Q4 2024 Gryphon Digital Mining Inc Earnings Call
Speaker Change: [music].
Yeah.
Speaker Change: Greetings and welcome to the Griffin made it digital mining fourth quarter and full year 2024 earnings call on the call are Steve Gutterman, Chief Executive Officer of the company and some Salzman Chief Financial Officer of the company.
Speaker Change: Before I turn the call over to Mr. Gutterman. Please note that the statements made on this call that are not historical facts may be forward looking statements from the company's management made within the meaning of section 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities and Exchange Act of 1930 for asthma.
Speaker Change: Mendes concerning future events.
Speaker Change: Words, such as May should projects expects intends plans believes anticipates hopes estimates and variations of such words and similar expressions are intended to identify forward looking statements.
Speaker Change: These statements are subject to numerous conditions, many of which are beyond the control of the company, including those set forth in the risk factors section of the company's Form 10-Q, and 10-K as updated by the company's subsequent disclosures filed with the S. E C.
Speaker Change: Copies of these documents are available on the Sec's website at Www Dot S E C Dot Gov.
Speaker Change: Actual results may differ materially from those expressed or implied by such forward looking statements any forward looking statements made on this call are made only as of today's date and that the company does not undertake any obligation to update or supplement any such statements to reflect subsequent developments.
Speaker Change: I'd like to turn the call over to Steve Gutterman, Steve. Please proceed.
Steve Gutterman: Thank you operator, good afternoon shareholders. Thank you for joining us today for our earnings call I'm excited to share our progress in vision for positioning Griffin at the forefront of the rapidly growing demand for high performance computing driven by artificial intelligence I'll walk you through a British company history.
Steve Gutterman: And our evolution through a series of deliberate actions supporting our growth plans moving forward and how we're positioning ourselves for significant growth.
Chris: Chris on digital mining was founded with a mission to mine bitcoin profitably and sustainably.
Chris: A key milestone last year. It was a reverse takeover of Corona and public listing on the NASDAQ.
Chris: 2024 was a good year for for mining, we we mined 334 coins.
Chris: But as many of you know bitcoin mining is a highly competitive industry subject to several variables that are largely outside miners control, namely Bitcoin price network had freight and energy costs with global Heartbreak continually rising at an ever decreasing number a bitcoin two.
Chris: B mind.
Chris: We recognize the need to differentiate and focus on what we can control.
Chris: <unk> strategy.
Chris: The cost and availability of power is critical to the mining profitably and more generally.
Chris: Or is becoming an increasingly scarce and value and valuable resource well beyond crypto mining, we believe that the currency of the next decade will be tower and the rapid advancement of artificial intelligence is driving an explosion in demand for high performance computing.
Chris: Sure.
Chris: Industry reports estimate incremental power demand over the next five years in North America alone equating to 50% to 70% of current U S household consumption.
Chris: Building the energy infrastructure to meet that demand is a kin to recreating.
Chris: Or more.
Chris: Burnt power grid in a fraction of the time it took to build originally.
Chris: Recognizing this need we have seen a broader trend in our industry, a bitcoin miners acquiring energy assets to vertically integrate and control power costs.
Chris: Bitcoin miner, we are well equipped to apply the extra the expertise and identifying energy sources and deploying computing equipment to serve the growing demand for AI computing infrastructure.
Chris: Therefore, as we look to the future our corporate focus has shifted while we view bitcoin mining as a revenue bridge our efforts over the last six months.
Chris: And we will continue to be to develop world class power assets that can be used to operate H P C and AI data centers.
Chris: To that end over the last six months.
Chris: We've expanded our team strengthened our balance sheet and evaluated a range of energy assets to acquire and develop we ultimately determined that natural gas presents the optimal combination.
<unk> cost efficiency and reliability.
Speaker Change: Specifically in September my role was expanded from director to CEO, We added Jimmy dropped below the former holiday.
Speaker Change: CFO as chairman and in a massive win for the company, we announced that Sim Salzman, former marathon CFO would be continuing his role as CFO.
