American Bitcoin Q2 2024 Earnings Call Transcript

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Provided by Quartr
August 15, 2024

Key Takeaways

  • Griffin achieved a 20% year-over-year increase in hash rate to 8.99 PH/s and set a new energy efficiency peak at 28.5 J/TH, bringing its self-mining hash rate to ~0.94 EH/s ahead of schedule.
  • The company was selected for inclusion in the Russell Microcap Index, reflecting its strengthened capital markets profile since going public.
  • Mining 84 BTC generated $5.5 M in revenue (up from $4.9 M), but the Q2 breakeven cost rose to $45,452 per BTC due to the halving event and higher global hash rate.
  • Griffin reported a $4 M net loss in Q2 2024, including $2.5 M in non-cash expenses, and its adjusted EBITDA turned negative $3 M, driven by increased marketing and listing costs.
  • With profit-share contracts that flex costs to Bitcoin prices and a pipeline of 25+ vetted prospects for low-cost power (≤$0.04/kWh), Griffin is pursuing accretive growth opportunities amid market consolidation.
AI Generated. May Contain Errors.
Earnings Conference Call
American Bitcoin Q2 2024
00:00 / 00:00

Transcript Sections

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Operator

Greetings, and welcome to the Gryphon Digital Mining Second Quarter 2024 Earnings Call. On the call are Rob Chang, Chief Executive Officer of the company, and Simeon Salzman, Chief Financial Officer of the company. Before I turn the call over to Mr. Chang, please note that statements made on this call that are not historical facts may be forward-looking statements from the company's management, made within the meanings of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, concerning future events. 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.

Operator

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-K for the year ended December 31, 2023, as updated by the company's subsequent disclosures filed with the SEC. Copies of these documents are available on the SEC's website at www.sec.gov. 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 the company does not undertake any obligation to update or supplement any statements to reflect subsequent developments. Now, I would like to turn the call over to Mr. Rob Chang. Rob, please proceed.

Rob Chang
CEO at Gryphon Digital Mining

Thank you, operator, and thank you everyone for joining us today to discuss Gryphon Digital Mining's second quarter 2024 results. I'm excited to share that Gryphon has achieved remarkable progress in both hash rate and energy efficiency during the second quarter of 2024, setting new benchmarks for the company. We recorded a quarterly average hash rate of 899 PH/s in Q2 2024, which represents a 20% increase from the same quarter in the previous year. Additionally, we reached a new peak in energy efficiency, achieving 28.5 J/TH in June. We believe these accomplishments highlight our dedication to operational excellence and position us strongly for future expansion. Underpinning these fantastic operational results was our Q2 miner upgrade program coming in ahead of schedule, enhancing our operational efficiency while strengthening our competitive position.

Rob Chang
CEO at Gryphon Digital Mining

As a result, Gryphon's self-mining hash rate has now reached approximately 0.94 exahashes per second. I'm also pleased to highlight that in Q2, we learned that Gryphon was selected to join the Russell Microcap Index. We feel that our inclusion in this index reflects the significant progress we have made in the capital markets in the short time we've been public. Now, shifting gears from the capital markets back to the Bitcoin market, recently, we have seen some pullbacks in the price of Bitcoin, which is not uncommon. Historically, Bitcoin has tended to base around the $50,000 level during these pullbacks. However, if we overlay the price action following previous halvings, we see that Bitcoin has historically doubled within six months post-halving.

Rob Chang
CEO at Gryphon Digital Mining

If these patterns hold, we believe the current market represents the bottom of the upcycle, and we expect the price of Bitcoin to trend higher in the coming months. We believe that recent market weakness can be attributed to factors such as Germany selling off some of its Bitcoin holdings and the general perception of Bitcoin as a risk-on asset amidst instability in the Middle East. Despite these short-term fluctuations, we believe that the fundamentals of Bitcoin remain strong, with a fixed supply of 21 million coins against the ongoing devaluation of fiat currencies. We project that Gryphon is well positioned to navigate these market conditions due to our uncommon cost structure. Our profit share-based contracts with our host provider allow our production costs to flex downwards in correlation with Bitcoin prices, providing downside protection.

