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spk00: Greetings. Welcome to the Mawson Infrastructure Group Incorporated third quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Nick Hughes-Jones. Thank you. You may begin.
spk03: Hello, everyone, and thank you for joining the Mawson Infrastructure Group third quarter results presentation. The call today will be hosted by CEO and founder James Manning, as well as myself, Chief Commercial Officer Nick Hughes-Jones. James and I will take you through Mawson's third quarter results and November investor presentation. Following this, there will be a Q&A session open to participants on the call. We appreciate the opportunity to review the third quarter financial results and discuss recent business highlights. Before we get started, please be aware this call is being recorded and webcast. During this call, management will make forward-looking statements. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the cautionary text regarding forward-looking statements contained in this presentation on slide two and the third quarter earnings release summary issued yesterday both of which apply to the content of this call. I'd like to now turn the call over to James Manning, CEO and founder of Mawson Infrastructure Group. James, please proceed.
spk04: Thanks, Nick. Hello, everyone, and thank you for joining. We're excited to run through our quarter three highlights and provide investors with an operational update. Starting with slide three, Q3 has been very busy for Mawson. During the period, we have listed on the NASDAQ capital markets in late September. We purchased over 17,000 additional Bitcoin miners. We signed a new 100-megawatt facility in Pennsylvania. We kicked off the expansion of our 100-megawatt facility in Georgia. And finally, we generated our first meaningful revenues from our hosting co-location business. By the end of November 21, Molson will have 0.8 of an exahash of Bitcoin mining capacity online, well on our way to our recently upgraded guidance of 3.35 exahash online by Q2 2022. We have now secured 220 megawatts of energy infrastructure across four sites and are continuing to roll out towards our corporate target of 5 exahash by early Q1 2023. Turning to slide four and the financial and operational highlights for Q3. I am pleased to report that revenue for the quarter was 10.9 million. up 1100% from Q3 2020 and up 85% from the second quarter of 2021. The trend of strong margins has continued with gross profit of $8.4 million for the third quarter. After raising $45 million as part of our NASDAQ listing, cash and cash equivalents were $51 million at period end. We also saw our first meaningful revenues from our hosting co-location business. generating $800,000 in the third quarter. The trend of strong demand for hosting has continued into the fourth quarter, and we are balancing demand with our own rollout strategy. Subsequent to period end, Mawson announced a partnership with Queensland Infrastructure Partners, a global green energy infrastructure fund, to jointly develop sites in Australia and the US. Our first site on Australia's east coast is now operational. It will scale up to full capacity in Q1 next year. Mawson's investment in Cosmos Asset Management launched a Bitcoin miner ETF. FIGA, which is listed on ChaiX, the stock exchange in Australia, was the best performing ETF in Australia in the last five years, up 30% in the first five days, reflecting the strong return seen by investors in the Bitcoin mining space. Turning to slide five, we can see the steady growth in both our revenue and gross profit as we scale up our Bitcoin mining and hosting co-location businesses. Similarly, our strong balance sheet is growing and currently has minimal leverage. I am proud of the discipline we have shown to date in strategically raising capital where required and building a strong business focus on investor returns. On slide six, you can see between November 21 and Q2 2022, Wilson will deliver a massive increase in exahash, moving from 0.8 to 3.35 exahash. This reflects a four times increase in our Bitcoin mining production and in turn our annualised revenue. Importantly, we are currently enjoying strong growth profit margins across our facilities in Australia and the US. What really excites us, however, is our corporate target of 5x the hash online by early Q1 2023, which would see a six times increase in our Bitcoin