LM Funding America, Inc.

Good day, and thank you for standing by. Welcome to the LM Funding America, Inc. Second Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's 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. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I'd like to hand the conference over to your first speaker today, Coley Fletcher, Director of Orange Group Advisor. Please go ahead.

Thank you, Operator, and thank you all for joining LM Funding America's second 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 more 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'll now turn the call over to our CEO, Bruce Rogers. Bruce?

Thanks, Cody. Good morning, and thank you for joining us today. On August 1st, we signed a definitive purchase agreement to acquire an 11-megawatt Bitcoin mining site in Columbus, Mississippi from Greenwich Generation for $3.9 million, or approximately $355,000 per megawatt. The 6.4-acre property comes with low power costs and roughly 7.5 megawatts of mining capacity, along with an additional 3,000 KVA transformer. The acquisition is fully funded from our balance sheet. closing expected on or before September 16, 2025. This acquisition meets our M&A criteria and is precisely the type of attractively priced asset we are targeting. Once closed, this site will increase our wholly owned U.S. power and Bitcoin mining capacity to 26 megawatts, equivalent to approximately 1.7 exahash capacity, assuming latest generation Bitcoin miners at 15 joules per terahash. It will also accelerate our expansion timeline compared to greenfield builds, maximizing ROI for our shareholders. We also made progress towards our two-megawatt immersion-based expansion in Oklahoma, which we expect to be completed by the end of the year. In our view, immersion cooling delivers superior ROI in climates like Oklahoma by mitigating many of the performance and maintenance challenges faced by traditional air-cooled systems. With these strategic expansions firmly underway, we strengthened our operational foundation and positioned LM funding with a strong growth runway. In terms of our financial results for the quarter, we mined 18.4 Bitcoin, down slightly from Q1 due to curtailments for hot summer months and the relocation of approximately 800 miners from our third-party hosting site in Kentucky to our wholly owned site in Oklahoma. These S21 and XP next generation miners replaced our S19J pro miners and increased our overall fleet efficiency. These miners are also now running on approximately 40% cheaper power, thereby increasing our profitability and mining margins. In addition, thanks to our strategic transition to a fully integrated model, curtailment and energy sales generated approximately $223,000 in Q2. which helped offset some of the lower Bitcoin production and drove higher mining margins compared to Q1. We ended the second quarter with 155.5 Bitcoin valued at $16.7 million, about $3.25 Bitcoin per share based on June 30 prices, and ended July with 150.4 Bitcoin valued at $17.8 million, or $3.46 of Bitcoin per share. I'll now hand it over to Ryan Duran, president of our U.S. Digital Mining subsidiary, to discuss our operations in more detail. Ryan?

Thank you, Bruce. Our vertical integration strategy has given us significantly greater control of our operations. We've reduced power costs, eliminated hosting fees, optimized our fleet efficiency with software upgrades, and unlocked high-margin power sales back to the grid. A key milestone late in Q2 was the successful relocation of our remaining machines from a hosted facility to our wholly owned Oklahoma site, completing the final step of our third-party hosting exit initiative. Our two-megawatt Oklahoma expansion is progressing on schedule. The two one-megawatt immersion containers ordered in April are expected to arrive in the third quarter, and we expect energization later this year. We believe immersion cooling provides improved margins through higher efficiency, longer equipment life in harsh environments, and the ability to access new markets that are not suitable for air cooling. Looking ahead to the Mississippi acquisition, the facility, currently operating around 7.5 megawatts, provides an excellent platform to deploy miners we have in storage and apply the firmware optimizations that are already boosting margins at our Oklahoma site. We see a clear path to reach the full 11 megawatts capacity in the coming months. and we look forward to updating you on this progress. With that, I'll now turn the call over to our CFO, Richard Russell, to review the financial highlights for the second quarter of 2025. Rick?