Rob Chang
CEO at Gryphon Digital Mining

We expect that this gives us a competitive advantage over peers with fixed costs, who may struggle to operate efficiently in a lower price environment. As we move further beyond the halving, a clear distinction is emerging between companies that can operate efficiently and those that struggle. While some are considering sales or strategic options, Gryphon is actively pursuing growth, positioning itself to take advantage of consolidation opportunities and strengthen its foothold during this industry transition. To that end, during the quarter, we remained focused on opportunities to grow our hash rate in a highly accretive manner. We have vetted over 25 prospects, conducting due diligence, legal analysis, and site visits. We are enthusiastic about the possibilities and will judiciously pursue ventures that align with our stringent criteria, emphasizing accretion and impact.

Rob Chang
CEO at Gryphon Digital Mining

Lastly, I would like to address the recent announcement regarding our CFO's decision to step down to spend more time with his family and to pursue other professional opportunities. We appreciate everything Sim has done for the company and wish him well. He will be staying through November fifteenth to shepherd the transition process, and we have initiated a search for his successor. Rest assured, this transition will be seamless, and Sim will be on the next earnings call as well. I'll now turn it over to Sim to review our financial results before closing with some additional remarks. Sim?

Simeon Salzman
CFO at Gryphon Digital Mining

Thank you, Rob. I will now highlight our financial results for the quarter ended June 30, 2024. Gryphon mined approximately 84 Bitcoin, generating mining revenues of $5.5 million in Q2 2024, compared to $4.9 million in the same period in the prior year. Breakeven costs in Q2 2024 were approximately $45,452, compared to $34,063 in Q1 2024.

Simeon Salzman
CFO at Gryphon Digital Mining

The change in break-even costs quarter-over-quarter reflect the halving event that occurred in late April, whereas the Bitcoin rewards decreased by 50%, combined with the increase in global hash rate. For that three months period ending June 30, 2024, and June 30, 2023, the company incurred pass-through variable energy costs of $0.060654 per kWh and $0.000569 per kWh, respectively, a change of 15%. In addition, the daily average global hash rate increased by 68% over that same period, from 357.7 exahash to 602.1 exahash per day during each respective quarter.

Simeon Salzman
CFO at Gryphon Digital Mining

Please note that over the same period, Bitcoin's average price changed from $25,428 to $59,572, or an increase of 134%, resulting in a change in profitability for each Bitcoin mined. We believe Bitcoin costs and total cash costs at the mine level are the most relevant factors for assessing Bitcoin mining operations. Highlighting these metrics gives investors and analysts better transparency for comparative analysis across mining companies. Turning to our results of our consolidated statements of operations, our net loss of $4 million in Q2 2024 includes net non-cash expenses of $2.5 million. Net non-cash expenses consisted of items including depreciation, stock-based comp expense, fair value of common stock issued to consultants, unrealized loss on marketable equity securities, change in the fair value of notes payable, and unrealized gain on digital assets.

Simeon Salzman
CFO at Gryphon Digital Mining

This compares to a net loss in Q2 2023 of $2.6 million, which includes net non-cash expenses of $4.8 million. Our adjusted EBITDA, which we believe is an important gauge of our operational effectiveness and financial well-being, stood at approximately -$3 million for the quarter ended June 30, 2024, compared to $4.2 million for the quarter ended June 30, 2023. This loss was largely attributed to higher than normal marketing expenses as the company moved to showcase its recent merger and listing on Nasdaq. Net loss per basic and diluted share for Q2 2024 was -$0.10, based on basic and diluted weighted average shares outstanding of approximately 39 million shares. This compares to net loss per basic and diluted share of Q2 2023 of -$0.18.

Simeon Salzman
CFO at Gryphon Digital Mining

Weighted average shares outstanding was approximately 14.4 million. Our average efficiency for our active fleet of approximately 88,825 Bitcoin mining machines was around 28 J/TH as of June 30, 2024. As of June 30, 2024, our balance sheet reports approximately $1.2 million of cash and cash equivalents, $1 million in Bitcoin, and approximately $19.1 million due for the note denominated in Bitcoin. As of December 31, 2023, our balance sheet reported approximately $0.9 million in cash and cash equivalents, $2.1 million in Bitcoin, and $14.9 million due for the note denominated in Bitcoin.

