Q2 2024 Stronghold Digital Mining Inc Earnings Call

Operator: Good morning and welcome to Stronghold Digital Mining's conference call for the second quarter ended June 30th, 2024.

Greg Beard: Good morning, everyone. And thank you for joining us on our second quarter 2024 earnings call. We will be referencing an associated slide presentation throughout the call that is available to the webcast and on the investor relations section of our corporate website. Let's start on slide.

Greg Beard: As we previously announced on our Q1 earnings call, we initiated a formal review of strategic alternatives, and that process is ongoing. To date, the company has received numerous bids for all or parts of the company, and we are considering a wide range of alternatives to maximize stronghold value. These alternatives range from sales of all or part of the company, mergers, strategic financings, and expansion of our available power, potentially into other data center use cases. Moving to slide four.

Good morning and welcome to Stronghold Digital Minings Conference call for the second quarter and the June 30th, 2024.

Operator: My name is Josh, and I will be your operator this morning.

Operator: Before this call, Stronghold issued its results for the second quarter of 2024 in a press release, which is available in the Investors section of the company's website at www.strongholddigitalmining.com. You can find the link to the Investors section at the top of the homepage.

Josh: My name is Josh and I will be your operator this morning.

Speaker Change: Before this call, Stronghold issued its results for the second quarter 2024 in a press release, which is available in the Investors section of the company's website at www.strongholddigitalmining.com. You can find the link to the Investors section at the top of the homepage.

Unknown Executive: Joining us on today's call are Stronghold's chairman and CEO Greg Beard and CFO Matt Smith.

Speaker Change: Joining us on today's call are Stronghold's Chairman and CEO, Greg Beard, and CFO, Matt Smith. Before we begin, Alec Wilson from Gateway Group will make a brief introductory statement. Alec Wilson, please proceed.

Alec Wilson: Before we begin, Alec Wilson from Gateway Group will make a brief introductory statement.

Alec Wilson: Alec Wilson, please proceed. Thank you, operator. Good morning everyone, and welcome. Today's slide presentation, along with our earnings release and financial disclosures, were posted to our website earlier today and can be accessed on our website at www.strongholddigitalmining.com.

Alec Wilson: Thank you, operator. Good morning, everyone, and welcome. Today's slide presentation, along with our earnings release and financial disclosures, were posted to our website earlier today and can be accessed on our website at www.strongholddigitalmining.com.

Unknown Executive: Some statements made today may be considered forward-looking statements under securities law and involve a number of risks and uncertainties. As a result, we caution you that there are a number of factors, many of which are beyond our control, which could cause actual results and events to differ materially from those described in the forward-looking statements. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission. We just claim any obligation or undertaking to update forward looking statements to reflect circumstances or events that occur after the date the forward looking statements are made, except as required by law.

Speaker Change: Some statements we're making today may be considered forward-looking statements under security wall and involve a number of risks and uncertainties.

Speaker Change: As a result, we caution you that there are a number of factors, many of which are beyond our control, which could cause actual results and events to differ materially from those described in the forward-looking statements.

Speaker Change: For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission.

Speaker Change: We just claim any obligation or undertaking to update forward-looking statements to reflect circumstances or exempts that occur after the date of the forward-looking statements are made, except as required by law.

Unknown Executive: We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and the reconciliation tables to applicable GAAP measures in our earnings release carefully as you consider these metrics.

Speaker Change: We will also discuss non-gap financial metrics and encourage you to read our disclosures and the reconciliation tables to applicable Gap measures in our earnings release carefully as you consider these metrics.

Unknown Executive: We expect to file our quarterly report on Form 10-Q on or around August 14, 2024, with the Securities and Exchange Commission, which sets forth detailed disclosures and descriptions of our business as well as uncertainties and other variable circumstances. Including, but not limited to risks and uncertainties identified under the caption Risk Factors, you may access Stronghold's Securities and Exchange Commission filing for free by visiting the SEC website at www.SEC.gov or Stronghold's Investor Relations website at IR.strongholddigitalmining.com.

Speaker Change: We expect to file our quarterly report on Form 10-Q on or around August 14, 2024, with the Securities and Exchange Commission, which sets forth detailed disclosures and descriptions of our business, as well as uncertainties and other variable circumstances.

Speaker Change: including but not limited to risk and uncertainties identified under the caption risk factors. You may act as strongholds.

