Bit Digital Q1 2025 Earnings Report

Bit Digital EPS Results

• Actual EPS: -$0.05
• Consensus EPS: -$0.05
• Beat/Miss: Met Expectations
• One Year Ago EPS: N/A

Bit Digital Revenue Results

• Actual Revenue: $25.11 million
• Expected Revenue: $26.38 million
• Beat/Miss: Missed by -$1.27 million
• YoY Revenue Growth: N/A

Bit Digital Announcement Details

• Quarter: Q1 2025
• Date: 5/15/2025
• Time: After Market Closes
• Conference Call Date: Friday, May 16, 2025
• Conference Call Time: 10:00AM ET

Bit Digital (NASDAQ:BTBT), together with its subsidiaries, engages in the bitcoin mining business. It is also involved in the treasury management activities; and digital asset staking and digital asset mining businesses, as well as ethereum staking activities. In addition, it provides specialized cloud-infrastructure services for artificial intelligence applications. The company was formerly known as Golden Bull Limited and changed its name to Bit Digital, Inc. in September 2020. Bit Digital, Inc. was founded in 2015 and is headquartered in New York, New York.

Bit Digital Q1 2025 Earnings Call Transcript

Key Takeaways

• Mining revenue declined 64% year-over-year and 26% sequentially due to the 2024 halving and facility exit, but margins improved by ~500 bps to 21% and fleet efficiency rose to 24.5 J/TH, with hash rate set to rebound to ~2.5 EH/s by June.
• Cloud services grew 84% year-over-year to $14.8 million with 59% gross margins, backed by multiyear GPU contracts totaling over $20 million in annualized revenue with DNA Fund and fully sold-out H200 capacity.
• Colocation expansion remains on track despite modest delays at Montreal 2 (now targeting early Q3), with a built-to-suit Cerebras deployment at Montreal 3 and a signed purchase agreement for a 95-acre North Carolina site as part of >500 MW pipeline.
• Q1 results showed $25.1 million in total revenue (-17% yoy), 49% gross margin, GAAP net loss of $0.32 per share, $57.6 million cash, $80 million digital assets, and zero debt, yielding $141 million in total liquidity.
• Financing strategy favors non-dilutive capital: the company raised $10 million via ATM in Q1 and $48 million post-quarter, sold $32 million in Bitcoin, and is finalizing mortgage financing for its data centers while keeping ATM capacity for optionality.

Presentation

[Operator]

Hello, and welcome to the BitDigital First Quarter twenty twenty five Earnings Conference Call. Good morning, good afternoon, and good evening, depending on where you are joining us from. Thank you for being here. We are just giving a few more moments for attendees to dial in, so thank you for your patience. While we wait, please note that during this call, all participant lines will be in an in listen mode listen only mode.

[Operator]

Following the officers' update, we will open the floor for a question and answer session. If you have a question at that time, simply press star one on your telephone keypad. Also as a reminder, today's conference is being recorded. I'll now hand it over to your host, Cameron Schneer, Head of Investor Relations at BitDigital. Cameron, the floor is yours.

[Cameron Schnier, Head of Investor Relations at Bit Digital]

Thank you. Good morning, welcome to the BIT Digital First Quarter twenty twenty five Earnings Call. Joining us on the call today are Sam Tabar, Chief Executive Officer and Eric Wong, 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.

[Cameron Schnier, Head of Investor Relations at Bit Digital]

I therefore refer you to yesterday's 10 ks filing and our other SEC filings. Our comments today may also include non GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures can be found in our 10 ks filing, which is on our website. After our prepared remarks, we will open the call up for questions. With that covered, I will turn the call over to Sam to discuss our performance.

[Cameron Schnier, Head of Investor Relations at Bit Digital]

Sam?

[Samir Tabar, Chief Executive Officer at Bit Digital]

Thank you, Kim. Ladies and gentlemen, thank you for joining us on the call today. Today, I'll walk through our first quarter results and provide key updates across the different business units at BitDigital. Let's start with the Mining business. Our overall top line results were dragged down by our Mining segment, where first quarter twenty twenty five revenue decreased 64% year over year and 26% sequentially.

