Hello, and welcome to the Bit Digital Third Quarter 2024 Earnings Conference Call. Good morning, good afternoon, and good evening depending on where you are joining us from. Thank you for being here. We're just giving a few more moments for attendees to dial in, so thank you for your patience. While we wait, please note that during the call, all participant lines will be listen-only mode. Following the officer's update, we will be open the floor for a question-and-answer session. [Operator Instructions] Also, as a reminder, today's conference is being recorded. I'll now hand the call over to your host, Cameron Schnier, Head of Investor Relations at Bit Digital. Cameron, the floor is yours.

Thank you. Good morning, and welcome to the Bit Digital Third Quarter 2024 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 filings, yesterday's 6-K filings, and our other SEC filings. Our comments today may also include non-GAAP financial measures, additional details and reconciliation in the most directly comparable GAAP financial measures can be found in our 20-F filing and today's 6-K filing, which are on our website. After our prepared remarks, we will open the call up for questions. [Operator Instructions] With that important note covered, I will now turn the call over to Sam to discuss our performance. Sam?

Thank you, Cam. Ladies and gentlemen, thank you for joining us on the call today. Today, I will dive into our third quarter results, discuss some ongoing strategic initiatives, and provide some color on what we envision as the future for Bit Digital. Erke will then provide more detail on our financial results and then we will open the line for your questions. The third quarter of 2024 and the last 12 months have revolved around laying the foundation for the future of Bit Digital. We've embraced a completely different mindset than when we previously had when we were strictly a Bitcoin miner. We now make decisions that we think will bear fruit over a longer timeline. We prefer this mindset over the near-term fixation and macro sensitivity inherent to Bitcoin mining decisions. In October, we announced the acquisition of Enovum, an owner, operator, and developer of high performance computing data centers for approximately $46 million. This was a transformational deal for Bit Digital. Why? Because the transaction vertically integrated our HPC operations with an existing, fully operational, and fully leased Tier 3 data center in a major city. We added colocation as a new business and revenue line. We also added a strong mix of existing and prospective customers. Further, we gained a strong pipeline of expansion site opportunities and an extremely experienced team with a proven track record to lead the development process. The benefit of adding a highly experienced team cannot be understated. Developing Tier 3 data centers was not a skill we possessed in-house. We solved this gap through M&A and now we have what we believe to be one of the best data center teams in the world. This is a huge advantage in terms of accelerating our time to market. The Enovum team is…

Thank you, Sam. I will now discuss certain financial results for the third quarter of 2024. Total revenue was $22.7 million, a 96% increase compared to the prior year. The revenue increase was driven by the contribution of our HPC businesses and partially offset by decreased mining revenue. Our Bitcoin production decreased 59% year-over-year to 165.4 Bitcoins. Despite more than doubling our hash rate growth, the impact of having coupled with higher network difficulty led to decreased production. Bitcoin mining revenue decreased 11% from the prior year to $10.1 million, with higher Bitcoin prices, partially offsetting the decrease in production. Our HPC services business recognized $12.2 million of revenue during this quarter. As a reminder, this business began generating revenue in early 2024. And we earned 161.9 Ethereums from native staking rewards during the quarter, representing approximately $450,000 in revenue. Our total cost of revenue was $15.5 million compared to $8.8 million in the prior year. The increase was driven by an increase in our active mining fleet, higher Bitcoin network difficulty, and the start of our HPC business. Gross profit increased by 162% from the prior year to $7.2 million. Our HPC services business was the main driver of gross profit, contributing $6.7 million towards the total, while ETH staking added 435,000 and mining contributed 112,000. The total gross margin expanded 800 bps from the prior year to 32%, with the addition of HPC offsetting lower mining margins related to increased Bitcoin network difficulty and reduced block rewards. General and administrative costs were approximately $13.7 million compared to $4.9 million during the prior year's quarter. Third quarter 2024 G&A expenses includes $5 million of stock-based compensation and $4.8 million of professional and consulting expenses. The increase related to the prior year can be partially attributed to expense related to…

