LM Funding America, Inc.

Good day and thank you for standing by. Welcome to the LM Funding America's Inc. First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Cody Fletcher of Investor Relations. Please go ahead.

Thank you, Operator, and thank you all for joining LM Funding America's first quarter 2025 earnings conference call. Joining us today are Chairman and CEO Bruce Rogers, President of U.S. Digital Mining Ryan Duran, and CFO Richard Russell. For today's call, we have uploaded an accompanying supplemental investor presentation, which can be found under the events section of LM Funding's investor relations website. Before we get started, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. We will also reference certain non-GAAP financial measures today. Please refer to our 10-Q filing and our website for a full reconciliation of these non-GAAP performance measures to the most comparable GAAP measures. For a comprehensive discussion of these and other risks, please refer to our filings with the SEC available on sec.gov and in the investor section of our website at www.lmfunding.com backslash investors. I will now turn the call over to our CEO, Bruce Rogers. Bruce.

Thanks, Cody. Good morning and thank you for joining us today. The first quarter of 2025 marked another period of strong execution and strategic progress for LM funding. Since entering the Bitcoin mining business in 2021, we have transitioned from an asset-light model to a vertically integrated operator, gaining full control of our fleet, improving margins, and reducing operational risks. We mined 24.3 Bitcoin for the quarter, continuing to scale our production capabilities while improving our operational efficiency. In parallel, we've begun monetizing our curtailment energy sales, by selling energy back to the grid during periods of peak demand, creating a natural hedge against Bitcoin price volatility and further reducing our cost of operations. Our disciplined approach to cost management also drove a meaningful reduction in operating expenses as we continue to build a leaner, more agile, vertically integrated business without compromising performance. Rick will cover this in more detail shortly. We're seeing progress in margin improvements and cost control, furthering our discipline growth strategy. Finally, we again call attention to the disparity between the value of our Bitcoin held versus our market cap. On April 30th, we held 148.7 Bitcoin. Given a market price of $104,000 per Bitcoin, our Bitcoin holdings will be worth $15.5 million or approximately $3.01 per share when our stock is trading at $1.87 as of May 13th close. I'll now turn the call over to Ryan Duran, our president of U.S. Digital Mining, to review our operational highlights in more detail. Ryan?

Thank you, Bruce. In the first quarter, we focused on maximizing the operational efficiency of our existing infrastructure while targeting strategic growth opportunities. We achieved 560 petahash at the end of March, deployed LUXOS upgrades across our Oklahoma fleet, and executed our first power sales back to the grid. In May, we ordered two 1-megawatt immersion mining containers for our previously announced 2-megawatt expansion of our Oklahoma site. We expect to complete construction and energization by the end of third quarter, pending international shipping timelines. We believe the shift to immersion cooling marks a meaningful advancement in our operational strategy. This technology will allow us to operate in crowded and harsh environments that offer access to lower-cost power. Immersion technology reduces dust, heat, and humidity, leading to more consistent performance with longer equipment lifespan and improved reliability. We expect immersion technology to expand our operational horizons and add shareholder value. Our shift to immersion cooling led to the strategic decision to sell the 256 Bitmain S21 Plus machines ordered last December and delivered this April. Machine prices have been relatively stable throughout this period, so we anticipate this transaction to be cash neutral. Lastly, as mentioned in our April production update, we began relocating our 800 machines from our hosting partner site to our wholly owned Oklahoma site. Once installed, these machines will operate with lower power costs, enabling us to mine Bitcoin more cost-effectively. Our CFO, Rick Russell, will now provide a review of the financial highlights for the first quarter of 2025. Rick?

