Q3 2023 LM Funding America Inc Earnings Call
Yes.
Greetings and welcome to the L. M Funding America, Inc. Third quarter 2023 business update conference call.
At this time all participants are in a listen only mode.
And answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Ted Avis Investor Relations Ted you may begin.
Okay.
Good morning, and thank you for joining L. M funding America's third quarter 2023 conference call on the call with US today are Bruce Rogers, Chief Executive Officer, and Richard Russell, Chief Financial Officer of L. M funding.
This morning, the company announced its operating results for the quarter ended September 30th 20, twenty-three and its financial condition.
The press release is posted on the company's website L M funding dot com.
In addition, the company has filed its quarterly report on Form 10-Q, 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 Dot FCC Dot Gov.
You have any questions. After the call would like any additional information about the company. Please contact crescendo communications at 2126711020.
For management reviewed the company's operating results for the quarter ended September 30th 2023 and its financial condition as of that date, we would like to remind everyone that this conference call may contain forward looking statements all statements other than statements of historical fact contained in this conference call, including statements regarding our future results of operations and financial position.
<unk> strategy and plans and our expectations for future operations are forward looking statements.
These forward looking statements are based largely on the Companys 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 needs. These forward looking statements are subject to various risks uncertainties and assumptions as described in the comp.
<unk> Form 10-K filed with the U S Securities and Exchange Commission on March 31st 2023.
Because of these risks uncertainties and assumptions the forward looking events and circumstances discussed in this conference call may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward looking statements.
You should not rely upon forward looking statements as predictions of future events, although the company believes that expectations reflected in the forward looking statements are reasonable it cannot guarantee future results level of activity performance or achievements. In addition, neither the company nor any other person assumes responsibility for the accuracy or completeness of any of these forward looking today.
The company disclaims any duty to update any of these forward looking statements. All forward looking statements attributable to the company are expressly qualified in their entirety by these cautionary statement as well as others made in this conference call.
Should evaluate all forward looking statements made by the company in the context of these risks and uncertainties.
In addition, today's discussion will include references to non-GAAP measures. 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 directly comparable GAAP measures is available in today's news release on our website.
Having said that I would now like to turn the call over to Bruce Rogers Ruth.
Thanks, Ted good morning, and thanks to everyone for joining us today.
On behalf of the lending team I want to thank our shareholders for your continued support despite volatility and weakness in the market.
Nevertheless, our company has made significant progress in executing on our business model, including advancing our bitcoin mining strategy. Another key strategic activities. We believe the steps we're taking today will lead to considerable long term value for our shareholders.
As of September 32023, or.
Our bitcoin mining operations included about 5900 mining machines actively engaged in mining at various hosting facilities, providing approximately 640 <unk> per second mining capacity.
During the quarter ended September 32023, the company mined 117.1, bitcoin, marking a 10% sequential increase from the 106.6 bitcoin mined in the second quarter of 2023.
As an average market revenue value of approximately $28000 per bitcoin.
The current bitcoin prices mid higher fluctuating between 35030 $7000 over the last several weeks.
As most people likely know bitcoin, having as an event where the reward for mining new Bitcoin box is cut in half, resulting in miners receiving 50% fewer box for verifying transactions having.
Having is built into the bitcoin algorithm and designed to limit the supply of new Bitcoin is as expected that the next have an will occur in the first half of 2020 for.
Historically big corn prices have tended to increases of having as it nears often reaching record highs in the six months following the event Michael.
Likewise, the value Bitcoin mining machines has typically peak between habits.
<unk> funding is actively implementing infrastructure light approach to our bitcoin mining business that seeks to mitigate risk and volatility in the market by focusing our capital investments on bitcoin and bitcoin mining machine with track the value of bitcoin.
The success of our infrastructure light strategy depends upon declined capital acquire assets best correlated to the price of Bitcoin, which we believe will appreciate.
If history repeats and the anticipated events unfold as expected, we expect to create meaningful value for shareholders, reflecting both the value of our bitcoin holdings as well as the increased value of our mining.
Overall, we are quite encouraged by the recent performance of the mcallen market as well as the outlook to bitcoin pricing.
The company installed brains O S plus software on approximately 1000 of our mining machines as expected. This will increase the highest rate of these machines by as much as 25%, which should lead to an increase in the number of big coins the company can mine.
A further advantage to mining bitcoin with machines operating brains O S. Plus software is that machines equipped with this software may mine with any pool or mine with the brain's pool without having to pay who piece to the range tool.
