Q3 2024 BitFuFu Inc Earnings Call
Okay.
Speaker Change: Good day, and thank you for standing by welcome to the pit phases third quarter 2024 earnings Conference call.
At this time all participants are in a listen only mode.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: Not like teleconference over to your speaker today, Charlie Brady Vice President of Investor Relations. Please go ahead.
Speaker Change: Thank you operator, good morning, ladies and gentlemen, and welcome to <unk> third.
Speaker Change: Third quarter 2024 earnings call.
Speaker Change: The company's financial results were released earlier today and are available on the Investor Relations website at IR.
Some dot com.
Global Newswire Dot Com website.
Speaker Change: Joining me today on the call are real new chairman and CEO.
Speaker Change: Chief Financial Officer.
Speaker Change: Before we begin please note that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.
Statements of industrial facts, including statements about the company's beliefs and expectations are forward looking statements forward looking statements involve risks and uncertainties.
Cause actual results to differ materially from management's current expectations.
Potential risks and uncertainties include but are not limited to those outlined in the company's public filings with the SEC.
Speaker Change: The company does not undertake any obligation to update any forward looking statements.
Sept as required under applicable law.
Speaker Change: We're discussing non-GAAP financial information on this call. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or GAAP.
Speaker Change: You can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation tables provided in today's earnings release.
Final note, although we will not be recording a Q&A on his call questions can be emailed to IR at <unk> Dot com and we will respond as quickly as possible generally within 24 hours I'll now turn the call over to Lee alluded to the company's chairman and Chief Executive Officer.
Lee: Good morning, and thank you for joining us today I'm excited to share updates on big Foods performance for the third quarter of 2024.
Along with the progress we've made on our strategic initiatives.
In the third quarter.
Lee: Bit fufu delivered strong revenue growth with.
Lee: With total revenue of $93 million up 47, 5% year over year.
Lee: Our cloud mining solutions generated $68 9 million in revenue Rec.
Representing 75% of our total revenue.
Fuel by new customer acquisitions, and continued support from existing customers.
Lee: In self mining.
Despite a challenging macro environment Rev.
Revenue reached $25 million up 44% from last year.
Lee: The third quarter was the first full quarter following the bitcoin having event in late April which reduced our bitcoin block subsidy from six 5% to $3 125 bitcoin per block despite the having event it.
Lee: <unk> had another successful quarter generating positive adjusted EBITDA in fact, I am proud to say that the third quarter of 2024 is the 11th consecutive quarter.
<unk> four has generated positive adjusted EBITDA. This consistency demonstrates the profitability and resilience of our business model.
Lee: Regardless of whether the price of bitcoin is in a bear market or bull market.
Like our peers, we faced some headwinds as well.
Lee: The cost to mine bitcoin from ourself mining operations rose to $59452 per bitcoin, primarily due to increased blockchain difficulty and the effects of the April having event.
However.
Lee: It is important to note that our cost to mine a big coin includes not only the electricity on hosting costs.
Lee: But also the cost of hatch rate, we purchase from suppliers in the leasing cost of miners.
Speaker Change: Which make up a majority of our mining fleet as such our $59000 cost is likely not an apples to apples comparison to some of our peers as they may exclude the depreciation cost of minors and their calculations and depreciation to some extent is embedded in our cost of acquiring hash rate.
Speaker Change: And leasing miners.
Speaker Change: To offset the increase in mining costs during and shortly after the third quarter, we strategically reallocated our fleet deployment secured long term.
Speaker Change: Lower cost purchase agreements and acquired our first owned mining site all of which I will discuss further in just a minute beyond. These actions we are evaluating additional opportunities to acquire or cooperate with mining sites with lower electricity cost and are continuously focused on improving our operational efficiency.
Speaker Change: As of September 30th our total mining capacity under management stood at 26.2 access.
Marking a significant.
Speaker Change: 88, 5% increase year over year.
Speaker Change: Our hosting capacity was 556 megawatts.
Speaker Change: Compared to 339 megawatts a year ago.
Speaker Change: And 522 megawatts as.
Speaker Change: As of June 32024.
Speaker Change: As I mentioned in the third quarter of 2024 to meet the challenge of reduced mining output and fluctuations in the price of bitcoin and to ensure long term efficiency.
Speaker Change: And profitability beat Fufu took specific actions to improve our cost structure and increase our geographically diversity.