production capacity from today. Slide 7 helps you see in more granular detail our ramp-up schedule after Q2 2020 and then on to early 2023. At Mawson, we have a very disciplined approach to ensure that we can deliver our expansion on time and on budget. Underpinning this is our infrastructure-first approach to growing our business. I am genuinely excited about the work our team has put into the facilities to date and to get us to where we are today. Having focused on securing energy infrastructure early on in our journey, we have ensured that we are among the lowest-bought oil producers, with a blended mining cost of approximately $5,321 per Bitcoin mined. The Mawson team is now focused on the substantial growth ahead of us. The black bars in this chart illustrate our historical hash rate. The dark green bars, our contracted hash rate. And the light green bars represent the mining hardware we are yet to order, but will, to meet our 5XR hash goal. We will be able to achieve this based on our current forecast and our strong operational cash flow. Turning to slide eight, and in Mawson's DNA, is our ability to identify and secure long-term, high-quality, low-cost energy infrastructure. It's no accident we're at the front of the pack in energy infrastructure, given the depth of experience at both board and management levels in this space. A secured energy infrastructure, currently at 220 megawatts, is complemented by a qualified pipeline of 870 megawatts. with a much larger prospective pipeline of sites in excess of one gigawatt. Expanding on our established energy pipeline, Mawson is committed to being a sustainable Bitcoin miner. We target carbon-free and renewable energy at our site, and slide nine goes into further detail on this front. We are intently focused on new site development, which meet our strict ESP criteria And importantly, across all new sites, we have a focus on carbon-free energy, evidenced by our recently launched facility on the east coast of Australia, which is 100% renewable energy. Turning to slide 10, and as an investor, understanding what underpins our growth is important. Our focus on infrastructure is key to this approach. We have established four key criteria when developing our infrastructure assets. One, a strict return on capital approach to site development. This means we are focused on low-cost, high-quality energy assets. Combined with the target total cost of power sub-4 cents a kilowatt hour, importantly, we consider the total infrastructure cost, so CapEx becomes a high priority. Two, our modular design principles, our MBC technology, enables us to scale rapidly, further improving deployment time and keeping CapEx low. This modular approach allows us flexibility to redeploy across sites should economics demand relocation, a key competitive edge. Three, long-term agreements. Enable us to ensure longevity in our business. We focus on developing strong relationships with stable partners. And four, finally, how ESG impacts on each investment. We consider how a site meets our corporate ESG targets especially how it aligns with our net zero carbon 2030 strategy. Importantly, energy isn't the only consideration. Slide 11 illustrates our focus on building on all aspects of our infrastructure. We are in a strong position to not only deliver the 3.35 exahash contracted to date, but critically, we have the underlying infrastructure in place to take this to 5 exahash and beyond. As previously disclosed, we have now purchased over 40,000 ASIC Bitcoin miners. which gets us to 3.35 exahash by Q2 2022. We have purchased over 200 modular data centers, and we have purchased over 100 transformers. This provides us with the infrastructure to scale beyond 5 exahash. We are often asked how our business will perform under different Bitcoin pricing scenarios. Slide 12 gives us some context around this. Here we have modeled our business based on 3.35 exahash online, providing investors with visibility on our revenues and gross profit from the various Bitcoin prices scenarios. For example, with Bitcoin trading around $60,000 overnight in Q2 2022, Wilson would generate monthly revenue of $35.5 million and gross profit of $32.7 million based on difficulty as at November 12, 2021. Underpinning this is our low blended cost of power across the portfolio of less than 4 cents a kilowatt hour and our low deployment costs at each of our sites. With that, I'll hand over to Nick.
