Bit Digital, Inc. (NASDAQ: BTBT) Q4 2023 Earnings Conference Call
March 19, 2024 10:00 AM ET
Company Participants
- Cameron Schnier – Head of IR
- Sam Tabar – CEO
- Erke Huang – CFO
Conference Call Participants
- Mike Grondahl – Northland Securities
- Kevin Dede – H.C. Wainwright
- Edward Engel – Singular Research
- Alex Schmidt – CoinShares
Operator: Good morning, good afternoon, and good evening. Ladies and gentlemen, thank you for standing by. And welcome to the Bit Digital Fiscal Year 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Cameron Schnier, Head of Investor Relations. Please go ahead, Cameron.
Cameron Schnier: Thank you, Mariana. Good morning and welcome to the Bit Digital fiscal year 2023 earnings call. Joining us on the call today are Sam Tabar, Chief Executive Officer; and Erke Huang, Chief Financial Officer. Before we begin, I would like to remind all participants that some of the statements we will be making today are forward-looking. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. I therefore refer you to our latest 20-F filing and our other SEC filings. Our comments today may also include non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures can be found in our 20-F filing, which is on our website. After our prepared remarks, we will open the call up for questions. [Operator Instructions] With that, I will turn the call over to Sam.
Sam Tabar: Thank you, Cam. Ladies and gentlemen, thank you for joining us on the call today. In my prepared remarks, I’ll discuss three things, our fourth quarter and full year results, discuss a number of achievements, and our thoughts on the outlook of 2024 and our future ambitions. Cam and Erke will then provide more detail on our financial results. And then we’ll open the line for your questions. 2023 was quite a year. It was a rebound year for our industry and a foundational year for Bit Digital. We began last year with bitcoin prices below 17,000 and ended above 43,000 with the majority of that gain occurring in the final months of the year. The price rally has continued into 2024 with the price of bitcoin reaching new all-time highs. The bitcoin price rally was a welcome reprieve for the mining industry, especially given the upcoming halving when mining rewards will be cut in half. However, we spent the last year focused on building a company that could withstand both halving events and cyclical gyrations in the price of bitcoin. More on that later in this call. As of December 31, 2023, our bitcoin mining fleet was approximately 93% carbon-free, which is a material improvement from our prior year levels, but a small dip below our prior 99% run rate. The decrease is because of our geographical diversification into new regions, namely Texas and Kentucky, where the power grids there use more carbon-based energy sources. While we continue to strive to be entirely carbon-free, we are willing to make certain compromises as we search for the best economics and the benefits of geographical diversification. As of December 31, we had approximately 101 megawatts contracted with six hosting partners. We have since added six megawatts, bringing the total to 107 megawatts. We are using approximately 80 megawatts as of that date, providing roughly 27 megawatts to support our growth initiatives. We are targeting an active hash rate of six exahash by the end of the year, roughly double where we are today. This means we’ll have to secure approximately 37 incremental megawatts if we fill the capacity with new generation miners, such as the S-21. We are actively engaged in discussions with several hosting partners for new sites, and we have a strong pipeline of new potential locations. At this time, we did not foresee hosting capacity as a bottleneck for achieving our six exahash target in 2024. While we continue to believe in our infrastructure light approach, which is conducive to our own goals, we would consider owning a portion of our infrastructure at the right price and returns profile. Our balance sheet remains a core strength with approximately $140 million worth of cash and digital assets at the end of February and zero debt. We believe, we continue to believe, a strong balance sheet and liquidity position is one of the most important features to withstand halving events. In October, we proudly announced a new business line, Bit Digital AI. Importantly, we didn’t just announce an aspiration to start a business in AI because we noticed it was trending. We had carefully considered this business long before the announcement, and it was critical to us that we not only – we were not only confident in our ability to execute on this strategy, but to secure an anchor customer prior to any announcement. Our core competencies include sourcing specialized computer systems, data center selection, and network design. Our GPU business fits seamlessly within these strengths, allowing us to go from signing a customer contract to installing and deploying an incredibly complex network of more than 2000 GPUs in a matter of months. This contract is now generating over $50 million of annualized revenue, and our sights are set on expanding this business line, both through expanding the scope of our existing customer contract and by onboarding new customers. We’re actively engaged in conversations with new prospects, and we hope to be able to announce growth initiatives soon. We are targeting a minimum of $100 million in annualized run rate revenue from this business by year-end, and we are confident in reaching that goal. While we have purposely remained debt-free to date, we would consider leverage as a means to accelerate the growth of our Bit Digital AI business, as we believe predictable cash flows from that segment are much more conducive to debt relative to bitcoin mining. We understand that we are unlikely to receive full credit for this business until we start reporting the financials. Given that this business started earning revenue at the end of January of 2024, our first quarter 2024 results will be the first time that this business shows up in our financial statements. While we can’t offer guidance on the specifics of the margin profile, we will state that even at current bitcoin prices, our Bit Digital AI business earns substantially higher margins than our mining business, even on a pre- halving basis. I’ll now hand over the line to Erke who will discuss our financial results.
Erke Huang: Thank you, Sam. I will now discuss certain financial results for fiscal year 2023 and the fourth quarter of 2023. The total revenue for 2023 was $44.9 million, a 39% increase compared to the prior year. The revenue increase was primarily driven by increase of deployed mining fleet and a modestly higher average bitcoin price. Our bitcoin production increased 21% year-over-year to 1,507 with an increase in our active cashflow partial offset by increase of network difficulty. Our ETH staking strategy generated approximately $700,000 in 2023 in its full year of operations. Cost of revenue was $29.6 million for 2023, an increase of approximately $9 million from 2022. The increase was primarily driven by increase our active mining fleet. Our electricity price was approximately $0.05 cents kilowatt hour for 2023. Our production cost per bitcoin defined as electricity and other hosting fees divided by bitcoin production amounted to approximately $15,700 for 2023. Profit sharing fees amounted to around 3,900 per bitcoin for 2023. Depreciation amortization expense was $14.4 million in 2023 compared to $26.8 million in 2022 with a decrease due to – primarily due to lower carrying values for miners. But we expect [DNA] increase in this year due to our recent GPU procurement and new miner purchases. Adjusted EBITDA was $2.4 million in 2023 compared to a loss of $26.9 million in 2022. The improvement was primarily driven by better cash margins and reduced digital assets impairment charges. As a note, we have not yet adopted new FASB fair value accounting rules but plan to implement the change for our first quarter earnings report this year. GAAP earnings per share for 2023 was a loss of $0.16 compared to a loss of $1.34 in