Speaker Change: Specifically, we gradually shifted the deployment of the least himself on mining machines from high cost facilities to low cost facilities.
Speaker Change: Well.
Speaker Change: Keeping the United States is a key strategic region for our mining sites.
Speaker Change: We expanded our search for additional hash rate supply globally as a result at the end of the third quarter of 2024, our 556 megawatt hosting capacity spend 17 sites on three continents with 10 sites in the U S. Six in Ethiopia, and one in Paraguay.
Following this migration of locations our average hosting cost charged by the facility operators in the third quarter of 2024 decreased to $6.08 per kilowatt hour.
Speaker Change: A 13% improvement.
Speaker Change: Compared to the second quarter of 2024 in October we further reduced our hosting costs by an additional 5% to $6.05 per kilowatt hour our ability to quickly adjust to changes in the market is a testament to the advantages of our asset light strategy, particularly in <unk>.
Speaker Change: LNG period, following bitcoin having events.
Speaker Change: However, as I have emphasized in previous earnings calls and discussions with investors. We believe owning some data centers is essential to bid.
Speaker Change: Batesville foods business, we are focusing on finding the optimal mix between a pure asset light strategy and an asset heavy strategy an important strategic focus is vertical integration and we continuously look at M&A opportunities for mining facilities to secure cost efficient and stable energy sources for.
Speaker Change: Our operations as.
Speaker Change: As part of this effort during the third quarter we.
Speaker Change: We signed a 10 year.
Speaker Change: Long term.
Speaker Change: Lease agreement for our 22 megawatt site in the U S with an electricity cost of around $4 five per kilowatt hour.
Speaker Change: And we have an option to acquire 70% ownership of this site by the end of 2024.
Speaker Change: Subsequent to the end of the third quarter in October we entered into a definitive agreement to acquire a majority stake in an 80 megawatt mining site in Ethiopia within electricity cost of around three six.
Speaker Change: Per kilowatt hour.
Speaker Change: The site, which has the capacity to deploy 26000 miners.
Speaker Change: It's currently operating 8000 and minor S 19, J Pearl miners with a combined 0.8 <unk> and.
Speaker Change: In the coming quarter, we plan to fill in the remaining capacity with the deployment of and minor S. 19, XP miners with combined mining capacity of two five extra harsh longer term. We believe this facility could reach $4 six extra cash if running and minus 21 series minus this acquisition not only <unk>.
Speaker Change: <unk> the diversity of our mining portfolio, but also aligns with our strategic goal to build a sustainable energy platform. In addition to the sites I. Just mentioned, we have a potential M&A pipeline of over 100 megawatts that we are evaluating which includes both traditional grid and.
Speaker Change: Off grid options. Additionally.
Speaker Change: Additionally, we're exploring opportunities in other regions were favorable energy rates can further reduce our costs and enhance long term operational stability.
Speaker Change: With 90% of our computing power leased from the suppliers we've secured.
Speaker Change: <unk> rate of three <unk> for the next two years with long term purchase agreements.
Speaker Change: This strategic move will help lock in a portion of our hash rate costs.
Speaker Change: Further increases in the price of bitcoin and accordingly.
Speaker Change: Cash rate price, which we expect in the coming quarters.
Speaker Change: The long term procurement also allows us to manage future expenses more predictably as we expand.
Speaker Change: Maintaining a mix of short term and long term supply allows us to better balance the flexibility and stable less of our portfolio.
Speaker Change: Our strategic response to industry wide cost pressures also includes leveraging our proprietary technology to optimize our fleet and manage expenses.
Speaker Change: With these proactive measures we believe beat for food is well positioned to navigate volatility in bitcoin prices in mining challenges.
Speaker Change: As we head into the final quarter of 2024, we remain committed to driving growth and value for our shareholders.
Speaker Change: Our initiatives in vertical integration global expansion and operational efficiency are critical elements of our strategy.
Speaker Change: With continued investment in stable energy sourcing and capacity growth, we are confident in our ability to deliver a resilient performance.
Speaker Change: In the face of a dynamic market environment and with that I'll turn the call over to Carla to discuss our financial results in detail.
Speaker Change: <unk>.
Carla: Thank you Neil.
Carla: Good morning, everyone I'm pleased to provide a deeper dive into our financial performance for the third quarter of 2024, which reflects both the strategic investments we're making.
Carla: The impact of external market conditions on our operations.
