Bitfarms Ltd. (BITF) on Q4 2021 Results - Earnings Call Transcript

Operator: Good morning. My name is Gary. And I will be your conference operator today. At this time, I would like to welcome everyone to the Bitfarms Third Quarter 2021 Financial Results Conference Call. All participants will be in a listen-only mode. As a reminder, this conference is being recorded March 28, 2022. I will now turn the call over to David Barnard from LHA Investor Relations. David, you may begin your conference. David Barnard: Thank you Gary. Good morning everyone. And welcome to the Bitfarms conference call for the fourth quarter of 2021. With me on the call today is Emiliano Grodzki, Chief Executive Officer of Bitfarms, Geoff Morphy, President and Chief Operating Officer and Jeff Lucas, Chief Financial Officer. Before we begin, please note this call is being webcast live with an accompanying presentation. To watch along with the slides you can log on to our website www.bitfarms.com under investors presentations. If you prefer to listen to the call on your smartphone, you can also download the presentation from there as well. I would like to remind you that this morning Bitfarms issued a press release announcing its fourth quarter 2021 financial results. Turning to Slide 2, as a reminder there are certain statements that we make during the conference call that may constitute forward-looking information and statements. Bitfarms cautions its listeners that forward-looking information and statements are based on certain assumptions and risk factors that could cause actual results to differ materially from the expectations of the company. Listeners should not place undue reliance on forward-looking information or statements. Please see today's press release and refer to those risks set out in Bitfarms public documents filed on sedar.com as well as the sec documents filed on Edgar. The Company undertakes no obligation to revise or update any forward-looking information or statements other than as required by applicable securities laws. During this call, the Company will refer to certain matters not recognized under IFRS and that do not have a standardized meaning prescribed by IFRS and therefore may be comparable to similar measures presented by other companies. The Company uses the following non-IFRS measures: gross mining profit; gross mining margin; EBITDA, EBITDA margin; adjusted EBITDA and adjusted EBITDA margin as additional information to complement IFRS measures to provide a further understanding of the Company’s results of operations from management’s perspective. Gross mining profit is defined as gross profit, excluding depreciation and amortization and other minor items included in the cost of sales for the mining segment of the company. Gross mining margin is defined as a percentage obtained when dividing gross mining profit by revenues for the mining segment of the company. Direct cost of production represents the direct cost of Bitcoin based on the total electricity costs and hosting costs related to the mining of Bitcoin, divided by the total Bitcoin mined. EBITDA is Earnings before Interest, Taxes, Depreciation and Amortization. Adjusted EBITDA is EBITDA less changes in the value of our Bitcoin Holdings and non-cash G&A charges included in equity compensation expense. These alternative IFRS measured limitations of analytical tools and you should not consider such measures either in isolation or as substitutes for analyzing the company results reported in IFRS. We invite listeners to refer to today's earnings release and the company's fourth quarter 2021 management discussion and analysis for definitions of the non-IFRS measures and their reconciliations to IFRS measures. Please note that all financial references are denominated in U.S. dollars unless otherwise noted. During today's call President Geoff Morphy will review our operations for the quarter CFO Jeff Lucas will follow with a detailed financial review and CEO, Emiliano Grodzki will have some closing remarks after the Q&A. We've requested investors to send the questions in advance which I will read to management after we open the call to analysts in the live Q&A. Turning to slide three, it's now my pleasure to turn it over to Geoff Morphy. Geoff Morphy: Thank you, David. Greetings from Argentina. I'd like to welcome everyone to today's call. Building on our success in the third quarter of 2021, we delivered another profitable quarter with revenues of $60 million, gross mining profits of $49 million or 84% gross mining margin and adjusted EBITDA of $44 million, which represents a 74% adjusted EBITDA margin. Our hash rate as of December 31 was 2.2 exahash per second, up 47% from 1.5 exahash per second at the beginning of Q4 and up 166% from 965 Petahash at the beginning of 2021. As of today, our hash rate is 2.7 exahash per second, and is expected to exceed three exahash per second within the next seven to 10 days. As we grow our hash rate, it is significant to point out that we are growing faster than the Bitcoin network, which was recently