Stronghold Digital Mining, Inc.

Good morning and welcome to Stronghold Digital Mining's conference call for the fourth quarter and four year ended December the 31st, 2023. My name is Tawanda and I will be your operator this morning. Before this call, Stronghold issued its results for the fourth quarter and four year of 2023 in a press release, which is available in the investor section of the company's website at www.strongholddigitalmining.com. You can find the link in the investor section at the top of the homepage. Joining us on today's call, our strong host chairman and CEO, Greg Beard and CFO Matt Smith. Following their remarks, we will open the call for questions. Before we begin, Alice Cupton from Gateway Group will make a brief introductory statement. Mr. Cupton, please proceed.

Great. Thank you, Operator. Good morning, everyone, and welcome. Today's slide presentation, along with our earnings release and financial disclosures, were posted to our website earlier today and can be accessed on our website at www.strongholddigitalmining.com. Some statements we're making today may be considered forward-looking statements under securities law and involve a number of risks and uncertainties. As a result, we caution that there are a number of factors, many of which are beyond our control, which could cause actual results and events to different materially from those described in forward-looking statements. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission. We disclaim any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and the reconciliation tables to applicable GAAP measures in our earnings release carefully as you consider these metrics. We expect to file our annual report on Form 10-K on or around March 8, 2024 with the Securities and Exchange Commission, which sets forth detailed disclosures and descriptions of our business. as well as uncertainties and other variable circumstances, including but not limited to risks and uncertainties identified under the caption risk factors. You may access Strongholds Securities and Exchange Commission filings for free by visiting the SEC website at www.sec.gov or Strongholds Investor Relations website at ir.strongholddigitalmining.com. I would like to remind everyone this call is being recorded. and will be made available for replay via a link available in the Investor Relations section of Stronghold's website. Now, I would like to turn the call over to Stronghold's Chairman and CEO, Greg Beard. Greg?