Carla: Total revenue for the third quarter was $93 million or 47, 5% increase compared to the same period last year.
Carla: This growth was driven strong double digit growth in both our self mining and cloud mining operations.
Carla: I want to highlight that the accumulated revenue for the first three quarters of this year already achieved $354 million, representing 86, 7% increase compared to the same period of 2023.
Carla: Revenue from our self mining operations reached $25 million, representing a 44% increase over third quarter 2023, and accounting for approximately 23% of third quarter revenue.
Carla: Slide 834% decline in bitcoin production due to increased blockchain difficulty and the residual effects of the April 2020 for having this segments growth was bolstered by significant year over year increase in the average price of bitcoin.
Carla: By securing additional harsh rate and locking in three acts of hospice second under long term contract.
Carla: And its strong position to manage costs and support future growth in this segment.
Carla: As a reminder, pickproof cloud mining business is a key differentiator from other public Bitcoin mining company and provides us with a more stable revenue stream as it mitigates the inherent price volatility in the price of bitcoin.
Carla: So let me provide a closer look at our cloud mining segment, which continues to drive growth and underscoring <unk>, leading position in the bitcoin cloud mining space.
Carla: In the third quarter revenue from cloud mining solutions rose to $68 $9 million, representing a 51, 4% increase over the same period last year. Despite the April having event.
Carla: The increase in revenue was driven by a combination of new customer acquisitions and strong repeat business from existing users in fact recurring revenue from customers who are active in the same period last year accounted for 63% of our cloud mining revenue underscoring the loyalty and engagement.
Carla: One of our customer base.
Carla: Additionally, revenue from new customers acquired after September 2023 contributed the remaining 37%.
Carla: Our cloud mining platform.
Carla: Potential increase in registered users, reaching over 455000 as of September 32024 up 75.3.
Carla: <unk>, 3% year over year, and 15, 4% sequentially from the second quarter, highlighting the effectiveness of our customer acquisition efforts and marketing strategy.
Carla: Mining accounted for just over 76% of our total third quarter revenue, reflecting both the demand for our services and the strength of our recurring revenue base.
Carla: Our net dollar retention rate in the cloud mining segment came in at 96% this quarter.
Carla: This metric reflects both our ability to retain and expand customer standing over time, a testament to our strong customer relationships and the quality of our mining services.
Carla: The retention rate is especially noteworthy considering the market volatility, indicating that customers see our platform as a stable and attractive choice within the broader industry landscape.
Carla: We are also seeing evolving customer demographics within cloud mining.
Carla: Our platform is attracting a more diverse range of participants from individual digital asset enthusiasm to sophisticated institutional investors.
Carla: Institutional customers, including high net worth individuals family offices, and private equity funds now make up a significant portion of our revenue due to the larger average contract sizes.
Carla: Meanwhile, individual users representing the majority in terms of customer count continued to benefit from our user friendly platform and flexible contract options, which make mining accessible to a much broader audience.
Carla: Takeda to this diverse customer base, we are focused on product innovation and customer experience.
Carla: For instance, we enhanced our platform's interface and introduce new features and products that meet the demands of different customers and provide greater transparency to the customers.
Carla: We believe these enhancements are strengthening customer loyalty and will encourage long term engagement.
Carla: Looking ahead, we see significant potential for further expansion in the cloud mining segment, particularly in Underpenetrated markets, where we have not previously offered cloud mining services.
Speaker Change: Yeah.
Speaker Change: Analyzing the regulatory environment of those markets and are actively scaling our outreach efforts in other regions, where digital asset adoption is on the rise positioning bit full forward to capture market share and drive user growth globally.
Speaker Change: In summary, our cloud mining segment is not only a substantial contributor to revenue, but also a critical part of our growth strategy. We believe the ongoing investment in this area will enable us to maintain and expand our market leadership, leveraging our technology and operational scale to deliver stable.
Speaker Change: High quality mining services to a global customer base.
Speaker Change: As of September 32024, total mining capacity under management was 26, 2% ex cash and 89% year over year increase from 13, 9% excess cash at the end of the third quarter of 2023.
Speaker Change: Of the total $26 two weeks of hash 24 X a harsh word from leased miners and two weeks of harsh weather from ourself or minors.
Speaker Change: In third quarter 2024, 68% of the average daily mining capacity was used for our cloud mining solutions with the remaining 32% used for self mining operations.