measured at 205 exahash per second. As such, our market share is now about 1.3% and is anticipated to increase. We continue to focus on both absolute growth and achieving relative market share gains, as we execute against our global expansion plan. During the fourth quarter, we mined 1045 Bitcoins, about the same low level as achieved in the third quarter of 2021. However, from a global network perspective, the third quarter was unusual as the entire sector benefited from the network mining disruptions that occurred last summer in China. Cost of mining in the fourth quarter were $8,000 per Bitcoin and generally consistent with historical levels, except for in Q3 2021, which as mentioned benefited from the macro developments. Moving to more particulars concerning our Q4 achievements, we completed construction of a new 10 megawatt facility in Paraguay and acquired a facility in Washington State, which is currently operating at 17 megawatts, and has a defined path forward to increase to its full potential of 24 megawatts. Turning to slide four, I want to highlight Washington for a moment. It is our lowest cost facility, and the majority of our miners in Washington, are Bitmain's S19J Pros among the most efficient and profitable class of miners on the market today. With its combination of low cost energy, and miner efficiency, this farm delivers our highest gross mining margins. We generated nearly 8 million in revenue over the 52 days from the date of acquisition on November 9, 2021, through quarter end, and we expect payback on this acquisition to be realized by mid-2022. Slide five summarizes our current operating locations to elaborate. We began the fourth quarter of 2021 with five farms in operation all in Québec. We then added the previously mentioned Washington State Farm during the quarter bringing the total to six at year end. Since then, we have grown to eight operating locations as shown on the slide. And our global expansion plan continues. Accordingly, here are some of the highlights since the quarter end. Please move on to Slide six. We began production at our 10 megawatt farm in Paraguay during January. This is a picture of our completed building, located near Asunción, the largest city in Paraguay. This farm is presently operating at six megawatts and we expect it will ramp to its full capacity of 10 megawatts within the next few weeks as the final tranche of miners are installed and the remaining capacity is turned on. As part of our optimization strategy, miners in this facility include the relocation of less efficient miners located previously in some of our farms who go back to greater effectiveness here with Paraguay’s lower cost of energy. Turning to slide seven, two weeks ago, we began production at one of our new farms in the City of Sherbrooke, Québec, called the Bunker. The first phase of the Bunker involves 18 megawatts, of which we are currently drawing 12 megawatts. Under construction, our phases two and three, which involve 18 megawatts, and 12 megawatts respectively. They are targeted for completion in the second and third quarters of 2022. Upon full build out of the bunker which is slated to be a 48 megawatt facility housing 13,000 miners anticipated to deliver almost 1.3 exahash per second. Another location in Sherbrooke and located a short distance from the Bunker is called Leger. It is planned to start production within the next 10 days and will ultimately be a 30 megawatt facility capable of delivering over 740 Petahash per second. Also in Sherbrooke, and located a short distance from the Bunker and Leger Farms is our newly purchased site named Garlock. The Garlock property, combined with a Bunker and Leger facilities are intended to replace the de la Pointe facility and fully utilize the company's power contract in the municipality, in accordance with the company's previously announced agreement with the city of Sherbrooke reached in September 2021. All in, Sherbrooke is lined up to be a multi-location farming campus operating at 96 megawatts. Please turn to slide eight. In Rio Cuarto, Argentina, we have contracted plans for up to 210 megawatts consisting of four warehouse style buildings inside gates of a private power company, which will utilize available capacity and otherwise transit tower. Embarking on a four phase approach to this project, 105 megawatts of capacity are under construction present in the initial two phases. In these phases, we plan to install 27,500 of the 48,000 latest generation MicroBT miners being delivered this year, and we expect production to begin sequentially by year end 2022. Our power is secured under an eight year agreement, which involves fixed pricing on a portion of the contract for the first four years, after which the agreement calls for repricing for the remaining four years. Under full development, the Argentine Argentina farm is expected to accommodate over 55,000 miners. As we assess the impact of rising natural gas prices globally, our real total farm is expected to comprise a smaller portion of our previous 2022 