Q2 2023 LM Funding America Inc Earnings Call
Speaker 1: That that that, that that.
Speaker 2: Greetings. Welcome to the LM Funding America Inc. second quarter 2023 business update conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press.
Speaker 2: star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to your host Ted Avis. You may begin.
Speaker 3: Good morning and thank you for joining LM Funding America's second quarter 2023 conference call. On the call with us today are Bruce Rogers, Chief Executive Officer, and Richard Russell, Chief Financial Officer of LM Funding.
Speaker 3: This morning the company announced its operating results for the quarter ended June 30, 2023, and our financial conditions as of that date.
Speaker 3: The press release is posted on the company's website, lmfunding.com. In addition, the company has filed its quarterly report on Form 10Q with the U.S. Securities and Exchange Commission, which can also be accessed on the company's website as well as the SEC's website at www.SEC.gov.
Speaker 3: If you have any questions after the call or would like any additional information about the company, please contact Rescendo Communications at 212-671-1020. Before management reviews, the company's operating results for the quarter-ended June 30th, 2023, and its financial condition as of that day.
Speaker 3: And we'd like to remind everyone that this conference call may contain forward looking statements. All statements other than statements of historical facts contained in this conference call, including statements regarding our future result of operations and financial position, strategy and plans, and our expectations for future operations of forward looking statements.
Speaker 3: These forward-looking statements are based largely on the company's current expectations and projections about future events and trends that it believes may affect its financial condition, results of operations, strategy, short-term and long-term business operations and objectives, and financial need.
Speaker 3: These forward-looking statements are subject to various risks, uncertainties and assumptions described in the company's form 10K file with the United States Securities and Exchange Commission on March 31, 2023. Because of these risks, uncertainties and assumptions, the forward-looking events and circumstance discussed in this conference call.
Speaker 3: May not occur, and actual results could differ materially and adversely from these anticipated or implied in the forward-looking statement. You should not rely upon forward-looking statement as predictions of future events. Although the company believes that the expectations reflected in the forward-looking statement are reasonable, it cannot guarantee future results. Level of activity, performance, or achievements.
Speaker 3: In addition, neither the company nor any person assumes responsibility for the accuracy and completeness of any of these forward-looking states.
Speaker 3: The company disclaims any duty to update any of these forward looking states.
Speaker 3: All following looking statement attributable to the company are expressly qualified in their entirety by these cautionary statements, as well as others made in this conference call.
Speaker 3: You should evaluate all forward-looking statements made by the company in the context of these risks and uncertainty.
Speaker 3: In addition, today's discussion will include references to non-GAAP measures.
Speaker 3: The company believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non- GAAP measures to the most direct comparable GAAP measures is available in today's news release on our website.
Speaker 3: With that, I will now turn the call over to Bruce Rogers. Bruce.
Speaker 4: Thanks Ted. Good morning, thanks to everyone for joining us today.
Speaker 4: On behalf of the LM funding team, I want to thank our shareholders for their continued patience with our share price through much of the second quarter.
Speaker 4: Our company made significant progress in the second quarter towards our Bitcoin mining and other objectives in furtherance of our strategic plans. We believe our strategic plans for our businesses will lead to considerable value for our shareholders.
Speaker 4: At June 30, 2023, we had approximately 5,200 and 30 mining machines electrified at hosting facilities and actively mining Bitcoin.
Speaker 4: During the quarter ended June 30, 2023, we mined 106.6 Bitcoin. A sequential increase of 16% compared to 91.6 Bitcoin mined in the first quarter of 2023, at an average market revenue value of $27,900 per Bitcoin.
Speaker 4: The current Bitcoin price has been higher and is fluctuated between $29,000 and $31,000 over the last several months.
Speaker 4: As of August 14, 2023, we have approximately 5,950 mining machines fully operational and mining, providing approximately 615 Teta hash of mining capacity.
Speaker 4: Looking ahead to the next Bitcoin having event, projected occur in 2024, our goal is to continue to procure more energy efficient mining machines to boost our rep mining capacity and lower our average jewels per tarage costs.
