LM Funding America Q4 2023 Earnings Call Transcript

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April 1, 2024

There are 7 speakers on the call.

Operator

Good morning, everyone, and welcome to the LM Funding America Fourth Quarter Business Update Conference Call. At this time, all participants have been placed on a listen only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Ted Avis. Sir, the floor is yours.

Speaker 1

Good morning, and thank you for joining LM Funding America's 2023 Financial Results and Business Update Conference Call. On the call with us today are Bruce Rogers, Chief Executive Officer and Richard Russell, Chief Financial Officer of LM Funding. This morning, the company announced its operating results for the Q4 year ended December 31, 2023 and its financial condition as of that date. The press release is posted on the company's website, lmfunding.com. In addition, the company has filed its annual on Form 10 ks with the U.

Speaker 1

S. Securities and Exchange Commission, which can also be accessed on the company's website as well as the SEC's website atwww.sec.gov. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at 212-671-1020. Before management reviews the company's operating results for the 3 months and year ended December 31, 2023, and its financial condition as of that date, we would like to remind everyone that this conference call may contain forward looking statements. All statements other than statements of historical facts contained in this conference call, including statements regarding our future results of operations and financial position, strategy and plans and our expectations for future operations are forward looking statements.

Speaker 1

These forward looking statements are based largely on the company's current expectations and projections about future events and trends that it believes may affect its financial condition, results of operations, strategy, short term and long term business operations and objectives and financial needs. These forward looking statements are subject to various risks, uncertainties and assumptions as described in the company's Form 10 ks filed with the U. S. Securities and Exchange Commission on April 1, 2024. Because of these risks, uncertainties and assumptions, forward looking events and circumstances discussed in this conference call may not occur and actual results could differ materially and adversely from those anticipated or implied in these forward looking statements.

Speaker 1

You should not rely upon forward looking statements as predictions of future events. Although the company believes that the expectations reflected in the forward looking statements are reasonable, it cannot guarantee future results, level of activity, performance or achievements. In addition, neither the company nor any other person assumes responsibility for the accuracy and completeness of any of these forward looking statements. The company disclaims any duty to update any of these forward looking statements. All forward looking statements attributable to the company are expressly qualified in their entirety by these cautionary statements as well as others made in this conference call.

Speaker 1

You should evaluate all forward looking statements made by the company in the context of these risks and uncertainties. In addition, today's discussion will include references to non GAAP measures. The company believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website. With that, I will now turn the call over to Bruce Rogers, Chairman and CEO of LM Funding.

Speaker 1

Bruce?

Speaker 2

Thanks, Ted. Good morning and thanks to everyone for joining us today. On behalf of the LM Funding team, I want to thank our shareholders for your continued support and for joining us this morning. I'm proud to report that our business is firing all cylinders and our strategy is working. As evidenced, let me walk you through a few key metrics.

Speaker 2

First of all, we mined 423 bitcoins in 2023 valued at approximately $12,300,000 at an average market revenue value of approximately $29,000 per bitcoin. Obviously, with Bitcoin market prices recently at near record highs of approximately $70,000 we believe that this validates our strategy. 2nd, our revenue grew over 600% versus last year, which was based on the average $29,000 Bitcoin price for 2023, which is now substantially higher. Additionally, we reported positive core EBITDA for the Q4 of 2023, a major milestone for the company. Last and possibly most important, I'd like to highlight the fact that we have stockholders' equity of $36,200,000 or $14.52 per share as of December 31, 2023.

Speaker 2

We believe we are creating value for shareholders. If you give us absolutely no value for future growth, our stockholders' equity per share is roughly 4 times our current stock price. We are clearly executing on our strategy and remain committed to delivering value for our shareholders. We also believe that as we start to get our story out, the intrinsic value of our company will be more accurately reflected in our market share price. In 2023, our first full year as a Bitcoin mining company, we made tremendous progress in implementing our approach to mining Bitcoin.

Speaker 2

As of December 31, 2023, our Bitcoin mining operations included about 5,900 minuteing machines actively engaged in mining at various hosting facilities, providing approximately 614 petahash per second of mining capacity. The company held approximately 95 Bitcoin on December 31, 2023 valued at approximately $3,400,000 Mining activity from January February this year brought that total to approximately 154 Bitcoin held on February 29, 2024, valued at approximately $10,800,000 based on the recent Bitcoin price of approximately $70,000 In December 23, we sold Symbiance Blockchain Technology, which we had acquired earlier in 2023 as debtor

Speaker 3

in

Speaker 2

This transaction provided the company with additional capital to grow our Bitcoin business. Additionally, the transaction provided the company with additional working capital strengthen our balance sheet. As most people likely know, Bitcoin halving is an event where the reward for mining new Bitcoin blocks is cut in half, resulting in miners receiving 50% fewer Bitcoin for verifying transactions. Having is built into the Bitcoin algorithm and designed to limit the supply of new Bitcoin. It is anticipated that the next having event will occur in late April or early May of this year.

