LM FUNDING AMERICA, INC. Q2 FY2024 earnings call

• Bitcoin mining: Mined 44.1 Bitcoins in Q2 2024 valued at ~$2.9 million. Relocated miners to cost-effective sites, with approximately 3,800 miners at 639 petahash. Entered a letter of intent to acquire a Texas mining site with 12 MW initial capacity (potential to expand to 72 MW) using immersion mining. Partnered with Arthur Mining for a 15 MW Oklahoma hosting facility, relocated 3,000 miners, and Arthur will host at cost for 10 months. Secured a $5 million non-convertible loan for additional miners.
• Legacy business: Stable since the end of 2023, with anticipation of growth due to Florida legislative changes mandating reserve funding for community associations.

In the second quarter of 2024, digital mining revenue was $2.9 million (relatively flat compared to $3 million in Q2 2023). Total revenue for Q2 2024 was approximately $3 million, a decrease of $184,000 from the same period last year. Operating expenses for the quarter ended June 30, 2024, were $7.8 million. Net loss attributable to shareholders was approximately $6.1 million, including a $1.9 million unrealized loss on securities. Core EBITDA loss was $2.2 million in Q2 2024, but positive core EBITDA for the first half of 2024 was $2.2 million. As of June 30, 2024, the company held 160.4 Bitcoins valued at approximately $10 million.

• Plan to grow the Texas site from 12 MW to 72 MW, projected to yield approximately 1,000 Bitcoins annually.
• Partnership with Arthur Mining for a 15 MW Oklahoma site, with consideration of a 60 MW adjacent site.
• $5 million loan for acquiring additional miners.

• Forward-looking statements subject to risks, uncertainties, and assumptions as per the company's Form 10-K.
• Impact of Bitcoin halving event on mining rewards.
• Dependence on power costs and availability at mining sites.

Q: Can you help us get a better read on Texas and Oklahoma just in terms of the build-out? I know you mentioned immersion. Do you plan on just dropping containers there? Or do you expect to have a larger build-out? Also, what are you thinking about in terms of power? Are transformers going to be needed at – additional transformers needed at both of these sites?

A: Texas and Oklahoma are two different places. Both sites will operate using containers – Texas actually does have a – well, yes, Texas will be immersion containers. Right now, the Oklahoma site is air containers, right, and that is 15 megawatts is fully built out right now. The Texas site, they’ve got four new immersion containers that were put in service once we buy the three slightly older suburb immersion containers that are active right now. And then, of course, we will buy more immersion containers to fill out the other 6 megawatts of the site at Texas. Second part of your question, Michael, was yes, there are transformers on the ground in Texas. There are in Oklahoma, but there are costs for – additional costs per build-out at both in tranches to build more megawatts.

Q: Now in terms of the potential for AI or HPC hosting, what sort of connectivity do these sites offer either for fiber connectivity? And what sort of water sources do you have nearby just for this potentiality?

A: We’ve not priced or valued the sites for HPC uses. I only have general knowledge and stuff like that. To us, it’s securing the power. So it’s 72 megawatts in Texas, and there would be an additional 60 potential in Oklahoma, what we’ve got there. So just not our business yet.

Q: Oklahoma, so it’s going to be at cost for 10 months for the – running the 3,000 miners there. After the 10 months, have you guys discussed what that looks like or what a potential deal would be after the initial… A: It’s in the agreement, Michael. It’s in the agreement in the docs. It goes to market price after the 10 months. So the big picture of that is we – rather than provide a hosting company with a deposit that they use to build, do something, we loan them on a secured basis, the money they needed to build it out. And then to make money on our money, they’re mining for us for cost for these first 10 months. And then after that, we plan to be elsewhere, and they’ll rent our space out to somebody that will pay market rates and be able to pay off that loan to us.

Q: In terms of the timeline that took to transition those 3,000 miners, was that in June and July? I think, I believe that they’re all over there now, right, the 3,000? So just that...

A: Correct.

Q: And can you remind us where that be the new machines that you S21 and where – are they located at a third-party site? I believe you’re expecting them to rise in March, April. Can just help with that?

A: Yes. They came in, I want to say April and very solid at the core location in Kentucky with our XPs. So we have about 800 S21s and XPs combined over there.

Q: And for your third-party hostings, is there anything with core now? Or do you still have some at Giga?

A: No. We transitioned out of Giga, and they went into a warehouse. And we’re looking to move some of those over to the Texas side once that’s done.

Q: More of a big picture question, though, with that – the $5 million loan, I believe you spoke to some of that being for immersion. Is this going to be mostly for infrastructure or purchasing new machines to? How should we think about that?

A: Mostly has a number attached to it? Whatever infrastructure it takes plus whatever machines the infrastructure will support, that’s the plan.