Gryphon Digital Mining, Inc

Greetings and welcome to the Griffin Digital Mining first quarter 2024 earnings call. On the call are Rob Chang, Chief Executive Officer of the company and Sim Salzman, Chief Financial Officer of the company. Before I turn the call over to Mr. Chang, please note that statements made on this call that are not historical facts may be forward-looking statements from the Companies Management made within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended, concerning future events. Words such as may, should, projects, expects, intends, plans, believes, anticipates, hopes, estimates, and variations of such words and similar expressions are intended to identify forward-looking statements. These statements are subject to numerous conditions, many of which are beyond the control of the company, including those set forth in the risk factors section of the company's Form 10-Q for the quarter ended March 31, 2024, filed with the SEC. Copies of these documents are available on the SEC's website at www.sec.gov. Actual results may differ materially from those expressed or implied by such forward-looking statements. Any forward-looking statements made on this call are made only as of today's date, and the company does not undertake any obligation to update or supplement any such statements to reflect subsequent developments. Now, I would like to turn the call over to Rob Chang, CEO of Griffin Digital Mining. Rob, please proceed.

Thank you, Operator, and thank you, everyone, for joining us today to discuss Griffin Digital Mining's first quarter of 2024 results. In Q1, we continue to execute our mission of creating a financially nimble, highly profitable, and environmentally responsible Bitcoin mining operation. I am pleased to highlight that we have successfully completed our miner upgrade program ahead of schedule. This strategic initiative is expected to significantly enhance our operational efficiency and strengthen our competitive position in the market. As part of this program, we have deployed the previously announced batch of Bitmain S21 200 terahash per second miners, which were procured to replace a portion of our older fleet. The integration of these cutting edge machines is projected to contribute an additional 23 petahashes per second to our hashing power, while simultaneously improving our average fleet efficiency to an impressive 28.5 joules per terahash. As a result of these upgrades, Griffin's self-mining hash rate has now reached a capacity of approximately 0.94 exahashes per second, showcasing our unwavering commitment to maintaining a robust and efficient mining operation. We are confident that these enhancements will position us for continued success and growth in the dynamic Bitcoin mining industry. This upgrade is also a notable first step towards our aspirational target of achieving 10x hash in an accretive manner as we look to transition from a smaller player to a significant industry presence through accretive growth. Moreover, our focus on operational efficiency resulted in a Q1 breakeven cost for Bitcoin of approximately $34,000 compared to $23,800 in Q4 2023. Over the last 12 months, our average cost for Bitcoin was about $22,500 per Bitcoin. As a reminder, we define breakeven as the cost of revenues, excluding depreciation, divided by the total Bitcoin generated. We believe this industry-leading cost structure positions us to weather Bitcoin price volatility and maintain profitability, even in challenging environments. During the quarter, we remained focused on opportunities to grow our hash rate in a highly accretive manner. We actively focused on private Bitcoin mining companies that are struggling post-having due to lack of capital on the scale. These carbon neutral miners in safe jurisdictions are prime M&A targets for us. By merging into our public vehicle, they can access the capital markets while any equity we issue would be highly accretive given our relative valuations. I want to emphasize that any growth we pursue will be done in an accretive manner. We will not issue equity simply for the sake of increasing hash rate without accounting for the cost to do so. At this time, we have not entered into any binding LOIs with potential targets. Additionally, I'm pleased to highlight that our board of directors recently authorized the share buyback program, allowing for the repurchase of up to 5 million of Griffin's common stock. This strategic move underscores our ongoing commitment to enhancing shareholder value and demonstrates the board and management team's confidence in Griffin's strategy. In an industry where share sales are common, Griffin is showing that share capital management goes both ways. The Bitcoin halving event has been a key theme impacting the industry and our business. With mining rewards cut in half as of mid-April, mining operations that were ill-prepared are now at a crossroads. We expect this reckoning event to lead to further industry consolidation that rational operators like Griffin can take advantage of. We believe our low-cost structure positions us to be a consolidator and emerge stronger on the other side of this industry shakeout. I'll now turn it over to Sim to review our financial results before closing with some additional remarks. Sim?

Thank you, Rob. I will now highlight our financial results for the quarter ended March 31st, 2024. Griffin mined approximately 142 Bitcoin, generating mining revenues of $7.5 million in Q1 2024 compared to $4.8 million in the same period in the prior year. Breakeven costs in Q1 2024 were approximately $34,000 compared to $23,800 in Q4 2023. The increase in breakeven costs quarter over quarter reflect the direct correlation in the increases in pass-through electrical rates, mining difficulty, and global hash rate over that same period. For the three-month period ending March 31, 2024 and March 31, 2023, the company incurred pass-through variable energy costs of 4.6 cents per kilowatt hour and 3.1 cents per kilowatt hour, respectively, an increase of 46%. In addition, the daily average global hash rate increased 88% over that same period. On a per kilowatt basis, this translates into a cost of approximately $0.08 for Q1 2024. Please note that over that same period, Bitcoin's price increased from $22,830 to $52,746, or 131%, resulting in increased profitability for each Bitcoin mined. We believe break-even costs and total cash costs at the mine level are the most relevant metrics for assessing Bitcoin mining operations. Highlighting these metrics gives investors and analysts better transparency for comparative analysis across mining companies. Turning to our results of our consolidated statements of operations, Our net loss incurred during Q1 2024 of $11.7 million included net non-cash expenses of $11.6 million inclusive of depreciation expense of $3.2 million, stock-based compensation expense of $208,000, unrealized losses on marketable securities of $216,000, changes in fair value of the Bitcoin denominated note payable of $9.6 million, offset by unrealized gains on digital assets of $1.7 million. This compares to a net loss of $6.9 million in the quarter ended March 31st, 2023, which included net non-cash expenses of $11 million, inclusive of depreciation expense of $4 million, changes in fair value of the Bitcoin denominated note payable of $8.2 million, offset by unrealized gains on marketable securities of $63,000, and stock-based compensation benefit of $1.2 million. Our adjusted EBITDA, a critical gauge of our operational effectiveness and financial well-being, stood at approximately $1.9 million for the quarter ended March 31, 2024, compared to $4.2 million for the quarter ended March 31, 2023. This metric signifies not only our profitability, but also our capacity to produce substantial cash flow while dedicating resources to fuel future expansion. Net loss per basic and diluted share for Q1, 2024 was 36 cents based on basic and diluted weighted average shares outstanding of approximately 32.4 million. This compares to net loss per basic share of Q1, 2023 of 28 cents. Weighted average shares outstanding of approximately 24.9 million. Our average efficiency for our active fleet of approximately 8,700 Bitcoin mining machines was 28.9 jewels per terahash as of March 31st, 2024. Since then, we have deployed a batch of newer generation mining machines and have improved the fleet efficiency to 28.5 joules per terahash. As of March 31st, 2024, our balance sheet reports approximately 1.7 million of cash and cash equivalents, 4.2 million in Bitcoin, and approximately 23 million due for the note denominated in Bitcoin. As of December 31st, 2023, our balance sheet reported approximately 0.9 million in cash and cash equivalents, 2.1 million in Bitcoin, and $14.9 million due for the loan payable. We would like to note that the increase in the debt presented as of March 31st, 2024 is due to its structure being denominated in Bitcoin and as such reflects a direct correlation to the price of Bitcoin as the period end. We have not increased our position of Bitcoin due and we remain fully hedged to our production. To reiterate Rob's comments, we remain laser focused on pursuing growth in a financially disciplined, creative manner. With that, I'll turn it back to Rob to discuss Griffin's 2024 strategy.