Our total cost of revenue rose by 46, 1% to $89 $4 million in line with the expansion of our cloud and self mining operations.
Speaker Change: Gross margin declined quarter over quarter due to several factors. In addition to the impact of the Harbin event gross margin was negatively impacted by the temporary downtime of mining machines as we strategically migrated miners from high cost to low cost hosting facilities.
Speaker Change: During the migration self owned machines did not contribute enough revenue to cover the depreciation.
Speaker Change: However, the migration nearly completed in October and ultimately position the company for greater long term efficiency and profitability.
Speaker Change: To mitigate cost pressures, we are actively pursuing additional opportunities to optimize our fleet network power costs by acquiring mining sites.
Speaker Change: Furthermore, we're exploring additional floating price mechanisms in our hosting contracts that align with bitcoin price fluctuations, allowing us to optimize our cost structure during periods of price volatility. These strategies are part of a broader focus on sustainable cost management to maintain profitability.
Speaker Change: In various market conditions.
Speaker Change: Our operating expenses also rose this quarter.
Speaker Change: <unk> and marketing expenses general and administrative expenses and R&D expenses were $6 $5 million in total up $5 million compared to the same period of last year. This increase was largely due to the addition of share based compensation expense of $4.
Speaker Change: $3 million, which we have previously not had to record we expect share based compensation expense in the fourth quarter to be approximately $17 million due to initial grants of restricted stock to larger group of employees. Thereafter, we expect a modest level of share based compensation expense.
Speaker Change: In addition, there was a $3 million increase in legal and consulting costs related to business development activities, and then point $2 million increase in employee related costs compared to the same period of last year.
Speaker Change: Adjusted EBITDA for the third quarter was $5 $8 million up 48% from $3 $9 million in third quarter 2023. This improvement was driven by our disciplined approach to cost control and the scaling of our cloud mining operations, which helped.
Speaker Change: Offset some of the pressures we're experiencing himself mining costs.
Speaker Change: Due to the consecutive gaining adjusted EBITDA the accumulated adjusted EBITDA for the first three quarters of this year already achieved $64 million, representing 136% increase compared to the same period of 2023.
As of September 32024, we had a strong liquidity position with cash cash equivalents and digital assets totaling $142 $7 million up from $76 million at the end of 2023. This growth was supported by proceeds from our NASDAQ listing.
Speaker Change: And an increase in digital assets from Ourself mining operation, we held 1638 bitcoins as of quarter end, reflecting our prudent approach to capital management and the ability to capitalize on favorable market conditions.
Speaker Change: Our balance sheet strength and liquidity position provide us with the flexibility to pursue growth opportunities and make strategic investments in line with our long term objectives. This includes expanding our mining footprint in regions with low cost electricity optimizing our cost structure at least facilities.
Speaker Change: And advancing our vertical integration initiatives by increasing our hash rate at owned facilities.
Speaker Change: Our third quarter results underscore the progress, we're making towards creating a resilient growth focused business model.
Speaker Change: Through disciplined cost management strategic energy investments and robust revenue generation across our segments. We are building a foundation for long term success and sustained profitability. Thank.
Speaker Change: Thank you all for your continued interest and support I'll now turn the call back over to Neal for his closing remarks.
Neal: Thank you Carlo as.
Neal: As we reflect on our performance this quarter.
Neal: Encouraged by the progress we've made in a challenging and rapidly evolving market.
Speaker Change: <unk> focus on strategic investments in vertical integration, securing long term hatch rate.
Speaker Change: Spending our geographic footprint is creating a stronger more resilient business model that can thrive in various conditions.
Speaker Change: Our recent acquisition in Ethiopia, exemplifies our commitment to growth and operational efficiency.
Speaker Change: And we're excited about the additional opportunities this new market holds for us.
Speaker Change: As we continue our journey.
Speaker Change: We are looking at off grid, and low cost energy solutions as potential avenues to further stabilize our cost structure.
Speaker Change: Enhanced profitability.
Speaker Change: Our team remains focused on executing our strategy with discipline and agility and we are deeply committed to driving sustainable long term value for our shareholders with a solid financial position and a clear strategic roadmap.
Speaker Change: <unk> is well prepared to navigate future challenges and seize new opportunities in the digital asset mining industry.
Speaker Change: I'd like to thank our employees for their dedication our customers for their trust and our shareholders for their continued support.