Simeon Salzman
CFO at Gryphon Digital Mining

We would like to note that the change in the fair value of the note payable as of June 30th, 2024, is due to its structure being denominated in Bitcoin, and as such, reflects a direct correlation to the price of Bitcoin as of the period end. We have not increased our position of Bitcoin due, and we remain fully hedged to our production. To reiterate Rob's comments, we remain laser-focused on pursuing growth in a financially disciplined, accretive manner. With that, I'll turn it back to Rob to discuss Gryphon's 2024 strategy.

Rob Chang
CEO at Gryphon Digital Mining

Thank you, Sim. To sum up, the second quarter was another period of efficient performance for Gryphon, as we maintained above average Bitcoin efficiencies and an increase in our hash rate. The halving event is distinguishing the resilient players in our industry, and we believe we are well positioned to emerge stronger. Our cost-efficient operations and growth-oriented strategy set us apart from others. I particularly would like to highlight our leadership in the cost to mine a Bitcoin. As Sim noted, our break-even cost to mine a single Bitcoin in the second quarter was approximately $45,000. While this does signify an increase from prior quarters, it is important to note two things. First, the cost to mine Bitcoin generally trends upwards as the price of Bitcoin increases and the global network hash rate increases.

Rob Chang
CEO at Gryphon Digital Mining

As such, costs will always march higher with the price of Bitcoin as market participants mine at lower costs and sell at higher prices. Second, we believe a miner's relative position on the cost curve is what matters. According to the MacroMicro website that cites the usage of Cambridge University data, the average cost to mine Bitcoin is currently $77,878 per Bitcoin, which places our $45,000 cost in a favorable light. Looking forward, we continue to focus on growth and have expanded our target set in response to the realities that we have noticed during our review of over 25 different acquisition opportunities. Mining operations that are up for sale are those that generally do not have attractive cost profiles.

Rob Chang
CEO at Gryphon Digital Mining

While we may have been able to acquire several high-cost miners to grow our hash rate, we believe those would have only been temporary solutions, as high-cost operations are not a recipe for success. As such, our attention has expanded towards acquiring low-cost power that we believe will position Gryphon not only for success in the near term, but also for the next few halvings. We continue to maintain our leading cost structure while enhancing operational efficiencies, and we'll still look to seize opportunities for acquiring distressed assets at favorable valuations to accelerate our growth. We remain dedicated to upholding our rigorous standards and will not compromise our standards for the sake of expediency. Ahead of that, we look forward to opening the line for Q&A. If there are any questions, we can certainly answer those at this time. Operator?

Operator

Thank you. Ladies and gentlemen, the floor is now open for your questions. If you have any questions or comments, please press star one on your telephone keypad at this time. If you would like to remove your question, you may press star two. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Thank you. Our first question is coming from Kevin Dede with H.C. Wainwright. Your line is live.

Kevin Dede
Kevin Dede
Managing Director and Senior Technology Analyst at H.C. Wainwright

Thank you, Rob. Hi, Sim. Thanks for taking the questions.

Rob Chang
CEO at Gryphon Digital Mining

Hey, Kevin.

Kevin Dede
Kevin Dede
Managing Director and Senior Technology Analyst at H.C. Wainwright

So Rob, could you just give us some background again on the power draw at your hosting facility, how much room you have, and what you're thinking about in terms of fleet upgrades as the year goes on? Or are we looking at a pretty consistent 940 petahash?

Rob Chang
CEO at Gryphon Digital Mining

Yeah. Thanks, Kevin. Great question. So currently we're drawing approximately 28 megawatts from our facility located in Upstate New York, which of course, is hydropowered. We have a standing understanding with them that as more space comes free, we put our hands up to be among the first to take it. As a note, when we first started with them, we started at around 23 megawatts, and now we're 28, so we have been taking as much as we can get, and that's ongoing. So, that'll always be there. And of course, as our comments have noted, we are looking outside of that location to get chunkier amounts of power so that we can grow.

