Stronghold Digital Mining, Inc.

Good morning and welcome to Stronghold Digital Mining's conference call for the second quarter ended June 30th, 2024. My name is Josh and I will be your operator this morning. Before this call, Stronghold issued its results for the second quarter 2024 in a press release, which is available in the investors section of the company's website at www.strongholddigitalmining.com. You can find the link to the investors section at the top of the homepage. Joining us on today's call are Strongholds Chairman and CEO Greg Beard and CFO Matt Smith. Before we begin, Alec Wilson from Gateway Group will make a brief introductory statement.

Alec Wilson, please proceed.

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 you that there are a number of factors, many of which are beyond our control, which could cause actual results and events to differ materially from those described in the forward-looking statements. For more detailed risks, uncertainties, and assumptions relating to our forward-looking 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 gap measures in our earnings release carefully as you consider these metrics. We expect to file our quarterly report on Form 10-Q on or around August 14, 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 Stronghold's securities and exchange commission filing for free by visiting the SEC website at www.sec.gov or Stronghold's investor relations website at ir.strongholddigitalmining.com. I would like to remind everyone that 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 Strongholds Chairman and CEO, Greg Beard.

Greg? Good morning, everyone, and thank you for joining us on our second quarter 2024 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. As we previously announced, on our Q1 earnings call, we initiated a formal review of strategic alternatives, and that process is ongoing. To date, the company has received numerous bids for all or parts of the company, and we are considering a wide range of alternatives to maximize shareholder value. These alternatives range from sales of all or part of the company, mergers, strategic financings, and expansion of our available power. potentially into other data center use cases. Moving to slide four, we are excited to announce several positive updates regarding our power strategy and assets. In July, PJM's capacity market base residual auction cleared at $270 per megawatt day, up more than 800% from last year. Panther Creek cleared 69 megawatts, and scrubgrass cleared 76 megawatts. We have since exited 17 megawatts of the scrubgrass commitment and retained 59 megawatts. We are working with advisors to evaluate exiting the rest of the scrubgrass capacity position because capacity payments and demand response are mutually exclusive. But at Panther Creek alone, we estimate that capacity payments will drive approximately 7 million of incremental revenue between June 2025 and May 2026 at 100% margin. We also have a positive update on waste coal tax credits. Last month in Pennsylvania's bipartisan budget, which was passed by the State House and Senate and signed into law by the governor, the waste coal tax credit was doubled from $4 per ton to $8 per ton through 2036. This legislation highlights the importance of our reclamation activities and the bipartisan support that they have in Pennsylvania. And importantly, we estimate that this increase in the tax credit will represent an additional cash flow of two to four million per year for strongholds starting in 2025. Lastly, in April, PJM updated its guidance for co-located loads like ours. Based on this guidance to date, We believe that our Bitcoin mining operations qualify for PJMs, demand response, and sync reserve programs. And we are currently in the process of registering the Scrubgrass data center for these programs. Moving on to slide five. We have spent the last few months evaluating the expansion potential for our current assets. As a part of this process, we have engaged Applebee's strategy group to help us explore data center opportunities and uses for our assets. Some key value drivers for data centers are access to land, power, fiber, and water, and we believe that our assets possess these qualities. We own 636 acres of scrub grass and 117 acres of Panther Creek, and we recently optioned an additional 1,140 acres immediately adjacent to our Panther Creek property. We have entered into load studies with local utilities at both sites to understand how much power we can access. And our first preliminary load study at Panther Creek recently came back and is supportive of bringing in an additional 250 megawatts. We are evaluating timing for the potential expansion and site development. Additionally, both of our sites have various nearby fiber providers that represent diversified paths to market and both have robust water supply further enhancing the data center prospects for our sites. With that, I'll turn the call over to Matt Smith to discuss Q2 results.

Thanks, Greg. Lastly, on slide six, revenue for the second quarter was 19.1 million, with 18.8 million from cryptocurrency operations on 299 Bitcoin mined, along with 0.3 million revenue from energy operations during the quarter. GAAP net loss was $21.3 million for the second quarter, and non-GAAP adjusted EBITDA was negative $0.3 million. A reconciliation for those figures is included in the appendix. I will now turn the call back over to Greg for closing remarks.

Thanks, Matt.

At Stronghold, we own a portfolio of hard assets that are becoming increasingly more valuable. We are at the intersection of a tight power market reflected in the increase capacity auction pricing, increased demand for power from AI, HPC data center development, and a market with power generation supply constraints. We are continuing to evaluate all strategic alternatives and look forward to updating you in the near future.