[Samir Tabar, Chief Executive Officer at Bit Digital]

This contrasts greatly with our HPC business lines, which demonstrated solid growth. Mining results were affected by the 2024 halving event and by our fleet redeployment program as we exited Coimbat facilities at the end of twenty twenty four. These factors contributed to an 80% year over year decline in production to 83 bitcoins for the quarter. Despite the lower production, our mining operations remained gross margin positive. In fact, mining margins expanded approximately 500 basis points sequentially to 21%, reflecting improvements in fleet efficiency and cost structure.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Our active Hash rate stood at approximately 1.5 exahash by the March, and fleet efficiency was approximately 24.5 joules per terahash. We had a shipment of previously ordered s 21 miners from Southeast Asia that we paused amid tariff uncertainty as the prescribed import duties would have significantly increased payback periods. But we have since begun taking delivery of those units and expect to return to approximately 2.5 exahash with fleet efficiency in the low 20s during June. Mining represented just 31% of our total revenue for the quarter compared to 72% in the same period last year. This shift reflects both the growth of our HPC business and the reality that without heavy reinvestment, mining market share naturally declines, and we are fine with that.

[Samir Tabar, Chief Executive Officer at Bit Digital]

While our Hash rate stands to rebound in the second quarter, our primary focus remains on investing in our data center build out and cloud services business. Turning to cloud services. Revenue for the segment increased 84% year over year and 14% sequentially to 14,800,000 Gross margins rebounded, expanding approximately 700 bps sequentially to 59%. We continue to expect segment margins to improve over time as revenue scales and as the impact from operating lease costs tied to our anchor customer contract is spread across a broader base. Based on our current contracted deployments, we expect stronger sequential revenue growth in the second quarter and continued growth in the third quarter of twenty twenty five.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Several deployments commenced midway through the first quarter, so we expect a recognition of full quarter of revenue contribution in the second quarter. Additionally, our initial deployment for a DNA fund, a five seventy six H200 cluster, began generating revenue in April and represents approximately $10,000,000 in annualized revenue. In May, we expanded our relationship with DNA Fund through new two new contracts totaling 616 h 200 GPUs under two year terms, representing approximately $10,800,000 of additional annualized revenue. The expansion with this customer reflects our strategy of building trust through execution and using that as the foundation for expanding relationships over time. Our procurement strategy remains focused on aligning GPU purchases with contracted demand rather than taking speculative inventory risk.

[Samir Tabar, Chief Executive Officer at Bit Digital]

We are effectively sold out of h 200 capacity and have prioritized deployments backed by secured contracts. While overall demand for b 200 GPUs remains healthy, uptake through our on demand distribution partnership with Shadeform has been impacted by hardware real reliability issues. We believe the crux of that issue is tied to the early iterations of servers we received, and we're working with the OEM to address that issue. We expect this dynamic to improve over time as early hardware issues are hopefully resolved. We are currently marketing this cluster to customers for a multiyear contract.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Separately, our anchor customer exercised their right to adjust the start date on their 464 b 200 deployment from June 30 to August 20, the latest allowable date under the agreement. As a result, this contract represents approximately $15,000,000 of annualized revenue for eighteen months. If we don't secure an acceptable customer contract for our existing B 200 cluster, we will likely use those GPUs to fulfill our anchored customer contract. We continue to prioritize securing multiyear deployments with creditworthy counterparties as the foundation for our growth strategy. Looking ahead, we're engaged in several large contract discussions with a focus on securing multiyear agreements that are financeable and aligned with our capital efficiency objectives.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Currently, we are conducting diligence and negotiating on four separate deployments with creditworthy counterparties. Each opportunity carries an annualized revenue potential above 100,000,000 and a three to five year contract term. These are the types of contracts that we believe would support attractive financing structures, and we're working on those financing options in parallel with negotiations. It's too early to say whether we'll ultimately win any of those deals, but we're encouraged by the progress and the fact that we're increasingly included in these processes. We believe this reflects the strength of the platform that we've built and are continuing to build through a disciplined investment and execution.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Finally, we are investing in proprietary software development to enhance our platform capabilities. A key milestone was the launch of our API layer for external provisioning of bare metal GPU servers with Shadeform as our first integration partner. This development not only expands our ability to integrate with third party platforms but also streamlines operations for our direct customers. Over time, we expect that this will position WhiteFiber as a premium cloud infrastructure offering focused on maximum performance and reliability. Turning to colocation services with our data centers.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Development activity continues across our sites. While the segment represents a small portion of Q1 revenue, we are laying the foundation for this segment to be a major growth engine in the coming years. At Montreal two, development time lines have shifted modestly and we now expect initial capacity to come online around early to mid third quarter. The delay is largely due to the timing of debt financing, which we had expected to secure quicker, but we're but we're now in the very, very final stages. We recently completed the physical installation of a Pilot GB 200 liquid cooled system at Montreal two.

