Q4 2023 LM Funding America Inc Earnings Call
Good morning, everyone and welcome to the L. M funding America fourth quarter business update conference call.
At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host Ted Avis, Sir the floor is yours.
Ted Avis: Good morning, and thank you for joining Alan funding America's 2023 financial results and business update conference call on the call with US today are Bruce Rogers, Chief Executive Officer, and Richard Russell, Chief Financial Officer of L. Unfunded.
Ted Avis: This morning, the company announced its operating results for the fourth quarter and year ended December 31, 2023, and its financial condition as of that date. The press release is posted on the company's website at LM funding dotcom.
Ted Avis: In addition, the company has filed its annual report on Form 10-K, 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 SEC Dot Gov. If you have any questions after the call or would like any additional information about the company. Please contact crescendo communications.
Ted Avis: The two went to 6711020.
Before management reviews, the company's operating results for the three months and year ended December 31, 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 facts contained in this conference call, including statements regarding our future results of operations and.
Ted Avis: Financial position strategy and plans and our expectations for future operations are forward looking statements.
Ted Avis: 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 needs. These forward looking statements are subject to various risks uncertainties.
Ted Avis: He's an assumption as described in the company's Form 10-K filed with the U S Securities and Exchange Commission on April 2024, 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.
Ted Avis: Kapadia to applied in the forward looking statements you should not rely on forward looking statements as predictions of future events, Although the company believes that the expectations reflected in the forward looking statements are reasonable it cannot guarantee future results level of activity performance or achievements. In addition, neither of the <unk>.
Ted Avis: Company, nor any other person assumes responsibility for the accuracy and completeness of any of these forward looking statements. The company disclaims any duty to update any of these forward looking statements.
Ted Avis: All forward looking statements attributable to the company are expressly qualified in their entirety by these cautionary statements as well as others made in this conference call you should evaluate all forward looking statements made by the company in the context of these risks and uncertainties.
Ted Avis: 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 with that I will now turn the call.
Ted Avis: Over to Bruce Rogers, Chairman and CEO of L unfunded Rus.
Bruce Martin Rodgers: Thanks, Ted good morning, and thanks to everyone for joining us today.
Bruce Martin Rodgers: On behalf of the L. M funding team I want to thank our shareholders for your continued support and for joining US This morning.
Bruce Martin Rodgers: I'm proud to report that our business is firing on all cylinders and our strategy is working.
None: Evidenced let me walk you through a few key metrics.
None: First of all we mined 423 big points in 2023 valued at approximately $12 $3 million at an average market revenue value of approximately $29000 for big point.
None: Obviously with bitcoin market prices recently at near record highs of approximately $70000. We believe that this validates our strategy.
None: Second our.
None: Our revenue grew over 600% versus last year, which was based on the average.
None: 9000 dollar bitcoin price for 'twenty, 'twenty, three which is now substantially higher.
None: Additionally, we reported positive core EBITDA for the fourth quarter of 2023, a major milestone for the company.
None: Last and possibly most important I'd like to highlight the fact that we had stockholders equity of $36 $2 million or $14.52 per share as of December 31 2023.
None: We believe we are creating value for shareholders, if you'd give us absolutely no value for future growth.
None: Our stockholders' equity per share is roughly four times, our current stock price.
We are clearly executing on our strategy and remain committed to delivering value for our shareholders.
None: We also believe that as we start to get our story out the intrinsic value of our company will be more accurately reflected in our market share price.
None: In 2023.
None: Our first full year as a bitcoin mining company, we've made tremendous progress in implementing our approach to buying bitcoin as of December 31, 2023, our bitcoin mining operations included about 5900 mining machines actively engaged in mining at various hosting facilities, providing approximately six.
None: Third and 14 <unk> per second of mining capacity.
The company held approximately 95 bitcoin on December 31, 2023 valued at approximately $3 $4 million.
None: Mining activities in January and February of this year brought that total to approximately 154 bitcoin held on February 29, 2020 for that.
He is at approximately $10.8 million based on the recent big point price of approximately $70000.
None: In December 23.
None: We sold Symbionts block chain technology, which we had acquired earlier in 2023 as debtor in possession and Cindy on its chapter 11 bankruptcy case, we sold four $2 million to Platonic Holdings, Inc.
None: This transaction provided the company with additional capital to grow our bitcoin business.
None: Additionally, the transaction provided the company with additional working capital strengthen our balance sheet.
