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spk00: Good afternoon, and welcome to the Mawson Infrastructure Group's first quarter 2023 earnings results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star and zero. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tim Broadfoot, Chief Corporate Officer. Thank you, Tim. You may begin.
spk06: Welcome, ladies and gentlemen, to the Q1 presentation for Mawson Infrastructure Group. In this presentation, we look forward to updating you to the operating and financial performance of the company. In today's presentation, we may make forward-looking statements. We bring your attention to the disclosures on slide two regarding these statements, and encourage you to read our full disclosures in our most recently filed 10-K and 10-Q. In addition, some of the metrics in today's presentation use non-GAAP financial metrics. We bring your attention to slide 13 for a reconciliation of those metrics. Mawson utilizes a dynamic three-pillar approach to revenue generation in its standard business operations. This allows for a robust revenue model to navigate the volatility in all associated markets within our industry. Firstly, we have our self-mining operation. Mawson currently has 13,500 miners deployed and hashing at its facilities. Secondly, we enter into long-term hosting contracts with 50 megawatts deployed and additional 70 megawatts planned over the remaining of the year. Lastly, we have our energy markets program. That enables Mawson to mitigate energy pricing risk, support the local grid, and also earn high margin returns by strategically reducing load during high demand periods. I will now hand over to our Chief Operating Officer, Liam Wilson, to take you through the operational updates from the quarter. Thanks, Tim. Mawson has started 2023 with a bang. We announced the sale of our Greenfield, Texas land and transformers for $8.5 million. We complemented the strategic sale of Texas with the addition of our new facility in Corning, Ohio. This 24 megawatt facility has a further 26 megawatts of capacity, capable of holding just under 15,000 miners or two exahash equipment. We are actively looking for the right hosting partner for this site. The site will be a mixture of self-mining and hosting. On top of Corning, Ohio, we have secured an additional 20 megawatts at our live facility in Midland, Pennsylvania. Operationally, during the month, we have begun the build-out of the next 70 megawatts of the Midland Pennsylvania Fertility, as well as the first 12 megawatts of our Sharon Fertility. We are looking forward to having that power come online through Q2 2023. We firmly believe that Mawson has best-in-class operations. Our uptime through Q1 was 92%, with the 8% being curtailed hours when we were driving revenue through another strength. We have 264 megawatts sewn up with 88 megawatts currently online. We foresee having 132 megawatts online through Q2. What makes our sites more impressive is that they are both carbon-free, being 100% nuclear, and also sit within Pennsylvania and Ohio with cool winters and mild summers. The average temperature through Q1 was 43 Fahrenheit or 6 Celsius, which is perfect Bitcoin mining weather. Mawson strategically locates and acquires assets in specific locations which provide optimal operating conditions in a variety of different ways. We like our sites to be located in deregulated markets where curtailment is an option. However, we need a reliable grid. We like our energy low and accessible to a readily accessible workforce near major cities. Most importantly, we love a cool climate, which means air-cooled is the preferable operating model at both inflated and deflated BTC prices. Our strategic decisions to operate in cooler climates in certain parts of the US allows us the advantage of not having to concentrate our efforts on immersion. This is a huge advantage when it comes to the efficient deployment of capital. Our in-house designed MDC solution is manufactured and installed for $527 per line-up, which is a market leading price. This is in comparison to approximately $3,635 per miner, the immersion systems needed to effectively operate mining farms in warmer climates. Mawson has one of the most solid and robust energy pipelines in the industry. Our flagship facility in Midland, Pennsylvania is supported by the Sharon and Corning facilities. We are also in deep final discussions for additional sites in our region, which we're excited about hopefully announcing to the market soon. Not only is our pipeline solid, but our history of execution is reliable and market leading. With our secure energy pipeline and ability to execute, Mawson has set itself up for a very successful and fruitful 2023 and beyond. We are aiming for 7.2 exahash of units installed by the end of 2023, with our target set on 10 exahash in 2024. Our mining fleet consists of 20,000 units at the moment, which is capable of producing up to 1.7 exahash of computing power, which translates to approximately 4.45 Bitcoin per day. This equates to $124,000 a day at the current price of Bitcoin, or $45 million per year in revenue. We are actively looking to test new units at the moment as we decide when and where to place our next large order. We have space in our pipeline for additional miners to be deployed and look forward to updating the market on this in due course. With that, I will pass the Chief Financial Officer, Ariel Sivakovsky, for further. Thank you.