Speaker Change: Securities and Exchange Commission filing for free by visiting the SEC website at www.sec.gov or Strongholds Investor Relations website at ir.strongholddigitalmining.com

Unknown Executive: I would like to remind everyone that this call is being recorded and will be made available for replay via a link available in the Investor Relations section of Stronghold's website.

Greg Beard: I'd like to remind everyone that this call is being recorded and will be made available for replay via link available in the Esther Relations section of Strongholds website. Now, I would like to turn the call over to Strongholds Chairman and CEO Greg Beard, Greg.

Greg Beard: Now, I would like to turn the call over to Stronghold's Chairman and CEO, Greg Beer. Good morning, everyone, and thank you for joining us on our second quarter 2024 earnings call. We will be referencing an associated slide presentation throughout the call that is available through the webcast and on the Investor Relations section of our corporate website. Let's start on slide three.

Greg Beard: Good morning, everyone. And thank you for joining us on our second quarter 2024 earnings call. We will be referencing an associated slide presentation throughout the call that is available through the webcast and on the investor relations section of our corporate website.

Greg Beard: As we previously announced on our Q1 earnings call, we initiated a formal review of strategic alternatives, and that process is ongoing. To date, the company has received numerous bids for all or parts of the company, and we are considering a wide range of alternatives to maximize stronghold value. These alternatives range from sales of all or part of the company, mergers, strategic financing, and expansion of our available power potentially into other data centered use cases.

Greg Beard: Let's start on slide three.

Speaker Change: As we previously announced on our Q1 earnings call, we initiated a formal review of strategic alternatives, and that process is ongoing.

Speaker Change: To date, the company has received numerous bids for all or parts of the company, and we are considering a wide range of alternatives to maximize your home value.

Speaker Change: These alternatives range from sales of all or part of the company, mergers, strategic financings, and expansion of our available power, potentially into other data-centered use cases.

Greg Beard: Justice. Moving this slide for, we are excited to announce several positive updates regarding our power strategy and assets. In July, PGM's capacity market-based residual auction cleared at $270 per megawatt-day, up more than 800% from last year. Cancer Creek cleared 69 megawatts, and Scrub Grass cleared 76 megawatts. We have since exited 17 megawatts of the scrub grass commitment and retained 59 megawatts. We are working with advisors to evaluate exiting the rest of the scrub grass capacity position, because capacity payments and demand response are mutually exclusive. But at Panther Creek alone, we estimate that capacity payments will drive approximately $7 million of incremental revenue between June 2025 and May 2026 at 100% margin.

Greg Beard: We are excited to announce several positive updates regarding our power strategy and, In July, PJM's capacity market-based residual auction cleared at $270 per megawatt day, up more than 800% from last year. Panther Creek cleared 69 megawatts and Scruggrass cleared 76 megawatts. We have since exited 17 megawatts of the scrubgrass commitment and retained 59 megawatts. We are working with advisors to evaluate exiting the rest of the scrubgrass capacity position, because capacity payments and demand response are mutually exclusive.

Speaker Change: Moving to slide four. We are excited to announce several positive updates regarding our power strategy and assets.

Speaker Change: In July, PJM's capacity market-based residual auction cleared at $270 per megawatt day, up more than 800% from last year.

Speaker Change: Panther Creek cleared 69 megawatts and Scruggrass cleared 76 megawatts.

Speaker Change: We have since exited 17 megawatts of the scrubgrass commitment and retain 59 megawatts.

Speaker Change: We are working with advisors to evaluate exiting the rest of the scrub grass capacity position because capacity payments and demand response are mutually exclusive.

Greg Beard: But at Panther Creek alone, we estimate that capacity payments will drive approximately $7 million of incremental revenue between June 2025 and May 2026 at 100% margin. We also have a positive update on waste coal tax credit. Last month, in Pennsylvania's bipartisan budget, which was passed by the State House and Senate and signed into law by the Governor, the waste coal tax credit was doubled from $4 per ton to $8 per ton through 2036.

Speaker Change: But at Panther Creek alone, we estimate that capacity payments will drive approximately $7 million of incremental revenue between June 2025 and May 2026 at 100% margin.

Greg Beard: We also have a positive update on waste coal tax credits. Last month, in Pennsylvania's bipartisan budget, which was passed by the State House and Senate and signed into law by the governor, the waste coal tax credit was doubled from $4 per ton to $8 per ton through 2036. This legislation highlights the importance of our reclamation activities and the bipartisan supports that they have in Pennsylvania. And importantly, we estimate that this increase in the tax credit will represent an additional cash flow of 2 to 4 million per year for Stronghold starting in 2025.