plan for achieving our goal of eight exahash per second. And we have adjusted our planned development and fleet allocation accordingly. More about that just a moment. Turning to slide nine. In summary, total farms in production now stand at eight, which is up from six at the beginning of 2022. This includes two operating farms in Canada, one in Washington and another in Paraguay, which are currently operational and being expanded. As of today, we have capacity of 121 megawatts up from 69 megawatts on September 30. We have an additional of 118 megawatts under development that are expected to come online in 2022 for a total plant capacity of 289 megawatts, and are assessing additional megawatt opportunities to bring our production capacity to our eight exahash target and beyond. To maintain our low cost mining structure amidst the current changing energy environment, including the dramatic increase in natural gas prices during the past three months, we are revisiting our existing production plans and considering other opportunities that are more insulated from the risk of dramatic swings in energy pricing, which could see higher prices in over the years. Executing to our plan, we expect will bring us to 7.2 exahash at year-end. In addition, we are actively exploring and in discussions about expansion opportunities in Canada, Paraguay and the United States bring us to eight exahash by year end and higher in 2023 primarily with green hydro energy. Turning to slide 10. Bitfarms' remains one of the largest and most profitable Bitcoin miners in the world. Since the beginning in 2017, we have been a vertically integrated, decentralized global, self-mining operation. Our strong in-house capabilities and infrastructure, including our authorized repair center, and wholly owned electrical contractors subsidiary, with over 30 licensed electricians, helps ensure that we remain as one of the lowest cost miners in the industry. Our strategy continues to be to diversify our mining portfolio by prioritizing locations with cost effective electricity. With proven expertise, expanded infrastructure and a strong management team, we are better positioned than ever to execute on our growth plans for 22 and beyond. For a review of miner’s complete activity, please turn to slide 11. Deliveries and installation in Q4 2021 from MicroBT and Bitmain numbered over 7000 latest generation miners. For the full year 2021, we received and installed approximately 12,000 miners and we exited the year with approximately 27,000 miners online. As of today, our total installed suite is approximately 30,800 miners. Significantly our fleet is comprised of the most reliable miners made and we pride ourselves in running our operations to maximize uptime, drive productivity from this key asset. The 48,000 Miners ordered in 2021 commenced deliveries this January with 27,500 planned for Argentina and 20,500 to be installed in Québec. As of 2022, year-to-date, we have received or having transit nearly 11,000 miners, which have been and are in process of being installed at several farms, including our recently opened facility at the Bunker, as well as other locations to optimize our mining fleet. Apart from a pause for the Chinese New Year in the first half of February, and recent COVID lock downs in that country deliveries have been as scheduled and continue to run at about 4000 miners per month. Regarding these miners we emphasize they are highly cost effective, which in part was from our successful negotiation in mid-2021 to reprice these 48,000 miners to an average cost per terahash of $38.50, well below current market prices per terahash for these types of miners. Our average daily production now stands at about 12.5 Bitcoin per day, which based on recent prices, above 47,000 per Bitcoin equates to approximately $590,000 in daily revenue, with the exception of the macro conditions that boosted productivity, productivity, product production a typically higher in the third quarter of 2021. This marks our highest production level since before the last halving event in May 2020. Leading into Jeff Lucas’ portion of the presentation, I want to emphasize, despite volatility in the price of Bitcoin, we came through the year with profitable results, and reported net income of $10 million in the fourth quarter of 2021. Please turn to slide 12. With that, I will now hand over the call to Jeff Lucas. Jeff Lucas: Thank you, Geoff. First, let's discuss some highlights about fourth quarter of 2021. We mined 1045 Bitcoin with an average cost of $8,000 per Bitcoin, which is in line with historical levels, except for lower production costs experienced in the third quarter of 2021 as previously discussed. Overall, we continue to focus on being a low cost producer and we actively drive efficiencies towards this objective in all of our operations and as you pursue growth opportunities. During the fourth quarter of 2021, we generated record quarterly revenues of $60 million, up 426% from the prior year period, reflecting the increase in average Bitcoin