Thank you for joining us today at Stronghold's earnings call. You may now disconnect. Music Music Music Music Thank you. Thank you. Thank you.

Good morning and welcome to Stronghold Digital Mining's conference call for the second quarter ended June 30th, 2024. My name is Josh and I will be your operator this morning. Before this call, Stronghold issued its results for the second quarter 2024 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 to the investor section at the top of the homepage. Joining us on today's call are Strongholds Chairman and CEO Greg Beard and CFO Matt Smith. Before we begin, Alec Wilson from Gateway Group will make a brief introductory statement.

Alec Wilson, please proceed.

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 you that there are a number of factors, many of which are beyond our control, which could cause actual results and events to differ materially from those described in the forward-looking statements. For more detailed risks, uncertainties, and assumptions relating to our forward-looking 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 gap measures in our earnings release carefully as you consider these metrics. We expect to file our quarterly report on Form 10-Q on or around August 14, 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 Stronghold's securities and exchange commission filing for free by visiting the SEC website at www.sec.gov or Stronghold's investor relations website at ir.strongholddigitalmining.com. I would like to remind everyone that 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 Strongholds Chairman and CEO, Greg Beard.

Greg? Good morning, everyone, and thank you for joining us on our second quarter 2024 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. As we previously announced, on our Q1 earnings call, we initiated a formal review of strategic alternatives, and that process is ongoing. To date, the company has received numerous bids for all or parts of the company, and we are considering a wide range of alternatives to maximize shareholder value. These alternatives range from sales of all or part of the company, mergers, strategic financings, and expansion of our available power. potentially into other data center use cases. Moving to slide four, we are excited to announce several positive updates regarding our power strategy and assets. In July, PJM's capacity market base residual auction cleared at $270 per megawatt day, up more than 800% from last year. Panther Creek cleared 69 megawatts. and scrubgrass cleared 76 megawatts. We have since exited 17 megawatts of the scrubgrass commitment and retained 59 megawatts. We are working with advisors to evaluate exiting the rest of the scrubgrass capacity position because capacity payments and demand response are mutually exclusive. But at Panther Creek alone, we estimate that capacity payments will drive approximately 7 million of incremental revenue between June 2025 and May 2026 at 100% margin. We also have a positive update on waste coal tax credits. Last month in Pennsylvania's bipartisan budget, which was passed by the State House and Senate and signed into law by the governor, the waste coal tax credit was doubled from $4 per ton to $8 per ton through 2036. This legislation highlights the importance of our reclamation activities and the bipartisan support that they have in Pennsylvania. And importantly, we estimate that this increase in the tax credit will represent an additional cash flow of two to four million per year for strongholds starting in 2025. Lastly, in April, PJM updated its guidance for co-located loads like ours. Based on this guidance to date, We believe that our Bitcoin mining operations qualify for PJM's demand response and sync reserve programs, and we are currently in the process of registering the Scrubgrass Data Center for these programs. Moving on to slide five. We have spent the last few months evaluating the expansion potential for our current assets. As a part of this process, we have engaged Applebee's strategy group to help us explore data center opportunities and uses for our assets. Some key value drivers for data centers are access to land, power, fiber, and water, and we believe that our assets possess these qualities. We own 636 acres of scrub grass and 117 acres of Panther Creek, and we recently optioned an additional 1,140 acres immediately adjacent to our Panther Creek property. We have entered into load studies with local utilities at both sites to understand how much power we can access. And our first preliminary load study at Panther Creek recently came back and is supportive of bringing in an additional 250 megawatts. We are evaluating timing for the potential expansion and site development. Additionally, both of our sites have various nearby fiber providers that represent diversified paths to market and both have robust water supply further enhancing the data center prospects for our sites. With that, I'll turn the call over to Matt Smith to discuss Q2 results.

Thanks, Greg. Lastly, on slide six, revenue for the second quarter was $19.1 million, with $18.8 million from cryptocurrency operations on 299 Bitcoin mined, along with $0.3 million revenue from energy operations during the quarter. GAAP net loss was $21.3 million for the second quarter, and non-GAAP adjusted EBITDA was negative $0.3 million. A reconciliation for those figures is included in the appendix. I will now turn the call back over to Greg for closing remarks.

Thanks, Matt.

At Stronghold, we own a portfolio of hard assets that are becoming increasingly more valuable. We are at the intersection of a tight power market reflected in the increase capacity auction pricing, increased demand for power from AI, HPC data center development, and a market with power generation supply constraints. We are continuing to evaluate all strategic alternatives and look forward to updating you in the near future.

Thank you for joining us today at Stronghold's earnings call. You may now disconnect.