Speaker 2

In anticipation of the upcoming halving event, the company has invested approximately $1,100,000 in acquiring 300 Bitmain S21 Antminer units. These machines are known for their high efficiency and substantial hash rate capabilities, specifically designed for mining the Shaw 256 algorithm. Each unit boasts a hash rate of 200 terahash per second, while consuming 3,500 watts of power. We expect the delivery of the machines by the end of March or early April and plan to locate, energize and commence mining with them by mid April, which may increase the company's mining capacity to 674 petahash per second. We remain committed to investing our resources, including the proceeds from our Bitcoin mining activities towards acquiring the most efficient Bitcoin mining hardware on the market.

Speaker 2

We are confident that the S-twenty one machines will stand out as top performers during this year's having event and will continue to play a significant role in driving revenue growth over the long term, including through and beyond the next having event anticipated to take place sometime in 2028. We are concentrating our capital investments on Bitcoin and Bitcoin mining machines, whose value closely follows that of Bitcoin itself. However, we are open to investing in opportunities to lower our mining costs and to eventually provide hosting facilities for artificial intelligence machines. If historical patterns continue and expected events materialize as predicted, we expect to create meaningful value for shareholders. This value creation is expected to mirror both the appreciation of our Bitcoin holdings as well as the enhanced value of our mining equipment.

Speaker 2

In addition to the purchase of the S-twenty one minuteing machines, the company has upgraded approximately 1,000 of its mining machines with BRAIN's OS plus software. This enhancement is anticipated to boost the hash rate of these machines and improve efficiency by as much as 20%. As a result, this improvement should lead to an increase in the number of Bitcoin that the company combined and an increase in the profitability using these upgraded machines. An additional benefit of utilizing Brains OS plus software for Bitcoin mining is that machines equipped with this software have the flexibility to mine with any pool or specifically with the Brains pool without incurring any pool fees to Brains. With respect to our legacy business, which involves offering funding to non profit community associations, the business has remained fairly stable since the conclusion of 2022.

Speaker 2

We see opportunities in the future to grow this business from demand from reserve funding requirements and active in response to the collapse of the seaside tower in South Florida. We continue to be extremely frustrated by the considerable disparity between our stockholders' equity, which as I stated earlier was valued at $36,200,000 or $14.52 per share as of Twelvethirty Onetwenty 3 and the recent trading price of our shares at around $3.66 which represents a discount of around 75% from book value. Although we acknowledge the ongoing issues affecting the microcap market, our outlook for the business has never been more optimistic. Our optimism is rooted in our dedication to achieving strategic objectives and enhancing our Bitcoin mining activities in a prudent manner, which we believe will eventually be recognized by the market. On that note, I would like to turn the call over to Rick Russell, Chief Financial Officer of LN Funding, who will review the financial results for the year ended December 31, 2023.

Speaker 4

Rick?

Speaker 3

Thanks, Bruce, and good morning, everyone. Total revenue for the quarter ended December 31, 2023 was approximately $4,100,000 an increase of $2,900,000 or approximately 262 percent compared to $1,100,000 for the Q4 of 2022. Total revenue for the year ended December 31, 2023 was approximately $13,000,000 an increase of $11,300,000 from the $1,700,000 in 2022. These increases were primarily due to digital mine revenue of $3,900,000 $12,300,000 in the 3 months year ended December 31, 2023, compared with $900,000 for both comparable periods in 2022 as the company commenced our Bitcoin mining operations in late September 2022. The average Bitcoin price for 3 months year ended December 31, 2023 recognized as revenue was approximately $36,500 $29,000 respectively.