We believe the best use of our capital is to increase hatch rate production through the purchase of additional miners and enhancements to their ash and capabilities.
With respect to our legacy business, which involves offering funding to nonprofit community Association the.
The business has remained fairly stable since the conclusion of 2022.
We share investors' frustration that there is such a significant gap between our stockholders' equity valued at $35 $9 million or $2.45 per share as of September 32023.
And the recent trading price of our shares at 40 cents, representing an approximately 85% discount to book value.
Recognize the broader downturn in the stock market, particularly disproportionate impact on the Microcap sector.
We remain extremely optimistic about the outlook for the business. Our confidence lies in our commitment to our strategic goals increased prudent bitcoin mining efforts, which we believe will ultimately be recognized by the market.
On that note I'd like to turn the call over to Rick Russell Chief Financial Officer of L. M funding, who will review the financial results for the three months period ending September 32023.
Thanks, Bruce and good morning, everyone.
Revenues for the three months ended September 32023 increased by approximately $3 $2 million to $3 4 million from the tour a thousand generated in the three months ended September 32022.
Beyond our year over year quarterly revenue growth. We also experienced sequential quarterly revenue growth of 7% compared to the second quarter client went through.
Revenues for the third quarter of 2023 and include digital mining revenue of $3 3 million.
Due to the mine of $117, one big coins during the third quarter, our coin 23 compared to 2.2 big coins for the third quarter ended 2022 is.
There's a big quaint mine operation had begun late September 2022.
Operating expenses totaled $6 6 million for the third quarter of 2023 compared to $5 5 million the third quarter acquaint way too.
The change is primarily cable to a $2 7 million increase in digital mining costs and $1 5 million increased depreciation.
Partially offset by $3 million decrease in stock compensation.
And at 3000, a decrease in professional fees as compared to the third quarter of 2022.
For the third quarter of 2023, the net loss attributable to <unk> founding shareholders was $3 7 million, which included an 800000 noncash unrealized loss on investment in equity Securities.
Hundred thousand noncash impairment charge on long lived intangible assets.
As compared overall to a net loss of $6 7 million.
Third quarter of 2022, which include a 200000 noncash.
All eyes are on investment in equity Securities.
Okay.
Core EBITDA loss at Warner ended September 32023 was approximately 600000 compared to a loss of 1.59 and a 2022 comparable quarter.
Primarily due to the increase or a bitcoin mining operations.
Turning to our balance sheet, we ended the quarter.
500000, cash 90, bitcoins valued at approximately $2.2 million and working capital of 4.5 months, which we believe provides us with sufficient liquidity to execute on our current bitcoin mining strategy ambition, we have minimal long term debt.
It is a corner with stockholders' equity of $35 9 million, our Q4 five per share.
That concludes our prepared remarks, I would now like to open the call for questions.
Operator can you please assist us with that.
Yeah.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again. Please press star one if you wish to ask a question at this time.
Please hold while we poll for questions.
Okay.
The first question today is coming from Matthew Kalanchoe from Maxim Matthew.
Matthew your line of lives.
Hey, Thanks for taking my questions.
We will start with Bruce.
Bruce I think you talked about the post having value having you know a correlation to both the value of that coin itself and the value of the machines that can you touch on you know what the freeze to run a bitcoin what has been the trend in the.
The value of the mining equipment.
Yeah.
Sure that's great question.
The value of mining equipment right now says effected by two different things one.
<unk> has introduced some newer machines that are not been that's why on the 190 and above 200 tier ash as opposed to the machines that are selling just a year ago around the hunter Jerry.
And then the second Influencers, obviously that having is coming up and notes.
Having makes hassle the machines basically obsolete sort of in the lower and the lower end of the production range. Those machines have a short life and the very low price range. So there's folks making their beds at different ends of the machines spectrum.
<unk>.
Our position is that.
Bitcoin post having the two quarters afterwards, so we should expect to reach an all time high in the past, having the ramp up to that.
It's been led by an increase in machine prices.
That is true.
<unk> has two investing in bitcoin machines as well as bitcoin.
Both correlating to the same asset class question.
Got it thank you and I guess I wanted to also touch on just some of the sources of capital that are a little bit.
Standard I think you've got a partial repayment on a wall.
Loan too.
Uh huh.
Daystar medical and I think you have an arbitration with a bitcoin mining codes.
We can talk about those.
Those sources of capital and potential sources of capital.
Sure.
We are.
Our plans and hopes would would've been sort of some of it has to be worth more and more liquid than they are right now, but we have now held or she started stocks over a year since it became public.