[Samir Tabar, Chief Executive Officer at Bit Digital]

While not yet operational, the project supports collaboration between our cloud services and colocation teams, providing our cloud team a platform to test next generation hardware and our data center team early exposure to advanced liquid cooled systems. We secured our third data center site, Montreal 3, in April under our lease to own structure. Development remains on track with the Cerebras deployment expected to commence about two months from now. As a result, this is a built to suit deployment for a customer with a very sophisticated technology requirements, and we're really proud to partner with them and help accelerate their growth plans. We are making progress on both sides and remain confident in our ability to meet key customer key customer commitments.

[Samir Tabar, Chief Executive Officer at Bit Digital]

In April, we disclosed via an eight k filing that we signed a purchase agreement to acquire a roughly 95 acre property in North Carolina intended for data center development. This transaction remains subject to customary closing conditions, and we're actively working through those processes. While it is too early to provide additional details, we are very excited about the potential strategic significance of this site of this plat for our platform, and we look forward to providing further updates as appropriate. In addition to our active projects, our broader development pipeline remains robust. We continue to pursue additional data center opportunities

[Samir Tabar, Chief Executive Officer at Bit Digital]

S. With over 500 megawatts of potential capacity under evaluation or negotiation. Customer demand for high performance AI optimized colocation remains strong, and we're engaged in multiple active discussions that could drive incremental leasing at our existing and planned sites. On the financing side, we are now nearing finalization of a mortgage financing package for our Montreal Two facility with a leading global banking partner. We expect to be in a position to announce the terms shortly.

[Samir Tabar, Chief Executive Officer at Bit Digital]

We believe this financing will validate the scalability and capital efficiency of our data center development model and provide a very strong foundation for future growth. Our data center platform is a critical pillar of our strategy to build a durable, diversified and high margin infrastructure platform. We're very excited about the opportunities ahead as we continue to expand capacity and deepen relationships with high quality customers. I'll now hand over the line to Eric, who will discuss our financial results.

[Erke Huang, CFO & Director at Bit Digital]

Thank you, Sam.

[Erke Huang, CFO & Director at Bit Digital]

I will now walk through our financial results for the first quarter of twenty twenty five. Total revenue for the quarter was $25,100,000, a 17% decrease compared to the same quarter last year. And slightly below the 26,100,000.0 reported in the fourth quarter of twenty twenty four. The decline was primarily due to the lower Bitcoin mining revenue, which was partially offset by growth in our cloud services business and a full quarter of colocation revenue. Bitcoin mining revenue was $7,800,000, down 64% year over year and 26% sequentially.

[Erke Huang, CFO & Director at Bit Digital]

This decline reflects the impact of April 2024 happening, increased network difficulty, and a temporary decrease in operational hatchery as we exited equipment facilities. We also retired and replaced older units to optimize fleet efficiency. Cloud services revenue was $14,800,000, increase of 84% compared to the first quarter of twenty twenty four and fourteen percent sequentially. Growth was supported by new crowds contracts signed in both late twenty twenty four and during the first quarter of twenty twenty five. Contributed $1,600,000 in revenue, up from 1,400,000.0 in the first quarter.

[Erke Huang, CFO & Director at Bit Digital]

This reflects a full quarter of operations following our acquisition of Innova in late twenty twenty four. If you're mistaken, revenue was $600,000 slightly lower than the prior quarter. Our cost of revenue, excluding depreciation, was $12,800,000 down from $16,200,000 in the same period last year and flat compared to the first quarter. This included $6,100,000 in cloud services costs and $6,100,000 in mining costs. Gross profit was $12,300,000 representing a total gross margin of 49%, then compares to 47% in the same quarter last year and 40% in the fourth quarter of twenty twenty four.

[Erke Huang, CFO & Director at Bit Digital]

Cloud services gross margin expanded to 59% from 52% last quarter, reflecting improved utilization and scale. Collocation services gross margin improved improved modestly to 67%. General and administrative expenses were $8,200,000 up from $6,000,000 in q one twenty twenty four, which reflects an increase in headcount as we invest in our HPC business lines. Depreciation and amortization was $7,200,000, up slightly from the prior quarter, mainly due to a larger GPU fleet. As a note, we adjusted our depreciation schedule for cloud services for three years from three years to five years, which we believe better reflects the useful lives of these assets.