price, and the increase in our hash rate in excess of the increase in network difficulty, meaning an increase in our market share. We were profitable and achieved net income of $10 million for the quarter versus a loss of $5 million in the year ago period, and achieved the adjusted EBITDA of $44 million versus $4 million in the year ago period. Also from a financial standpoint, at the end of the quarter, we entered into $100 million revolving credit facility collateralized by a portion of a Bitcoin of which $60 million has been drawn. Turning to a detailed review of our bottom line, our net income of $10 million in the fourth quarter, of $0.05 per fully diluted share, includes a loss of $4 million from the revaluation of Bitcoin holdings at December 31, 2021. An impairment charge on early generation miners existing infrastructure and $800,000 gain on disposition of property, plant and equipment and income tax expense of $8 million. This compared to a net loss in the fourth quarter of 2020 of $5 million or net loss per share of $0.06. As I mentioned a moment ago, fourth quarter 2021 adjusted EBITDA was $44 million. This was up $32 million in third quarter 2021 and an increase from $4 million in the prior year period. As a result, our adjusted EBITDA margin was 74% in the fourth quarter 2021 up from 71% in the third quarter. Turning to slide 13 to review the balance sheet. We ended the fourth quarter with cash of $126 million and 3301 Bitcoin, of which 18 175 Bitcoins are collateralizing the $60 million in a working capital facility. Working capital at December 31 stood at $186 million. Our financial position also reflects a corporate decision in early January 2021 to attend a Bitcoin we mined. For the full year, we retained over 96% of the Bitcoin we mined using only a small portion for commitments that are contractually payable in Bitcoin. The December 31, 2021 cash position reflects the following financing activity, totalling $371 million for the 12-month period. $115 million in net proceeds from private placements completed in the first half of 2021, $53 million in the exercise of warrants to stock options, $60 million in proceeds from our new $100 million Bitcoin credit facility, $146 million in net proceeds from the sale of 23.9 million common shares, and our ATM program launched on August 16 at an average share price approximately $6.28. In financing, a $14 million in new long term debt, offset by repayments of $25 million to retire existing long term debt, repay these liabilities and for other financing costs. During 2021, the financing proceeds were mainly used to invest $108 million in mining and infrastructure equipment, and $23 million for the acquisition of our Washington operations as well as to make prepayments totaling $85 million on future mine delivery. For the current quarter-to-date, we have issued an additional 6.4 million shares on the ATM at an average price of $3.97 per share for net proceeds of $25 million. Overall since the inception of the ATM program on August 16 2021, we have issued 30.4 million shares in the program with net proceeds to the company of $171 million. This now brings us to a discussion of our financial strategy, which is added two components since that third quarter report. Our key goals are to fund a plan rapid growth and to maintain sufficient flexibility to enable us to act quickly and opportunity to be identified at a relatively low overall cost of capital. Our equity ATM program remains in effect, and is the most flexible source of financing. A $100 million Bitcoin backed credit facility is an attractive way to leverage the value of Bitcoin holdings, and substantial credit remains available in this facility. Our $32 million equipment financing agreement is yet another instrument in our financial toolbox and we expect to further utilize equipment based financing and similar means to leverage the value of our growing asset base. I will add that the attractive pricing we have achieved through our miners and the rapid payback makes us mean the financing very attractive to us. And lastly, with robust mining production, the number of Bitcoin in our balance sheet continues to grow. Jeff noted we are currently adding over 12.5 Bitcoin each day, which adds to our overall financial strength and options to leverage this in other assets. Overall, Bitfarm is well capitalized and positioned to execute on the growth opportunities before us and we look forward to building on success in 2022. Before turning the call back over to Geoff Morphy, I mentioned that in addition to our on-going attendance and investor conferences, we will be participating industry events next quarter with upcoming events including Bitcoin 2020 to Miami in April in the AIM or AIM summit in London in mid-May. Please contact the LHA investor relations, if you have wished to meet with us at either of these events. Turning not to slide 14. With that, I'll turn the call back over to Geoff who will close our prepared remarks before opening the call up for Q&A. Geoff? Geoff Morphy: Thanks, Jeff. We