Rob Chang
CEO at Gryphon Digital Mining

In terms of our fleet upgrades, we're looking to be opportunistic, and if we find good pricing, we would like to upgrade continuously our machines and are looking to do that. Also noting, though, that we are saving some powder so that when we do those chunkier acquisitions, we have capital to put new machines there. So it's a bit of a, a push-pull between upgrading what we exist and we have, and also adding entirely new, which we're looking forward to do so as soon as possible.

Kevin Dede
Kevin Dede
Managing Director and Senior Technology Analyst at H.C. Wainwright

Okay. So the last order that you put has been filled, and there aren't any outstanding orders, just to be clear, for machines?

Rob Chang
CEO at Gryphon Digital Mining

As of what we've noted to the market, correct.

Kevin Dede
Kevin Dede
Managing Director and Senior Technology Analyst at H.C. Wainwright

Okay. Okay, perfect. Sim, I think you spoke to general and administrative expenses and the sequential increase. Can you give me a ballpark on where you think those sort of fall out for the balance of the year?

Simeon Salzman
CFO at Gryphon Digital Mining

Yeah, absolutely, Kevin. Great question. Good talking to you. Essentially, our normal expenditures are around $2.2 million cash out per month. So this three-month and six-month position was increased due to the advertising and marketing expenses. So for three months, we basically incurred an extra roughly $2.5 million for three months ended June 30th, and then for the six months ended, we incurred an extra, and what we feel is one time, of about $3.4 million in excess of where we feel we would be moving forward. So similar to our Q1 and lower cost of G&A and things of that nature, we would be back in that realm.

Kevin Dede
Kevin Dede
Managing Director and Senior Technology Analyst at H.C. Wainwright

Ah, okay. Okay. All right. Now, Rob, I appreciate that you offered insight on looking at 25 different locations. I mean, you must rack up a lot of frequent flyer miles. I was just wondering if you could maybe peel the onion back a little bit and give us more color on the things that you passed on, and maybe a little bit more on, you know, what specifically you're looking for. I mean, it's—

Rob Chang
CEO at Gryphon Digital Mining

Yeah.

Kevin Dede
Kevin Dede
Managing Director and Senior Technology Analyst at H.C. Wainwright

It's clear that there are plenty of the large companies out there using, you know, their stock as currency, and I know you have that flexibility to do that. I was just kinda curious to hear a little bit more about the specifics.

Rob Chang
CEO at Gryphon Digital Mining

Yeah. Certainly happy to do so as best I can. So yes, it's been a pretty intensive, really post-merger life for us, given that we've been looking at so many different opportunities. To peel back the onion a little bit, but without giving too much, because I certainly don't want to, you know, throw sand or throw mud at other companies. Generally speaking, what we have seen is, everyone will trot out how big they are, but really only when you peel back the onion and get into the real details, do you start noticing that their cost structures are not quite as good as ours. And it's a little unfair because we have been leading on our costs for so long that it's difficult to find something as good.

Rob Chang
CEO at Gryphon Digital Mining

But given the post-halving environment, we were kind of forced to look that way because it seems like the market, well, not seems, it definitely is a market where lower cost is going to win. And so as we started looking at these opportunities, sure, they had lots of size, but they had higher cost profiles where it's like $0.07/kWh to $0.08/kWh, for example, or something like that. And that just won't work, especially when Bitcoin has those periods where it drops, and then it those certainly won't work at all. So there's stuff like that. There are other situations too, where, for example, if it's hosted, we found out that the hosting was ending very soon, and so what were you really buying?

Rob Chang
CEO at Gryphon Digital Mining

You're only just really buying their machines with no real guarantee that the, that the hosting would be there, and the hosting would be expensive as well. So it's things like that, of that nature. And so as we started going through those, we realized that the available opportunities, especially with the values that they were asking for, which we still believe were a little bit inflated, didn't quite make sense. And, and also just looking at how operations were going and how Bitcoin prices were going, it seemed—sorry, it seems it became very evident that the real gain here is finding low-cost power, and that's where we've expanded our view. So not moving away from looking for acquisitions, still looking to do so, but we focused a lot more on finding effectively costs at $0.04 or lower.