spk05: Thanks, Liam, and thank you to everybody who has joined the call today. Following on from the operational measures discussed already, some of the financial highlights of Quarter 1, 2023. Mawson generated mining revenues of $2.8 million. Pleasingly, our co-hosting business continues to generate solid revenue growth at $4.3 million for the quarter, with the energy markets program contributing another $400,000 at a gross margin of 84%. The sale of assets contributed $1.59 million of revenue, primarily being the sale of marketable securities, being the CleanSpark stock. The cost of revenues amounted to $4.7 million. The net EBITDA result was a minor loss of $2 million, an adjusted EBITDA loss of $400,000. Quarter one US GAAP net loss was $11.4 million, being a similar result for the same period last year. Moving to the balance sheet, as that quarter one closed, the total assets of the group amounted to $116.7 million, primarily made up of fair-valued fixed assets of $84.6 million, derivative assets of $10.6 million relating to the energy markets program, and trade and other receivables of $10.6 million. The liabilities amounted to $50 million, with trade and other payables and borrowings being $24.2 million. and $22.9 million respectively. This results in a net asset position at quarter end of $66.7 million. Now, as a summary of the previous two slides, and in reconciling to our statutory reporting, from a net loss of $11.4 million, similar to the same period last year, a minor adjusted EBITDA loss of $400,000 was achieved. from total revenues of $7.7 million and costs of revenues of $4.7 million. An overall growth as profit margin of 40% or $3 million was achieved. As detailed previously, as that quarter one end, total net assets amounted to $66.7 million from an asset base of $116.7 million and total liabilities of $50 million. It must be noted that our liabilities were reduced by $8 million in this quarter. And with the subsequent events highlighted earlier by Liam, being the close of the Texas R transaction and the successful $5 million capital raising, it strengthens our balance sheet further. Now I hand over to Tim Broadfoot.
spk06: Through Mawson's site development and operations, we like to have a responsible corporate perspective to decision making. This has led to an operational model that utilises 100% nuclear, non-carbon emitting power for its mining and hosting operations. We also partner and support local initiatives that we believe align Mawson with the local community and support the people who support us in our mission to grow. At Mawson, we are very grateful for the local communities, suppliers, shareholders and employees that enable us to be the company that we are today. I now hand you over to our CEO and founder, James Manning.
spk03: Thanks, Tim.
spk06: The cornerstone of our success at Mawson is the employees and the leadership team. The deep knowledge base of our diversified experience and expertise starts at the board level and cascades down through the executive team to create a robust management team that drives the business. Each and every member brings a valuable addition to the operations of the company, and we're excited to be able to drive the company with this support in place. The shareholder base we have at Mawson is very important to us, and we are grateful for the support and trust that they provide us with. The team at Mawson believe there is real value to the company we have, and the market is undervaluing that. As we highlight on this slide, the trading value of the mid-year stock is at a 39% discount to the net asset, and there's a large distortion tracking from the value of the BTP recovery. We believe there is a solid opportunity for investment in Mawson. In summary, we look forward to the continued growth of Mawson, which Mawson has been working very hard on, and we hope to deliver value improvement to our shareholders in the next quarter of the year. We look forward to achieving our forecast operational goals the same way as we have historically, and we're excited to grow our relations with all our stakeholders of the company. With the presentation now complete, we'd like to take this opportunity to thank all our employees, suppliers and shareholders for their ongoing support through Outpost 2022 and into 2023.
spk03: We will now take any questions.
spk01: Thank you. If you would like to register a question, you can press the 1 followed by the 4 on your telephone keypad. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, you can press the 1 followed by the 3. And our first question is from the line of Josh Siegler with Cantor Fitzgerald. Please proceed with your question.
spk04: Yeah. Hi, guys. Good afternoon. Thanks for taking my question today. I guess, first of all, I would love to get an update on how you're thinking about the company's long-term outlook on self-mining versus hosting.
