Stronghold Digital Mining (SDIG) 6 Mar 242023 Q4 Earnings call transcript

Good morning and welcome to Stronghold Digital Mining's conference call for the fourth quarter and full year ended December 31, 2023. My name is Towanda, and I will be your operator this morning.

Before this call, Stronghold issued its results for the fourth quarter and full year of 2023 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 in 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.

will call we questions. remarks, their open for the Following

Group Kovtun a please Before Alex Gateway proceed. will Kovtun, we begin, Mr. from make statement. brief introductory

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

and and may we're considered forward-looking law making uncertainties. securities risks of today be involve statements number Some under a statements

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

release and undertaking to For disclaim the relating more law. circumstances forward-looking disclosures statements our or assumptions and required detailed Exchange any made, that made obligation statements as forward-looking date forward-looking earnings or to after public the by with Commission. events uncertainties see occur except filings statements, We Securities risks, reflect to and please update our the are in the

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

including, around XXXX as well report as annual Form expect file not descriptions business, Risk under Factors. our sets and to, but to circumstances, the of limited uncertainties Commission, We identified our forth uncertainties with and which other XX-K March on Exchange on risks Securities or caption X, the detailed variable and disclosures and

would be via Relations available website at section and Investor Relations website. Stronghold's filings is everyone by Securities Commission the the available for website like a SEC made access will this remind Investor Stronghold's in recorded call may You Stronghold's replay or to of being free for link and at ir.strongholddigitalmining.com. I Exchange www.sec.gov visiting

call Now, and Stronghold's Greg I turn like Chairman to to Beard. would over the CEO, Greg?

XXXX earnings fourth on call. thank year and for joining quarter and full everyone, morning, us you our Good

will that Investor slide the presentation throughout website. We call on associated the section be Relations our the through corporate available and is of an referencing webcast

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into grow avenues this We are to and exploring capacity. structures various

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that we attractive. opportunity high-grading very the So think is

We since This been team in our have of our to exahash Frontier working also closely a evidenced been Mining data with enhance on at partnership focused has achievement as the and halving improved into hash uptime the April. October by success, of centers data approximately center recent our remain rate. X.X operations going operating

to focus the halving X, approaches, service Moving obligations. Slide liquidity we as debt and to continue on

million As with liquidity covers committed CapEx. amortization miner $X.X of million operations quarter, over And importantly, our of the first had XXXX our the February WhiteHawk for mandatory million are projected EBITDA the million generating liquidity. of enhancing adjusted further XX, notes of associated $X over flow $XX in current we The than and more $X resiliency. cash with remaining our

X Slide discuss market to on Bitcoin dynamics. Moving to

per in approval $X than billion what has ] of day, the inflows rise of have seen high, have significant a Bitcoin and hash price and $X.XX There Bitcoin is a we more price. Bitcoin around X.Xx is X,XXX mined the per Following nearly been Bitcoin ETF set hash which daily. new [ price terahash. averages January, ETFs, all-time in into

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Bitcoin cost prices higher in lower and than miners. Power to costs, turn off turn for miners. the forward with our of changing use variable our megawatt we curve optionality, power our lot as power plants are to of XXXX Moving are import averaging us economics costs, the around currently $XX largest is prices own grid. responsive our when Bitcoin. we high, remainder very the And to on to lower but power to hour. are plants mine X, plant our market our the our and variable region low, ability than electricity per we miners fuel prices power variable conditions. When owning the assets be power It a to off prices the to Slide mining sell electricity than gives are enhances When

low great it because power lowest electricity forward to can pricing now. gives a flexibility that. the trend is and us the our broadly, the PJM us import in This just right are do you to for expect from curves country to generally power see grid opportunistically in While us the miners, is

of that the other clean, grid. of solar with Slide intermittently. medium side the X, is replace gigawatts power extremely term. XXXX. on generate by thermal PJM XX% to this, Renewable Replacing renewables capacity. unfortunate own be This generation because PJM great the megawatts the megawatt they're its wind but Moving stable is retired the are generation reality long of equation, the each generating baseload the to to baseload like and of stability are On power severely threatens becoming expected intermittent XX PJMQ in to over of of the grid by PJM in nearly clear it renewable, multiple very energy This is sources over projects generation of queue current the account. baseload generation is they takes top XX% vulnerable of and generation. is

and in to and the result, is medium valuable. a by be outcome As baseload keep The to retirements at development, term, projects demand that of making assets here with rate Panther Creek up sufficient PJM long XXXX. implied and existing tightness expected the highly growth plant the new the extreme volatility like market not Scrubgrass will current believes

