self-mining capacity was partially offset by an increase in blockchain difficulty for Bitcoin mining, leading to a decrease in Bitcoin output per tera hash. Bitcoin production from our self-mining operations in the first quarter of 2024 decreased 11% to 1,106 Bitcoins from 1,239 Bitcoins in the same period of 2023. As of March 31st, 2024, total mining capacity and management was 28.6 XH, among which 26 XH were from least miners, 2.1 XH were from our self-owned miners, and 0.5 XH was from customer-hosted miners. In Q1 2024, 66% of the average daily mining capacity was used for our cloud mining solutions. with the remaining 34% used for self-mining operations. This is compared to the same period in 2023, in which 55% of the average daily mining capacity was used for our cloud mining solutions and 45% for self-mining operations. Our business strategy is to dynamically adjust and optimize the mix of cloud mining and self-mining operations over different cycles to enhance profitability, sustain growth, and increase long-term shareholder value. As a percentage of total revenue during the first quarter of 2024, cloud mining solutions accounted for approximately 56%. Bitcoin self-mining operations accounted for just under 42%. and housing services accounted for 2%. Total cost of revenue was $122.7 million, representing an increase of 121% from the same period of last year. The increase was in line with the expansion of car mining solutions and self-mining operations in the quarter. The average cost to mine Bitcoin from self-mining operations were around $39,000 per Bitcoin, representing a 76% increase from the $22,000 per Bitcoin during the same period last year. This increase was primarily due to the increase in the price of BTC, which led to higher costs for procuring hash rates or leased miners. Additionally, increased blockchain difficulty also resulted in lower Bitcoin output per unit of hash rate. However, the increase in mining revenue due to the higher price of BTC more than offset increased BTC mining cost per unit. This resulted in self-mining growth margin increased to 27.6% in the first quarter of 2024. from 2.6% in the same period of 2023. Currently, we do not hold any mining facility assets and our self-owned mining equipment accounts for a relatively small proportion of the total equipment under management. As a result, around 90% of our costs during the quarter were rivaled and consisted primarily of electricity, housing, and leasing costs. This asset-like strategy typically implies higher profitability, quicker deployment, and lower costs to turn around. However, it also exposes us to risks, including increasing leasing costs due to BTC market fluctuations. and increasing electricity and hosting fee from our partner mining facilities. Going forward, we will focus on optimizing our core structure and striking the right balance between CAPEX and OPEX. The overall growth profit margin was 15%, compared with 4% in the same period of 2023. In 2023 and 2024, to attract cloud mining customers and expand our market share, we adopted a competitive pricing strategy. Due to the approval of BTC ETFs and improved market sentiment during the quarter, the price of BTC increased significantly, leading to an increase in the gross profit margin for self-mining business. to around 28%. Sales and marketing expenses were $0.4 million, flat compared to the same period in 2023. Despite the 181% year-over-year increase in revenue from cloud mining solutions, the company did not increase spending on advertising and proportional activities during the quarter due to strong market demand. General and administrative expenses were $1.9 million, an increase of 111% from $0.9 million in the same period of 2023. This increase was mainly due to a $1.2 million increase in legal and other consulting expenses associated with our public listing on NASDAQ in March 2024, and other business development activities. Research and development expenses were $0.4 million, a decrease of 20% from $0.5 million in the same period of 2023, primarily due to lower payroll costs for technical and development employees. There were no impairment losses on digital assets during the quarter, compared to $1.7 million during the same period of 2023. That is because of the adoption of fair value accounting rules on digital assets. Starting from January 1st, 2024, the company implemented the early adoption of FASB fair value accounting rules, ASU number 2023-8 and started to measure its digital assets by their fair value. The company recognized a revenue gain on Bitcoin of $11.8 million that has yet to realize as of March 31, 2024. Game on sales of digital assets were $13.1 million. compared to 4.5 million during the same period of 2023. From memory, due to the increase in the warrant of Bitcoin sold and an increase in the difference between the selling price and the carrying value of Bitcoin sold in the first quarter of 2024. The remaining Bitcoin, we hope, will be retained for further potential capital appreciation reflecting the careful and strategic management of our digital asset portfolio and ability to capitalize on favorable market conditions. Net income was $35.3 million, a significant increase from $2.7 million in the same period of 2023. Adjusted EBITDA grew 431% to $49.9 million from $9.4 million in the same period of 2023. Now I'd like to discuss the strength of our balance sheet. As of March 31, 2024, we had cash, cash occurrence, and digital assets of $163.7 million. Compared with $76 million as of December 31, 2023, The increase in cash and cash occurrence were mainly due to the funds raised in connection with our business combination and listing on Nasdaq in March 2024. The increase in the balance of digital assets was due to the salary gain on Bitcoin. For the Bitcoin we obtained from our self-mining operations, we adjust our BTC holding strategy based on our working capital needs and market conditions. such as the Bitcoin price and short-term price outlook. Overall, we have adopted a relatively conservative approach. We sell a portion of our daily mining rewards on the same day to cover our hosting costs, including electricity costs. This approach ensures our cash flow remains healthy and secure. Additionally, selling daily also helps maintain an average selling price for the Bitcoin avoiding the need for sell large amounts at low Bitcoin prices to supplement cash flow. Beyond that, we hold the remaining mining profits in the form of Bitcoin, waiting for potential rise appreciation. However, we may fine-tune this strategy and could choose to purchase more Bitcoin or increase our Bitcoin sales when we have attractive financing or investment plans. Our debt-to-access ratio was 62% as of March 31, 2024. We're continuously monitoring market conditions, liquidity requirements, and risk management strategies to optimize our holdings and protect the interest of our shareholders. With that, I would like to turn the call back over to the operator to begin the Q&A section. Thank you.