Speaker 4: In July , we announced that the company had installed brains OS plus software on 360 of its mining machines.
Speaker 4: We expect this to increase the hash rate on these machines by as much as 25%, which should lead to an increase in the number of bitcoins that we can mine.
Speaker 4: In addition to increasing hash rate, there's further advantage to mining Bitcoin with machines operating brains OS plus software. As machines equipped with this software, may mine with any pool or mine with brains pool without having to pay pool fees to brains.
Speaker 4: We believe the best use of our capital is to increase hash rate production through the purchase of additional minors enhancements to their hashing capabilities. We believe the best use of our capital is to increase hash rate production through the purchase of additional minors enhancements to their hashing capabilities.
Speaker 4: We pivoted our focus to Bitcoin mining with the purchase delivery and energyization of our first miners completed at the end of 2022. We mined 53.4 Bitcoin in 2022, 91.7 Bitcoin in the first quarter of 2023, 106.6 Bitcoin in the second quarter of 2023.
Speaker 4: Since the beginning of Q1, we have increased our mining capacity from 3,000 mining machines to 5,950 mining machines generating 615 petash.
Speaker 4: We believe our stock price should better reflect the growth in our Bitcoin binding business since the beginning of 2023.
Speaker 4: A significant highlight from the recent quarter was our successful $2.6 million stocking horse bid leading to the acquisition of Symbion Inc's assets, including its flagship product, the Assembly Financial Services Blockchain Enterprise Plapment.
Speaker 4: The assembly was developed for financial institutions to handle the issuance tracking and management of various financial transactions such as loans, investment contracts, and securities on a shared blockchain.
Speaker 4: This acquisition affords us entry into the smart contracts business with an advanced technology offering developed for real customers.
Speaker 4: We are currently in dialogues with technology partners to license, develop, and sell our symbiote assets and expect to announce further developments this quarter.
Speaker 4: With respect to our legacy business, which involves offering funding to nonprofit community associations, the business has remained fairly stable since the conclusion of 2022.
Speaker 4: In summary, we find it puzzling that such a substantial disc frequency exists between our stockholders' equity of $39.9 million, equivalent to $2.72 per outstanding share as of June 30, 2023, and the recent trading price of our shares at $0.70 per share.
Speaker 4: This represents a 75% discount to book value. While we are mindful of the broader weaknesses in the stock market, especially within the micro-cap market and the sufferer disproportionately, we were made optimistic that by diligently executing on our strategic plan, mining more Bitcoin and monetizing the symbion assets.
Speaker 4: We can narrow this valuation gap. On that note, I'd like to turn the call over to Rick Russell, Chief Financial Officer of Ellen Bunn, who will view the financial results from three month period ended June 30, 2023.
Speaker 4: Thanks Bruce and good morning everyone.
Speaker 4: Total revenues for the three months and a June 30, 2023 increased by $3 million to $3.2 million from $2.30,000 to $3,000,000 for the three months and a June 30, 2020.
Speaker 4: Furthermore, we have experienced strong sequential poorly routed growth of more than 38% compared to the first quarter of 2023.
Speaker 4: Rebours for the Street 3 Month in a June 23, 2023, include digital mining revenue to $3 million due to the mine of 106.4 big coins in the second quarter of 2023, where there was no mining for the 2022 comparable quarter.
Speaker 4: Operating expenses total 6.4 million for the three months in a June 30, 2023 compared to 5.6 million for three months in a June 30, 2022.
Speaker 4: The $1 million increase is primarily a triple to a 2.4 million increase in digital mining calls.
Speaker 4: at 1.3 million increase in depreciation.
Speaker 4: Partially all set by 1.9 million decreases dot compensation and a 700,000 decrease in professional fees as compared to the second quarter of 2022.
Speaker 4: So three months in the June 30, 2023, the net law attributed to Allan Fundy's shareholders 4.5 million, which included a 3.7 million non-cash.
Speaker 4: Unreweis all of some investment in eco securities.