our is has is Karbolith Karbolith More enhanced XX% our assisting analysis, announcing ash. significant Moving our design starting inclusive proving capture recent who airflow further with our we third-party our X, Environmental at expect November, time. tests Scrubgrass capture validating first and progress process. improving up and made had testing reduce that carbon running construction Technology and begun early and weight We announced that Scrubgrass, of and enhancements with out, Slide costs achievable. constructing of since more project team that partnered partners, and Mineral process. lab our our Pittsburgh with ash now of the to indicated the increase up In to that demonstrated to in Karbonetiq. second could XX% Recall & our in will initial capacity by carbon Karbolith recently have our we February, at up we carbonation Lab, a from that This is enhancing reinforcing

cost first continue to Karbolith. costs materials, scale. to we as Karbolith we in about second expect $XX,XXX reduce from And The the savings representing significant is

on to list earnings September Carbonomics we call, engineered project As our carbon our monetize in closely working private last our the markets. Registry, since the mentioned with team the to sequestration Puro our has registry on been for carbon removals projects, first world's

generating the announce the to Registry process, excited late step February, are that which next revenue. registered now the carbon is undertake company facility Scrubgrass capture-related will and Puro.earth the We audit towards in

early as our and have quarter. the the materials process to We are as of project carbonated Puro, now on an audit the embarking goal second accredited is end with

including updates that, months. With monetization related it time to line for Smith. project, few I to Matt CFO, like expect on next to pass We our would further have in meaningful and over the this milestones

Thank you, Greg.

annualized believe discount XX, select adjusted to at production, to Bitcoin on Moving and to have to and When trades add. valuation an to January we EV to Slide peers. absolute Stronghold so relative that Bitcoin EV peers. capacity to Stronghold public undervalued XX% else hash acutely an is continue basis looking significantly adjusted approximately I at mining nothing rate metrics,

million GAAP million Slide mined the on revenue and EBITDA million XX, fourth for is operations $XX.X was for energy to adjusted from for now and in for operations. was $XX.X the $X.X back $X.X Bitcoin the remarks. those over net A appendix. I reconciliation loss was figures million, quarter on from with will included fourth closing quarter, call Lastly, $XX.X XXX the million. turn Greg cryptocurrency

summarize discussed the that, going Q&A. growth carbon to up we that have We for high-grading through our the Thanks, communicated we the believe call remain the of objectives and market. halving, our are developing business fleet open strength Matt. Operator? capture. With and in we outstanding what confident we To on prospects executing will we into have the today, we've

line first Lucas Instructions] the of Our Riley. [Operator comes with from Pipes question B.

show opportunities, there. X, and with to wanted a that few additional questions first you a few on questions column I Slide ask where

What First, so, more perspective. don't Or reasonable few be that a would then, is for cost I included And what follow-up type be appreciate that? your CapEx thinking guidance? or questions of we think there. machines I I about? in have a from should range the would but

Yes.

latest buy. about generation So can that I like generic miner you the of still in think -- think so we're terms it

So we're latest the Bitmain that's so looking the now generation, something next like so SXX. a at current generation,

the -- it very market in machines high opportunistic JV-ing terms for managed we've ROE. efficiency changes whether to a just machines very the the weekly. really just outright, slots, be and these of buying machines And improve capital past, we've on fill been to get In how to about

the slots would think you'd -- around million say, And so, to obviously, market think, up the the these $XX we're I rates different to we be be We prices, rates. what if current of the as prices, market we all always, And current hey, than fill how trying are to at terms at spend going structure. and better materially potentially post halving. in do

Greg, additional when would capital there? on decision a make deploying you

sure we So a achieve equipment. And these we and to with opportunistic you return won't that's the of be that You pace give that of do of know data rates to to times making a think pricing those. miners? best or -- I repowering us more and the not present want of the to just I that think all what we're really yet miners and ready dates potential with specific on what? quarter center replacing function on of we're

Do you a it. in site Got mind? have

Yes.

I sites, and Scrubgrass only Panther Creek. the got X think we've

that So clear, at million per $XX plants. pricing, both think at current just missed. And exahash be case to was expect machine, in it's it you I can just

just would add. I Lucas,

what can were slots, to as -- you least lines We've could X, third greenfield announcing a the significant what's Xx that X, delivery Tier there's terms kind get those we've focus on called we've SXX miners take into sites. Tier schedules, growth to have efficient miner, we X organically at of by XX,XXX in number efficiency. future stratifying builds observing or And require of trying peers think of and existing extraordinary is to you hash plus. I Tier high-grade are existing that if utilize plugs you industry kind looked the fact projects that type that and miners own and an carefully energized, at of which been are looked time we're our

that the without lot -- think And opportunity money a so, in filling do And said, to very that's to do as But we've a we identifying are spend stretching creative that. opportunities of not Greg very an ways is that commitment of for the there demonstrated to past. slots it.