began 2022 better positioned than ever to scale the business and execute our growth plans. We now have production in three countries, Canada, the United States and Paraguay. We expect to begin operations in Argentina by year end, and we are actively pursuing additional opportunities in these and other regions. In summary, as of today, we're operating with 121 megawatts, and are on the verge of hitting new hash rate milestone three exahash per second in the coming days. In 2021, we outpaced the network hash rate growth rate, and thus gain market share. With a strong balance sheet, and flexible capital strategy, and our expanded management team, we are positioned to aggressively invest in our business plans to continue that trend and meet our goal of exceeding 8 exahash by year end. And significantly, with our low cost structure and efficient operations, we are delivering profitable results to our shareholders in volatile times. Operator, we can now open up the call for questions. Please go ahead. Operator: We will now begin the question-and-answer session. Our first question is from Kevin Dede with H. C. Wainwright. Please go ahead. Kevin Dede: Good morning, Geoff and Jeff. Kevin Dede here. Thanks for the great presentation, maybe just helped me understand exactly the year-end target, I guess stands at eight. But there was some discussion of seven just help me understand exactly where you're hoping to be. And what you could attain with the miners that you have or have on contract now? Geoff Morphy: Hi, Kevin, it's good to hear from you. We haven't changed our year-end target. It's been eight exahash for really over the last year. And we're not deviating from that. What we've decided to do, as a result of these higher energy prices, is just how we're going to get to that target. Because, as you know, we've got a very long term focus and margins and just getting to our goals has always been something that we've prided ourselves on. And with the higher energy prices we’re quite literally three times what they were three months ago, and this paradigm shift in the world in energy supply, we've decided that we need to go prudently with Argentina. And we have a lot of other exciting opportunities in Paraguay, Washington and Québec, which are all hydro facilities, and with pretty secure rates where we don't expect any surprises and they're much more insulated than the natural gas. So with Argentina, we've decided that we're going to, we're going to do half of the facility this year and Qian the other half next year. And really make sure that we understand where gas prices are going because we don't want to expose the site or part of our operations to what might be an unprofitable operations. And Kevin and others on the phone, you'll remember, this is an eight year contract. And the final four years is completely open to market pricing. And we're fully conscious of that. So we're concerned, we're watching it closely. But we want to make good conscious decisions and because of a pretty robust pipeline of opportunity, we have good opportunities in all the other geographies with energy prices that we're confident on. And as a result of that, we've adjusted the installation infrastructure schedule for this year, not radically, but enough that we can take our existing miners and put them into operations that are developed that are under construction and development right now and not miss a beat. So hopefully that answers your question down. Kevin Dede: Okay, so the of that eight extra hash, you have Geoff, how much is either contracted or in place? Geoff Morphy: We have a defined route to 7.2 exahash, and that is building out our facilities in Québec, optimizing and building more in Québec, some more in Paraguay, and Argentina. Kevin Dede: Okay, that's where I was… Geoff Morphy: Right. Right. And the remainder, we are in various stages just in discussions in those geographies. And we feel quite confident that we can find the additional contracts and opportunities to hit the eight exahash and actually exceed it. Kevin Dede: Okay. I appreciate the commentary on energy prices, certainly natural gas focus, can you just talk a little bit about Hydro Québec and whether or not you're seeing change in pricing there? Geoff Morphy: We are not seeing any; we don't have any visibility towards change in pricing in Hydro Québec, in Washington State or in Paraguay. We are still at average, about four cents U.S. per kilowatt hour in Québec. If they are able to raise rates in Québec, they would be more sort of inflation index. But they have been reluctant to do that. Because these are in Québec that is a different animal compared to some of the other geographies in which we work, because it's a provincial utility that is providing power to really all the residents and businesses in Québec and they have an obligation to do that. They've been doing that for over a century. And so they know that if they raise rates, it's going to penalize everybody and hamper growth there. Hydro Québec has surplus power that they are