[Erke Huang, CFO & Director at Bit Digital]

This accounting change decreased D and A by approximately $2,500,000 for the quarter. Adjusted EBITDA was negative $44,000,044,500,000 compared to a positive 58,500,000.0 in the first quarter of twenty twenty four. This decline was primarily due to a $49,200,000 mark to market loss on digital asset holdings, reflecting lower BTC and ETH prices at quarter end. These were non cash charges and do not reflect changes in operating performance. GAAP net loss per share was $0.32 on a fully diluted basis compared to earnings of 43¢ per share in the first quarter of twenty twenty four.

[Erke Huang, CFO & Director at Bit Digital]

Now turning to the balance sheet. As of March 31, we held $57,600,000 in cash and cash equivalents and $3,700,000 in restricted cash. The fair market value of our digital assets was approximately $80,000,000 as of that date. Total liquidity, including digital assets and USDC, was approximately a hundred $41,000,000 as of that date. Since then, the price of Bitcoin has increased by 25%, and the price of Ethereum has increased by 40%.

[Erke Huang, CFO & Director at Bit Digital]

The market value of digital asset position has appreciated on a mark to market basis. Total assets were $485,000,000 and the shareholders' equity was $470,000,000 We remain debt free. CapEx for the quarter was $65,000,000 approximately 36,000,000 for the core CapEx was spent on the GPUs, including our b 200 deployment, with the remainder spent on data center infrastructure, networking and storage equipment, and Bitcoin mining units. I will now hand it back to Sam for closing remarks.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Thank you, Eric. Before opening the line for questions, I wanna address our financing strategy and recent capital mark capital activity. We remain firmly committed to pursuing nondilutive financing structures to support the expansion of our HPC platform. We're actively working toward finalizing our first commercial mortgage financing, and we're confident that this will provide a strong foundation for scaling our data center business efficiently. We have also initiated the process for commercial mortgage financing in The US.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Regarding the filing of a new ATM registration, I wanna emphasize that this was mechanical renewal of our shelf capacity. It doesn't reflect any change in our philosophy. We continue to view equity issuance as a tool to be used selectively and strategically with a strong preference for nondilutive financing wherever possible. During the first quarter, we raised approximately $10,000,000 through our ATM program as part of our normal course of operations. Subsequent to quarter end, we raised approximately $48,000,000 through the ATM.

[Samir Tabar, Chief Executive Officer at Bit Digital]

These proceeds strengthen our liquidity position and support certain strategic growth initiatives that we believe will be transformative for our business. We look forward to providing additional updates on these certain initiatives at the appropriate time. In parallel, we also sold approximately $32,000,000 worth of Bitcoin holdings during the quarter to help fund growth while managing our use of equity issuance. We did not sell any ETH during the quarter but transferred 3,400 into an internally managed fund, which we do not count as treasury holdings. Maintaining a strong liquidity position is critical not just for executing on our expansion plans but also for building trust with our customers.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Prospective colocation tenants view financial strength as a key factor in selecting infrastructure partners, and our balance sheet reinforces our ability to deliver projects reliably. Our focus remains on executing our growth strategy, scaling our infrastructure platform and pursuing disciplined shareholder friendly capital deployment. As our business continues to evolve, we are actively evaluating corporate structure and strategic initiatives to maximize long term shareholder value. With that, I would like to turn the call over to the operator for Q and A. But as a note, we have Billy Krosopoulos, who leads our data center business and Ben Lampson, Head of Revenue for our Cloud business, on the line for Q and A.

[Operator]

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. Please make sure your mute function is turned off to allow your signal to reach our equipment. If you're on a speakerphone, you may need to pick up the handset to signal. A voice prompt on the phone line will indicate when your line is open.

[Operator]

May I ask that you please limit yourself to one question and then rejoin the queue for additional questions? Again, press star one to join the queue. And we can take our first question from George Sutton with Craig Hallum.

[George Sutton, Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC]

Ben, I'd like to address my question to you, if I could, on the white fiber rebranding. Can you just give us an update of how that's been received in the market? And then I know you're working on a lot of platform initiatives that are are somewhat new to the market. Can you just give us any updates there?