Speaker 3

Operating expenses totaled $23,000,000 for the year ended December 31, 2023 compared to $26,400,000 for the year ended December 31, 2022. The decrease is primarily due to a $13,600,000 decrease in staff costs and payroll and a $1,300,000 decrease in professional fees, partially offset by an $8,400,000 increase in digital mining costs and a $4,500,000 dollars increase in depreciation as compared to 2022. Net loss attributable to LM Funding shareholders for the 3 months ended December 31, 2023 was approximately $1,600,000 which included a $500,000 non cash unrealized gain on investment in equity securities compared to a net loss of approximately 19 point $7,000,000 for the 2022 comparable quarter, which included a $6,600,000 non cash unrealized loss on investment in equity securities and a $4,900,000 impairment loss in various floating assets. Net loss attributable to LM Funding shareholders for the year ended December 31, 2023, was approximately $15,900,000 which included a $9,800,000 non cash unrealized loss on investment and equity securities compared to a net loss of approximately $29,200,000 for the year ended December 31, 2022, which included a $4,400,000 non cash unrealized gain on investment and equity securities and a $4,900,000 impairment loss in various hosting assets. Core EBITDA was positive for the 3 months ended December 31, 2023, which totaled approximately $300,000 compared to a core EBITDA loss of $2,800,000 in the prior year's comparable quarter.

Speaker 3

Core EBITDA loss for the 12 months ended December 31, 2023, totaled approximately $200,000 compared with core EBITDA loss of $6,500,000 in 20.22. The improvement in core EBITDA for the 3 12 month period ended December 31, 2023 was primarily due to the existence of material Bitcoin mine operations in the current year that did not exist in the prior year. Core EBITDA is a non GAAP financial measure and a reconciliation of core EBITDA to net loss can be found in our press release. Turning to our balance sheet. Cash was approximately $2,400,000 with digital assets of $3,400,000 and working capital of $7,400,000 as of December 31, 2023, based on 95.1 Bitcoin at a price of approximately 36,000 dollars as of December 31, 2023.

Speaker 3

The current Bitcoin market price has fluctuated recently, but is around $70,000 in recent weeks. In 2023, the company also received approximately $2,700,000 from C store Medical Holdings as a partial repayment of their outstanding note receivable. Total LM Funding stockholders' equity was approximately $36,200,000 or 0.14 $5.2 per share as of December 31, 2023. That concludes our prepared remarks. I would now like to open the call for questions.

Speaker 3

Operator, could you please assist us with that?

Operator

Certainly.

Speaker 3

Thank

Operator

you. Your first question is coming from Kevin Dede from H. C. Wainwright. Your line is

Speaker 5

live. Good morning, Bruce, Rick. Thanks so much for having me on.

Speaker 4

Can you hear me guys?

Speaker 3

Yes. Good.

Speaker 5

Okay. Listen, congrats on all the mining improvement over the year. Appreciate the hard work that you put in on that. A couple

Speaker 3

of questions, I guess.

Speaker 5

The if you'll allow me, the 300 new machines, I think you'll need, what, about a megawatt for those? Can you give me some insight on where you think you're going to put them? If you think you're going to replace existing plugs, that brings your total petahash to almost 700 if you keep everything you have. And then maybe some insight on the Brain software. Your fleet is a lot larger than the, I guess, the amount of seats that you've bought.

Speaker 5

So maybe give us some thinking on that.

Speaker 3

Sure.

Speaker 2

The 3 new machines, we're going

Speaker 4

to be putting them over at core. They agreed to that. And we also had an addendum to our contract to be able to put up to 1100 new machines at core if we want to. We're going to actually take those take 3 machines out of core right now and stick them over at Giga. And Giga is where we run our brain software.

Speaker 4

They have about a 1,000, 1100 machines right now. So we'll move those 300 machines over there and they will be running the brain software because Core does not run

Speaker 5

brains. Okay. That helps. Thanks. So no retirement, just some moving around?

Speaker 5

Correct. Okay. Understand you sold Symbian and understand that you received a partial payment on Cstar. Can you offer a little bit more color on where you stand with Cstar? What's left?

Speaker 5

And how are you looking at that investment through the course of this year? And maybe, Rick, you could touch on I mean, I looked at the core EBITDA reconciliation in the press release, but it doesn't really point to the lines of business that you're considering core.

Speaker 4

Okay. So for Cstar, we received all the cash that was on the intercompany loan so far,

Speaker 3

I think all the way through this year. So that's now receivable is all fully paid. As

Speaker 4

opposed to core. And then let me back up and proceed. So we have our common stock with them. So we'll see how that investment continues. We believe it's still a solid investment.

Speaker 4

They were solely progressing on getting more hospital studies in FDA approval.

Speaker 3

For core again, what was that question? I'm sorry.