Speaker Change: Then in October we announced a transformative debt restructuring with Anchorage digital converting $13 million of debt to equity at a premium to our stock price, we restructured the $5 million of debt on favorable terms will describe that in more detail the impact on our cash.
Speaker Change: Cash flow has been substantial instead of having to sweep the majority of our mind bitcoin to Anchorage, we now pay a nominal monthly interest payment of $17708 on the remaining debt.
Speaker Change: And perhaps more importantly acreage has become our largest shareholder and a key adviser we appointed Dan <unk> from Anchorage digital to our board.
Speaker Change: In December we added a galley formerly of luminous capital management as SVP of energy strategy.
Speaker Change: Recognizing the immense opportunity ahead, 100% of our management team and the majority of our board invested personally.
Speaker Change: Our $2 8 million dollar January equity raise a testament to our collective conviction.
Speaker Change: The capstone of our strategic shift is the definitive agreement to acquire a captisol, which we site, which we signed in January kept us would position us to become one of the largest dedicated H P C and AI computing infrastructure providers with up to four.
Speaker Change: Gigawatt.
Speaker Change: Potential power.
Speaker Change: I'll dive deep more deeply into campus, but first I'll pass it over to Sam to walk through the financials.
Speaker Change: Yes.
Speaker Change: Thank you Steve I will now highlight our financial results for 2024 for the year ending December 31, 2024, we might approximately 334, bitcoin and generated mining revenues of approximately $25 million compared to approximately 740, bitcoin and generated revenues of approximately.
Speaker Change: $21 1 million for the year ending December 31, 2023 breakeven call her bitcoin for the year ending December 31, 2024 were 47359 compared to 18192 for the year ending December 31 2023.
Speaker Change: The change in breakeven cost year over year reflect the having event that occurred in 2024 with a big one rewards decreased by 50% combined with the increase in global cash rate of approximately 66% from an energy perspective, the companys net cost of producing a bitcoin for 2024 was approximately.
Speaker Change: $6 97 per kilowatt hour or adjusted EBITDA stood at approximately negative $5 5 million for the year ending December 31, 2024 compared to 94000 for the year ended December 31, 2023, I'd also like to note that included in our adjusted EBITDA numbers were approximately 6 million.
Speaker Change: And in legal and marketing fees associated primarily with one time deal costs and going public absent. These fees are adjusted EBITDA would have been above breakeven, we believe breakeven costs and adjusted EBITDA are important gauges of our operational effectiveness.
Speaker Change: And then highlighting these metrics gives investors and analysts better transparency for comparative analysis across mining company reconciliations to the nearest GAAP measures can be found in our earnings release disseminated prior to this call. The company recognized net income of approximately $401000 for the three months period ending December.
31, 2024, which include net noncash expenses of approximately negative $2 4 million net noncash expenses consist of items, including depreciation employee stock based compensation expense fair market value of common stock issued your consultant change in fair value of notes payable gain on restructuring our bitcoin.
Speaker Change: Nominated note payable and unrealized gain or loss on marketable equity equity security. This compares to a net loss of approximately 10.9 billion for the three months period, ending December 31, 2023, which included net noncash expenses of approximately $9 million the company recognized a net loss.
Speaker Change: With approximately $21 3 million for the year ended December 31, 2024, which included net non cash expenses of approximately $14 9 million net noncash expenses consisted up depreciation employee stock based compensation expense fair market value of common stock issued to consultants change in fair value of notes payable.
Speaker Change: Gain on restructuring of bitcoin denominated note payable and unrealized gain or loss on the marketable equity securities. This compares to a net loss of approximately $28 6 million for the year ending December 31, 2023, which included net non cash expenses of approximately $27 9 million as of December.
Speaker Change: Remember 31st 2024, our balance sheet reported approximately zero point $7 million of cash and cash equivalents $1 million in bitcoin approximately $5 6 million due for the note payable as Steve noted, we completed a debt restructuring with Anchorage digital converting $19 6 million of debt to equity as of December 31, 2023.
Speaker Change: Our balance sheet reported approximately zero point $9 million in cash and cash equivalents $2 million in bitcoin at $14 9 million due for their note denominated in bitcoin as mentioned during prior quarters. The change in the fair value of notes denominated in bitcoin reflected a direct correlation to the price of bitcoin as of the period and following.