Speaker Change: We look forward to sharing further updates with you as we close out the year and move into 2025 with strong momentum.
Speaker Change: Thank you all for joining us today, and we look forward to speaking with you again in February when we report our fourth quarter and full year 2024 results.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
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Speaker Change: Good day, and thank you for standing by welcome to the pit phases third quarter 2024 earnings Conference call.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: Not like teleconference over to your speaker today, Charlie Brady Vice President of Investor Relations. Please go ahead.
Charlie Brady: Thank you operator, good morning, ladies and gentlemen, and welcome to <unk> third quarter 2024 earnings call.
Charlie Brady: These financial results were released earlier today and are available on the Investor Relations website at IR <unk>.
Charlie Brady: Some dot com.
Charlie Brady: Well from the global Newswire Dot Com website.
Speaker Change: Joining me today on the call, our new chairman and CEO.
Speaker Change: <unk>, our chief Financial Officer.
Speaker Change: Before we begin please note that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.
Speaker Change: Statements that are not historical facts, including statements about the company's beliefs and expectations.
Speaker Change: Our forward looking statements forward looking statements involve risks and uncertainties.
Speaker Change: They cause actual results to differ materially from the management's current expectations Patel.
Speaker Change: Potential risks and uncertainties include but are.
Speaker Change: Not limited to those outlined in the company's public filings with the SEC.
Speaker Change: The company does not undertake any obligation to update any forward looking statements, except as required under applicable law.
Speaker Change: We will discussing non-GAAP financial information on this call.
Speaker Change: Company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or GAAP.
Speaker Change: You can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation tables provided in today's earnings release.
Speaker Change: One final note, although we will not be recording a Q&A I will call questions can be emailed to IR at <unk> Dot com.
Speaker Change: Will respond as quickly as possible generally within 24 hours.
Speaker Change: I'll now turn the call over to Lee alluded, the Companys, Chairman and Chief Executive Officer.
Lee: Good morning, and thank you for joining us today I am excited to share updates on Big Foods performance for the third quarter of 2024, along with the progress we've made on our strategic initiatives.
Lee: In third quarter beat.
Lee: Bit fufu delivered strong revenue growth.
Lee: With total revenue of $90 3 million up 47, 5% year over year.
Lee: Our cloud mining solutions generated $68 $9 million in revenue.
Lee: Presenting 75% of our total revenue.
Lee: <unk> by new customer acquisitions, and continued support from existing customers.
Lee: And self mining despite a challenging macro environment.
Lee: Revenue reached $20 5 million up 44% from last year.
Lee: The third quarter was the first full quarter following the bitcoin having event in late April which reduced our bitcoin block subsidy from six 5% to $3 125 bitcoin per block despite the having event it.
Lee: <unk> had another successful quarter generating positive adjusted EBITDA in fact, I am proud to say that the third quarter of 2024 is the 11th consecutive quarter.
Lee: Bid for has generated positive adjusted EBITDA. This consistency demonstrates the profitability and resilience of our business model.
Lee: Regardless of whether the price of bitcoin is in a bear market or below market.
Lee: Like our peers, we faced some headwinds as well.
Lee: The cost to mine bitcoin from ourself mining operations rose to $59452 per bitcoin, primarily due to increased blockchain difficulty and the effects of the April having event.
Lee: However.
Lee: It is important to note that our cost to mine a big coin includes not only the electricity and hosting costs.
Lee: But also the cost of hatch rate, we purchase from suppliers in the leasing cost of miners.
Lee: Which make up a majority of our mining fleet as such our $59000 cost is likely not an apples to apples comparison to some of our peers as they may exclude the depreciation cost of minors and their calculations and depreciation to some extent is embedded in our cost of acquiring hash rate.
Lee: And leasing miners.
Lee: To offset the increase in mining costs during and shortly after the third quarter, we strategically reallocated our fleet deployment secured long term.
Lee: Lower cost purchase agreements and acquired our first owned mining site all of which I will discuss further in just a minute beyond. These actions we are evaluating additional opportunities to acquire or cooperate with mining sites with lower electricity cost and are continuously focused on improving our operational efficiency.
Lee: As of September 30, our total mining capacity under management stood at 26.2 access.
Lee: Marking a significant.
Lee: 88, 5% increase year over year.
Lee: Our hosting capacity was 556 megawatts.
Lee: Compared to 339 megawatts a year ago.
Lee: And 522 megawatts as.