Good morning, everyone, and thank you for joining us on our fourth quarter and full year 2023 earnings call. We will be referencing an associated slide presentation throughout the call that is available through the webcast. and on the investor relations section of our corporate website. Let's start on slide three. I will say this on every earnings call until it is no longer true. Stronghold is the only environmentally beneficial and vertically integrated public Bitcoin miner. We own and operate two mining waste to power facilities in Pennsylvania, Scrubgrass and Panther Creek, with aggregate power capacity of 165 megawatts. Through our process, Scrubgrass and Panther Creek have removed an estimated 30 million tons of toxic mining waste from the environment from nearly 100 different sites. Today, we operate over 40,000 Bitcoin miners with 4.1 exahash of hash rate capacity. While we are thrilled to surpass 4 exahash, we believe that we have significant runway to continue hash rate growth within our existing infrastructure by hydrating our fleet. As a vertically integrated Bitcoin miner, we have a unique, substantial asset base with significant potential for complementary revenue streams. In November, we announced our carbon capture project, which is simply an extension of our reclamation process. We are excited about the progress we have made on this project over the last few months. We believe that we could capture up to 100,000 tons of CO2 annually at base load capacity utilization of our plants, as discussed in our December presentation. Moving to slide four. Over the past year and a half, Stronghold executed on its plan to grow hash rate to 4 exahash with high capital efficiency, and we plan to continue adding hash rate and improving our fleet efficiency opportunistically. We have over 40,000 energized slots And these slots could support more than seven exahash of mining with a high-graded fleet of latest generation miners. We are exploring various avenues and structures to grow into this capacity. Looking at our fleet, the average efficiency for our 2,500 least efficient miners exceeds 40 joules per terahash. And our next 10,000 least efficient miners are approximately 37 joules per terahash. That's low-hanging fruit, and just replacing those miners with the latest generation miners could yield hash rate capacity of over 5.3 exahash. So we think that the high-grading opportunity is very attractive. We also remain focused on improved uptime at our data centers, and have been working closely with the Frontier mining team since October to enhance our data center operations going into the halving in April. This partnership has been a success, as evidenced by our recent achievement of approximately 3.9 exahash of operating hash rate. Moving to slide five. As the halving approaches, we continue to focus on liquidity and debt service obligations. As of February 29th, we had over 10 million of liquidity. So current liquidity more than covers the 6.5 million and 2024 mandatory amortization associated with our WhiteHop notes and the 1 million of remaining committed minor CapEx. And importantly, our operations are generating cash flow, with over 5 million of adjusted EBITDA projected for the first quarter, further enhancing our resiliency. Moving on to slide six to discuss Bitcoin market dynamics. Following the approval of Bitcoin ETFs in January, we have seen a significant rise in Bitcoin price and hash price. Bitcoin has set a new all-time high, and hash price is around 12 cents per terahash. There have been 8 billion of inflows into the ETFs, which averages nearly 6,000 Bitcoin per day, 6.5 more than what is mined daily. So we view the recent run-up in Bitcoin price as a result of the mismatch in supply and demand. Will the price run-up continue? While we won't take a view on inflows representing potential demand, the halving will impact the supply side of the equation, which all else equal is quite constructive for future Bitcoin price. Moving on to slide seven. Owning our own power assets gives us a lot of optionality. as electricity is the largest variable cost to mine Bitcoin. It enhances our ability to be responsive to changing market conditions. When power prices are high, we turn off our miners and sell to the grid. When prices are lower than Bitcoin mining economics, but higher than variable fuel costs, we use the plants to power our miners. And when power prices are lower than our variable plant costs, we turn off the plants and import electricity to power our miners. Power prices in our region are currently very low, with the forward curve for the remainder of 2024 averaging around $30 per megawatt hour. While low power pricing is a trend broadly, forward curves in PJM are generally the lowest in the country right now. This is great for us because it gives us the flexibility to opportunistically import electricity from the grid to power our miners, and you can expect to see us do just that. Moving to slide eight, On the other side of the equation, the PJM grid is extremely vulnerable over the medium to long term. Renewable energy sources like solar and wind are great because they're clean, but the unfortunate reality is that they generate power intermittently. Replacing stable base load generation with intermittent generation severely threatens the stability of the grid. This is becoming very clear in PJM by its own account. 40 gigawatts of base load thermal generation is expected to be retired by 2030. This is over 20% of current PJM generating capacity. On top of this, nearly 95% of the power generation projects in the PJMQ are renewable, and it takes multiple megawatts of renewables to replace each megawatt of base load generation. As a result, at the current rate of development, PJM believes that the new projects will not be sufficient to keep up with demand growth and the expected plant retirements by 2030. The implied outcome here is extreme volatility and market tightness in the medium to long term, making existing base load assets like scrubgrass and Panther Creek highly valuable. Moving to slide nine. Since announcing our carbon capture project in November, Our team has made significant progress in proving out, enhancing, and validating our process. Recall that our initial third-party testing indicated that our scrub grass ash could capture carbon at a capacity of up to 12% by starting weight of the ash, where recent tests from our first carbon list have demonstrated that up to 14% is achievable. We recently partnered with the Pittsburgh Mineral and Environmental Technology Lab was assisting with more enhanced lab analysis, further improving and reinforcing our process. In early February, we announced that we had begun constructing our second carbon lift with our partners, Carbonetic. This carbon lift is now up and running at Scrubgrass, inclusive of design enhancements that we expect will increase airflow and carbonation and reduce costs and construction time. The second carbon lift cost is about $33,000 in materials, representing significant savings from the first couple, and we expect to continue to reduce costs as we scale. As we mentioned on our last earnings call, our team has been working closely with Carbonomics since September to list our project on the Puro Registry, the world's first registry for engineered carbon sequestration projects, to monetize our carbon removals in the private markets. We are excited to announce that Puro Earth Registry registered the scrubgrass facility in late February, and the company will now undertake the audit process, which is the next step towards generating carbon capture-related revenue. We are now embarking on the audit process for Puro, and our goal is to have an accredited carbonated materials project as early as the end of the second quarter. We expect to have further updates on this project including timeline for meaningful monetization and related milestones in the next few months. With that, I would like to pass it over to our CFO, Matt Smith.