Thank you, dear participants.

As a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star 11 again. Please stand by, we'll compile the Q&A roster.

This will take a few moments. And now we're going to take our first question for today.

And the question comes to the line of Kevin Deed from HC Wainwright. Your line is open. Please ask your question.

Thank you very much for having me on the call. I'm curious to hear your view of the overall environment post-having. If you could give us some insight on how you've seen power and lease costs change, and what you think your target X to hash will be for 2024. Okay. Who's talking?

Hello, I'm Liu, and over 88% of the computing power managed by Bitfoom comes from the S19 XP model, which has a efficiency of 21.5 terahash. And this is a low risk of being shut down. On the cob computing power, we have already the risk of profitability from the cob mining operations is . However, please note that this doesn't mean customers will necessarily incur losses after the halving event, as we have already factored in the potential impact of halving in the pricing of our cloud computing power . Hey, Kevin.

This is Charlie. What was the other part of your question?

Well, I was wondering what your target X to hash level would be this year. And maybe you could give us some insight on the mix. I understand how revenue broke down, but it's not clear how X to hash break down. The 28.6 cloud versus self. And where do you think that number goes this year?

Yeah. We have to... Currently scale our mining capacity over the next few years to capture growth opportunities while maintaining balance to this trend. We expect our mining capacity to grow in a double-digit annuality over the next three years.

Okay, thank you very much.

Thank you. Now we're going to take our next question. And the question comes from Hunter Diamond from Diamond Equity.

Your line is open. Please ask your question.

Hi. Firstly, congratulations on the very strong results. My question relates to how are you looking to balance growth and profitability versus, you know, you're a profitable company, but you also want to continue expanding facilities. So how are you looking to balance those two objectives at a high level?

Yeah.

Okay, so I will take the question.

Yeah, in general, we remain confident in our growth. Yes, as mentioned, now we expect our mining capacity to grow in the double digits annually over the coming two or three years. And regarding the gross margin profit and actually affected by the saturation of Bitcoin prices and blockchain difficulties, which was similar to traditional miners. It's important to know that positive impact of our cloud mining solutions and our other business lines can reduce the volatility of the growth margin, especially when compared to the volatility of Bitcoin price. Our priority is to optimize the return on invested capital through prudent execution of our strategy roadmap, and we will maintain the best in adjusting our capacity expansion based on dynamic mine availability and economics.

Great. No, thank you. I appreciate the additional color and congratulations again on the results.

Thank you.

Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad. And now we're going to take our first question. The next question, my apologies. And the question comes from John Roy from Water Tower Research. Your line is open. Please ask your question.

Great. I wanted to talk about a little bit. I know you're doing the flare effort, which I commend you on out there. You know, Galaxy is up there, of course, saying West Texas is the best dirt for mining. Do you expect to expand significantly in West Texas?

Yes.

Okay. Yeah. So you would mention – hold on. He's answering a little bit more.

A little bit more. Yeah. Yes. We are venturing to flood gas operations. Yeah. On strategies that they're converting to energy, aligning with our industry's move towards substantiality with initial developments planned in Texas 2020. This initiative not only supports our environmental commitments, but also diversifies our energy portfolio to ensure a stable off-grid power supply. By converting waste gas into valuable resources, we create additional revenue opportunities and move towards energy and self-sufficiency. Thank you.

Yeah, one more quick question.

On the broader double-digit growth over the next few years, do you expect to grow faster than the industry?

Sorry, can you repeat again?

Sure.

You had mentioned double-digit growth over the next few years, and I believe you'd mentioned industry growth somewhere around 19%. Are you expecting to grow faster than the industry?

I don't think, Charlie, I don't think we want to get into specific growth rates. We said we're going to grow double digits, right? So you can factor that into whatever your market growth rate is based on that. All right, great.

Thank you so much. Excellent quarter. Thanks, guys. Thank you.

Thank you.

Now we're going to take our next question.

And the question comes from Kevin Didi from H.C. Wainwright. Your line is open. Please ask a question.

Yeah, thanks very much. Understand 29 facilities. I was wondering if you could give us sort of a range of their size from a megawatt perspective. How big are some of the large ones and how small are the small ones? And then... Maybe give us a view to the size of the flare gas pilot you're running and how large you think you could grow that to.

Yeah, we don't have information in front of us right now, but we can have Charlie follow up with you directly after the call to provide more details.

Wonderful. Thank you. Just specific to the flare gas project in Texas, it's a pilot phase program right now. So we're still in the process of collecting data. And I think we're probably putting out more information as we gather that data. So stay tuned in future quarters. And I'll circle back with you after the call to give you a more specific question about the range of the size of those various sites across the states.

Yeah. Also love to hear some insight on power costs, too. as you're digging around back there, Charlie. Appreciate it. Thank you very much, gentlemen. Thank you.

Thank you.

Yes, speakers, there are no further questions for today. That does conclude our conference for today. Thank you for your participation. You may now all disconnect.

Have a nice day.