Lee: As of June 32024.
Lee: As I mentioned in the third quarter of 2024 to meet the challenge of reduced mining output and fluctuations in the price of bitcoin and to ensure long term efficiency.
Lee: And profitability beat Fufu took specific actions to improve our cost structure and increase our geographically diversity.
Lee: Specifically, we gradually shifted the deployment of the least himself on mining machines from high cost facilities to low cost facilities.
Lee: Well.
Lee: Keeping the United States is a key strategic region for our mining sites.
Lee: We expanded our search for additional hash rate supply globally as a result at the end of the third quarter of 2024.
Lee: Our 556 megawatt hosting capacity spend 17 sites on three continents with 10 sites in the U S. Our six in Ethiopia, and one in Paraguay.
Lee: Following this migration of locations our average hosting cost charged by the facility operators in the third quarter of 2024 decreased to $6.08 per kilowatt hour.
Lee: A 13% improvement.
Lee: Compared to the second quarter of 2024 in October we further reduced our hosting costs by an additional 5% to $6 five per kilowatt hour our ability to quickly adjust to changes in the market is a testament to the advantages of our asset light strategy, particularly in <unk>.
Lee: <unk> period, following bitcoin having events.
Lee: However, as I have emphasized in previous earnings calls and discussions with investors. We believe owning some data centers is essential to bid.
Lee: Batesville foods business, we are focusing on finding the optimal mix between a pure asset light strategy and an asset heavy strategy an important strategic focus is vertical integration and we continuously look at M&A opportunities for mining facilities to secure cost efficient and stable energy sources for.
Lee: Our operations.
Lee: As part of this effort during the third quarter we.
Lee: We signed a 10 year.
Lee: Long term.
Lee: Lease agreement for our 22 megawatt site in the U S with an electricity cost of around $4 five per kilowatt hour.
Lee: And we have an option to acquire 70% ownership of this site by the end of 2024.
Lee: Subsequent to the end of the third quarter in October we entered into a definitive agreement to acquire a majority stake in an 80 megawatt mining site in Ethiopia, with and electricity cost of around three six.
Lee: Per kilowatt hour.
Lee: The site, which has the capacity to deploy 26000 miners.
Lee: <unk> is currently operating 8000 and minor S 19, J Pearl miners with a combined.
Lee: Eight extra hush and.
Lee: In the coming quarter, we plan to fill in the remaining capacity with the deployment of and minor S. 19, XP miners with combined mining capacity of two five extra harsh longer term. We believe this facility could reach $4 six extra cash if running at minus 21 series minus this acquisition not only increase.
Lee: <unk> the diversity of our mining portfolio, but also aligns with our strategic goal to build a sustainable energy platform. In addition to the sites I. Just mentioned, we have a potential M&A pipeline of over 100 megawatts that we are evaluating which includes both traditional grid and.
Lee: Off grid options.
Lee: Additionally, we're exploring opportunities in other regions were favorable energy rates can further reduce our costs and enhance long term operational stability.
Lee: With 90% of our computing power leased from the suppliers, we've secured cash rate of three <unk> for the next two years with long term purchase agreements.
Lee: This strategic move will help lock in a portion of our hatch rate costs before further increases in the price of bitcoin and accordingly.
Lee: Cash rate price, which we expect in the coming quarters.
Lee: The long term procurement also allows us to manage future expenses more predictably as we expand.
Lee: Maintaining a mix of short term and long term supply allows us to better balance the flexibility and stable NAV of our portfolio.
Lee: Our strategic response to industry wide cost pressures also includes leveraging our proprietary technology to optimize our fleet and manage expenses.
Lee: With these proactive measures we believe beat for food is well positioned to navigate volatility in bitcoin prices in mining challenges.
Lee: As we head into the final quarter of 2024, we remain committed to driving growth and value for our shareholders.
Lee: Our initiatives in vertical integration.
Lee: Global expansion and operational efficiency are critical elements of our strategy.
Lee: With continued investment in stable energy sourcing and capacity growth, we are confident in our ability to deliver a resilient performance.
Lee: In the face of a dynamic market environment and with that I'll turn the call over to Carla to discuss our financial results in detail.
Lee: Sure.
Speaker Change: Thank you Neil.
Carla: Good morning, everyone I'm pleased to provide a deeper dive into our financial performance for the third quarter of 2024, which reflects both the strategic investments, we're making and the impact of external market conditions on our operations.