Speaker Change: The restructuring the remaining debt due to Anchorage is no longer denominated in bitcoin before I turn it over to Steve I'd like to take a moment to highlight the dramatic improvements. We have made since Steve became CEO in late September by our key metrics. We exited Q4 2024 in a stronger financial position than we entered it during the fourth.
Speaker Change: <unk>, we increased cash and cash equivalents for 368000 to 735000, we reduced total liabilities by approximately $13 million by completing the restructuring of the Anchorage note, we improved accumulated shareholders' equity from a deficit of $18 9 million to a deficit of $7 million, we improve the average treaty.
Speaker Change: Volume of our stock from approximately 249000 shares per day in Q3 to approximately 874000 shares per day in Q4 with that I'll turn it back to Steve for some additional comments.
Steve Gutterman: Thanks, Tim.
Steve Gutterman: We're excited about the improvements we've made to the to the business and how these improvements are going to position us to complete our shift towards power generation.
Steve Gutterman: Taking a closer look at cap. This the asset itself is an ideal site for an H P. C. In AI data center campus, consisting of 850 acres in Alberta. It has ample access to natural gas. It has access to the grid for redundancy power transmission Nonparty.
Steve Gutterman: Well water and onsite carbon sequestration once closed we will contemplate a staged development, where we aim to bring the first hundred 30 megawatts online in 2026 with the opportunity to expand up to four gigawatts over time.
Speaker Change: We feel the value creation opportunity by closing this acquisition will be a mess based on the 500000 to $3 million per megawatt valuation of comparable computing infrastructure companies that would imply that Chris and his four gigawatt potential of captives.
Steve Gutterman: Once developed could be worth billions.
Steve Gutterman: After closing on the captive acquisition and bringing the asset online we expect rapidly growing high margin recurring revenues from co located customers complementing our baseline bitcoin mining revenues.
Steve Gutterman: This will serve as an anchor site to attract additional power intensive computing customers, including AI and machine learning scientific computing and more.
Steve Gutterman: So in summary, we believe that the fourth quarter of 2024 and in fact, the last six months and year to date marks the beginning of a new chapter for aggression.
Steve Gutterman: Our definitive agreement to acquire Captisol and the anticipated development. After the closing of the transaction, we feel will create extraordinary shareholder value generating significant revenue growth and positioning us as a leader in sustainable computing infrastructure and positioning Griffin as a substantial player.
Steve Gutterman: In the H P C. In AI energy economy, our focus now is on execution closing the acquisition and advancing development securing strategic partnerships and achieving key milestones that will drive exceptional shareholder returns.
Steve Gutterman: Still I would acknowledge that it has not been all roses to get here the stock has come under pressure in the market is volatile.
Steve Gutterman: That has been hard, but we believe in where we're going and we continue to build the company to create and maximize shareholder value.
Steve Gutterman: On behalf of the board and the management team, we'd like to thank our shareholders for continuing to support US we are laser focused on maximizing maximizing the value of your stock.
Steve Gutterman: We look forward to sharing updates on the progress.
Steve Gutterman: And working together to build a world class company and with that operator, let's open up the line for questions. Thanks.
Speaker Change: Certainly at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press star two if he would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment that may be necessary to pick up your handset before pressing the star keys. Once again. Please press star one if you wish to ask a question at this time one moment, please while we pull for questions.
Speaker Change: And our first question today is coming from Kevin Dede from H C. Wainwright, Kevin Your line is live.
Speaker Change: Thank you for having me Steve Sin precede it.
Speaker Change: Lots of talk about cap this but no mention of Ericsson in D. C. You kind of give us a status there, Steve and what you're thinking.
Speaker Change: Yep Yep, Thanks, Kevin good to talk to you.
Speaker Change: Ericsson as as we've publicly disclosed we terminated our original agreement there which was to acquire.
Speaker Change: 500 wells in in British Columbia, What we found is that we are still interested in Ericsson and we are still engaged in conversations to acquire a subset of those assets are because what we found in our diligence process is that there are a handful.