None: As most people likely know bitcoin, having as an event where the reward for mining new Big point box is cut in half, resulting in miners are saving 50 per cent.
None: You were bitcoin for verifying transactions having.
None: Having is built into the big point algorithm and designed to limit the supply of new Big one.
None: It is anticipated that the next halving of that will occur in late April or early may of this year.
None: In anticipation of the upcoming having a that the company has invested approximately $1 $1 million in acquiring 300 Bip main F 'twenty, one and minor units.
None: These machines are known for their high efficiency of substantial hash rate capabilities, specifically designed for mining the shop 256 algorithms.
None: Each unit Bose hash rate of 200, and tear ash per second while consuming 3500 watts of power.
None: We expect the delivery of the machines by the end of March or early April and plan to locate energize and commence mining with them by mid April which may increase the company's mining capacity to 674 kind of hashed per second.
None: We remain committed to investing our resources, including the proceeds from our bitcoin mining activities towards acquiring the most efficient bitcoin mining hardware on the market.
None: We are confident that the F. 'twenty, one machines will stand out as top performers. During this year's having event and will continue to play a significant role in driving revenue growth over the long term, including through and beyond the next having events anticipated to take place sometime in 'twenty 'twenty eight.
None: We are concentrating our capital investments on bitcoin bitcoin mining machines, whose value closely follows that of bitcoin itself.
None: However, we are open to investing in opportunities to lower our mining costs and to eventually provide hosting facilities for artificial intelligence machines.
None: If historical patterns continue and expected events materialize as predicted we expect to create meaningful value for shareholders. This value creation is expected to mirror, both the appreciation of our bitcoin holdings as well as the enhanced value of our mining equipment.
None: In addition to the purchase of the F. 'twenty one mining machines. The company has upgraded approximately a thousand of its mining machines with brains O S plus software.
This is Dan Smith is anticipated to boost the hatch rate of these machines and improve efficiency by as much as 20%.
None: As a result, this improvement should lead to an increase in the number of bitcoin that the company can mine and an increase in the profitability using these upgraded machines.
None: An additional benefit of utilizing brains O S plus software or bitcoin mining is that machines equipped with this software has the flexibility to mine with any pool or specifically with the brain's pool without incurring any pool fees to breaks.
With respect to our legacy business, which involves offering funding to nonprofit community associations the.
None: The business has remained fairly stable since the conclusion of 2022.
None: We see opportunities in the future to grow this business from demand from reserve funding requirements enacted in response to the collapse of the seaside tower in South Florida.
None: We continue to be extremely frustrated by the considerable disparity between our stockholders' equity, which as I stated earlier was valued at $36 $2 million or $14 52 per share as of 12 31 23.
None: And the recent trading price of our shares at around $3.66, which represents a discount of around 75% from book value.
None: Although we acknowledge the ongoing issues affecting the microcap market our outlook for the business has never been more optimistic.
None: Our optimism is rooted in our dedication to achieving strategic objectives and enhancing our bitcoin mining activities in a prudent manner, which we believe will eventually be recognized by the market.
None: On that note I would like to turn the call over to Rick Russell Chief Financial Officer of L. M funding, who will review the financial results for the year ended December 31 2023.
None: Rick.
Richard D. Russell: Thanks, Bruce and good morning, everyone.
Richard D. Russell: Total revenue for the quarter ended December 31, 2023 was approximately $4 $1 million, an increase of $2 9 million or approximately 262% compared to $1 1 million for the fourth quarter of 2022.
Richard D. Russell: Total revenue for the year ended December 31, 2023 was approximately $13 million an increase of 11.3 million.
Richard D. Russell: From the $1 7 million in 2022.
Richard D. Russell: These increases were primarily due to digital money revenue of $3 9 million and $12 3 million.
Richard D. Russell: Three months a year ended December 31 2023.
Richard D. Russell: Compared with 0.9 billion for both comparable periods in 2022 has the company commenced a bitcoin mining operations.
Richard D. Russell: In late September 2022.
Richard D. Russell: The average bitcoin price for three months and year ended December 31 2023.
Richard D. Russell: This revenue was approximately $36500 and $29000 respectively.
Richard D. Russell: Operating expenses totaled $23 million for the year ended December 31st 2023, compared to $26 4 million for the year ended December 31st 2022.
Richard D. Russell: The decrease is primarily due to a $13 6 million decrease in staff cost of payroll.
Richard D. Russell: 1.3 million decrease in professional fees.