Lee: Total revenue for the third quarter was $93 million or 47, 5% increase compared to the same period last year.
Lee: This growth was driven strong double digit growth in both our self mining and cloud mining operations.
Lee: Also wanted to highlight that the accumulated revenue for the first three quarters of this year already achieved $354 million.
Lee: Representing 86, 7% increase compared to the same period of 2023.
Lee: Revenue from our self mining operations reached $25 million.
Lee: Representing a 44% increase over third quarter, 2023, and accounting for approximately 23% of third quarter revenue.
Lee: Despite a 34% decline in bitcoin production due to increased blockchain difficulty and the residual effects of the April 2020 for having this segments growth was bolstered by a significant year over year increase in the average price of bitcoin.
Lee: Securing additional hash rate and locking in three <unk> per second.
Lee: Long term contract we are in a strong position to manage costs and support future growth in this segment.
Lee: As a reminder, pickproof cloud mining business is a key differentiator from other public bitcoin mining companies and provides us with a more stable revenue stream as it mitigates the inherent price volatility in the price of bitcoin.
Lee: So let me provide a closer look at our cloud mining segment, which continues to drive growth and underscoring <unk>, leading position in the bitcoin cloud mining space.
Lee: In the third quarter revenue from cloud mining solutions rose to $68 $9 million, representing a 51, 4% increase over the same period last year. Despite the April having event.
Lee: The increase in revenue was driven by a combination of new customer acquisitions and strong repeat business from existing users in fact recurring revenue from customers who are active in the same period last year accounted for 63% of our cloud mining revenue underscoring the loyalty and engage.
Lee: <unk> of our customer base.
Lee: <unk> revenue from new customers acquired after September 2023 contributed the remaining 37%.
Lee: Our cloud mining platform saw a substantial increase in registered users reaching over 455000 as of September 32024 up 75.3.
Lee: <unk>, 3% year over year, and 15, 4% sequentially from the second quarter, highlighting the effectiveness of our customer acquisition efforts and marketing strategies.
Lee: Mining accounted for just over 76% of our total third quarter revenue, reflecting both the demand for our services and the strength of our recurring revenue base.
Lee: Our net dollar retention rate in the cloud mining segment came in at 96% this quarter.
Lee: This metric reflects both our ability to retain and expand customer standing over time, a testament to our strong customer relationships and the quality of our mining services.
Lee: The retention rate is especially noteworthy considering the market volatility, indicating that customers see our platform as a stable and attractive choice within the broader industry landscape.
Lee: We are also seeing evolving customer demographics within cloud mining.
Lee: Our platform is attracting a more diverse range of participants from individual digital asset enthusiastic to sophisticated institutional investors.
Lee: Institutional customers, including high net worth individuals family offices, and private equity funds now make up a significant portion of our revenue due to the larger average contract sizes.
Lee: Meanwhile, our individual users representing the majority in terms of customer count continued to benefit from our user friendly platform and flexible contract options, which make mining accessible to a much broader audience.
Lee: To cater to this diverse customer base, we are focused on product innovation and customer experience.
Lee: For instance, we enhanced our platform's interface and introduce new features and products that meet the demands of different customers and provide greater transparency to the customers.
Lee: We believe these enhancements are strengthening customer loyalty and will encourage long term engagement.
Lee: Looking ahead, we see significant potential for further expansion in the cloud mining segment, particularly in Underpenetrated markets, where we have not previously offered cloud mining services.
Lee: Analyzing the regulatory environment of those markets and are actively scaling our outreach efforts in other regions, where digital asset adoption is on the rise positioning bit full forward to capture market share and drive user growth globally.
Lee: In summary, our cloud mining segment is not only a substantial contributor to revenue, but also a critical part of our growth strategy. We believe the ongoing investment in this area will enable us to maintain and expand our market leadership, leveraging our technology and operational scale to deliver stable.
Lee: High quality mining services to a global customer base.
Lee: As of September 32024, total mining capacity under management was 26, 2% ex cash and 89% year over year increase from 13, 9% excess cash at the end of the third quarter of 2023.
Lee: Of the total $26 two weeks of hash 24 X a harsh was from leased miners and two weeks of harsh were from ourself or minors.
Lee: In third quarter 2024, 68% of the average daily mining capacity was used for our cloud mining solutions with the remaining 32% used for self mining operations.