spk03: Thanks, Josh. Thank you.
spk06: Apologies for my cough. Josh, we're definitely now that we're Commissioning and turning on Midland and we've announced some other sites and we've got a couple others that are near term to be announced. We've definitely refocused on the mining aspect. Obviously, hosting served as well and we'll continue to host some customers in our site. We're definitely looking to get that mix up and get some of the self-mining online. Part of that's commissioning the existing equipment we have. And part of that is looking at how we apply some additional equipment at the right time and whether that's in some mining joint ventures or some hosting arrangements with profit share. We're definitely looking at getting that proportion of our infrastructure online with mining or self-mining equivalent online up a lot higher. We always knew quarter one was the toughest quarter for us in many ways as we moved out of GA and we had the time lag between GA and PA coming fully online. We've been commissioning PA. We'll have the whole 100 megawatts online and up and running this quarter. So we're really excited to have that on. You'll see a large jump in our online hash accordingly.
spk04: Yeah, understood in that regard. And then for my follow-up, I'd like to focus a little bit on the new Ohio facility. Specifically, if you could dive a little bit into how you're thinking about cost of power at Ohio. And do you have access to similar energy demand response programs there? Thank you.
spk03: James, I can take that one.
spk06: Yeah, sure. G'day, Josh. So firstly, the site in Corning, Ohio, sits within the PJM market. So we're going to be pulling index pricing at the moment. We think it's cheap enough. It's certainly attractive at these levels. and we're very confident in that grid as a whole. So we'll be pulling it directly from the index. We won't be looking to hedge at the moment. With regards to the split of the site, that'll be a mixture of self-mining and hosting. We're in kind of significant conversations with a number of parties who are interested on the site and would like to move forward on it. Mate, sorry, I've just forgotten the second part of your initial question.
spk03: Thank you very much. Appreciate it.
spk06: Sorry, I believe you asked around the curtailment programs that we have. And yes, it's exactly the same curtailment program that we have in Midland, Pennsylvania. So we have access to all the same, you know, through BOLTIS and through Sioto Energy, we have access to all the same demand response programs. So we're pretty bullish on that as an operating model as well. Got it. Understood. Thank you. I'll add to that answer with another question. I've also been... I've got a posted question here online just asking about power rates. So, as Liam alluded to, we're in the PJM market, and so we are taking market power. In Midland, we have some of that power hedged at 3.6 cents a kilowatt hour. But beyond that, we're in market power rates. And obviously, after last year, we've seen a lot of volatility in power and power pricing. And we are looking at how we hedge some of that power over time. But to give you a bit of a feel, we're seeing power as low as 1.7 cents a kilowatt hour and as high as 4 cents a kilowatt hour in the 4 cent range a kilowatt hour intraday. We've got really competitive power in the PGM market. It's cheap, it's reliable, and we strategically have contracted that as all this nuclear energy, so it's zero carbon power as well from our perspective, which I think is important from our ASG perspective, but also from an overall industry power mix perspective. I'm trying to look ahead to some of those regulatory risks that may be on the horizon, but I think we've got contracted clean energy up, and that's a really important part of the mix in the story there.
spk03: Great. Thanks for all the callers, guys. Appreciate it.
spk01: And as a reminder, if you would like to register a question, you can press the 1 followed by the 4. All right.
spk03: We've got several questions that have come in via the web interface.
spk06: What would determine the final mix of hosting and self-mining and cloning?
spk03: Liam, do you want to take that one? Absolutely, James. What is the final mix of self-mining and hosting, was it? Correct.