Rob Chang
CEO at Gryphon Digital Mining

So we've been making significant progress and having conversations with groups that have that and are looking forward to announcing a few things in the future once we get close enough.

Kevin Dede
Kevin Dede
Managing Director and Senior Technology Analyst at H.C. Wainwright

Can you offer some color on sort of the geographies that you've been searching out?

Rob Chang
CEO at Gryphon Digital Mining

Yeah, we continue to remain open-minded, so any place that we consider politically safe, we would take a look at. But generally speaking, most of our opportunities remain in North America.

Kevin Dede
Kevin Dede
Managing Director and Senior Technology Analyst at H.C. Wainwright

Okay. Well, thanks very much, gentlemen. I appreciate the color.

Rob Chang
CEO at Gryphon Digital Mining

Yeah. Thanks, Kevin.

Simeon Salzman
CFO at Gryphon Digital Mining

Always great talking to you, Kevin. Thank you.

Operator

Thank you. Once again, if you have any questions or comments, please press star one on your telephone keypad. Our next question is coming from Martin Toner with ATB Capital Markets. Your line is live.

Martin Toner
Martin Toner
Managing Director at ATB Capital Markets

Thanks so much for the question, and good morning. Just wondering, and, you know, I'm a public market—I'm a public, you know, public equity guy, so I don't—I, I'm not too familiar with how you get deals done in, in distressed private situations. But, it seems to me that there's, like, a bit of a behavioral aspect to it, i.e., it's tough to get people to come to grips with reality and, and what the fair price. Just, can you kinda, like, walk me through, like, your approach to getting some of these folks to say yes to what is actually, like, from their perspective, should be a pretty good deal?

Rob Chang
CEO at Gryphon Digital Mining

That's a great question, and it's a little, it's fun to say because we haven't done a deal yet. And it's quite frankly more so because we stopped proceeding once we found out that there was more here than we were willing to deal with those projects. But your question does point to an issue where many companies believe they're worth more than they are. And, for example, I see many private companies looking at pubcos and the largest ones, applying their valuation and saying, "That's what I'm worth." That's probably a negotiating tactic, knowing that we're probably gonna ask for something lower. But we have often seen asks that were so high that we didn't think it made sense regardless. So it—

Rob Chang
CEO at Gryphon Digital Mining

At some point, I think what really needs to happen is more pain needs to be occurred, and people will start realizing that they can't survive much longer doing things the way they are, and they need to go to more reasonable valuations. But the bigger problem, as I just mentioned earlier, is not the number we settle at, but whether we believe it's a worthy enough investment to dig in the first place, and that's actually where the first stumbling block has occurred for us generally, is that we probably don't even wanna get to that point once we peel back the onion enough and have seen what's actually there.

Martin Toner
Martin Toner
Managing Director at ATB Capital Markets

Thanks for that. That's great color, Rob. Another question for you. Given your low cost operation and the current market should be good for you, right? I mean, do you think that's gonna help expedite doing some deals?

Rob Chang
CEO at Gryphon Digital Mining

Yeah, well, relatively speaking, we are lower cost than everyone else, and I guess if Bitcoin was ripping, it's great for everyone, so I can't say I don't want that. But on a relative basis, given that we are the one of the most efficient, highest uptime operators as well, generally speaking, when things are weaker in the Bitcoin pricing, we tend to relatively outperform. That's true. Especially also with our flexible cost structure, where if Bitcoin prices go down, so do our costs. So on a relative basis, yes, but I certainly wouldn't be against seeing a higher price of Bitcoin. And I think what you're implying, though, is the question on acquisitions, and yes, that's true.

Rob Chang
CEO at Gryphon Digital Mining

If we're in a tougher environment, it will bring others down to the reality more and lower their asks for a potential combination or some type of deal.

Martin Toner
Martin Toner
Managing Director at ATB Capital Markets

Super. That makes sense. Okay, thank you. That's it for me.