[Benjamin Lamson, Head of Revenue at Bit Digital]

Yeah. Happy to. So the rebrand has been really, really well received. We actually have have gone through a few iterations on the website as we've gotten feedback from customers and partners. You may have seen we recently launched a new version of the website about two weeks ago, week and a half ago, and and the reviews have been fantastic.

[Benjamin Lamson, Head of Revenue at Bit Digital]

So really, really happy with with how that's been panning out for us. In terms of on the platform layer, I I wanna be careful not release anything a little too soon. We we will have some news coming out here, in the next couple weeks that will be really exciting, some some first to market technology that we're gonna be releasing. We're just waiting on some independent third parties to publish some benchmarks around that. So, you know, look out for that.

[Benjamin Lamson, Head of Revenue at Bit Digital]

That's gonna be coming in the coming weeks. And then we've got some other developments coming later this year on the platform side around, cross data center workloads, which we believe is gonna be a really a a revolutionary technology, in terms of us being first to market to productize that.

[Benjamin Lamson, Head of Revenue at Bit Digital]

So I don't I don't wanna say too much just because I wanna allow some

[Benjamin Lamson, Head of Revenue at Bit Digital]

of these independent third parties to release some of this data, and, and we'll be able to leverage that the media splash there appropriately. But just stay tuned in the next few weeks for some announcements.

[George Sutton, Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC]

Understand. Thank you.

[Operator]

Thank you. Our next question comes from Brian Dobson with Clear Street.

[Brian Dobson, Managing Director & Senior Research Analyst at Clear Street LLC]

Thanks very much for taking my question this morning. You think that we could take maybe a step back and you could provide a 30,000 foot view on on how you see demand from hyperscalers and enterprise users evolving over the next six months or so?

[Samir Tabar, Chief Executive Officer at Bit Digital]

Would that be for the data center side? If so, Billy, please feel free to weigh in. Is that just to clarify, that's that's with respect to data center's colocation. Correct?

[Brian Dobson, Managing Director & Senior Research Analyst at Clear Street LLC]

Yeah. That's right.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Okay.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Billy, would you like to take that?

[Billy Krassakopoulos, CEO at Enovum Data Centers]

We're seeing very strong and positive demand from, not only hyperscalers, but medium sized NeoClouds as well for capacity that we're evaluating and looking to come online, later on this year. We should have some news in the next couple of months, about that.

[Brian Dobson, Managing Director & Senior Research Analyst at Clear Street LLC]

That's very exciting. Thank you very much.

[Operator]

Thank you. Our next question comes from Mike Grandahl with Northland Securities.

[Mike Grondahl, Head of Equities & Director of Research at Northland Capital Markets]

Hey, guys. Good morning. I I think what you were describing is a delay for customer one from June 30 to August 20. '1, can you talk a little bit about why? And then I think you were saying how you were gonna use maybe those GPUs for your own book.

[Mike Grondahl, Head of Equities & Director of Research at Northland Capital Markets]

Just kinda walk us through the options you have there.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Yeah. I think the the maximal allowable date is the date they've exercised. And as you as you mentioned, Mike, we have we have the cluster to honor what they're looking for. So that's that's a that's a good thing since we already have that cluster, and we could just use that if we don't score a multiyear contracts for that current inventory. Is your question about why they shifted?

[Samir Tabar, Chief Executive Officer at Bit Digital]

The the start

[Samir Tabar, Chief Executive Officer at Bit Digital]

date for couple of months?

[Mike Grondahl, Head of Equities & Director of Research at Northland Capital Markets]

And then if so what you're saying is, hey. The GPUs might not sit idle until August if you can put them in a new customer win?

[Samir Tabar, Chief Executive Officer at Bit Digital]

Correct.

[Mike Grondahl, Head of Equities & Director of Research at Northland Capital Markets]

Got

[Mike Grondahl, Head of Equities & Director of Research at Northland Capital Markets]

it.

[Samir Tabar, Chief Executive Officer at Bit Digital]

But as for the reasons for shifting, I I'm not familiar. Eric, do you have any color on the reasons they're shifting the start date for two months? I think it

[Erke Huang, CFO & Director at Bit Digital]

has some internal, you know, product development schedule change. So, like, to they still want those compute, but they like to, you know, exercise their option to extend at a little, you know, later date. And, you know, we had installed and deployed those equipments in our authentic data center already. So right now, we can sell those compute, and I know Ben is working on that. There's a few, you counterparties we're negotiating with for multiyear contracts.