Speaker Change: Full of wells that have significant production and less associated liabilities and then on the other end of the spectrum. There are some wells that have limited production and excessive liabilities associated with that so the course of action was to one terminate the agreement to continue to engage.
Speaker Change: Age with relevant parties. So that story, we can end up with a with a subset of those wells that can get us to the same or a better place in terms of power available to us.
Speaker Change: Okay could we do a little deeper dive on Captisol.
You mentioned, Alberta, but is it within say 10 milliseconds of latency of Calgary or.
Speaker Change: Yeah, Yeah. So.
Speaker Change: Great Great question, sorry I.
Speaker Change: I cut you off was that you wanted to talk solely about the latency or do you want to talk more generally about that lately. Yeah latency is a big deal also you referenced partnerships.
Speaker Change: Development like this requires a ton of capital as you well know give us a little insight and maybe some comfort and how you see that progressing.
Speaker Change: Mhm.
Speaker Change: Yes, first let me talk specifically to latency. So we actually have a fiber from Rogers and from tell us that are extremely close to the asset the asset itself is about an hour outside of Calgary and pictured Creek. So we've got great latency and as a matter of fact, that's one of the key.
Speaker Change: Elements to assessing.
Speaker Change: Now.
Speaker Change: How good your your side is gonna be because exactly to your question and to your point yes.
Speaker Change: You don't have if you don't have good latency. If you if you don't have good connectivity.
Speaker Change: Not going to be an effective site. So we feel really good about that one of the reasons we picked it.
Speaker Change: More specifically or generally about captisol we.
Speaker Change: Now spent months combing North America, or and ideal site. So what is an ideal site me number one we should talk about the the power source because as I mentioned in my opening comments. According to some experts like you.
Speaker Change: By the way.
Speaker Change: There is going to be a dramatic increase in demand for power and.
Speaker Change: And so up to 50.
Speaker Change: 60, 70, Gigawatts potentially 100 gigawatts of incremental power that's necessary over the next five to 10 years.
Speaker Change: For AI related data.
Speaker Change: Data centers and so the question. The first question is where size when it comes off what what's the power source and or our belief is that the answer is that there's going to be a mix of things right, there's probably going to be some nuclear power. Although there is obviously regulatory and I'm not in my backyard problems with.
Speaker Change: There.
Speaker Change: There could be some solar or wind or geothermal other no one's really crack the code on how to do that efficiently.
Speaker Change: For our for our money, we believe that natural gas is the very non sexy low tech tried and true solution to how to generate.
Speaker Change:
Speaker Change: The incremental power and so the thing that we're really we love about captives is that it has a couple of different.
Speaker Change: Pipelines for natural gas and it has grid connectivity for redundancy. So we have abundant natural gas and.
Speaker Change: Importantly, there is a depleted reservoir and the saline aquifer onsite with which we could kinder carbon sequestration. So.
Speaker Change: Not only would we be producing the energy from natural gas there, but we have a mechanism to make sure that the whole project is green and we avoid carbon taxes or carbon transportation costs.
Speaker Change: The.
Speaker Change: The there's a subset of the inquiry, Steve too was just about.
Speaker Change: Wow.
Speaker Change: You're developing things outside of you know power.
Speaker Change: Power and those resources, but instead, obviously your relationships with our construction team and an eventual customer. So how are you thinking about this with this become a site.
Speaker Change: That you used to host other people's machines or do you expect that Griffin would run its own fleet, how how is the team thinking about it.
Speaker Change: Yeah, Great question and Theres, a couple of pieces to that question number one let me talk a little bit about the cap. This management team, which is part of the the transaction really one of the things that we were most excited about but any plus team led by Gary Anderson, who is the former COO Tampa pipeline.
Speaker Change: Which is one of the largest pipeline companies in Canada and.
Speaker Change: Then so he and his team collectively have over 100 years of relevant experience. They are true experts in developing power assets. So we really wouldn't be.
Speaker Change: B B doing this project like this without a team like that and I'm really excited to get Harry and the crew aboard.
Speaker Change:
Speaker Change: The there's actually two other parts of your question one is about potential customers and then one is about capital. So let me address both of those.
