Bitfarms Ltd. (Canada) Q3 FY2024 earnings call

• Year-to-date in 2024, upgraded 10 data centers and added 3 new data centers, unracked over 50,000 older gen miners and racked over 46,000 new miners, increased hashrate by 83% to 11.9 exahash, improved efficiency by 40%. - Acquired Stronghold Digital Mining, integrating vertically, expanding U.S. power capacity, creating energy trading and demands response opportunities, and integrating HPC/AI. - Recruited numerous industry experts, reorganized operations into two divisions: mining operations and infrastructure. - Enhanced corporate governance, strengthened Board of Directors, and reached a settlement agreement with Riot Platforms.

In the third quarter, revenue from mining activities was $43 million, an increase of over 7% from the prior quarter. Total revenue was $45 million in the third quarter, a $3 million (8%) increase from the second quarter and a 30% increase year-over-year. Gross mining profit was $17 million, or 38% of mining revenue, down from $21 million, or 51% in the prior quarter. The overall corporate electricity rate for the quarter was $0.0047 per kilowatt hour, an increase from $0.043 per kilowatt hour in the second quarter, but electricity cost per terahash decreased over the quarter by 10% to $0.027 from $0.03 per terahash per day due to improved electrical efficiency.

• Behind schedule on delivering midyear 12 exahash target due to minor construction delays, shipping delays, and extended warranty servicing; hash rate target now expected in first half of 2025. - 2025 megawatts plan adjusted; previously guided 35 exahash at year-end 2025 is premature, will issue updated guidance once strategies are finalized.

• Minor construction delays, shipping delays, and extended warranty servicing have impeded achievement of hash rate target. - Uncertainties related to the deployment and monetization of assets in Paraguay and other regions.

Q: Could you provide more detail on the discussions you're having with prospective customers for the HPC/AI vertical?

A: We're in active conversations with multiple parties. Revenues on HPC/AI deals are expected to be $100 a megawatt hour plus. We believe Bitcoin mining will have better economics and return on invested capital than HPC/AI in the next 15 - 18 months, with HPC/AI contributing meaningfully to revenues towards end of 2025 or beginning of 2026.

Q: How should we think about the cadence of hashrate expansion from where we are today at 11.9 exahash and as we progress through the first half of 2025 to get to the 21 exahash?

A: We're continuing to plug in miners, with first miners from Stronghold hosting agreements plugged in this week. Expect regular linear growth trackable with monthly production reports, and 21 exahash target to be hit in first half of 2025.

Q: In terms of the two pilots the one to two megawatts are there megawatts behind those so those sites could be used for larger projects once the pilots have proceeded and you've learned what you needed to learn. Any number you can give us at each site like how many other megawatts are available if any?

A: One site has an expansion capacity of about 20-ish megawatts and the other is in the triple figures. Decision on which site to finalize is dependent on strategic partner, as different sites have different advantages based on proximity to metropolitan centers.

Q: How should we think about the impact of an administration change in Washington could potentially impact regulations in the United States? And how are you viewing that?

A: Pennsylvania voted in favor of Trump, which bodes well for energy assets, infrastructure, and regulatory environment. We're very bullish on our US energy assets. We enjoy a constructive relationship with the SEC and expect it to get easier going forward. In terms of returns, hash price historically has seen 300% - 400% increase from first month exiting halving to peak of Bitcoin bull market, and we're working towards that with Bitcoin mining.

Q: On HPC side technically about Slide 12. You pointed on accelerated deployment for HPC and AI side. And what exactly is this? And what is the time line and associated CapEx for this pilot project?

A: Accelerated deployment is to get understanding and expertise in hand before allocating more capital into meaningful lease sized deployment. Earliest online is end of 2025 or beginning of 2026, but we're looking to make it faster with pilot. CapEx is more focused on infrastructure side, cutting out up to 75% of CapEx associated with HPC/AI deployment if only doing infrastructure.

Q: Can you reiterate the source of caution around Paraguay and the build-out and exahash there? And just give us a sense for like where that could fit into your plans going forward into next year?

A: It's more about managing portfolio to create optimal scenarios with miner deployment schedules and capital allocation. Original plan with Paraguay was before Stronghold transaction. We still remain very long on Paraguay and LatAm with 280 megawatts about to be ready there and 340 across LatAm, but we're optimizing existing miner deployments given various factors.