[Erke Huang, CFO & Director at Bit Digital]

And on top of that, we're putting this, you b 200 compute on on demand, you know, pamphlet through shape form as well. So it's already generating, some revenue.

[Mike Grondahl, Head of Equities & Director of Research at Northland Capital Markets]

Okay. Okay. Great. Thank you.

[Operator]

Thank you. Our next question comes from Nick Giles with B. Riley Securities.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Thank you, operator. Good morning, everyone. Guys, it's good to see you further expand into The US with the North Carolina agreement. So my first question is, how should we think about your desire to continue that expansion in The US versus Canada? And secondly, apologies if I missed this, but can you just outline when those megawatts could be available, what the ramp will ultimately look like, and and CapEx expectations?

[Samir Tabar, Chief Executive Officer at Bit Digital]

Yeah. Well, look, as as you know, we disclosed in an eight k that we signed a purchase agreement to acquire a roughly 95 acre property in in North Carolina. The transaction remains subject to some closing conditions. So we're it's too early for us to provide additional detail until it closes. But I I can tell you I'm deeply excited about its potential strategic significance, and we will definitely update you and the markets as soon as if if this closes.

[Samir Tabar, Chief Executive Officer at Bit Digital]

The deal isn't closed, so there isn't much we can say or frankly or what, you know, what we wanna say until something is finalized in either in either direction. But to your question about the broader colocation development pipeline, we're evaluating and negotiating over 500 megawatts of additional potential capacity across Canada and The US. These sites range from small sites in the five to 21 20 megawatt range to sites with over 100 megawatts, and we continue to target those sites in adjacent adjacent to market cities or improving corridors of customer demand. That's really important for us geographically. We focus on retrofits.

[Samir Tabar, Chief Executive Officer at Bit Digital]

So we look at sites that aren't currently configured as data centers but would lend themselves well to redevelopment and reduce costs and timelines relative to a greenfield site. And the team that we have, when we acquired Innovium last year, it wasn't just about an acquisition of a tier three data center, but more importantly, it was about a team that's been doing this their entire careers and also a a huge pipeline that they've identified through LOIs and through a lot of work, about 500 mega 500 megawatts worth. So they the secret sauce with respect to that particular acquisition was their experience in retrofit and how they could do it faster and cheaper, and they have a track record of doing it faster and cheaper. And this is this is this is really the secret sauce of we're we're not trying to sort of figure it out as we go. We have acquired a team that's been doing this for a long time before this sector got hot.

[Samir Tabar, Chief Executive Officer at Bit Digital]

So we're really looking forward to developing that colocation pipeline, and and, you know, there'll be some exciting definitely some exciting announcements in the medium term future, if not the near term future.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Sam, I appreciate all the color and look forward to the updates.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Likewise. Thank you for asking.

[Operator]

Thank you. Our next question comes from Joe Gomes with NOBLE Capital.

[Joe Gomes, Senior Generalist Analyst at Noble Capital Markets]

Good morning. Just wanted to kinda get your your thoughts. And if I if I look through the the 10 k q this morning and, you know, you're you've got 33,000,000 on the balance sheet of investments. And at the same time, you're you're raising equity. And just trying to get, you know, your thought on, you know, how do you weigh that?

[Joe Gomes, Senior Generalist Analyst at Noble Capital Markets]

Is it more, you know, is it a better opportunity to to liquidate those investments and not have to sell so many shares in the ATMs? Just trying to get your your thought process on that.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Yeah. Absolutely. So the the recent filing was a mechanical renewal just to maintain flexibility and optionality. It doesn't reflect the change in our posture towards selective and strategic use of equity issuance. We understand.

[Samir Tabar, Chief Executive Officer at Bit Digital]

I completely understand. The optics are not great given the size of the ATM relative to our market cap. The market cap is transitory. Having the ATM on file is really just a tool we have access to. It's worth more to have that optionality in future years than to forego in favor of optics.

[Samir Tabar, Chief Executive Officer at Bit Digital]

But, look, liquidity is critical for executing strategic initiatives and building customer confidence as mentioned on my on the call earlier. We we do balance raising equity with selling digital assets to fund growth responsibly. We did sell some Bitcoin. Fortunately, we did not sell any ETH. As you know, the ETH has had a a really great run, and we're still pretty strong believers.