Speaker Change: On customers, it's really interesting, we're not ready to make any announcements yet, but as the amount of inbound calls that we have received since we announced the definitive agreement.
Speaker Change: There's been surprising frankly to me and.
Speaker Change: And it points to the fact that the bottleneck is power and so we believe that we will be able to after we secure the acquisition be able to make subsequent announcements about partners and customers.
Speaker Change: That's oh.
Stay tuned for that that brings me to the last part of your question, which is about capital.
Speaker Change: And to your point it is costly to develop megawatts, let alone gigawatts of power and so we're going to take a very deliberate approach to this step number one and this seems obvious but I'll state it is.
Speaker Change: We acquired the asset.
Speaker Change: And the total acquisition cost that we've announced is about $19 million U S of which 17 million is in cash.
Speaker Change: So that's that's step number one making that acquisition step number two we will continue to go through the <unk> process to get all of the regulatory approvals that we need and currently with that we will be developing the first 630, and 100 megawatts kind of in that order.
Speaker Change: <unk>, so 136 megawatts.
Speaker Change: And we will be.
Speaker Change: Announcing various capital partners, which should include project management types of sources as we as we develop that so step number one secure the asset and the management team step number two begin to develop the first 136 megawatts, while having these very interesting.
Speaker Change: First nations with potential customers and then step number three to your question of whether we're gonna hosts or whether we're going to actually provide the services.
Speaker Change: We'll see how the market develops after we've kind of gone through those sequential steps.
Speaker Change: That makes sense.
Speaker Change: Perfect sense, absolutely. Our last question for me is how how competitive was the process to secure campus.
Speaker Change: In your letter of intent.
Speaker Change: Yeah.
Speaker Change: There has been significant interest around Captisol and I think that one of the reasons that we were able to secure the asset is because Harry and his team believe in what we are doing here. The whole team is being is getting.
Speaker Change: Griffin stock as part of this transaction and I think they and we are excited to go build this thing together I think that was a critical piece of why we won the bid.
Speaker Change: Perfect.
Speaker Change: Gentlemen, I will.
Speaker Change: Remove myself from the end of the queue.
Speaker Change: Awesome. Thanks, guys.
Speaker Change: Thank you and once again it will be star one if you wish to ask a question today. The next question is coming from Jon Hickman from Ladenburg Thalmann, John Your line is live.
Speaker Change: Okay.
Speaker Change: Oh.
Speaker Change: Yeah.
Hi, Steve could you elaborate a little bit more on the timing of the 136 megawatts.
Speaker Change: Could you say the end of 2006.
Speaker Change: Yeah, and actually we're still we're still nailing down all of the timeline. So I don't want to I don't want to work them out here, but we're hoping to get the first megawatts. The first six actually out there by the end of this year or the very beginning of next year and with the 30 coming shortly.
Speaker Change: After that and then the 100.
Speaker Change: Towards the end of 'twenty six.
Speaker Change: Okay and then.
Speaker Change: The financing are you can.
Speaker Change: Can you give us any timeline on that.
Speaker Change: Yeah that we we expect to announce them.
Speaker Change: <unk> details on that.
Speaker Change: Imminently and I think that that's probably.
Speaker Change: All I will say right now on that but we.
Speaker Change: We that's that's kind of.
Speaker Change: Okay imminently, okay. Thank you congratulations on that.
Speaker Change: And then I can ask what do you expect to hear a little more on the British Columbia thing.
Speaker Change: Down the line since you haven't given up on that okay, yeah, Okay lately band.
Speaker Change: Thanks, John.
Speaker Change: Right.
Yeah.
Speaker Change: Thank you.
Speaker Change: And there were no other questions in queue at this time I would now like to hand, the call back to Steve Gutterman for closing remarks.
Speaker Change: Okay great.
Speaker Change: I don't think I have anything to add other than what we've said, where we're excited about where we are we expect to make subsequent announcements about captisol.
Speaker Change: Over the coming days and weeks and we are excited to have all of your board. So thanks, everyone.
Speaker Change: Thank you. This does conclude today's conference and you may disconnect. Your lines at this time and thank you for your participation.