spk03: Thanks, James. At Mawson, ESG is a core priority for us. Our integrated model is based on long-term strategy to assist in the global transition to a decarbonised society. James has touched briefly on our focus on carbon-free energy. In addition to this, we offset any residual carbon footprint using carbon offset credits. In 2020, we offset over 22,000 tonnes of carbon, supporting wind and native biodiversity projects in the process. In 2021, we have planted 25,000 trees across Australia and the US. And in 2022, we will plant over 53,000. That's a tree planted every time a block is created on the Bitcoin blockchain. Mawson is also a very active member of the local community. We sponsor both the local athletics teams in Sandersville, Georgia, and are active supporters of the Washington County Regional Medical Centre and Chamber of Commerce. Turning to slide 14, Mawson has a fantastic team, headed by our founder, James Manning. Our US team is led by our Chief Operating Officer, Liam Wilson, and is supported by recent high-quality addition, Craig Hibbard, who oversees development of our portfolio of facilities in the US. Our finance team is headed by CFO, Kessel Majikia, who joined us from PwC and brings a wealth of large listed company experience to the Mawson team. Our board is chaired by Greg Martin, who is the CEO of Australia's largest energy business. And our other independent non-exec directors are Michael Hughes and Yossi Kerat, who both bring extensive experience across capital markets, governance and audit. On slide 15, I wanted to touch briefly on Mawson's innovation portfolio. James has touched briefly on our Bitcoin miner ETF, Digger, the first listed product from Cosmos Asset Management, which is up 35% since inception only 18 days ago. Our Filecoin mining business, Distributed Storage Solutions, which Mawson owns a 20% stake in, is expected to grow significantly in 2022. Finally, Lunar Squares, our co-hosting location business, generated $800,000 in revenue in Q3 and is seeing insatiable demand for Bitcoin mining hosting services out of North America and globally. Last slide for me is slide 16, which illustrates the high insider ownership in this business. The board and management team own approximately 24% of Mawson. This is unique amongst our NASDAQ listed peers and ensures we're extremely focused on shareholder returns. Over to you, James.
spk04: Thanks, Dick. Slide 17 summarizes the Mawson investment thesis. Over the next 18 months, we will grow our operations by over 600%, expanding into a $20 billion annualized revenue opportunity with a clear focus on sustainable Bitcoin mining and shareholder returns. We are very excited about the rapid scale-up and growth of our business. Our infrastructure-first approach has given us a fantastic platform to down-take Mawson to the next level. Thanks for taking the time to hear about our third quarter results.
spk06: Brett, I'll hand over to you now to take any questions.
spk00: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Kevin Dade of HC Wainwright. Please proceed with your question.
spk01: Thanks. Kevin Dade, HC Wainwright. I'm James. Nick, thank you so much for having me on the call. Great to be here. Could you help me understand the difference between qualified and prospective pipeline?
spk04: Sure. Thanks, Kevin, for joining. It's great to have you on the line. So the difference between the qualified and the prospective is the qualified pipeline is a site where we've got either we're in contractual negotiations or we're always contracted, but we're expanding the facility, so we might have a toehold on the facility and we expect to get it from a smaller megawatt capacity to a larger megawatt capacity. The prospective pipeline, the entire pipeline of sites that we have, some of those are at an earlier stage and they're not at a point that we would be comfortable in representing to investors that we had that additional capacity in a point that we would be out of contract in the near term.
spk01: Okay, thank you. The Luna opportunity seems very interesting, especially given hot demand. Five customers, I think you noted. Can you talk about revenues?
spk04: Yeah, so this quarter was our first quarter. We started to see some substantial revenue. We saw 800,000 case this quarter in hosting revenues. Obviously, it's a margin business, and it's not as lucrative as Bitcoin mining, but we think it's an important part of the mix long-term and part of that infrastructure play. We've got insatiable demand for hosting, and really it's a balance between how much hosting we'd like to take on and what we're going to reserve for our own self-mining operation.
spk01: The... As you know, the Canaan call was this morning, and obviously you stand out as a critical customer for them. Given there were lots of shady bars in the forecast and Canaan seeing great demand, can you speak to the assurances you have, given the long-term nature of your relationship, that you'll be able to secure the machinery that you need to generate 5G?
spk04: Yeah, I mean, without giving anything away with, you know, ongoing discussions we're having in Canaan, you know, we were an early adopter and backer of the Canaan team and we believe their equipment, you know, very good equipment at the end of the day. They, you know, they're as good as anyone else manufacturing equipment and, you know, we saw that early on and we supported them. So I think the relationship there is one that both parties appreciate that we're working together and there's mutual cooperation on a number of fronts and, You know, Canaan have been great to us, and I think we've been a great partner to them. You know, they're still a bit early. They're on time. Sometimes they're a little bit early to us. And, you know, we've got great transparent relationship with them. I mean, you look at the money universe, they're the only listed manufacturer, so you've got a real sense of the quality of your counterparty there, and I think that's really important.