Richard D. Russell: Partially offset by an $8 4 million increase in digital mining called a 4.5 million increase in depreciation as compared to 2022.
Richard D. Russell: Net loss attributable to <unk> shareholders for the three months ended December 31 2023.
Richard D. Russell: Was approximately $1 $6 million, which included a 500000 noncash unrealized gain on investment and that creates curious compared to a net loss.
Richard D. Russell: Of approximately $19 7 million for the 2022 comparable quarter.
Which included a $6 6 million noncash unrealized loss on investments in equity Securities.
Richard D. Russell: $4 9 million impairment loss and various coating asset.
Richard D. Russell: Okay.
Richard D. Russell: Net loss, if you will to elope Bunny shareholders for the year ended December 31 2023.
Richard D. Russell: It was approximately $15 9 million, which included a $9 8 million noncash unrealized loss on investments in equity securities.
Richard D. Russell: Prior to a net loss of approximately $29 2 million.
For the year ended December 31st 2022, which included a $4 4 million noncash unrealized gain on investments in equity securities.
Richard D. Russell: They pour 0.99 impairment loss and various hosting assets.
Core EBITDA was positive for the three months ended December 31, 2023, which totaled approximately 0.3 million compared to a core EBITDA loss.
Richard D. Russell: A $2 8 million in the prior year's comparable quarter.
Richard D. Russell: Core EBITDA loss for the 12 months ended December 31, 2023 totaled approximately 0.2 million compared with core EBITDA loss of $6 5 million in 2022.
Richard D. Russell: The improvement in core EBITDA for the three and 12 months periods ended December 31, 2023 was primarily due to the existence of material bitcoin mining operations in the current year that did not exist in the prior year.
Richard D. Russell: Core EBIT is a non-GAAP financial measure and a reconciliation of core EBITDA to net loss can be found in our press release.
Richard D. Russell: Turning to our balance sheet cash was approximately $2 4 million the digital assets of $3 4 million in working capital.
Richard D. Russell: $7 4 million as of December 31, 2023.
Richard D. Russell: Based on $95, one big point at a price of approximately 36000.
Richard D. Russell: As of December 31, 2023.
Richard D. Russell: The current bitcoin market prices fluctuated recently, but is around 70000 in recent weeks.
Richard D. Russell: In 2023, the company also received approximately $2 $7 million from C store Medical holdings.
Richard D. Russell: As a partial repayment of the outstanding note receivable.
Richard D. Russell: Total elm funny and stockholders equity was approximately $36 2 million or 14.5 cents per share as of December 31 2023.
None: That concludes our prepared remarks, I would now like to open the call for questions.
None: Operator could you please assist us with that.
None: Certainly everyone at this time it will be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time.
None: We do ask the while posing your question. Please pick up your handset if you're listening on speaker phone to provide optimum sound quality.
None: Once again, if you have any questions or comments. Please press star one on your phone please.
None: Please hold while we poll for questions.
Thank you. Your first question is coming from Kevin Dede from H C. Wainwright Your line is live.
Kevin Dede: Oh, good morning, Bruce Rick Thanks, So much for having me on.
Kevin Dede: Can you hear me guys.
Kevin Dede: Good good okay listen congrats congrats on all the mining improvement over the year. Appreciate are the hard work that you put in on that.
None: A couple of questions I guess the.
None: If you'll allow me that's the 300 new machines.
None: I think you'll need what about a megawatt for those can you can you give me some insight on where you think youre going to put them. If you think youre going to replace existing clubs.
None: That brings your total pet a hashed almost 700, if you keep everything you have.
None: And then maybe some insight on the on the brain software your fleets a lot larger than.
The I guess the amount of seats that you've bought so maybe you can give us some thinking on that.
None: Sure.
The three new machines, we're gonna be put them over our core.
None: I would agree to that and we also had an addendum to our contract to be able to put up to 1100, new machines at core who want to.
We're going to actually take those three machines out of core right now and picking them up one giga.
None: And Giggled when we run our brain cells aren't they have about 1000 1100 machines right now.
None: So we'll move those 300 machines over there.
None: And they will be running in your brain software.
Core does not run brands.
None: Yeah.
None: Okay that that helps thanks.
None: So no no retirement, just some moving around.
None: Correct.
None: Okay.
None: Understand you sold symbion and understand that you received a partial payment on E Star can you offer a little bit more color on where you stand with the star What's what's left and how are you looking at that investment through the course of this year and maybe Rick you could touch on.