Thank you, Erke. We are extremely excited about the direction of Bit Digital. The company has been completely transformed relative to where we were just a few years ago. We believe we are on a credible path towards becoming one of the preeminent players in the HPC industry. We entered the HPC market in 2023 with our existing team at the time and relied on our core competencies to launch that business. We continue to believe that there are overlapping skill sets between Bitcoin mining and HPC and that they can be synergistic or complementary businesses under the same umbrella. That said, the overlapping skill is like comparing the basic skill sets of a taxi driver and the Formula 1 driver. Both Bitcoin mining and HPC require capital, but deploying capital is just the beginning of the HPC lifecycle. HPC isn't just about winning customers, it's about keeping those customers happy and retaining them. Unreliability is a critical issue in the HPC market and it creates churn. Churn creates opportunity for our customer-first business model, which is what we are driving towards. We learned quickly that we need to augment our talent base to really compete in this industry. The GPU as a service market has become more competitive and we needed to recruit top talent to effectively compete. We solved that need by hiring a Head of Revenue and CTO in addition to other key team members across the sales and technical functions. We then acquired one of the best HPC data center teams in the business through our acquisition of Enovum. The groundwork is now in place for us to become a formidable player in both the GPU Cloud and HPC data center business. We are only scratching the surface on the operational synergies we can achieve between…

Thank you. [Operator Instructions] We will take our first question from Mike Grondahl with Northland Securities.

Hey, guys. Thanks. Hey, guys. It's Mike. Can you hear me?

Yes, we can now. Go ahead, Mike.

Hey. Your pipeline on the GPU rental business and with Enovum is pretty robust. But can you help me, Sam? You're doing about $4 million of revenue a month in that business, the GPU rental business. How are you getting to like $8 million at the end of the year? I think that gets you to your $100 million annual run rate target roughly. Can you kind of help me with that bridge?

Yes. So it's late November. We reaffirm that by year-end, our revenue target will hit $100 million. I'll discuss why. First of all, we're pretty confident. And we're expecting the term sheets that we announced today on the call to commence prior to year-end and combined with Enovum, that gets us to about 90% of the way there and we still have a very busy sales cycle. As shown this week, deals can come in bunches and we now have the institutional bandwidth and processes to manage sales. Deployment timelines will effectively determine whether we reach the run rate in December or January. But currently, we're almost 90% there with the term sheets and the MSA that we announced today, including the Enovum contribution.

Okay. And if I remember right, the Enovum contribution was like $1.6 million in the fourth quarter. Is that number still accurate?

I believe it's about $7 million by the year end. Erke, who is on the line, our CFO, can you confirm that?

Yeah. That's a $7 million ARR going forward, starting the fourth quarter of this year.

Okay. I guess, I was asking about the fourth quarter of '24, the contribution from the acquisition. I had in my note, it's $1.6 million.

Yeah. But we looked at it from an annual [Multiple Speakers] Go ahead. Go ahead, Erke.

Yeah. Right. You are right, it's $1.6 million is the aggregate sort of revenue that we'd recognize, but the December run rate would just be slightly higher. So I mean, $1.6 million annualized versus $7 million, there's not a huge delta. It's just that certain contracts commencing towards Enovum or higher, so a higher run rate in 1Q?

Fair.

Yeah. I was given the annualized number, yeah.

Okay. And then secondly, Sam, can you spend a minute -- Coinmint basically gave you 90 days on 36 megawatts. It sounds like you've replaced that. How should we think about average exahash 4Q, 1Q, and 2Q ‘25 for your Bitcoin business?

Yeah. Well, as mentioned, we will get to three by the first half of next year. We were running about 1.4 exahash with Coinmint. And -- but again, we plan to return to around 3 exahash by I think around end of February. Likely at the cost of around $15 million to $20 million depending on the contracts. But just as a reminder, Coinmint cost of production was slightly above our company wide average on a year-to-date basis and mining will remain a small part of our capital deployment going forward. We have signaled our intention to maintain a small fleet and this represents maintenance CapEx to maintain the size and make the fleet more efficient, lower production costs, and increase our margin of safety from a production cost perspective in a low hash rate price environment. We're still not interested in owning mining infrastructure vertically integrating our mining, given the volatility of Bitcoin that remains our position.