the existing So message. that centers we capacity the the is fact hash have the Xx in data

of a kind of environment the speak that. power. toggle it. costs and produce you price appreciate very generation today I Got your little and soft, Could be bit to rate between and has the your expected this switching when Scrubgrass noted purchasing been power your in-house to you obviously, utilization price environment? to own are flexibility of in kind topics, and you at plants what Panther what And is

Yes.

centers expected is when So quickly it they're the Stronghold off. grid. a on cost to power high, power, we which low, low to reminder the turn of single power by make divert is, and month, can the we to turn nice for and but prices do just of or we off power all weeks -- be day, power hey, our prices strength of and the can super than lower business if if the plant wouldn't Conversely, this a data a model, can we that are low, the are we variable mean,

right power $XX that hour lowest you the per for power costs looked curve in expected So, the the one megawatt And in -- expecting now, pricing or $XX make power. PJM, we're it's at to the if to average saying between forward markets powered U.S. of we're

it, decision below, power of -- which it And it that make $XXs so, now seeing where when seasonally. we're to see instead we power in is buy that's the or comes

than price decision we make think which power to time, make all middle I run now, a to least spot like can playing our run for But can it can where it's a curve -- is the seasonally that we're cost buy power ends to centers. which a and than expect there's make and at at the it, So margins. all cheaper rather you Scrubgrass then economic we in up obviously makes the plants looking so the just power as lower priced, data if the improve sense buy us to the supply it, the out will we'll

comes question of from Point next Research with line Trading. Our & Compass the Joe Flynn

it's halving. bit months, marginal you wanted position? event on price both the don't little megawatt sub-$X.XX and you a I a hash I strategy and, to see keep and sheet of into prices going you hour, pretty guess, manage guess, $XX ambitions standpoint a a ultimately cost machines kind the your I see with better are more to dig in correction that of put strong it to guess on. cost growth the balance But where the from in you going cash levels a like how yourself from position in I

Yes.

CapEx benefit have making think no amortization we be very, not I or today. to have small we debt having So the payments. obligations on And very of

today, we're we So now, right and generating -- cash.

do. to the will fleet, for And -- we which a our if to lay do the going realistic think mining That's curve allowing think response view, low halving, best But to as control. just we really power variable do that luckily, to most drive you I have important our in power to costs can that. is potential time of so, think what to to is I market at in that, the -- looked the us frame you need have And we is that to you're can. happily, what we the the the efficiency a I improvement as

than let should the able through be our I you to to being upgrade a what just an cheap. having power quarter begin the sheet So to we lower were to to gas low where would us the low they curve up which so give we're point obligations, our related going to natural spend just to we think balance given power ago, top the modeled are extremely end us if with moved, But will study costs benefit have to where get a and fleet, halving purposely on price. pricing of

of price And well that. progress we're capture. -- basis power an really a as net a some on that making sort us carbon designed of even to project give I for at think point lot is also on lower

that that's one benefit -- a carbon the the capture of a continue that's company. focus to So to as reasons we on

have to hosting business, do you're if There's away. past the lot the advantages guess, guys' And X strong guess, going you That's positioned miners wanted definitely front? far hosting you struggled that wondering the overall helpful. traditional demonstrated how dig was in so opportunities hosting maybe And versus outlook the model just what what's to results. going also I years? are I respect? that kind industry into I which your a But additional of is talk I you about over more guys to of model pursue think that on there?

Yes.

we hosting, we of unlikely of strongly mining we're a we as -- we I you're prefer good I what partners. enter Bitcoin a partners. power. them think into the I So really revenue relationship miners describe amount where our where We think share with see the us And a and to way significant someone have regular think sell with model would run else's our like

So we think ways them we to view existing think I is from better the continue drive the partners. miners place as and way. with if our one I I the -- expect And to our opportunistic a through to some efficiency expanding would that of in new JVs

expecting I changes don't immediate So we -- the structures. a the any to it's to think we're think -- not JV I

with the Wainwright. question comes Kevin next from Our line H.C. Instructions] Dede [Operator of

running It's generate expected of deploy -- of do the you was run anyone offset. take curious regardless the that quarter, sort the point walk conceivably, question. ash and XX% means and big lower the capture now of the in the At and the seeing to a balance power the who's balance that else some Greg, just Karbolith you're of both you a think kind cost you're revenue recovery, I on the what of, me to plants Puro on time curve? next through you see a expecting guess, I third quarter. accreditation one. would and could can broad I hoping revenue out know you plants all which to carbon

Yes.

the describing carbon X I rate better the that driving because potential, of up. -- been, rate would ash you're up, is have up, that's upper I say, carbonating moved only and would when months you're goal. than the confirmatory has moved -- absolutely Ken, it the is last say, the it's absorption what So the is And not

not -- require only this the get down the Karboliths same So Karbolith is cost and The -- is down. fewer going to coming it labor coming is we're of job to done.