Speaker 4: compared to net income of 2.8 million for the second quarter of 2022, which included a 12.2 million annualized gain on investments in equity.
Speaker 4: Court EBITDA put a quarter in a June 23, 2023 was $19,000 compared to a court EBITDA loss.
Speaker 4: a torque 2.3 million and a 2022 to variable The core.
Speaker 4: primarily due to our Bitcoin mining operations and the gain on adjustment of symbiont note receivable allowance.
Speaker 4: Turning to our balance sheet, we enter the quarter with 1.8 million cash, bitcoins worth 2 million, and working capital of 5.59.
Speaker 4: which we believe provides us with sufficient liquidity to execute on our current Bitcoin mining strategy.
Speaker 4: In addition, we have minimal long-term debt. The end of the quarter is $2.30, $39.9 million, or $2.32 per share.
Speaker 4: Finally, net cash use by operations within 370,000, doing three months into June 30th, 2023, compared to net cash provided by operations through in 340,000.
Speaker 5: We have three months into June 30th, 2022.
Speaker 5: This change in cash using operating activities was primarily driven by the difference between Bitcoin mining revenue received and non-catch consideration at your Bitcoin.
Speaker 5: As compared to the amount of mind-baked equity support operations in three months and in June 30th, 2020.
Speaker 2: That concludes our precarious remarks. I would now like to open the call for questions. Operating, could you please assist us with that? Certainly. At this time, we will be conducting the question and answer session. If you would like to ask a question, please press star one on your telephone keypad.
Speaker 2: You may press star 2 if you would like to remove your question from the queue. For participants using a speakerphone, it may be necessary to pick up your handset before pressing the star keys. Please hold just one moment while we pull for questions.
Speaker 2: Your first question is coming from Matthew Filinco at Maxim Group. Please pose your question. Your mind is live.
Speaker 5: Hi, thanks for taking my question.
Speaker 6: Can we start with...
Speaker 6: Maybe a little bit more on your thoughts looking into the having event next, you know expected for next year. Is the
Speaker 6: you know, maybe talk a little bit more about your strategy going into that or maybe how you see that playing out.
Speaker 4: Sure, Matt.
Speaker 4: Well, from a 50,000 foot view, the halving means that basically half the machines will probably fall into a level of unprofitability worldwide. So you want to be at the top end of the efficiency curve there, which is why we've focused our purchases.
Speaker 4: most recent purchase on XP. Before that we have XJ pros or 19J pros.
Speaker 4: Then we've, we're an infrastructure light plan, so we host with other people and we have spread our hosting contracts around and we have our hosting contracts coming due around the period of having.
Speaker 6: keep our joules per terra hash low and have our contracts be in position that we can renegotiate should the having produce different economics on the go forth. Got it, thanks. And then maybe touching on the implementation of brains on a subset of your mining equipment, is that the fleet or you know what I guess what's the timing on you know rolling out more broadly optimization strategies like
Speaker 5: machines but we do run it at our other hosting giga.
Speaker 5: And it works a lot, I think, in the Texas environment.
Speaker 5: where there's a lot of adjustments to the power usage going on.
Speaker 5: but it won't be a roll out throughout the entire fleet.
Speaker 6: Got it. And then on Symbian...
Speaker 6: I think you mentioned –
Speaker 6: You might
Speaker 6: You're hoping to announce something in the next few months. So I guess...
Speaker 6: What's your sense since closing that acquisition?
Speaker 6: you know, are things going sort of according to plan or, you know, how...
Speaker 6: Could you help us with a little bit more color on?
Speaker 7: slide
Speaker 7: how that's going.
Speaker 4: Sure, so we've learned an awful lot about what it is we've acquired. And both on its functionality and speakers, which seem to be more robust than what's out there in the marketplace. And that seems to be encouraging and attracting a lot of attention. We've learned some criticisms of the technology and some of it.
Speaker 4: was done in a proprietary manner that if you can rule the world might work great, but maybe converting it to open source will be better.