And did you say 3.0 by the end of February or by mid-year?

Well, it's somewhere between conservatively by end of -- by mid -- by the end of the first half of the year and potentially by the end of February. So it's going to be somewhere in that range.

In that window. Okay.

Yeah.

And then lastly, I don't know, since July 1st or the end of June, how much did you guys pull off the ATM? Maybe number of shares up until last Friday in total dollars raised?

Well, I think we issued 38 million shares on the ATM since the end of June. We have massive CapEx plans and the equity issuance has been the bridge gap. Fortunately, we -- look, we need to ensure that we have enough capital to get the ball rolling in our data center build-out and to provide for near-term GPU ramp. And we've been careful on the credit side. Being risk-averse has always been in our DNA. So getting acclimatized to new industries where more risk is appropriate and can be underwritten confidently is something that we -- basically it's been our North Star. As mentioned on my call, we're very, very close to a massive debt deal, but we didn't feel like we had a firm enough handle on all the available financing options. And the deal would have made alternative options difficult and we're very, very wary of maintenance covenants. So we are looking at commercial real-estate loans, we're evaluating other financing avenues, and we're just being very thorough as we evaluate financing options. Our North Star is to not dilute, but rather go on the debt side, we will get there.

Got it. And just as a follow-up, the 38 million shares, do you have an average price or dollar amount raised? And then just what is the pro forma new share count fully diluted?

I don't have that information in front of me. I can try and get that for you perhaps after the call.

Okay. Hey. Thanks, guys.

Thank you, Mike.

We will take our next question from Kevin Dede with H.C. Wainwright.

Hi, Sam, Erke, Cam. Thanks for having me on. Sam, you went through a couple of the new HPC deals that I think totaled to about $20 million on an annual basis, one MSA and two signed. Could you just kind of give us a little more detail on that again? Because it wasn't really clear to me, I apologize.

No, that's okay. Perhaps the confusion is, if I'm using the annualized run rate number as opposed to the absolute contribution. Cam or Erke, why don't you drill down a little bit on giving the information on the client one Boosteroid, client three, client four, and client five and how that gets us to $90 million?

Hey, Kevin. I mean, I could just sort of walk through the term sheet. So there's three total term sheets, two of them have converted into [indiscernible] all that. Two have already moved to the MSA. So there's one that hasn't. One term sheet is for 576 H200s for 12 months. That's $10 million -- around $10 million of revenue. The other is 512 H200s for a period of at least six months. The six-month period represents around $5 million of revenue annualized gets to around $10 million. The MSA for this has been signed and from an initial purchase order, a small one went through. We expect the remainder of that to be through year-end. And the third is a month-to-month contract. That's term sheet and MSA, that's 64 GPUs representing $1.2 million of annualized revenue. Just around 21 to 22 ARR total across those three. Two to three are already at the MSA stage one, we still have to ink that MSA. And based on what we have o -hand, I mean, it's a total of like 1,160 H200s across those three. We already had 336 on hand. So it's basically solving for an additional 800.

And you might look at vendor financing for that, as you have in the past.

Yeah. Perhaps, I mean, I think for the initial or for the aggregate GPUs just to solve for that, probably in the range of $25 million. So like we certainly could look to other options or take it down on the balance sheet based on the cash still working through that. So we'll provide those details when we finalize the respective deals.

Great. Thanks, Cam. And what about the power side? I think Sam alluded to having data center optionality in the U.S. versus building Enovum. Is that sort of a way to think about it? Because Enovum won't be ready to handle that capacity at this juncture?

I'm not sure [indiscernible] I understand that question.

Go ahead, Sam.