Speaker Change: We also have a positive update on waste coal tax credits.

Speaker Change: Last month, in Pennsylvania's bipartisan budget, which was passed by the State House and Senate and signed into law by the governor, the waste coal tax credit was doubled from $4 per ton to $8 per ton through 2036.

Greg Beard: This legislation highlights the importance of our reclamation activities and the bipartisan support that they have in Pennsylvania. And importantly, we estimate that this increase in the tax credit will represent an additional cash flow of $2-4 million per year for strongholds starting in 2025. Lastly, in April, PJM updated its guidance for co-located loads, like ours. Based on this guidance to date, we believe that our Bitcoin mining operations qualify for PJM's, demand response, and sync reserve programs. And we are currently in the process of registering the Scrubgrass data center for these programs. Moving on to slide five.

Speaker Change: This legislation highlights the importance of our reclamation activities

Speaker Change: and the bipartisan support that they have in Pennsylvania. And importantly, we estimate that this increase in the tax credit will represent an additional cash flow of $2 to $4 million per year for Stronghold starting in 2025.

Greg Beard: Lastly, in April, PGM updated its guidance for co-located loads, like ours. Based on this guidance to date, we believe that our Bitcoin mining operations qualify for PGM's demand response and sink reserve programs. And we are currently in the process of registering the Scrub Grass data center for these programs. Moving on to slide five, we have spent the last few months evaluating the expansion potential for our current assets. As a part of this process, we have engaged Applebee Strategy Group to help us explore data center opportunities and uses for assets. Some key value drivers for data centers are access to land, power, fiber, and water.

Speaker Change: Lastly, in April, PJM updated its guidance for co-located loads, like ours.

Speaker Change: Based on this guidance to date, we believe that our Bitcoin mining operations qualify for PJMs, Demand Response, and Sync Reserve programs. And we are currently in the process of registering the Scrubgrass Data Center for these programs.

Greg Beard: We have spent the last few months evaluating the expansion potential for our current, As a part of this process, we have engaged Applebee's Strategy Group to help us explore data center opportunities and uses for Apple. Some key value drivers for data centers are access to land, power, fiber, and water, and we believe that our assets possess these qualities. We own 636 acres of scrub grass and 117 acres of Panther Creek, and we recently optioned an additional 1,140 acres immediately adjacent to our Panther Creek property.

Speaker Change: Moving on to slide five. We have spent the last few months evaluating the expansion potential for our current assets. As a part of this process, we have engaged Applebee's Strategy Group to help us explore data center opportunities and uses for our assets.

Speaker Change: Some key value drivers for data centers are access to land, power, fiber, and water, and we believe that our assets possess these qualities.

Greg Beard: And we believe that our assets possess these qualities. We own 636 acres of scrub grass and 117 acres of Panther Creek. And we recently optioned an additional 1,140 acres immediately adjacent to our Panther Creek property. We have entered into load studies with local utilities at both sites to understand how much power we can access. And our first preliminary load study at Panther Creek recently came back in a supportive of bringing in an additional 250 megawatts. We are evaluating timing for the potential expansion and site development. Additionally, both our sites have various nearby fiber providers that represent adverse flood past the market, and both have robust water supply, further enhancing the data center prospects for our sites.

Speaker Change: We own 636 acres of scrub grass and 117 acres of Panther Creek, and we recently optioned an additional 1,140 acres immediately adjacent to our Panther Creek property.

Matt Smith: We have entered into load studies with local utilities at both sites to understand how much power we can access, and our first preliminary load study at Panther Creek recently came back and is supportive of bringing in an additional 250 megawatts. We are evaluating timing for the potential expansion and site development. Additionally, both our sites have various nearby fiber providers that represent diversified paths to market, and both have robust water supply, further enhancing the data center prospects for our site.

Speaker Change: We have entered into load studies with local utilities at both sites to understand how much power we can access, and our first preliminary load study at Panther Creek recently came back and is supportive of bringing in an additional 250 megawatts.

Speaker Change: We are evaluating timing for the potential expansion and site development. Additionally, both our sites have various nearby fiber providers that represent diversified paths to market, and both have robust water supply, further enhancing the data center prospects for our sites.