That company seems to be rolling out FCA approval, and we're very very happy with how the stock has recovered and advancing it was beat down all the way to about 20 cents. It's on its way to recovering above about can we see the future of it above that she took that in perspective, if we mark.
<unk> position to a dollar during the third quarter things the parentheses fall off as much stuff. So that's one source of our liquidity.
We have an investment in the symbiont technology.
And we mark that down by $800000 in this quarter, we have an opportunity to sell that.
Turning it into cash, which we intend to turning the bitcoin mining machines, we simply don't have the capital to.
Invest in the semi on that asset to turn it into something right now.
Looking forward to that.
I'll tell you the seats are no receivable, yes. So he can take us all 800000 from that as well.
To improve our liquidity and there's another million.
And change.
To be received out of that.
And then the last thing.
Our attrition and that said that's a.
Long term fraud suite, we're chasing somebody took a deposit from us.
You have to win the arbitration and we have to succeed in protecting a judgment.
Yeah.
Got it and I guess for that last piece.
At least in terms of.
Finishing the arbitration is that there is there a timeline there that early 'twenty four or might we hear something.
And I don't want to do.
We want to speculate on Calendaring and arbitration going back and forth to core processes. It says it's always been a mystery to me as to how long it takes to do that stuff.
Okay. Thanks, I'll jump back in the queue.
Thank you and once again, ladies and gentlemen, if there are any questions. Please press star one on your phone at this time that star one if you wish to ask a question. The next question is coming from Michael Donovan from H C. Wainwright, Michael Your line is live.
Hi, Bruce.
I'll take that question.
Talk a little bit more about fleet expansion and what are your plans for expansion in front of them post tapping.
We always have a bias towards buying the fastest machines, we can at the lowest prices. So we're flushing.
Flushing that out with me right now as to the.
Besides the orders they want for the new machines are pretty big So we're trying to.
Get a bite size out of some of those.
Improving the efficiency and the size of the fleet is the name of the game. So we can mine bitcoin and reinvest it to get more bitcoin mining we will do that.
And this is a Greg and I think with improved value Big point I think we may have increased liquidity this quarter to look at more opportunities.
And that fleet.
We're also limited into degree with our erosion with core and we have a slot.
Slots that are open for us there.
What type of machines. They can take so we're looking at.
<unk> expansion there.
Yeah.
Okay, Great I appreciate that.
Bruce you mentioned the possibility.
Selling symbiont.
Can you add a bit more color around that.
No not really.
Obviously, I understand an LOI and there's confidentiality provisions and all that but we.
Got to have some resolution of that body.
Bare it out sounds good well I appreciate that Bruce.
Rick.
Congrats on the quarter.
Thank you.
Yeah.
Thank you and we did have a follow up question come from Matthew Cominco, Matthew Your line is live.
Hey, guys, just a kind of a hard.
Question around the core EBITDA number.
It's closed.
I can say that this progress.
I think year over year sequentially that swung down and I just wanted to understand the mechanics, there I think it's predominantly.
Well, maybe I'll, let you, but it seems like revenue.
With us from from the mining fleet and so could you just parse out what what sort of swung you down on the core EBITDA line and if you could provide any sort of.
Commentary, what we might expect into the fourth quarter.
Well you know core ebay.
Part of the problem is you know your revenue is based on an average for the quarter right or month by month, So it's not actually a flux.
Two more recent prices.
Hum.
It was an improvement year over year and were trying to take out more noncash items and the odd items like that shouldn't be an up and down.
And the impairment.
So mine digital.
At this point, because that's kind of where.
GAAP is going to.
We also had a little bit of our expenses.
Hosting this quarter due to remove machines from our AC DC side over to the core facility in Texas.
So that impacts the margin a bit but I think as you know.
The more current 35 plus.
Wow, there should be a quite a bit of improvement.
In the fourth quarter.
Okay.
Perfect. Thanks again.
Thank you there are no other questions at this time I would now like to hand, the call back to the island funding management team for closing remarks.
Thank you to everyone for joining our 2023 third quarter conference call accompanied shift towards bitcoin mining are yielding encouraging outcomes.
Were committed to reinvesting in our mining revenues into acquiring more mining machines without incurring debt and also integrating advanced software aimed at enhancing the highest rate of our current machines. Our belief in the long term value increase of bitcoin as an asset class remains strong.
Summary, we are extremely pleased with progress we've made during the third quarter of 2023 and believe the momentum of our transition to bitcoin mining will continue to accelerate as we acquire and electrify more mining 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.
Thank you very much.
Yeah.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.
Yeah.