Lee: Our total cost of revenue rose by 46, 1% to $89 $4 million in line with the expansion of our cloud and self mining operations.
Lee: Gross margin declined quarter over quarter due to several factors. In addition to the impact of the Harbin event gross margin was negatively impacted by the temporary downtime of mining machines as we strategically migrated miners from high cost to low cost hosting facilities.
Lee: During the migration.
Lee: One machine did not contribute enough revenue to cover their depreciation however, the migration nearly completed in October and ultimately position the company for greater long term efficiency and profitability.
Lee: To mitigate cost pressures, we are actively pursuing additional opportunities to optimize our fleet network power costs by acquiring mining sites.
Lee: Furthermore, we're exploring additional floating price mechanisms in our hosting contracts that align with bitcoin price fluctuations, allowing us to optimize our cost structure during periods of price volatility. These strategies are part of a broader focus on sustainable cost management to maintain profitability.
Lee: In various market conditions.
Lee: Our operating expenses also rose this quarter sales and marketing expenses general and administrative expenses and R&D expenses were $6 $5 million in total up $5 million compared to the same period of last year. This increase was largely.
Lee: Due to the addition of share based compensation expense of $4 $3 million.
Lee: We have previously not had to record.
Lee: We expect share based compensation expense in the fourth quarter to be approximately $17 million due to initial grants of restricted stock to larger group of employees.
Lee: Thereafter, we expect a modest level of share based compensation expense.
Lee: In addition, there was a point $3 million increase in legal and consulting costs related to business development activities and a $2 million increase in employee related costs compared to the same period of last year.
Lee: Adjusted EBITDA for the third quarter was $5 8 million up 48% from $3 $9 million in third quarter 2023.
Lee: This improvement was driven by our disciplined approach to cost control and the scaling of our cloud mining operations, which helped offset some of the pressures we're experiencing himself mining costs.
Lee: Due to the consecutive gaining adjusted EBITDA.
Lee: Accumulated adjusted EBITDA for the first three quarters of this year already achieved $64 million.
Lee: Representing 136% increase compared to the same period of 2023.
Lee: As of September 32024, we had a strong liquidity position with cash cash equivalents and digital assets totaling $142 $7 million up from $76 million at the end of 2023. This growth was supported by proceeds from our NASDAQ listing.
Lee: And then increase in digital assets from Ourself mining operation.
Lee: <unk> 1638, bitcoins as of quarter end, reflecting our prudent approach to capital management and the ability to capitalize on favorable market conditions.
Lee: Our balance sheet strength and liquidity position provide us with the flexibility to pursue growth opportunities and make strategic investments in line with our long term objectives.
Lee: This includes expanding our mining footprint in regions with low cost electricity optimizing our cost structure at least facilities and advancing our vertical integration initiatives by increasing our hash rate at owned facilities.
Lee: Our third quarter results underscore the progress, we're making towards creating a resilient growth focused business model through disciplined cost management strategic energy investments and robust revenue generation across our segments. We are building a foundation for long term success and sustained.
Lee: <unk> profitability.
Speaker Change: Thank you all for your continued interest and support I'll now turn the call back over to Neal for his closing remarks.
Speaker Change: Thank you Carlo as.
Neal: As we reflect on our performance this quarter I am encouraged by the progress we've made in a challenging and rapidly evolving market.
Lee: <unk> focus on strategic investments in vertical integration, securing long term hash rate and spending our geographic footprint is creating a stronger more resilient business model that can thrive in various conditions.
Lee: Our recent acquisition in Ethiopia, exemplifies our commitment to growth and operational efficiency.
Lee: And we're excited about the additional opportunities this new market holds for us.
Lee: As we continue our journey.
Lee: We are looking at off grid, and low cost energy solutions as potential avenues.
Lee: To further stabilize our cost structure and enhance profitability.
Lee: Our team remains focused on executing our strategy with discipline and agility and we are deeply committed to driving sustainable long term value for our shareholders with a solid financial position and a clear strategic roadmap Bigfoot <unk> is well prepared to navigate future challenges and seize new opportunities in the digital asset.
Lee: Mining industry.
Lee: I'd like to thank our employees for their dedication our customers for their trust and our shareholders for their continued support.
Lee: We look forward to sharing further updates with you as we close out the year and move into 2025 with strong momentum. Thank you all for joining us today and we look forward to speaking with you again in February when we report our fourth quarter and full year 2024 results.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.