Speaker 5

Yes. No, no, I think that kind of summed it up, right? Because right now as it is, you're just holding outstanding C Star stock. Could you remind us on how much that is? But its operations aren't flowing through your P and L at all.

Speaker 5

Correct.

Speaker 4

We own about 2,600,000 shares and CSR was about being traded between $0.70 $0.80 right now. We also have approximately $5,700,000 warrants,

Speaker 3

which I believe are being traded the public warrants, which are similar to ours are being traded around $0.14 per share.

Speaker 4

Okay. CSAR is almost $0.80 right now.

Speaker 3

Okay.

Speaker 5

Given for as long as I've known you, I don't know that you've had as strong a financial position in the past. So I'm just sort of wondering how you're thinking about understand the Bitmain purchase, but I'm just maybe a little insight on how you're looking at the balance of the year and what other commitments you might make in terms of growing your Hash rate?

Speaker 4

Bruce, do you want to chime in?

Speaker 3

Yes. We

Speaker 2

are going to continue to hold Bitcoin and to buy efficient machines with whatever excess proceeds we have. We may find some opportunities to go vertical and depart from our infrastructure light plan. If we can find a few megawatts at a really good price, it gives us some control, we probably would do that. That's where we're pointing for the balance of the year.

Speaker 3

Okay. Thanks, Bruce. That helps.

Speaker 5

I'll pass the floor on. Thank you very much for entertaining my questions.

Operator

Thank you. Your next question is coming from Jack Richter from Express Center. Your line is live.

Speaker 6

Yes. Can you hear me? Sure. I can

Speaker 3

hear you, Jack. Great.

Speaker 6

Thank you for the call, Bruce and Roger. Very good presentation. Just a couple of questions. I didn't get the name of the first caller, but he answered several of them. Roger, you mentioned you have 5,900 active rigs.

Speaker 6

Is that correct?

Speaker 2

More or less, yes, approximately. Never know which ones are running any given day.

Speaker 6

I didn't understand that. All right. Are most of those rigs, I call them rigs, are they S-19s?

Speaker 4

Not all of them. We do have X Teams also.

Speaker 6

We have

Speaker 4

a mix.

Speaker 3

You have mix? Okay.

Speaker 6

All right. That's good. Do you have a chart or a spreadsheet of your mix? Just something like a view that's public. I don't know.

Speaker 6

I'm just trying to get a balance of what you have, the S-19s, the XPs and now the S-21s.

Speaker 4

I think we disclosed in the

Speaker 2

that we

Speaker 3

have approximately hold on.

Speaker 2

We always know the current answers, but we have to look up what we've published.

Speaker 4

Hold on.

Speaker 6

And I'm not looking for exact numbers here. I'm not holding in, but anything I just want to find this idea.

Speaker 2

Right. Sure. But the plaintiff's lawyers on the call do like numbers.

Speaker 4

Yes. We have about we have ballpark around 500 XPs.

Speaker 3

Okay. And then we and

Speaker 6

then you've got and then so the balance would then be more or less S19s? Yes. Okay. So you get the S21s online. And then you got the S21s.

Speaker 6

Okay. That answers that question. Okay.

Speaker 3

Okay.

Speaker 6

All right. Rick, I your last reported quarter, is it we're talking about Q4 2023. What is the balance what is the balance what is the company holding an inventory for Bitcoin right now? What is that number?

Speaker 3

So we reported as of the end of February,

Speaker 4

we had about 153 bitcoin. At the end of the end of the December, it was like 90

Speaker 3

3 ish, whatever, 95 ish.

Speaker 6

Got

Speaker 4

it. And we've mined about 80, I mean 58 bitcoin the 1st 2 months

Speaker 3

of this year. So you can kind

Speaker 4

of calculate what that may be through the Q1.

Speaker 6

Got it. Okay. And that again answers my question. Thank you. UTC in 2020, 2024.

Speaker 6

Okay. All right. Let's see now, do you have any plans for any further purchases of the S-twenty one after this 300 that comes in?

Speaker 4

We're looking at additional investments

Speaker 3

in both S-21s and Bruce mentioned hospital small hosting joint venture,

Speaker 4

if there's something worthwhile at a cheap megawatt price. So we've got enough Bitcoin Dash that we have is

Speaker 3

a good opportunity for addressing?