spk06: Sure thing. So I think similar to what you spoke about earlier, You know, over the past three months, I would say that self-mining has certainly become a lot more attractive for Mawson. And as we're continuing to turn on our Midland and Sharon facilities over the next two months, you know, I think we'll see a large percentage of self-mining throughout Mawson. It's hard for us to categorically say what is going to be the final split for Mawson and for self-mining and hosting at the moment. because we do it on a case-by-case basis, and I think that's very important to note. You know, Mawson has always been the best idea within this business, and if a particular site means that we will have a hosting customer and have a site fully funded, then that could be the correct operating model for that particular site. If a site screams that we need self-mining, for example, we're looking at a few now that certainly scream self-mining, then we will do self-mining. If it means it's going to be a mixture, then it will be a mixture. But certainly, I will say that, yeah, over the past 60 to 90 days, there's been a lot more robust conversation around expanding our self-mining fleet and really getting involved there again. Thanks, James. Thanks, Graham. Sam, I've got you. I might ask another one that's come through. I saw that Stronghold did a deal recently with Canaan where Stronghold will host Canaan Bitcoin Monitors and they'll split the Bitcoin production 50-50. Is that something you're looking at? Yeah, for sure. Absolutely. We read that article as well. And congratulations to the Stronghold team for pulling that deal together. It reads very, very well. We would certainly entertain and are entertaining deals like that. I guess you would call that a miner for equity deal or a miner as currency deal, depending how you look at it. We've spoken to the major players, I would say, in the ASIC world around something like this. And as we continue to add sites, again, just to what I said before, the best idea wins. We'll run our numbers, decide whether it's hosting, decide whether it's self-mining, decide whether it's something like this, which is jumping in bed, basically, with an ASIC manufacturer and using their miners as currency and we bring the infrastructure. So it was a great deal and certainly something that we're... Thank you. Thanks, Liam. This one's probably for Ariel. I see that you have sold Texas for $8.5 million in April and raised $5 million in May, subsequent to the end of Q1, for a total of $13.5 million. What part of this cash will be spent on growing up the existing business and facilities in PR and IELTS, and is some of it earmarked for repayment of debt?
spk05: Hi, James. Thanks, James. Thanks for the question. Look, it's something that you've alluded to before and following on from Liam's last question. I guess we're earmarking our cash. We are actively looking to add equipment and working with the operations team on procurement strategy, whether that's in joint ventures or tight partnerships. and deployment time. We're also looking to, obviously, the balancing mechanism where we also use the cash that we've received as servicing our debt commitments in the near future. But it's really looking to expand our operations, finance them, and looking to add new equipment.
spk03: Thanks, Joe. Great. Thanks, Ariel.
spk05: We've got a few more calls coming through over the phone. I'll just check that.
spk03: I've got no one else in the queue. I've got one last question that's coming through. I've got one more question that's just come through. Can you shed more light on the details? Can you shed more light on the details regarding the recent stock offering? Come from Aaron.
spk06: Sure, Aaron, I'll take that one. Look, the company's recently secured that facility in Corning and we're shortly to announce an additional facility. So from a total capex and turning on sites perspective, it was prudent for the company to have some additional capital to invest to facilitate the deployment of these additional sites. We've got thousands of machines that have come up from GA that we own and we've paid and we own outright and that we need to submission and turn on. And the combination of Midland, even with just Midland coming online, we didn't have enough capacity, so we secured some additional sites. And those sites will be coming on in this quarter. and some of them will come on early next quarter as well. So the capital race is fundamentally around making sure we have enough working capital and capital for the infrastructure to turn those facilities off. And that actually covers the next question that came on, which, how long do you think it will take to deploy the 20,000 miners you already have? And, Lee, do you want to take that about the turn-on time? for the providers that we have? Yeah, absolutely. So I can say as of today, 13,500 units are deployed and operational for Mawson. We have the next stage of our deployment is the Sharon deployment, which will be 12 megawatts coming online in Sharon. We foresee that happening over the next three weeks. So call that early June, that will come online. And then the balance of those units will be coming on through another Mawson asset in the very near future as well. So by the end of June, by the end of Q2, as we've already stated, we'll have our whole fleet deployed.
spk03: That's great. Thanks, Liam. I've got no other questions coming through, guys.
spk05: So unless someone else popped one through at this point, I think we'll be...
spk03: Wrapping up the call, I'll just leave it a minute to see if there's any other questions that are coming through. No, and on that basis, I think we will wrap up the investor call today.
spk06: Just wanted to thank those investors and analysts that have jumped on the call. We really appreciate your continued support.
spk03: We look forward to presenting the next quarter's results in the near future. Thank you very much.
spk01: That does conclude your conference call for today. We thank you for your participation and ask that you please disconnect your lines.
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