making good use of, they are strategic in their ways, but we are not aware of any upcoming rate increases there from Hydro Québec or through the municipalities like Hydro Sherbrooke, Hydro Magog that we also have contracts with. Kevin Dede: Very good. Thanks, Geoff. Could you just talk a little to potential geopolitical risk is operating in Argentina. How do you respond to critics that may have voiced concerns about your ability to maintain your arrangements there? And, and maybe in an adding color to expand on how your project there is viewed by the government? Geoff Morphy: Okay, let me try to knock off some of those points. Initially, when we went public with our project in Argentina, it created a lot of curiosity. We also got a lot of emails with people that wanted to work for us. We also had questions from the government wanting to know more about it. And then we got questions from the media, wondering whether we were getting subsidies from the Argentine Government to set ourselves up there. And, like, the reality is, is that we are receiving more subsidies. And once the people and the government realized that we were doing this on our own volition, every time everybody got more supportive and understanding where we were coming from. Now, the environment in Argentina, for setting up new is more challenging than in other geographies. But it's there. And fortunately, our founders are from Argentina, they know the lay of the land here, they know how to get things done. And they're doing it. And over the last year or so we've set up -- one as areas office with very talented people we have set up contracts with, with the engineering construction firms and an engineering firm to assist us. So we've got some very capable people that are working with us. And as we've evolved Kevin, it's been interesting, because now the government is actually introducing us to people and showing us other locations, and trying to help us to get more of a beachhead in this country and open up other opportunities, which leads to employment and more development and construction in capital going in. We are being prudent and looking at those facilities. But it's, it's become very interesting. And I would be remiss if we can't talk about other lifetime opportunities. Paraguay, I think I commented at one of the last quarterly meetings, we did a 10 megawatt facility to see how it would go. It's been a success. And it's hydro in that country, a lot of hydro. We're seeing a number of good opportunities in Paraguay too. And in that situation, it's actually a geography, a country where we believe it's possibility that the electricity rates will actually go down rather than up because of sort of structural issues or structural benefits as a result of them paying off some debt on one of their hydroelectric dams. So it's favorable. We continue to tread carefully. Kevin Dede: Congratulations on the Garlock purchase. When do you suppose it looks to me based on your presentation, that's a retrofit of an existing fixture, and I was wondering how, how long it might be for Bitfarms to have that as a functioning, a functioning Bitcoin mine? Geoff Morphy: We expect production to start and the full 18 megawatts in the fourth quarter of this year. This is a facility that came about as a result of a receivership. We've had our eyes on it for a while, and I've worked on it for a while. So as you know, getting supplies miners, transformers and things like that takes a pretty good healthy lead time. But we were pretty confident with the basis of receivership and various subsequent negotiations that in time we would win that, that acquisition opportunity. And we did. It actually took a little longer than we expected. But we took a move of ordering transformers and some of the racks ahead of time. So we just got possessions a week or so ago. We are starting to do the engineering and plan to build that facility out. We already had access to the facility so we knew what it look like. It's a good facility. We bought it. It's got extra real estate around it, so we've got a nice buck around it and there is an opportunity to expand it down the road, should we get additional hydro contracts. But we've lined it up for production in the fourth quarter. I don't think it'll happen before then. But what we say we're going to do in Québec has always been pretty certain and we're feeling very good for the fourth quarter for 18 megawatts of facility. Kevin Dede: Okay, thanks for that color, Geoff. You answered a bunch of other questions there. You have access to more power and more space. So we look forward to hear more about that. Thank you very much for taking our questions. Geoff Morphy: You're welcome, Kevin anytime. Just to clarify, we don't have more power. We have 96 megawatts in the city of Sherbrooke through an existing contract, that 18 megawatts is filled out our 96 megawatts. So we don't have access to power there. But through further discussions, maybe we will. And hopefully we will and then we can easily build it out. But right now, that will