BitFuFu Inc.

Good day and thank you for standing by. Welcome to the Bitfufu INC's second 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. I would now like to hand the conference over to your speaker today, Charlie Brady. Please go ahead.

Thank you, Operator. Good morning, ladies and gentlemen, and welcome to Bitfufu's second 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 Leo Liu, Chairman and CEO, and Khalilzau, Chief Financial Officer. 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, and the 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 the 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 update any forward-looking statement except as required under applicable law. We were 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 tables provided in today's earnings release. One final note, due to some time constraints, we will not be conducting a Q&A this quarter. However, questions can be emailed to ir at bitfufu.com, and we will respond as quickly as possible, generally within 24 hours. I will now turn the call over to Leo Liu, the company's chairman and chief executive officer.

Good morning, everyone. Thank you for joining us today to discuss Bitfufu's operational and financial results for the second quarter of 2024. I'm pleased to share that we have once again demonstrated our ability to deliver strong financial and operational performance, even in the face of a dynamic and challenging market environment. Let me begin by providing an overview of our second quarter results. Total revenue for the quarter came in at $129.4 million, representing a 70% increase year over year. This growth was driven by strength in both our cloud mining and self-mining operations. Our cloud mining solutions have been a standout performer this quarter. Cloud mining revenue reached $76.3 million in the second quarter. up 67% from $46.2 million in the same period of 2023. The number of registered users on our cloud mining platform increased to over 395,000 by the end of June. an 87% increase compared to the same period last year. This significant growth in our user base is a testament to the value proposition that our cloud mining services offer to both individual and institutional investors. by providing a seamless and efficient way to participate in Bitcoin mining. We are maintaining our leadership position and capturing additional share of the global cloud mining market, which continues to grow. The current composition of our users consists of individual customers and institutional customers. majority of which are individual customers in terms of quantity. There are sophisticated customers with extensive mining experience, high net worth individuals, family offices, private equity funds, cryptocurrency exchanges, and some publicly listed companies that wish to invest in and hold Bitcoin. However, in terms of revenue contribution, Institutional customers contribute the majority of our cloud mining revenue because their average contract amount may be 10 to even 100 times larger than that of individual customers. in the future the growth of our cloud mining customer base will primarily come from increasing our outreach in low penetration countries and regions additionally we aim to attract more users who are interested in bitcoin mining by offering products that are easier to understand and cater to customers With different risk preferences, we are enabling more people to participate in mining activities. In addition to the expansion of customer base, which is increasingly turning to our platform as a trusted and reliable partner in the digital asset space, the strength of our customer relationships is reflected in our net dollar retention rate, which stood at 103% for the quarter. This metric highlights the loyalty of our customers and their ongoing engagement with our platform. As our cloud mining platform continues to scale with an expanding user base, we are increasingly positioned to unlock new opportunities within the digital currency ecosystem. This growth enables us to strategically explore and introduce additional products and services that can diversify and strengthen our revenue streams. We are actively evaluating potential avenues to enhance our offerings and drive long-term value for our shareholders. Moving on to our self mining operations, we also saw substantial growth in this area. with revenue increasing 81% year-over-year to $51.1 million. This increase was largely driven by a significant rise in the average price of Bitcoin and the expansion of our mining capacity, partially offset by increased blockchain difficulty and the recent halving event. It's important to note that while our Bitcoin production from self-mining operations decreased by 23% to 780 Bitcoins, this was an anticipated outcome due to the impact of halving. That was already factored into our internal forecasts and long-term strategy. We recognize that following the April halving event, investors may be focused on operational performance and profitability post-halving. Mining companies, including our competitors, face the impact of reduced mining rewards and the recent Bitcoin price decline. Should the price of Bitcoin remain at the current level without increasing, profit margins in the mining space will be significantly pressured. In response, we have implemented several measures to reduce costs and improve profit margins. First, technological leadership has always been a competitive advantage for Bitfufu. Since April, we have applied technology to overclock the hash rate of our ASIC mining machines. For