Speaker 2

So we have the opportunity because we're privity with Bitmain. We don't go through brokers. So if we Bitmain provides opportunities sometimes to buy these machines that discounts the market and with rebates and things like that. So there's always the opportunity when you can buy more to put together groups and do things to purchase them, but we don't have anything on the table right

Speaker 3

now. Okay.

Speaker 6

And then my last question and thank you. Everything is getting answered very efficiently by the way here. Has anyone done a breakeven rate on let's just stick with the S-nineteen's. Has anyone done a breakeven rate on the S-19s regarding

Speaker 2

So obviously, you're on a breakeven rate on everything, but there's 2 important variables. What is the price of Bitcoin and what's the price of the electricity you're putting in.

Speaker 6

That's correct. That's the bottom line. I agree.

Speaker 2

So yes, we run that all the time. I think that the generally published information out there would tell you that the '19s are with having teed up and the price of Bitcoin in the '70s. I think it's just most people are right at the cutting edge of whether those things are breakeven or losing depending on where the power contracts are. And that's to be expected, right, at having a minute.

Speaker 6

I agree. And again, you answered the question spot on in a roundabout way. The I remember I was on you may or may not remember, I was on a call maybe 2, 6 months ago, 2 quarters ago maybe. In any event, you Rick, you had told me that on average, you're paying about $0.085 ish on hosting fees per kilowatt at this point. I just kind of want to confirm that number, if it's gotten any better or not?

Speaker 6

It's gotten

Speaker 3

a little bit better.

Speaker 4

So it's a little bit

Speaker 3

lower, but and we're working to look at options a little bit more.

Speaker 2

Okay. Okay. And also remember, hosting involves the guy with the screwdriver, the building, the rack, the land and you can do that because we're paying a little more than $0.08 to get up the other marginal cost that roll into it.

Speaker 6

Yes, I agree. I agree. Who and just as a side note, when you do get a failure on a bit main product, does the LMFA have to pay to get those fixed or is the hosting the host are paying for that hardware fix, the physical hardware?

Speaker 4

Well, generally, you have certain period of time where there's a bit of a warranty and then after that it's on us. Generally, our hosting partners are able to get those fixed.

Speaker 6

Okay. Okay. All right. So they generally can go fix them pretty easy then and pretty cheap.

Speaker 4

That's what I'm saying. Yes. I mean, there's not yes.

Speaker 6

So I'm not trying to put words in your mouth, but I'm hearing it's not a big deal basically. No. It's not a huge line item expense. Okay. Okay.

Speaker 6

I'm good. Thank you. I'll turn it over to the next person. Thank you, guys.

Operator

Thank you. That concludes our Q and A session. I'll now hand the conference back to our host for closing remarks. Please go ahead.

Speaker 2

Thank you to everyone for joining our 2023 financial results and business update conference call. Our company's transition towards Bitcoin mining is clearly working as we continue to experience encouraging results. We remain committed to reinvesting our mining revenues into acquiring more mining machines without incurring debt and also integrating advanced software aimed at enhancing the hash rate of our current machines. With the price of Bitcoin reaching record high of approximately $74,000 earlier in March of 2024 and currently trading at approximately $70,000 our belief in the long term value of Bitcoin as an asset class has never been stronger. We believe the momentum with which we ended 2023 will continue to accelerate as we acquire and electrify more mining machines in 2024 and beyond.

Speaker 2

We're thankful for the ongoing support of our shareholders and we'll continue to provide updates on our progress as new developments emerge. Thank you again for attending our call.

Operator

Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

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Key Takeaways

  • LM Funding mined 423 BTC in 2023 (~$12.3 million at $29,000/BTC) and delivered over 600% revenue growth year-over-year, achieving positive core EBITDA in Q4 2023.
  • As of December 31, 2023, the company reported $36.2 million stockholders’ equity (~$14.52 per share), with $2.4 million cash, $3.4 million in digital assets (95 BTC) and $7.4 million working capital.
  • Mining capacity expanded to ~614 PH/s across ~5,900 machines, with an additional 300 Bitmain S21 units ($1.1 million investment) boosting projected capacity to ~674 PH/s by mid-April 2024.
  • Upgraded ~1,000 miners with BrainOS+ software to increase hash rate and efficiency by up to 20%, positioning the company for improved margins through the upcoming Bitcoin halving.
  • The legacy funding business remains stable, and recent transactions (Symbiance sale and Cstore Medical note repayment) have reinforced liquidity for ongoing mining investments.
AI Generated. May Contain Errors.
Earnings Conference Call
LM Funding America Q4 2023
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