None: I mean I looked at the.
None: The core EBITDA reconciliation in the press release, but it doesn't really point to the lines of business that youre considering core.
None: Okay. So for CSR.
None: We've received all the cash that was on the intercompany.
None: Loan so far.
None:
None: I think all the way through this year.
None: So.
None: That's now receivable is all fully paid.
None:
As opposed to core.
None: Yeah, Let me backup Inc. Receipts are you know we have our common stock with them. So we'll see how that.
None: Investment continues we believe it's still a solid investment there solely progressing.
None: I'm getting more hospitals studies and FDA approval.
None:
None: For core again, what was the question I'm sorry.
None: Yeah, No no I I I, I think that kind of summed it up right because.
None: Right now as it is you're just holding outstanding C Star stock can you remind us that how much that is but it's the operations aren't flowing through your P&L at all.
Correct, we own about key point 6 million shares.
None: And so you start with about being trained between 70 80 since right now we.
None: It also.
None: Have approximately $5 7 million warrants.
None: Which I believe are being cratered, the public warrant, which are similar to ours are being trade around 14 pence per share.
Okay.
None: So there's almost a sense right now so.
None: Yes.
None: Okay. Okay.
None: Given.
None: No for as long as I've known you a I don't know that you've had as strong.
None: A financial position in the past, so I'm sort of wondering.
None: I'm wondering how you're thinking about.
None: No understand the main purchase but I'm under just maybe a little insight on how youre looking at the balance of the year.
None: And.
What other commitments you might make in terms of growing your hash rate.
None: Bruce.
None: China, Inc.
None: Oh.
We are going to continue the whole bitcoin and two by efficient machine ever excess proceeds we have we may find some opportunities to go vertical and depart from our infrastructure light playing we can bond few megawatts.
None: I had a really good price it gives us some control, we probably would do that.
None: That's that's where we're pointing for the balance of the year.
None: Yeah.
None: Okay. Thanks, Bruce that helps.
None: I'll pass the I'll pass the floor on thank you very much for entertaining my questions.
None: Thank you once again, everyone. If you have any questions or comments. Please press star then one on your phone you're.
None: Your next question is coming from Jack Richardson from Express Center. Your line is live.
Jack Richardson: Yes can you hear me.
Jack Richardson: Sure I can hear you Jack books right. Thank you. Thank you for the call Bruce in the garage.
Jack Richardson: Roger I'm very good presentation.
Jack Richardson: Uh huh.
Jack Richardson: Just a couple of questions I didn't get the name of the first caller, but he he answered several of them.
Jack Richardson: Roger You mentioned you had 5900 active rigs is that correct.
Jack Richardson: More or less approximately more than never know, which ones are running on any given day.
Jack Richardson: I didn't understand that alright, or most of those rigs I call them regs are are they S 19th.
Jack Richardson: Not all of them, we do have X gene's also favorite mix.
Jack Richardson: Mix Okay.
Jack Richardson: That's good you do you have do you have a chart or spreadsheet of your mix.
None: Just something like a view that's public I don't know.
None: I'm just I'm just trying to get.
None: I'm just trying to get a balance of what you have that's 19th the xps and now the S 20 watts.
None: Mhm.
None: Oh.
None: Hum.
None: I think we disclosed in the.
None: That we have approximately all of them.
None: Yes.
Oh no.
None: Oh.
None: That's helpful.
None: We always know that answer, but we have to look at what we've published.
None: Yeah.
None: How long.
None: And I'm not looking for exact numbers here and I'm not a whole minute, but at anything I just want to find the ideal.
None: Right sure, yes, Walter but the plaintiffs Lori on the top.
None: I like numbers.
None: We have about it.
None: We have ballpark around 500 next season.
None: Okay.
None: And then we and then you've got a and then so the balance would then be more or less.
None: That's 19.
Yes.
None: Okay, I guess the 'twenty ones.
None: And then you've got the F 21, it's okay that answers my questions. Okay.
None: Alright.
None: Hum.
None: Well Rick I.
None: Your last reported quarter.
Is it as is.
None: We're talking about fourth quarter 2023.
What is the balance what is the balance what is what is the.
None: Company it hold holding in inventory for a big corn right now what is that number.
So we reported as of the end of February we had about 153.
None: Bitcoin.
None: Okay.
None: The temporary identity semi was like 90.
None: Greenish whatever 95 ish.