spk01: So Bitmain, obviously, after the big conference in Dubai, talked about their XP. And that's the S19J XP using a 5 nanometer chipset and pump and tear hash up to, I think, what was it, 120 or 140?
spk03: I don't remember. 145, yeah.
spk01: Yeah. So I was wondering if you could speak to Kanan's roadmap and, like, how close you might be to seeing where they're going and whether or not, I think they're reliant on TSMC as well. if their plans include a 5-nanometer chipset upgrade, and, you know, how comfortable you are in seeing them getting the wafers that they need for those chips?
spk04: Yes, I think there's two questions there. I think the Canaan development pipeline and what they've got, you know, in their product development pipeline, you know, while we're aware of it, I don't think it's appropriate that we comment on Canaan. you know, equipment and a new equipment pipeline. But we're very comfortable what I can say, what they're building and what that pipeline looks like. And we do have those discussions with them. The second part of the question is, you know, delivery and, you know, how that relationship works and how comfortable we are around them getting chip supply. We're very comfortable with the Canaan relationship and we're very comfortable with their supply chain. We've looked at and had discussions with them not only about their chipset supplies, but the manufacturing facilities, what their contingency plans are around China, if there was anything to occur there. We're very, very comfortable about that risk and how that risk could be mitigated by payment should anything arise in the future. I think they're very considerate in their view about how to manage both supply chains and other external risks.
spk01: Okay, last question for me, so you can take a deep breath, James. Just a little bit more on the Quinbrook relationship. Obviously, there's more to come there. I was wondering if you could zero in on a timeline, maybe how many other projects you're looking at, what the scope of them may be. You alluded to working with them in the U.S. I just know it's critical for Bitcoin miners to be joined at the hip with power generators So I think this is a great step for you folks. Just maybe you could dig in on that a little bit.
spk04: Yeah, I want to be a little bit careful there, Kevin. You know, I don't want to preempt any commercial arrangements. So I'll speak fairly broadly on that. But I think both Winbrook and us have a mutual understanding around the desire to build out partnerships you know, Bitcoin mining and distributed computing-based mining around the world across a variety of the Quimbook portfolio. We're obviously, you know, really proud to have launched the first project in Byron Bay in New South Wales, Australia. There are opportunities to do additional sites here in Australia. The initial site, the initial 20 megs was really a tease. It was like the entree to a main meal from our perspective and from Quimbook's perspective. And it's really about building a... great relationship with them and a long-term relationship. And I think that goes to, you know, us having a very strong partner and them having a very strong partner in us. So, you know, Crimbook's great to work with. And we think that, you know, that's a relationship that we'll be able to build on with a couple of sites. You know, as to total scale, I think it'd be inappropriate for me to tell you the number. But needless to say, we'll be looking to come to market in the near term with the additional sites that we're looking at and what some of those numbers are. That really goes to some of the earlier questions you raised about the qualified pipeline sites. We have sites and we have some understandings around them.
spk01: Very good. Okay. Thank you, James. I appreciate you entertaining my questions. Thanks, Kevin.
spk00: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. As we poll for more from the phone audience, we turn to Nick to read some questions that have come in from our webcast.
spk04: We have a question from Thomas Schumacher around the makeup of the blended mining costs. When we talk about blended mining costs, We talk about across the portfolios. So we have different contracted power rates across the different sites And so we like to average that across all the sites. We get an overall overall cost of mining across the entire portfolio. So some sites are slightly cheaper on a per megawatt basis and some sites are slightly more expensive. So a blended cost provides that measure or that metric.