Is it for the 4Q deployments? some of those will be going to Iceland with the capacity we already have. There's -- I think the Enovum capacity issue that you were referring to, just like building additional by 2Q and then note that we might take some of that capacity for our own, this would -- that would pertain to separate contracts, not the three-term sheets mentioned today.

The GPUs required for Boosteroid aren't the high-end NVIDIA type. Am I right in assuming that? Can you give us some cost ballparks on that?

Go ahead.

Yeah, they're lower. Those are gaming GPUs and specifically made by AMD, so certainly a huge cost differential. But I mean, for that initial 300 GP deployment, it's a very small number.

Okay. And obviously, you're very confident that contract accelerates in deployment. When do you think you'll be able to signal to the street on how that looks?

You're referring to our target run rate or something else?

Yeah. No, the Boosteroid GPU deployment getting you to your target run rate, would that…

Yeah. We're very -- we're pretty confident. I mean, like just last week, three deals in a row. So we still have November and December, half of November and December. We're pretty confident we'll -- well, right now, we're almost at 90% of those targets.

Yeah, I understand that. I'm more curious about Boosteroid specifically. Because there seems to be pretty big targets there. I just was wondering about your confidence there and when you might be able to give us more insight on that.

Yeah. I mean there -- our MSA has been -- yeah, the MSA there has been signed. There has been a purchase order of about 300 GPUs. Another deployment is expected in Europe this year. It's going to be a gradual build-out and it's going to be lumpy based on orders. It could also be lumpy based on orders and market conditions. But based on our order book for other customers, a gradual and slow deployment cadence would frankly be the best scenario for us just in terms of capital deployment. So, margins are very high. They -- we don't have the precise IRR (ph), but it meets our threshold for this sort of contract. Our CapEx for the first deployment is about $2 million.

Right, but that doesn't include your -- I guess, you’re -- the payments you need to make to secure power in space racks, right?

That was in the form of pass-throughs to the client.

Okay. On Coinmint and your hash rate changes, I understand you're not going to take the S19s, but you look to something like maybe an S21, where for the same power, you use half the machines and get the same hash rate. Is that the right way to think about it?

I think so. Yeah, that is the right way.

Okay. And you mentioned something about $20 million to $25 million. Would that be the amount you need to spend to get to your 3 exahash, the way you're looking at it now?

Yeah. I would love Erke for -- for Erke to confirm. But just before that, I just want to mention that we are the exclusive partner to Boosteroid, just worth mentioning. But going back to your question, Erke, do you want to confirm that number on our spend?

$20 million to $25 million, just -- I mean, if it's about an exahash, you could look at, yeah, market prices, but probably closer to $10 million to $15 million of that deployment, Kevin.

Okay. All right.

Hello?

Thanks, gentlemen, for taking my questions. Appreciate it a lot. Congrats on the HPC growth.

We will take our next question from Brian Dobson with Clear Street.

Thanks very much for taking my questions.

Hi, Brian.

Hey, good morning. So you had mentioned potentially separating the Bitcoin mining business and that's understandable. I guess at its core, do you see that potential move as an effort to make the company's new focus easier to understand for investors?

Yeah, absolutely. We have two different conversations going on these days. One with retail, one with institutions. They both want different things. We continue to study it. It seems that's a very viable way to unlock the value of the HPC business. The valuations and multiples on that are much higher than Bitcoin mining. This also has massive benefits from a financing perspective. So some banks are reluctant to deal with anything crypto. So this makes it a much cleaner story for lenders, if we were more a pure-play HPC company than having that crypto business, which limits our financing options. But again, from a valuation perspective, it is night and day. It does make sense to frankly pursue this option sooner rather than later.

Yeah. That makes a lot of sense. And I like your description of the business as stable and spicy because at this point, I think it's fair to say that HPC is the core of the business, future of the company going forward. So I guess on that note…

We don't disagree, we don't disagree.

So on that note, as you're looking at Enovum, the acquisition there, as you peer into that pipeline, which is attractive that you brought that over, what are you most excited about?

About Enovum?