So were assumption, it's X it's and far. think hey, be still really say, the amount made to of conservative -- going and of we're to and spike -- it's proven sequestration. early the of the number we to sort so ton on still progress, days, in project. the of I year, conservative generating potential last every X early revenue But while football describing Karboliths very a But of that late fully deployed we're related too to have we've

I literally think I still of -- the in just I we're But quarter. a dozens be we've do that we'll think that expect that would should testing position in to tests happen. week. next a got

Now, this increased we're Karbolith that airflow. has newly redesigned an #X testing

that's a CapEx always that say, the minimizes the the the a we the average than The that's down, you're we'll the to point build-out. which also sequester. But design CapEx which And vantage is plateau it's, think stream right. on that important even is see when for go are this is can that do point, airflow and revenue that of and megawatt describe iterated is it's we're up a cost. when the we've carbonation, that low to best testing ahead I excited ready we the we we'll more be meaningfully our that sort and what -- think costs of to I Karbolith at maximizes when looked going build-out to costs, from said the what we've and now and cost sort revenue results in So an per drive -- offset at efficiency machines think reason power power of the was cost,

toward. driving we're what that's So

give or and we with I continue can quarter stand our frames X time a accurate refine us by, those and have to So And designs, share. results results estimates think to designs. accurate and to CapEx

the are year. be no Puro will -- disclosed, the on listed we about big Scrubgrass their think also now this Registry, make now at year it, least at begun I But capture, on process". carbon and for "auditing think a we they've this I mistake

the specifics and have in hopefully, next well. -- So to share that's quarter, the as

basis, that's had we it than unit So December sorry, of did a and per and everything, what and I'm [ new absorption. exactly to terms on I that is a can say, math -- CapEx, we we in thought but a can't you initially of tell speed all materially in better rate hypothetical carbonate ]

So, yes, that's exciting. super

need apologize. appreciate I the a the No all effort it's there. understand situation. very Yes, to color. Appreciate dynamic

don't want want hey, say, and promise or we and be whatever just we X costs it -- have wrong. We to to go percent don't backwards

been Completely that. little understand. insight a on enough revenue There's timing. associated more of Maybe

registered in you would the a could third is are more that. by quarter, fair assume the at on little it? you to press give see How are insight the release us you intimated, it looking revenue quarter? that of the as -- end second Maybe If

is would credits carbon what what? do we on sell know hope private the if could say, You market we'd get basis. a and -- forward-looking to we I in on the registry,

in our buyers ability deliver I'd build up those of I signs share confident we then audited, could project carbon have number of out. a and certain So -- sell we -- to as potential credits say, transactable opens we're done, with and the guess on we're and once exchange sell then then we that the out that and can the for way, us the this credits we

absolutely it's right. think I So

before process sell it's to can generate to and I line time we them have there's the vetted think if So registry, and we fully an on credits deliver expected being then a -- them. benefit with out, that a

Love the forward market.

forward In the correct. market,

Okay. That good. sounds

think, I at of help power lower with and running the me to how and helping plants? prices how to topic, to interfaces capture carbon you see understand both you those up before between Champion mention you do is Another you PGM them just and deliver has fully Champion. Could

it's Matt. Kevin,

would months, of more visibility ago can onerous, in But we twice imported go which well. that, in think wanted ]. It they fuel can more we the flexibility or of $X.XX plant we've when adder I be back which when it's were versus around the market, that last And we've warm not and I we you banks that So the come of mentioned -- was and And in outage running gas when prices discussions PJM the Creek that when fuel electricity. out the the few you that load power period constructive this refer purchasing through to time, cost. at February. release in here December fourth during forward, -- very our to and at the an premium retail data purchasing And plants. press is times, course we deep the our we shoulder you're center co-located been had when December, discussions, on, been -- since we with and a wholesale is into have electricity. quarter been, retail over see at Fast and it's were our Panther year a market. [ the you were are $X.XX, marginal Natural

single-digit to real-time that of a structural in expect to shoulder as markets can at we type items. Ukraine-Russia in notwithstanding as to cost during potentially, so, purchase power real-time low prices And period. you the the want real And of be $XX you able any

of so, with a to we absolutely that make periods of Calpine, And step very result competitive Champion sure cost And ultimate will Calpine we -- from we're on are we supply that flexibility. or reduced have agreements -- And for Energy, part that been have grateful the we're when excited role. during have importing. very about working power into while to

will pretty pretty big for So it's a it a -- big in us. savings result

Okay.