None: Got it.
None: We've mined about 80 58 Big point, the first few months of this year.
None: So you can kind of calculate what that may be through the first quarter.
None: Got it okay that isn't that again my questions. Thank you.
None: The D C. In 2000 2024, Okay alright.
None: As you know do you have any plans for any further purchases.
None: The S 20 ones. After this 300 that comes up.
None: We're looking at a crucial investments in both the F. 'twenty, one and Bruce Perkins Hospital, you know small her joint venture.
None: There's something worthwhile to megawatt.
None: Right.
None:
So we've got.
None: And that's great coins backs that we have there's a good opportunity for growth.
None: So we have the opportunity because we're in privity with bit name, we don't go through brokers. So if.
None: If we do.
None: Good name provide.
Provides opportunity sometimes to buy these machines the discounts the market and with rebates and things like that so there's there's always the opportunity was when you can buy as board to put together groups and do things to purchase them, but we don't have anything on the table right now.
None: Okay.
None: And then my last question and thank you.
None: He was getting to answer very efficiently by the way here.
Has any one John.
None: They breakeven rate.
None: On let's just stick with E S 19th.
None: Has anyone done a breakeven rate.
None: On.
None: The.
None: S 19 regarding Oh.
None: Health.
None: Uh huh.
None: So obviously you know you're on a breakeven rate on everything but there's two important variables what is the price of bitcoin and what's the price of electricity, you're putting him on.
That's the bottom line I agree.
None: So yes, we run that all the time.
None: I think that the generally publish information out there would tell you that the the 19th or with the having teed up in the price of Bitcoin and the seven days I think it's just the most people are right at the cutting edge of where those things are breakeven or losing depending on where the power contracts are in.
That's it.
None: Can be expected right at a halving of it.
None: I agree and and and again, you're you're there.
None: You you answered the question spot on it.
None: A roundabout way.
None: Ah Ah I remember I was on a you may or may not remember I was on a call.
None: Call, maybe two six months ago, two quarters ago, maybe in any event.
None: You Ricky has told me that our debt.
None: On average you're paying about eight and a half cents.
None: Eight and a half ish.
None: On hosting fees per kilowatt at this point I, just kind of wanted to confirm that number.
None: If it's gotten any better or not.
It's gotten a little bit better so there's a little bit.
None: Lower but and we're working to.
None: We're looking at options that some more.
None: Okay, Okay and I also remember hosting involves the guy with the screwdriver the build in the rack the land and the electricity a lot of folks are approaching their electric price. We've got a total of really two guys that run the bitcoin mining business and you can do that because we're paying a.
None: Little more than eight cents to get up the other marginal costs that roll into it.
None: Yeah, Yeah, I agree I agree.
None: Who and just as a side note when when when you do get a failure on a on a bit main product.
None: Uh huh.
None: Does the does the element they have to pay to get those fixed stores are hosting.
None: They're paying for that hardware fix.
None: The physical hardware.
None: Well generally you know you've got a certain period of time or does it between warranty and then after that it's on US generally are hosting par.
Partners are able to get those fixed.
None: Okay. Okay, alright, so there they they generally can go fix them pretty easy that's pretty cheap that's yeah, I mean does that yeah.
None: So it's so I know I'm not trying to put words in your mouth, but I'm hearing it's not a big deal.
None: It's likely.
None: Yeah, there's no it's not.
None: A huge line item expense okay. Okay.
None: I'm good. Thank you all I'll turn it over to the next person. Thank you guys.
None: Thank you that concludes our Q&A session I'll now hand, the conference back to our host for closing remarks. Please go ahead.
None: Thank you to everyone for joining our 2023 financial results and business update conference call.
None: Our company's transition towards Bitcoin mining is clearly working as we continued to experience encouraging results.
None: We remain committed to reinvesting our mining revenues into acquiring more mining machines without incurring debt.
None: So integrating advanced software aimed at enhancing the ash rate of our current machines.
None: The price of bitcoin, reaching record high of approximately $74000 earlier in March of 'twenty 'twenty four.
None: And currently trading at approximately $7000 our beliefs in the long term value of bitcoin as an asset class has never been stronger.
None: We believe the momentum with which we ended 2023, we will continue to accelerate as we acquire and electrify more mining machines in 'twenty 'twenty four and beyond.
None: Well for the ongoing support of our shareholders will continue to provide updates on our progress as new developments in March.
None: Thank you again for attending our call.
None: Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.