Thank you, Ryan. For Q2, total revenue was $1.9 million compared with $2.4 million in Q1 2025. The sequential decline was driven by lower Bitcoin production as a result of curtailments during peak seven months and the relocation of third-party host miners to Oklahoma, as Bruce mentioned earlier, partially offset by higher Bitcoin prices. The Q2 2025 average Bitcoin price was approximately $98,100 as compared to Q1 2025 price of approximately $93,600. Curtailment in energy sales increased 49% to approximately 223,000 from 150,000 in Q1 2025. In June 2025 alone, we generated $55,000 in energy sales, and in July, this increased to $66,000. This demonstrates the value of our energy sales program as both a cost offset and a hedge against energy and Bitcoin price volatility. We expect curtailments in energy sales to decrease over the remainder of the year as we enter the cooler temperature months and begin emerging mining. Mining margins for Q2 improved to 41% as compared to 38.5% sequentially, supported by our transition to our lower cost Oklahoma facility. The quarter ended June 30th, 2025. We reported net income of approximately $60,000 compared to a net loss of $5.4 million in Q1 2025 and a $6.2 million loss in Q2 2024. Core EBITDA for Q2 was $2.6 million versus a negative $2.8 million in Q1 2025 and a negative $2.3 million in Q2 2024. As a reminder, our core EBITDA is impacted by the fair market value gain or loss from our treasury, depending on Bitcoin price at the respective quarter end. We finished the quarter with $400,000 in cash, and our Bitcoin holdings increased to 155.5 Bitcoin, valued at $16.7 million as of June 30th, 2025, with an average Bitcoin value of approximately $107,000. During the quarter, we strategically sold a portion of our Bitcoin holdings to support ongoing operations, and fund expansion projects while staying firmly committed to our long-term accumulation strategy. Given our discipline, cost management, and target growth initiatives, we are confident in our ability to steadily grow our Bitcoin treasury over time, creating long-term value for our shareholders. Bruce will now provide some thoughts on our outlook and strategy for the remainder of 2025. Thanks, Rick.

Our acquisition in Columbus, Mississippi for $3.9 million, fully funded by our balance sheet, represents exceptional value at approximately $355,000 per megawatt. Combined with our Oklahoma expansion, we will have up to 26 megawatts of own capacity, positioning us for accelerated growth while maintaining our disciplined approach to capital allocation. Our immersion mining deployment in Oklahoma is on track for energization later this year, and we continue to search for accretive M&A opportunities in the 5 to 20 megawatt range, our comfort zone for value creation. We took full advantage of our curtailment and energy sales in the quarter, showcasing the benefits of our power contracts. As seasonal temperatures moderate and we begin to energize our immersion systems, we expect curtailment revenue to trend lower while Bitcoin production and fleet efficiency increases, thereby improving our cost for Bitcoin and delivering more consistent uptime. Above all, we remain committed to our Bitcoin treasury strategy. We were early adopters, adding Bitcoin to our balance sheet in 2021, and have maintained our HODL approach ever since. Going into April 24 halving, we were among the smallest microcap miners, yet we continue to operate and grow while many larger peers have been forced to exit. highlighting the resilience of our model and our operational discipline. Lastly, I'd like to draw attention to the fundamental disconnect between our balance sheet and our market value. Our net book value as of June 30th was $31.9 million. Our Bitcoin treasury as of June 30th was valued at $16.7 million and $18 million at Monday's Bitcoin prices. Our fully diluted market cap was $14.7 million as of June 30th and $11.8 million as of last Monday's close. We remain committed in our conviction that Bitcoin is the world's premier reserve asset, and we continue to explore strategic opportunities to expand our treasury through innovative financing structures. Building upon the playbook we were early to adopt. Thank you for your time this morning and your continued support.

Thank you. At this time, we'll conduct a question and answer session. As a reminder to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question comes from the line of Kevin Diddy of HC Winwright. Your line is now open.

Thank you, operator. Hi, Bruce, Rick, and Ryan. This is Michael Donovan on the line for Kevin. Congrats on the Mississippi purchase. I just want to see after, so Ryan discussed deploying the machines you have in storage first for the 7.5 megawatts in operation. How many megawatts would still be free after deploying these machines? My back of the envelope math puts 1,200 units, a little bit over 4.3 megawatts. Is that accurate? I appreciate that.

So the top number is 26 megawatts of capacity, and then you backfill in using the numbers Ryan rattled off. So 11.5 in Oklahoma when that's finished, and then we'll have 7 in Mississippi once we own it, and then we're expanding that.

Yeah, so I think to your question, any minors right now that are in storage in Oklahoma would be fully used, you know, absent anything else in Oklahoma, I mean in Mississippi.

Okay, so let's, I appreciate that. How should we think about New miner purchases, what do you have planned for there? First deploy everything, or are you looking at purchasing any more miners at the time?

So the Mississippi transaction isn't complete as to miners, so we're not certain there yet. But yes, we'll have additional miners we've got to acquire to fill out all this capacity.

Okay, that's helpful. I appreciate it. I'll pop back in queue.

Thank you. I'm showing no further questions at this time. I'll now turn it back to Bruce Rodgers for closing remarks.

What is it? Tom, do you have any more questions before we leave? Thank you for joining us this morning, and we'll look forward to speaking to you at the end of this next quarter.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.