generally, plants Is past a the So should next the shoulder running fair and summer assume year at you're peak winter, or generally so? that that through ex but looking the on then times this assumption, out, both we of months. right, sort least off for maybe

Yes.

base to more So that, run would is, or as I depending Scrubgrass, more less case going we are than on a the peaker say or carbon.

carbon looking and the start July, our step power peak to as the But can monetize we it, price potentially we're design, is, As of Scrubgrass rest power. $XX-ish. for cost the perfect of now, change the carbon be at a in right in at year

Creek And aside so, power some yet do not planned calendar. in Panther potential throughout likely time a is below peaker you plant to outage that from run case, we're if on the runs as is not year, that cost, as you'll baseload your fuel well a marginal to and probably as can run the buy Scrubgrass baseload -- it. a -- continue

continuous have Okay. to that given a Any Karbolith plans try Panther, supply you'll ash? immediate at the of

can really see term why element we to Once but we're nearest the don't process both ash, starting We move it, any the well, as perfect is we ultimately calcium where Panther. can't where over to further and potentially limestone and and -- Scrubgrass due then use the -- reasons Panther at started byproduct test there. beneficial we the really still scale Scrubgrass, we're high to scale ash, of go CFB need over we'll plants. So the

XXX-plus are of we near-term started is the it's and ash. already because acres, Scrubgrass of say benefits, would I there and focus a including the very lot So have calcium nature rich

first at to and probably move then going scale And so, over Panther. Scrubgrass we're to

Any have But And on consider? the hinge. That's in type so, thinking change other on line Understand that? the capital. grand demand time you considered you might of sites? what if your

Yes.

high-grade what have, looking at think to sense we it or sites, I our we we're does should at fleet sites at current our always and comparing other make look sites. new

We that the are of could lower than review But power most I think new achieve. what the cost to is things we opportunities sites. constantly of our sent see

or pending no point, reviewing. but new announceable have we think at are we I constantly So this sites

[Operator Riley. have line the from a with question Pipes Lucas B. Instructions] of follow-up We

there's extent Bitcoin package? of you AI of only not To about applications. a power are demand shortages land from Greg, lot what and to receiving mining, talk but your power, access given direct also given inbound,

from recent say interest price, say Bitcoin see run inbound. I would fully multiple post if cash for as think, have in of from would price the XX,XXX what Bitcoin world what's yes, have price well. to hash built-out and But run-up price. given an attractive outlawed purposes happens available, do were now. the the there to it's But in halving and there happening I We'll capacity AI plugs to are computing -- right be business I Bitcoin that earth, we is

that that the we're infrastructure all that that running, built to the we the -- the the that asset. with we're power, access redundancy a -- and of So infrastructure confident is valuable

question the Tango quick a on slide. Whiskey Matt,

You've explain been markets to a public in these time. long discrepancies? keen your on Would How you that. do for take be get

Yes.

of related some a there's carbon by debt, are that cash or our And about can away plants chipped to So that really every where the happen market here an And view, sell in optimistic escape the flow- it's about a and of absolutely, speculating. interesting reasons our are issues is think people hard leverage, could which -- us day, value and about -- execution and stock business I that the to think that velocity against reasons we've industry potential lot is terms and past and where I sort asset recognized be market avoid or of But in in way. with -- we're deleveraging optimistic. there it's when not want at opportunity. you what's any a buy our some

other businesses. where of operating to And financial some matters. trading attributes in kind different through large should between and can There Stronghold nuances are the daily it's size-related step a other start And end, and scale-related there so I But there's than for industry be disparities other the commodity some not and compared leverage to of things. peers. volume some adjusting

sense. the trade discount And same a so, or are make business, doesn't at to peers, any who XX% in to XX%

going we're just to all that what's ponder, working on And close is, question -- what so, leave that? to And you it. but to I'll

leave it just I'll at that. So

call in no remarks. I to and for to over answer now Mr. would showing the question I'm queue. concludes That closing the the questions like further turn back Beard session.

employees, for Thank investors, We're see will for optimistic you. Thank all doing prospects, best, are next we and our given stockholders, Okay. effort. Stronghold you faith. you we model. Bye-bye. Hey, And business the our the quarter. the thank you about

us for Thank call. you joining for earnings Stronghold's today

disconnect. may You now