Thank you, Ryan. In the first quarter of 2025, we mined 24.3 Bitcoins at an average price of $93,500, which was 12% more Bitcoin mined sequentially. Bitcoin mining revenue for the quarter was approximately $2.3 million, up 25% sequentially, reflecting the success of our infrastructure investments and improved machine efficiency from the LUX OS upgrades. Year-over-year, revenue declined 50.5% largely due to the impact of the April 2024 heavy. Additionally, we have made significant strides in our operational strategy. As Bruce mentioned, during the first quarter, we generated approximately $150,000 from power cells back to the grid offsetting our mining costs of revenue. This contributed to an improvement in mining margins from 31.2% in Q4 2024 to 38.5% in Q1 2025. In April, we generated approximately $120,000 in power sales, demonstrating early momentum in this initiative. By incorporating curtailment into our operational models, we aim to stabilize operating costs by establishing a partial hedge against Bitcoin price volatility. As Bruce also mentioned, another highlight for the quarter was a reduction in our staff costs, professional fees, SDA, and other costs by 7.7% year over year. This improvement was driven by our transition to a leaner operational model while maintaining output and efficiency. Net loss for the quarter was $5.4 million, with a core EBITDA loss of $2.8 million. both driven by a $1.8 million Bitcoin non-cash write-down for fair market value of our Bitcoin held as of March 31, 2025. However, as of the date of this call, the $1.8 million write-down has nearly reversed given Bitcoin's price recovery to approximately $104,000 as of May 13, 2025. We finished the quarter with $1 million in cash, and our Bitcoin holdings increased to 160.2 Bitcoin, valued at $13.2 million as of March 31, 2025, or approximately $2.58 per share. Using our April month-end holdings of 148.7 Bitcoin and a Bitcoin price of $104,000 as of May 13, 2025, The calculated value of our holdings would be approximately $15.5 million, or about $3 per share, compared to our May 13th stock price, $1.87 on the same day. Bruce will now provide some thoughts on our outlook and strategy heading into the remainder of 2025.

Thanks, Rick. Looking ahead, as Ryan mentioned, we're excited to begin immersion mining with expansion of our Oklahoma site. We believe immersion mining will produce immediate returns in Oklahoma and open up unique mining site selection opportunities to us. We're seeking to deploy emerging technology at greenfield and brownfield sites offering 5 to 20 megawatts, facilities that typically fall below the acquisition thresholds of larger operators or offer environments best suited for emerging mining. In Oklahoma, curtailment and energy sales complement our mining revenue and provide a natural hedge against Bitcoin price volatility. By treating Bitcoin mining sites like ours as power producers, our energy agreement in Oklahoma allows us to sell curtailed energy back to the grid at market prices. We hope to build a sustainable business model around similar sites that can thrive in various market conditions, mining Bitcoin with greater flexibility and at lower costs. We remain bullish on Bitcoin and committed to our long-term Bitcoin accumulation strategy. We HODL. We began our treasury strategy in 2021. Holding and mining Bitcoin remains a logical continuation of this strategy. Recent news reports indicate we're not alone in our thinking. In 2024, we borrowed $5 million secured by our Bitcoin holdings. So like others in the news, we may want to add Bitcoin to our balance sheet with debt and or equity. In closing, we believe this approach to Bitcoin treasury management will create substantial long-term value for our shareholders, particularly given that our Bitcoin holdings are currently valued at more than 1.5 times our market capitalization. Thank you for your time this morning and your continued support.

Thank you, Bruce. Ladies and gentlemen, as a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. Our first question coming from the line of Michael Donovan, which is even right. Your line is open.

Hi, Bruce, Rick, Ryan. Thank you for taking my question. This is Michael Donovan calling in for Kevin Deedy. Can you guys talk a little bit more about the Oklahoma site build out and what you're thinking about currently in Texas?

Sure. It has got a counterparty issue, so I don't think that that's anything in the short horizon for us at this point. Oklahoma, we are up and running, and we will continue to convert containers to expand by megawatts, and that is on the timetable that we discussed earlier. And we'll update you as the quarter progresses.

Now, the two megawatts, we expect, I think, Ryan, the machines to be ready to ship to us. Okay, I appreciate that.

Now, after that April sales of the S21, so does that take care of all the machines that were in inventory and not plugged in?

I'm taking care of it. I don't know what that means. So we did sell S21s and... Pluses. Yes, pluses. Pluses, right. And then... Okay. Now... I think... We're going to... Into the hosting side. that the net revenue will be about, let's say, half the cost. Okay. Okay.

Now then for, I guess, just a 20,000-foot perspective question with the new sites, do you have any geographies in mind targeting the 5 to 20 megawatt greenfield, brownfield buildouts, or are you exploring?

Michael, the geography is a little bit different. second, and we do that through our energy providers. That's taking us right now a lot. This is in Oklahoma. This is in Pennsylvania. Okay, great. Well, thanks, guys, and best of luck.

As a reminder, if you have a question, please press star 11. And since there are no further questions in the queue, I would like to thank everyone for joining us on LM Funding Americas, Inc. First Quarter Earnings Call. Thank you for your participation, and you may now disconnect.