Matt Smith: With that, I'll turn the call over to Matt Smith to discuss Q2 results. Thanks, Greg. Last million, slide six. Revenue for the second quarter was 19.1 million, or 18.8 million from cryptocurrency operations on 209 Bitcoin mined, along with 0.3 million revenue from energy operations during the quarter.

Matt Smith: With that, I'll turn the call over to Matt Smith to discuss Q2 results. Thanks, Craig. Lastly, on slide. Revenue for the second quarter was $19.1 million, with $18.8 million from cryptocurrency operations on 299 Bitcoin mined, along with $0.3 million revenue from energy operations during the quarter. Gap's net loss was $21.3 million for the second quarter, and non-gap adjusted EBITDA was negative $0.3 million.

Speaker Change: With that, I'll turn the call over to Matt Smith to discuss Q2 results.

Matt Smith: Thanks, Greg. Lastly, on slide 6, revenue for the second quarter was $19.1 million, with $18.8 million from cryptocurrency operations on 299 Bitcoin mined, along with $0.3 million revenue from energy operations during the quarter.

Matt Smith: The app net loss was 21.3 million for the second quarter, and non-GAAP EBITDA was negative 0.3 million. A reconciliation for those figures is included in the appendix.

Matt Smith: GAAP net loss was $21.3 million for the second quarter and non-GAAP adjusted EBITDA was negative 0.3 million. A reconciliation for those figures is included in the appendix. I will now turn the call back over to Greg for closing remarks.

Greg Beard: A reconciliation for those figures is included in the, I will now turn the call back over to Greg for closing, Thanks, Matt. At Stronghold, we own a portfolio of hard assets that are becoming increasingly more valuable. We are at the intersection of a tight power market reflected in the increased capacity auction pricing. Increased demand for power from AI HPC data center development in a market with power generation supply constraints.

Greg Beard: I will now turn the call back of the drags for closing remarks. Thanks, Matt. At Stronghold, we own a portfolio of hard assets that are becoming increasingly more valuable. We are at the intersection of a tight power market reflected in the increased capacity option pricing, increased demand for power from AI, HPC data center development, and a market with power generation supply constraints.

Greg Beard: Thanks, Matt. At Stronghold, we own a portfolio of hard assets that are becoming increasingly more valuable.

Greg Beard: We are at the intersection of a tight power market reflected in the increased capacity auction pricing, increased demand for power from AI, HPC data center development, and a market with power generation supply constraints.

Greg Beard: We are continuing to evaluate all strategic alternatives and look forward to updating you in the near future.

Speaker Change: We are continuing to evaluate all strategic alternatives and look forward to updating you in the near future.

Unknown Executive: Thank you for joining us today at Stronghold's earnings call. You may now disconnect.

We are continuing to evaluate all strategic, and look forward to updating you in the near future. Thank you for joining us today at Stronghold's earnings call. You may now disconnect. , , , , , , , , , , , , , , , , , , , Brandon Stone, Bill Scott, Gregory Beard, Erin Halstead, Donald Royce, Alec Smith,

Speaker Change: Thank you for joining us today at Stronghold's earnings call. You may now disconnect.

Speaker Change: and the the the the

Operator: Good morning and welcome to Stronghold Digital Mining's conference call for the second quarter ended June 30th, 2024. My name is Josh and I will be your operator this morning. Before this call, Stronghold issued its results for the second quarter of 2024 in a press release, which is available in the Investors section of the company's website at www.strongholddigitalmining.com. You can find the link to the Investors section at the top of the homepage. Joining us on today's call are Stronghold's Chairman and CEO Greg Beard and CFO Matt Smith.

Alec Wilson: Before we begin, Alec Wilson from Gateway Group will make a brief introductory statement. Alec Wilson, please proceed. Thank you operator. Good morning everyone and welcome today's slide presentation along with our earnings release and financial disclosures were posted to our website earlier today and can be accessed on our website as www.strongholddigitalmining.com. Some statements were making today may be considered forward looking statements under securities law and involve a number of risks and uncertainties.

Alec Wilson: As a result, we caution you that there are a number of factors, many of which are beyond our control, which could cause actual results and events to differ materially from those described in the forward looking statements. For more detailed risks, uncertainties and assumptions relating to our forward looking statements, please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission. We just claim any obligation or undertaking to update forward looking statements to reflect circumstances or events that occur after the date, the forward looking statements are made, except as required by law.