air cooled machines, overclocking can increase computing power by 10% to 30% over the theoretical mining capacity of a mining machine. Importantly, it is worth noting that we have the ability to provide this technical service to other miners and charge a portion of the mining output as technical service income, which could be a future source of revenue for us. Second, the mining facility management system we developed has helped us improve the management efficiency of our cell phone mining machines and leased mining machines, as well as that of our partners, Currently, this software is being used to manage approximately 400,000 machines and has the ability to scale significantly higher. Third, we have strategically adjusted the operating mode of our mining machines in certain facilities where electricity and hosting fees are higher. This adjustment has allowed us to enhance fleet efficiency and reduce electricity costs. While this decision did lead to a temporary reduction in the operating mining capacity of these machines, it resulted in an improvement in their gross profit margin. Fourth, as part of our strategy to manage costs, a floating price mechanism was implemented in our hosting contracts with certain mining facilities. This allows us to adjust costs in line with Bitcoin price fluctuations, reducing expenses and ensuring profitability during periods of lower Bitcoin prices. Additionally, we are actively exploring mining facilities globally that offer lower electricity costs and are confident that we will soon finalize some agreements. Finally, given our long-term bullish outlook on Bitcoin, we are taking advantage of the current downturn in Bitcoin pricing to secure lower cost. Long-term computing power. Specifically, We intend to sign a two-year purchase agreement for computing capacity, enabling us to lock in a portion of our mining costs over the next two years. In terms of our operational metrics, our total mining capacity under management grew by 63% to 24.7 XA hash as of June 30th, 2024. Compared to the second quarter of 2023, this significant expansion is a clear indication of our ongoing commitment to scaling our operations and enhancing our market presence. Similarly, our hosting capacity increased year over year by 40% to 522 megawatt. underscoring our position as a leading player in the digital asset mining industry. On a sequential basis, total mining capacity under management and hosting capacity declined from the first quarter of 2024 This temporary decline was the result of our deliberate decision to decrease our leasing of mining machines and purchasing of computing power in order to minimize the uncertain impacts. Following the Bitcoin halving, this approach is consistent with the strategy we employed in the second and third quarters of 2023. where similar temporary reduction in our mining capacity. Under management was followed by recovery and growth in the fourth quarter, One of the key highlights of the quarter was the continued improvement in our fleet efficiency. For the eighth consecutive quarter, we made strides in optimizing our operations with our average fleet efficiency reaching 21.1 joules per terahash. This improvement is a direct result of our ongoing investments in technology and our continuous focus on operational excellence. by steadily enhancing the efficiency of our mining fleet. We are able to reduce our cost per unit of Bitcoin mined, which in turn supports our profitability and long-term sustainability. As we look ahead to the next six to 12 months, we remain confident in our ability to continue growing our mining and hosting capacity. However, similar to our approach in the second quarter, any decisions regarding additional mining capacity will be driven by our profitability forecasts. Our business model's inherent flexibility, whether by increasing or reducing purchases of computing power, matching short-term and long-term procurements, or optimizing the mix between cloud mining and self-mining computing power enables us to sustain growth and profitability in a complex and volatile market environment. That said, considering that total revenue of $274 million in the first half of 2024 nearly matches our full year revenue for 2023. And with combined Q1 and Q2 adjusted EBITDA reaching $58 million, we expect substantial growth in both revenue and adjusted EBITDA in 2024 compared to 2023. Our strategy of acquiring or building our own mining farms is progressing well, and we believe this will be a key driver of our future growth. We are currently evaluating several opportunities in regions with favorable energy costs and regulatory environments, which we believe will provide us with the competitive advantage needed to succeed in this highly competitive industry. HPC and AI data centers present a compelling growth prospect. We are carefully evaluating potential opportunities given the significant capital expenditures required to enter the market. Our focus is on identifying the right strategy and entry point to ensure that even with the significant costs, we can achieve healthy profit margins. In conclusion, the second quarter of 2024 was another period of strong performance for Bitfufu. We delivered solid financial results, made significant progress in expanding our operational capacity, and continued to enhance our efficiency and profitability. As we move forward, we remain focused on executing our growth strategy, optimizing our operations, and delivering long-term value to our shareholders. With that, I'll now turn the call over to our CFO, Kala.