Yeah…

Yeah. I mean, I would love to -- I just as say -- just as I thought, I will answer that question preliminarily, but I do want to mention that we have that Billy, the CEO of Enovum on the line. I'd love for him to pipe in, no pun intended. But with respect to our pipeline development schedule, that's one of the things I'm extremely excited about. We kept the total pipeline constant at 288 megawatts in our deck. We noted that we see an additional 100 megawatts based on conversations from the utility at a site we are reviewing. But we won't include that in the pipeline for now. If capital was unlimited, we break ground on it today, but we're not ready to formalize that site quite yet. We're still studying timelines internally. And we are planning on moving ahead with our plans. And Billy, I would love to perhaps hear from you on that. Billy, the floor is yours.

Good morning, everyone. Yeah. So I mean, it's just been just over 30 days since the acquisition. So I mean, we're formalizing procurement processes. We have a good line of sight on major long lead time items. What excites us the most is bringing all of this capacity online to meet the customer demands that we have for 2025. We're evaluating a different amount of -- large amount of projects, sites. It's a bit of a dynamic process right now. But like I said, we have a very good line of sight and we're looking -- we're very anxious to deliver.

Yeah. Very good. Thanks for that color.

We will take our next…

I also have -- yeah, just to mention, as the next question comes on, I also have our Head of Revenue on the line on the GPU as a service business, in case there are questions related to that.

We will take our…

And who is next?

Yes. We will take our next question from Joe Gomes with Noble Capital Markets.

Hi, Joe.

Hey. Good morning, guys. It's Josh filling in for Joe. Hey, so you guys were talking about just obviously the HPC side of the business. And I just wanted to see kind of just an update just kind of on the site pipeline. You may guys mentioned on the call earlier, but have you guys really secured any power outside the Montreal area? You guys have talked about going to Western Canada, Ontario, maybe the British Columbia, but can you kind of expand on that?

Billy, why don't you take that on? The floor is yours.

Sure. Like you mentioned, we had a couple of projects on the line for Western Canada, Ontario. In the last couple of weeks, we've had an American -- a site in the United States come across our table that we're actively vetting right now. So it'd be the first project that we would do in the United States, but we're well aligned and ready to go to execute that.

Okay. Perfect. And you guys talked about obviously having 3x exahash maybe by the end of February potentially, and then going into maybe the end of the second quarter, middle of the year. With Bitcoin kind of trading at where it's at, maybe is there a chance that we might see -- an active hash rate higher than that like because maybe activating idle miners?

Well, I think the Bitcoin price going up is kind of sometimes misleading because there is another -- the other part of the equation, which is hash rate difficulty. And that obviously has an effect on the margins of Bitcoin Mining. As of the business of Bitcoin mining, which makes it a little bit more complicated than just the price of a Bitcoin. We think that capital is finite and we have huge ambitions and we are frankly executing on those ambitions on our GPU Cloud and data center business. And so that's where we have to really kind of put the capital. But we still remain at an incredible call option on digital assets. And as I mentioned earlier, our company is stable in spice. We have the stability of HPC revenues and we have the spice of our digital assets position both in Bitcoin and Ethereum.

Yeah. And this is Erke speaking, if I may add, with the most recent happening happened in April, so we see this increase of Bitcoin price as opportunity to upgrade the fleet. So what we're going to do is we're going to sell some of the older models rather than keep them running and replace them with newer generations miners because we put those other models as a way of storing Bitcoin. When the Bitcoin prices are higher, we can sell them at a relatively higher price. And with the happening just happened, we wouldn't necessarily have a happening in the next 3.5 years. So that gives us more stable, predictable revenue for this cycle. So upgrading and liquidating older models will be the strategy we're taking for the next couple of quarters.

Okay. Great. Thanks for answering my question, guys.

We do not have any further questions in the queue.

Great. Okay. I guess that concludes the call. We look forward to engaging with our stakeholders on any further questions and thank you very much for the call today, everybody.

This concludes today's call. Thank you for your participation. You may now disconnect.