Alec Wilson: We will also discuss non-gap financial metrics and encourage you to read our disclosures and the reconciliation tables to applicable gap measures in our earnings release carefully as you consider these metrics. We expect to file our quarterly report on form 10Q on or around August 14, 2024 with the Securities and Exchange Commission, which sets forth detailed disclosures and descriptions of our business as well as uncertainties and other variable circumstances. Including, but not limited to risks and uncertainties identified under the caption risk factors, you may access strongholds, securities and exchange commission filing for free by visiting the SEC website at www.

Alec Wilson: SEC.gov or strongholds and investor relations website at IR.strongholddigitalmining.com. I would like to remind everyone that this call is being recorded and will be made available for replay via a link available in the investor relations section of strongholds website.

Greg Beard: Now, I would like to turn the call over to Strongholds Chairman and CEO Greg Beer. Good morning, everyone, and thank you for joining us on our second quarter 2024 earnings call. We will be referencing an associated slide presentation throughout the call that is available through the webcast and on the investor relations section of our corporate website. Let's start on slide three. As we previously announced on our Q1 earnings call, we initiated a formal review of strategic alternatives and that process is ongoing.

Greg Beard: To date, the company has received numerous bids for all or parts of the company and we are considering a wide range of alternatives to maximize stronghold value. These alternatives range from sales of all or part of the company, mergers, strategic financing and expansion of our available power potentially into other data centered use cases.

Greg Beard: Justice. Moving this slide for, we are excited to announce several positive updates regarding our power strategy and assets. In July, PGM's capacity market-based residual auction cleared at $270 per megawatt day, up more than 800% from last year. Cancer Creek cleared 69 megawatts, and scrub grass cleared 76 megawatts. We have since exited 17 megawatts of the scrub grass commitment and retained 59 megawatts. We are working with advisors to evaluate exiting the rest of the scrub grass capacity position, because capacity payments and demand response are mutually exclusive. But at Panther Creek alone, we estimate that capacity payments will drive approximately 7 million of incremental revenue between June 2025 and May 2026 at 100% margin.

Greg Beard: We also have a positive update on waste coal tax credits. Last month, in Pennsylvania's bipartisan budget, which was passed by the State House and Senate and signed into law by the governor, the waste coal tax credit was doubled from $4 per ton to $8 per ton through 2036. This legislation highlights the importance of our reclamation activities and the bipartisan supports that they have in Pennsylvania. And importantly, we estimate that this increase in the tax credit will represent an additional cash flow of 2 to 4 million per year for Stronghold starting in 2025.

Greg Beard: Lastly, in April, PGM updated its guidance for co-located loads, like ours. Based on this guidance to date, we believe that our Bitcoin mining operations qualify for PGM's demand response and sink reserve programs. And we are currently in the process of registering the scrub grass data center for these programs. Moving on to slide five, we have spent the last few months evaluating the expansion potential for our current assets. As a part of this process, we have engaged Applebee strategy group to help us explore data center opportunities and uses for assets.

Greg Beard: Some key value drivers for data centers are access to land, power, fiber, and water. And we believe that our assets possess these qualities. We own 636 acres of scrub grass and 117 acres of Panther Creek. And we recently optioned an additional 1,140 acres immediately adjacent to our Panther Creek property. We have entered into load studies with local utilities at both sites to understand how much power we can access. And our first preliminary load study at Panther Creek recently came back in a supportive of bringing in an additional 250 megawatts.

Greg Beard: We are evaluating timing for the potential expansion and site development. Additionally, both our sites have various nearby fiber providers that represent adverse flood past the market and both have robust water supply further enhancing the data center prospects for our sites.

Matt Smith: With that, I'll turn call over to Matt Smith to discuss Q2 results. Thanks, Greg.

Matt Smith: Last million, slide six. Revenue for the second quarter was 19.1 million, or 18.8 million from cryptocurrency operations on 209 Bitcoin mind, along with 0.3 million revenue from energy operations during the quarter. The app net loss was 21.3 million for the second quarter, and non-gapages EBITDA was negative 0.3 million. A reconciliation for those figures is included in the appendix.

Greg Beard: I will now turn the call back of the drags for closing remarks. Thanks, Matt. At Stronghold, we own a portfolio of hard assets that are becoming increasingly more valuable. We are at the intersection of a tight power market reflected in the increased capacity option pricing, increased demand for power from AI, HPC Data Center development, and a market with power generation supply constraints. We are continuing to evaluate all strategic alternatives and look forward to updating you in the near future.

Operator: Thank you for joining us today at Stronghold's earnings call. You may now disconnect.