spk03: And we've got another question here from Curtis Larson from North Capital. Can you give your view on where you see the global mining difficulty going in the near future with mining repurchase announcements across the Bitcoin mining industry? Hi, Curtis. Thanks for your question. Look, it's a difficult one to answer. I think Kevin's actually got some good research out on where he thinks the global hash rate's going to be end of next year and potentially the year after. Based on what I can see from public disclosures, my guesstimate, and it is only a guesstimate, would be circa 250 exit hash by the end of next year. But as we've seen this year, there's an incredible amount of volatility. We saw the Chinese miner exodus take it from 180 down to 80 and back to, I think, circa 150, 160 today. So it's only a guesstimate, Curtis. And the third question I've got from Angus McGuig at PLSA is, could you please talk through the ramp-up execution risks as you move from 0.8 of an exahash as at today to 3.35 in circa six months' time? Also, are there any supply chain concerns that could impact your ability to achieve the five exahash level by early 2023?
spk04: Thanks, Angus, for that question. There are a number of, there's always execution risks when you build out a scale like we are over the next six months. I think we've very well mitigated most of those risks by being focused on getting the infrastructure right first. So in Georgia, we have spent a lot of time making sure we've got supply to most of the data centers, we've got the transformers lined up, we've got the equipment. We're in the position where we are at the moment that we've actually got the infrastructure and the equipment all on the ground, and we're waiting to commission the power, and that's actively happening as we work with the local city to get that done. So, you know, we're running ahead. We've also recently added a couple of additional staff on the ground with, you know, deployment expertise, and they're materially reducing the time to deploy the equipment. So we've seen our time to deploy each modular container dropped by about 75, 80%, which materially increases our village's scale without adding headcount. So, and I think then the last thing is, you know, we're looking at how we can add some additional technology into the business to, you know, facilitate and bring that time to deploy a little bit faster again. With respect to the supply chain, Angus, you know, we've got a lot of competitive advantage, I think, in supply chain and, you know, I've come from a background where we've had a lot of experience in logistics, and we've been running logistics well out of China, and we're getting our equipment on time and to our deployment plan. So we're currently comfortable around that. We've been utilizing flights out of China the entire time. Our freight costs are a little bit higher, but we get them deployed faster, and I think the benefit of being online far outweighs any cost.
spk03: Next question is from Mark Skernick at Perpetual. Currently 75% renewable non-carbon. Can you talk about the pathway to net zero carbon emissions? Thanks for the question, Mark. So in 2020, we offset 22,000 tonnes of carbon and we had circa 75% of our energy mix from non-carbon emitting sources. The latest two sites we've announced, the first being Pennsylvania, is actually 100% nuclear energy. And the site that we've announced up on the east coast of Australia is also 100% renewable energy. New sites are looked at through the lens of our 2030 net zero carbon strategy and any residual carbon footprint we have this year will be offset with carbon credits.
spk06: Do we have any more questions from the webcast? Nothing I can say there.
spk00: Okay. We do have another phone question. This is from Angus McGelch from CLSA. Please proceed with your question.
spk02: Thanks, guys. I think you addressed my question on the webcast, but just following on from that, and hopefully I'm not misreading this, but it does appear that you've bought your ramp up timeline forward, just in terms of how you're executing towards that expanded capacity. In terms of the ability to continue to do that on a forward-looking basis, do you think there's further room to move to hit higher exahash rates at an earlier time than currently expected?
spk04: Thanks Angus. I think there's two factors there. I sort of want to under-promise and over-deliver on this result. So what we're presenting here, I think, is very deliverable. You know, there's always opportunities to bring things forward. And, you know, it goes to our strong relationship with Canaan that they're supportive of us being able to bring these things forward as well. So, you know, where we see opportunities to do so, we do do that. A great example of that is, you know, we've, change some of the infrastructure in Georgia so that we can bring some of that on Monday forward than what we originally envisaged. And I think that it will also give us the capacity to continue to expand that. The Pennsylvania site is well positioned. We have a public deployment time. We have our internal deployment time. Then we have our real target deployment time. And those numbers all vary. And sure enough, we always try and hit the internal one first. And if we can continue to do that, I think we'll be in a very strong position. Of course, we'll always be in a position to outperform, and that's our real focus as a business.