Speaker 4: And so everyone believes that for the different uses that we're looking at in the different projects that we're talking to people about, believe that there's a level of CapEx gonna be required to commercialize this for the customer base that they're targeting.
Speaker 4: And of course, all those things require money and money requires negotiation and different interests and different objectives for use of the technology. So it's going great, it just hasn't revealed itself as to how it's going to go.
Speaker 8: Thank you very much.
Speaker 8: Got it. Okay.
Speaker 6: Maybe, I think last question for me is
Speaker 6: plans for fleet, I guess evolution on the mining side to
Speaker 6: Do you expect to just sort of be in a steady state for the next few months going into the having in terms of the size of the fleet and, you know, if you have any failures, you'll replace them with higher efficiency units or what's the thinking there?
Speaker 4: So the latter part, yes. We're buying machines to replace and increase efficiency.
Speaker 4: Yes, we're buying machines to replace and increase efficiency.
Speaker 9: Thank you very much.
Speaker 4: Our executive comp plans are all incentivized to get us to 1x a hash. So everybody from Rick and I down through the guys that are out at the mines in Texas looking at broken machines today are motivated to do that. And so there's a combination of finding the machines at the right price, hosting at the right price.
Speaker 4: the right time to be acquiring machines, we are just looking at our best sources of capital to do so.
Speaker 7: Thank you.
Speaker 2: Once again, if you do have any questions, please press star 1 to enter the queue. Your next question is coming from Kevin Deedy with HC Wainwright. Please pose your question. Your line is live. Your line is live.
Speaker 2: Once again, if you do have any questions, please press star 1 to enter the queue. Your next question is coming from Kevin Deedy with HC Wainwright. Please pose your question. Your line is live.
Speaker 10: Hi Bruce and Rick, thanks for taking my question. This is Michael Donovan calling on behalf of Kevin Dee Dee.
Speaker 10: I'm hoping to get a bit more color on your fleet.
Speaker 10: So you mentioned again to 1x hash,
Speaker 10: And so how much are you planning to invest in purchasing new machines and then also you have any specific sites in mind for expanding or hosting agreements? Are you pretty content with your providers on that front right now?
Speaker 4: So the first question, we haven't released any guidance on that. To talk around the question, obviously machines cost a certain amount of money to get that one exit hash, then Bitmain offers coupons and incentives to their better customers that keep piling up for us.
Speaker 4: And then there's the amount of Bitcoin we have on hand that we could sell and then turn those into machines, the amount of cash we have on hand that we're willing to operate without. And then we're always looking at our capital markets and our stock and hoping that...
Speaker 4: We respond well to this earnings call and provide some opportunity there. So that's the status of sources of ways that you can buy machines. You can also borrow money, but we're very reluctant to leverage our position much.
Speaker 4: And then as for your hosting question.
Speaker 11: We, uh...
Speaker 4: We're pursuing a geographically dispersed hosting plan so that our CAPEX isn't tied up into transformers and land and buildings and things that don't equate to the actual coin mined when it's mined.
Speaker 4: And then by being geographically dispersed, you get politically dispersed with that as well as power source dispersed. And although we like all the people that we're currently mining with and are always asking them for more space, we're also open to going and seeing new sites and new technologies and new ways to mine.
Speaker 12: Yeah, that's helpful.
Speaker 12: That's helpful.
Speaker 10: In regard to Symbiont, I guess we'll have to wait for your announcements there. So a bit more of an esoteric question. Are you going to stick with the current branding of Assembly?
Speaker 10: or are you going to look to rebrand SimplyOps individual assets?
Speaker 4: I don't know the answer, but I know that I am not the one that's going to make that decision. We're surrounding ourselves with some very, very successful tech-savvy people that have their own views on those things, and I think we'd be better to defer to those.
Speaker 10: Makes sense. In terms of the regulatory landscape, what sort of feedback have you received?
Speaker 10: in terms of how symbiotic assets can play into the current
Speaker 10: current regulatory landscape.
Speaker 4: I'm unaware of any regulatory landscape effects on symbiont's assets. Could you elaborate on your question?