be the completion of our build out in the city of Sherbrooke. Kevin Dede: Very good. Thank you for clarifying. Operator: The next question is from Chris Brendler with D.A. Davidson. Please go ahead. Christopher Brendler: Hi, thanks. Good morning. And thanks for taking my questions. It's good to talk to you guys again. As far as most, Kevin asked you all the questions. But I want to just clarify, how much does the increase in commodity prices and natural gas impact your strategy and your plans for 2022? Is, is it a major change? Or is it more just tweaks around the edges? Geoff Morphy: So it does impact it. And like, we don't expect to bring in phases one and two. Like phase one is the first warehouse, phase two is the second warehouse, which are planned for this year. It's, we expect to bring them online. It will be tracked from some of our economics in the air. And like I guess none of us really know where natural gas prices are going to go from here. I don't expect they're going to go down anytime soon. But if they go up well, we as well as everybody else in the world are going to have to adjust. But no, we're proceeding full speed with warehouses wanting to. But as I mentioned in the remarks, this is an eight year contract with a full price reset the end of four years. That's actually where we're more concerned, because we're in this for eight years in this facility. So it's and during that timeframe, we're going through two habits. So making sure that we have low cost operations to benefit return on investment, return on assets is something we're constantly looking at. And we will re-evaluate as we go ahead. But right now, we're within the parameters to make this a green light project. Jeff Lucas: And by the way, Chris, just to be clarified here. As you know, everywhere else, we are entirely hydro. So we are largely insulated from some of the changes that alters the team and their energy prices. Christopher Brendler: That's great. Sure. The other question I had was really appreciate the slide that walks through the data and puts and takes in terms of capital. On slide 13. I guess my question was, given how the market has changed so far in 2022, are any of these sources of capital more or less attractive than they were in 2021? I'm thinking like, you're so you're still seeing increased providers increase supply from all the companies and the sensor systems that are looking to finance mining their equipment or against your Bitcoin holdings? So it feels like it's still pretty robust as it be in the equity markets, but just wanted to get your take there? Geoff Morphy: So yes, let me answer that. You talked about, needless to say the cost of equity is a heck of a lot higher now than it was last year at this point in time. But where that's leaned is to pursue more aggressively non-dilutive financing opportunities. And one of the benefits that we've had over time here is that we've got a growing asset base, both in the form of our Bitcoin, but also in the terms of our miners eat our infrastructure assets. So we are finding a lot of opportunities now as we began doing recently, actually finance with etheric collateralized non-recourse collateralized financing that was put in place here. It really brings out, reduces our cost of capital overall, and actually does make available to a lot more financing alternatives than we considered before. And this is actually found and plays straight nicely with our overall financing strategy. One of the financing we put in place that we spoke to was this $100 million BTC back facility. The goal behind that facility let me just talk about that for a moment here is not always a relatively inexpensive source of capital here. But very importantly, we can use that funding to meet our operational and our debt service requirements. That allows us to continue to hold our Bitcoin and to gain the continued upside appreciation that we all foresee for Bitcoin. So that actually makes a very compelling argument for going forward. But what is interesting here, actually Chris is that we are seeing as you can call it a maturation of the financing opportunities available, to the crypto community and Bitcoin miners particularly. And what we're seeing as a result of that is, as with some of these various alternatives here, our actual cost of capital and that base is beginning to go down over time. And we are recognizing through our broader sources of capital, more sophisticated and complex sources of capital. And part of our goal when they tend to financing flexibility here is to be able to take advantage of some of those lower cost sources of capital as the market expands, and as it is matures and grows overall. Christopher Brendler: Right? Does your geographic diversity make that a little tougher? Or is it not really a problem that comes to your lenders? Geoff Morphy: Well, clearly financing activities in Argentina is a whole different animal. And we are aggressively pursuing that. But that, to be blunt is being funded more right now. I think it has been funded more by the