Rob Chang
CEO at Gryphon Digital Mining

Thanks, Martin.

Operator

Thank you. Our next question is coming from Jon Hickman with Ladenburg Thalmann. Your line is live.

Jon Hickman
Jon Hickman
Managing Director of Equity Research at Ladenburg Thalmann

Hi, Rob?

Rob Chang
CEO at Gryphon Digital Mining

Hi, John.

Jon Hickman
Jon Hickman
Managing Director of Equity Research at Ladenburg Thalmann

Just a quick question about the acquisition or potential. Out of the 25 that you've looked at, you are—I mean, there are some that you're still interested in?

Rob Chang
CEO at Gryphon Digital Mining

I'm pausing because I'm wondering if I included that or not in the number. I would say yes, there are some that we're still remain interested in. It's we actually have several very attractive ones that we're looking at right now and looking forward to potentially—

Jon Hickman
Jon Hickman
Managing Director of Equity Research at Ladenburg Thalmann

Okay.

Rob Chang
CEO at Gryphon Digital Mining

Making some announcements off of those, but, but yes.

Jon Hickman
Jon Hickman
Managing Director of Equity Research at Ladenburg Thalmann

Okay. So you're still actively engaged with a few?

Rob Chang
CEO at Gryphon Digital Mining

Absolutely.

Jon Hickman
Jon Hickman
Managing Director of Equity Research at Ladenburg Thalmann

That you find attractive.

Rob Chang
CEO at Gryphon Digital Mining

It never ends, quite honestly. Correct.

Jon Hickman
Jon Hickman
Managing Director of Equity Research at Ladenburg Thalmann

Okay.

Rob Chang
CEO at Gryphon Digital Mining

And it doesn't end. Just because we're looking at some, doesn't mean we stop looking at new ones. So hopefully I'll have announced a few, but maybe the next call will be up to 40 at that point.

Jon Hickman
Jon Hickman
Managing Director of Equity Research at Ladenburg Thalmann

Okay, and then if you were to, I don't know if you've done this math, but if you were to, theoretically, swap out all your machines for, you know, the latest, greatest, out there, what would that do to your, I mean, that way, you wouldn't need any more power, but what would it do to your hash rate?

Rob Chang
CEO at Gryphon Digital Mining

That's a good question. I think it would also depend on which machines we're using. So I don't have that number off the top of my head, but I would expect that there would at least be a 30% improvement, if not higher, if we were to do something like that. Probably more, actually, depending on which machine we're using. So that's something we're considering, although the trade-off really is that capital will be used for an upgrade as opposed to something outright new, and our preference right now—

Jon Hickman
Jon Hickman
Managing Director of Equity Research at Ladenburg Thalmann

Yeah

Rob Chang
CEO at Gryphon Digital Mining

is to get something outright new and grow that way.

Jon Hickman
Jon Hickman
Managing Director of Equity Research at Ladenburg Thalmann

Okay. Thank you. Appreciate your comments.

Rob Chang
CEO at Gryphon Digital Mining

Yeah. Thanks for your time.

Operator

Thank you. As we have no further questions in queue at this time, I will turn it back over to Mr. Chang for any closing comments.

Rob Chang
CEO at Gryphon Digital Mining

Thanks, operator. And thanks everyone for their time in joining us on this call. We are always available to answer questions, and really do encourage everyone to do so, and they can certainly reach out to us through our website, gryphondigitalmining.com. We also have a Twitter presence as well, and we'd like to actively engage with our investors to make sure they're as up to speed as we can have them. So, again, thanks for everyone for their call, and have a good rest of the day.

Operator

Thank you. This does conclude today's call. You may disconnect your lines at this time, and have a wonderful day, and we thank you for your participation.

Analysts
    • Jon Hickman
      Managing Director of Equity Research at Ladenburg Thalmann
    • Kevin Dede
      Managing Director and Senior Technology Analyst at H.C. Wainwright
    • Martin Toner
      Managing Director at ATB Capital Markets
    • Rob Chang
      CEO at Gryphon Digital Mining
    • Simeon Salzman
      CFO at Gryphon Digital Mining
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