Speaker 10: It's more of just a general question of that in terms of crypto and blockchain in general, specifically in the US versus say Europe's MICA, RedGoodSoria, etc.
Speaker 10: that's being put in place right now. Just at 50,000 square foot.
Speaker 10: put level are you feeling optimistic about about the landscape or do you see things need to change before symbionts tech can really really take off.
Speaker 4: So we're Bitcoin miners at heart and the regulatory environment for being a Bitcoin miner kind of keeps getting clearer and clearer. We're a commodity, I guess we're not going to be treated as security.
Speaker 4: There's not a lot changing for us. What we're really hoping will change there will be on the accounting side. We need FINRA to come out and allow us to mark this thing to fair market value each quarter rather than to its lowest trading point and keeping it impaired. I think that the guidance on that, it's just a matter of time until it gets approved.
Speaker 4: private use among financial institutions and so it never really had a look towards the tokenization and some of the things that that the exchanges have run into issuing coins and such like that. Now it's a very robust blockchain that
Speaker 4: could be turned into a public blockchain, but we would be, we need to see a regulatory path for us to be able to pivot that thing to a public tokenization.
Speaker 4: Yeah, it's very interesting.
Speaker 4: if that path can present itself to having a licensed security, and a registered security rather, in an exchange to trade it on, that would interest us.
Speaker 1: Thank you.
Speaker 10: Okay, great. Well, thank you so much, Bruce and Rick.
Speaker 13: Thank you.
Speaker 2: Your next question is coming from Jack Richardson with Expressway Center. Please pose your question. Your line is live. This is Jack. Don't hear me. Hi, everyone. This is Jack. I'm Jack Richardson. I'm the director of the Expressway Center.
Speaker 6: Hello, can you hear? Okay, great. Yeah. This is the IMA stockholder
Speaker 14: This is my very first conference call of this matter.
Speaker 14: I just have really just one question and please tell me if this is proprietary or not. I will not be offended. My question is what is the average
Speaker 14: cost per kilowatt per power.
Speaker 14: including hosting fees.
Speaker 5: Well, you know, it includes all service needs and it's around eight-ish sentences. Okay.
Speaker 6: Again, that's the charge for the kilowatt, the real estate underneath the rack that the machine sits on, and somebody walking around with a screwdriver and fixing the brakes. That includes maintenance and real estate and does that include hardware maintenance? We do everything infrastructure-like.
Speaker 6: That's how we set up our apps. That's correct. OK. OK.
Speaker 14: And what, Rick, what, or in your presentation you had mentioned your net number of miners as of a couple of days ago in August . What is that number again?
Speaker 5: I believe it's like 5900 and change. 59 and change, okay. All right. Yeah. All right. And it's just we have a mixture of XP that's about 615 instead of half. Okay.
Speaker 14: And I guess the follow-up question is, I assume that all the rigs in LMFA are hosted?
Speaker 14: Yes, somebody or another. OK.
Speaker 13: Thank you. Thank you.
Speaker 2: This does conclude the question and answer session, and I will now turn the call back over to management for any closing remarks.
Speaker 4: I'd like to thank everyone for participating in our 2023 second quarter conference call.
Speaker 4: The company's pivot to Bitcoin mining has been successful to date. We continue to reinvest our mining revenues to purchase additional mining machines debt-free, as well as adding cutting-edge software designed to improve the hashrate of our existing mining machines.
Speaker 4: We continue to believe in the long-term appreciation of Bitcoin as an asset class, and believe the most efficient way to invest in Bitcoin is through the purchase of highly efficient mining machines.
Speaker 4: In summary, we are extremely pleased with the progress we have made during the second quarter of 2023 and believe that the momentum of our transition to Bitcoin mining will accelerate as we continue to acquire and electrify more machines in the future. We are thankful for the ongoing support from our shareholders and will continue to provide updates on our progress as new developments emerge.
Speaker 4: Thank you for joining us today and for your questions. I look forward to speaking to you soon.