equity raising that we've been doing here. But in terms of being in the U.S. and Canada, that has provided more opportunities. There are some folks who were there for their own structural purposes or otherwise may have a bias towards lending to a U.S. entity or a Canadian. We've been able to avail ourselves of both of those at an overall lower cost of capital. So in summary, it does help us but again, South America, while we are in discussions right now on various financing opportunities down there, that is a bit of a of a different animal than what we're seeing elsewhere. Christopher Brendler: Makes sense. Congratulations on the results. Thanks, guys. Operator: This concludes our question-and-answer session. I'll now turn the call over to Emiliano Grodzki, CEO of Bitfarms. Please go ahead sir. Emiliano Grodzki: Thank you for all of attending today's conference call. With a current hash rate of 2.7 exahash per second Bitcoin represents about 1.3% of the Bitcoin network. This is up from less than one exahash per second and setup points each share at the start of 2020. We have grown faster than the Bitcoin network, and we expect to continue to gain share, as we bring on production in multiple new locations in 2022. In summary, we are extremely excited about the future as we have assembled a world class team. These operate aid funds in multiple geographies, competition at the capital resources to support our role plans in 2022 and the year. We remain focused on being one of the largest and most profitable Bitcoin miners, and we look forward to updating you about our progress in the future. Thank you very much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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Bitfarms Ltd. Price Target and Strategic Moves Amidst Industry Consolidation

  • Bill Papanastasiou of Stifel Nicolaus sets a price target of $2.3 for Bitfarms Ltd., indicating modest upside potential.
  • Bitfarms rejects a buyout offer from Riot Platforms, emphasizing its strategic independence and long-term growth potential.
  • The company aims for an ambitious operational target of 21 EH/s and an efficiency of 21 w/TH by 2024, showcasing its commitment to operational efficiency and market position strengthening.

Bill Papanastasiou of Stifel Nicolaus has recently set a price target of $2.3 for Bitfarms Ltd. (NASDAQ:BITF), a notable entity in the cryptocurrency mining industry. This target suggests a modest upside of about 5.5% from its current trading price of $2.18. This valuation comes at a time when Bitfarms is navigating through a significant period, marked by an unsolicited proposal from Riot Platforms, a leading global bitcoin miner. The proposal, valued at $2.30 per share, underscores the competitive and consolidating nature of the cryptocurrency mining sector, especially following the substantial market downturn in 2022.

Bitfarms, with operations centered in Toronto, Ontario, and Brossard, Québec, has been proactive in addressing this unsolicited bid. The company has expressed its dedication to maximizing shareholder value, exploring strategic alternatives, and maintaining confidence in its operational roadmap. This includes achieving an ambitious target of 21 EH/s (exahash per second) and an efficiency of 21 watts per terahash (w/TH) by 2024. Such strategic goals highlight Bitfarms' commitment to strengthening its market position and operational efficiency amidst industry challenges.

The backdrop of this scenario is the broader cryptocurrency market's volatility, particularly the massive market collapse in 2022, which wiped out over two trillion dollars in value. This event has led to predictions of increased consolidation within the bitcoin mining sector, with larger players like Riot Platforms actively seeking to absorb smaller competitors. Bitfarms' rejection of Riot's buyout offer, valued at $950 million, not only reflects its strategic independence but also its belief in its long-term growth potential and operational goals.

The market's reaction to these developments has been notably positive for Bitfarms, with its stock experiencing an 11% increase in premarket trading following the disclosure of Riot's rejected offer. This investor optimism is reflective of Bitfarms' resilience and strategic positioning within the competitive landscape of cryptocurrency mining. Despite the industry's inherent volatility and the challenges posed by market consolidations, Bitfarms' focus on operational efficiency and strategic growth initiatives appears to resonate well with its stakeholders.

Currently, BITF's trading activity shows a slight decrease of 1.36%, with the stock fluctuating between $2.15 and $2.335. Over the past year, the company has seen its share price reach a high of $3.91 and a low of $0.919, with a market capitalization of approximately $658.05 million. This financial performance and market activity underscore the dynamic and volatile nature of the cryptocurrency mining industry, within which Bitfarms is striving to enhance its value and operational efficiency.