spk07: Okay, thanks, James.
spk02: And so just one last question. You've provided a lot of transparency there just around Bitcoin pricing and revenue forecasts, which is great. and you talk to being fully funded to that 5x a hash level, do you disclose at what Bitcoin price you may not be fully funded and you might need alternate sources of funding to achieve on that extended execution rate?
spk03: Sorry, Gus, can you just repeat that? The line broke up there a little bit.
spk02: You guys are obviously talking to be fully funded to the 5x a hash rate, notwithstanding the fact you need to order some more miners, but is there a Bitcoin price at which the ability to internally fund with the cash reserves you currently have plus the cash that you're generating, is there a Bitcoin price that might see that become problematic or do you think there's just a lot of margin of safety based on where you are today?
spk04: Look, I don't have the whole model in front of me at the moment, but I'm happy to take that on notice. What I would say to you, though, Angus, is we're obviously experiencing a period where we've got incredible margins in our operating business. The existing pipeline, one of the great things we did with the capital we've raised to date is we paid a 50% deposit on all the equipment that we've ordered. So we're more than cash flow greedy every month. So given that, it really gives us a position to go and acquire additional equipment with some ease and get into the market and do these things. And so for us, it's a combination of just watching the market and being opportunistic when we buy equipment as well. So if we see a pullback, we'll go and pounce on that pullback for delivery in the future of equipment. I think we've done that quite well in the past and we'll continue to do that. There's a combination of factors there and being very disciplined about how we do that. When the markets are very bullish for equipment, we also look to resell or sell down some of our older generational equipment and replace it with newer equipment. So there's definitely a capital recycling program there for us as well. So we like to add both of those things into the mix and they do vary a lot. So, you know, We're looking at constant ways to, you know, I guess, you know, maximise the balance sheet and ensure that we're there, but at the same breath, we're still very comfortable around the current operating environment that we'll get to that 5x5 mark.
spk07: Okay, great. Thanks, guys, and congrats on a strong quarter.
spk00: We have reached the end of the question and answer session. I will now turn the call back over to James Manning for closing remarks.
spk04: One last question, which I might take from Mark at Perpetual. He asked, can you talk through the SG&A costs and how they should scale as you grow? I think this quarter was a unique quarter for us, obviously, as we listed. There were a number of SG&A costs that were one-off and not reoccurring in nature. We took up a number of accruals during the period as well. We're comfortable with that. We have taken some feedback on in the last couple of days around breaking that SG&A number down. And so I think you'll see from us more additional detail in the SG&A and a further breakdown of what the labour components are moving forward. And we're always welcome to take any other feedback on that point. So, you know, we're more than happy to answer any other questions around SG&A. SG&A and go through those details, but we're fairly comfortable that the SG&A that we've incurred in this quarter is really once off in nature and higher than it should be, but reflective of the IPO process with NASDAQ. Given that we're due to conclude this, I just want to thank everyone for taking the opportunity to jump online and hear the live presentation. Now, over the next 18 months, we will grow our business by, you know, in excess of 600%. And, you know, the Bitcoin mining market's a huge opportunity with, you know, more than $20 billion of annualized revenue opportunities. We've got our focus on sustainable mining, and we're incredibly focused on those shareholder returns. I think the infrastructure-first approach is giving us a fantastic platform to take us to the next level, and we're really excited. I'm really proud of the team. I'm really proud about what we've done to date, and I'm just So I'm so excited and pumped to take this, you know, to deal with not just the 3.3, 5 extra hats, but that 5 extra hat number and beyond. And really, you know, we really see, you know, world's our oyster at this point in time. And I'm hoping next call that, you know, we're talking about our next material upgrade. So thanks, everyone, for joining. And we'll look forward to talking next time. Thanks.
spk00: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.
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