[Samir Tabar, Chief Executive Officer at Bit Digital]

There's a lot of there's a lot of juice in there. But we also are very excited to announce mortgage financing, which is really inexpensive capital in order to fund the growth of our data center business, and we look forward to announcing the terms of that mortgage financing very soon. And that will really help with respect to how we fund our growth. We want to use cheap sources of financing. We do not want to use the ATM, but it has to be an option.

[Joe Gomes, Senior Generalist Analyst at Noble Capital Markets]

Thanks.

[Operator]

Thank you. Before we take our next question, just a reminder to our audience that is star one to ask a question. Our next question comes from Kevin Dede with H. C. Wainwright.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Hi, Kevin.

[Kevin Dede, MD & Senior Technology Analyst at H.C. Wainwright & Co.]

Hi. Good morning, Sam, Eric. Thanks for having

[Erke Huang, CFO & Director at Bit Digital]

me on the call.

[Kevin Dede, MD & Senior Technology Analyst at H.C. Wainwright & Co.]

Apart you know, Eric mentioned changing the depreciation schedule. But apart from that, Sam, can you walk through the levers that you can pull or the variables that you see changing the gross margin profile of your cloud and colo business, and maybe layer in a little discussion on the GPU procurement strategy and filling the shade form and DNA fund business?

[Samir Tabar, Chief Executive Officer at Bit Digital]

There's a few questions there. Let me rephrase a couple of those questions. With respect to I'm not sure if it was a question or a comment about changing the depreciation schedule, but three years was just overly conservative and way too aggressive. If you look at others in the industry, they do five. Some even do more than five.

[Samir Tabar, Chief Executive Officer at Bit Digital]

So even being at five at this point is still, we believe, responsible and conservative. I think the next question you had in there was are what are the different levers to increase the margins of our cloud business and our data center business? Is that is that what I is that correct?

[Kevin Dede, MD & Senior Technology Analyst at H.C. Wainwright & Co.]

Yes. Absolutely, Sam. Thank you very much. I apologize for the the the connection that I'm working with here.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Yeah. No. All good. I mean, besides charging more, of course, to the customers, I'd love for Billy to weigh in on the different levers to increase margin. And then Go ahead, Cam.

[Cameron Schnier, Head of Investor Relations at Bit Digital]

I can jump in, Sam. I mean, Kevin, the biggest thing on the cloud side, is really just spreading the operating lease for for our anchor customer over a larger revenue base because that's one of the major COGS items right now. And it's, you know, effectively a financing structure, but it's above the line. So just getting more revenue, I see, the absorption across that will naturally drive gross margin up. So any increase in revenue is broadly gross margin accretive.

[Cameron Schnier, Head of Investor Relations at Bit Digital]

Billy can add in on the data center side, but I think the way we look at it is pretty much every leading edge contract that we sign and revenue that goes on will lift gross margins as well.

[Billy Krassakopoulos, CEO at Enovum Data Centers]

On the data on the data center side, margins are very predictable, and can be relied on. Long term contracts with clients who are very sticky, give us great insight on what the numbers will be over the next couple of years. We're aiming for minimum five year contracts on that segment. So the predictability and the reliability of those are are very certain.

[Kevin Dede, MD & Senior Technology Analyst at H.C. Wainwright & Co.]

Yes, Sam. Could you just touch on your procurement thinking, your GPU procurement thinking? I mean, I know in the past, you both bought and leased. I'm just wondering if that thinking and philosophy is altered in any way.

[Samir Tabar, Chief Executive Officer at Bit Digital]

I think Eric is closer to that work stream than I am, so I'd love to the procurement for on the cloud side? Just to clarify, which side of the business are you referring to? Procurement for equipment for data centers or procurement for the GPUs on the cloud side?

[Kevin Dede, MD & Senior Technology Analyst at H.C. Wainwright & Co.]

Yeah. G p yeah. GPU for cloud. Right? Because you're BitDigital is responsible providing a compute for both shade form and DNA Yep.

[Kevin Dede, MD & Senior Technology Analyst at H.C. Wainwright & Co.]

At at least as I understand.

[Samir Tabar, Chief Executive Officer at Bit Digital]

I'd love to Yeah. I'll pass that to Ben and to Ben and Eric.

[Erke Huang, CFO & Director at Bit Digital]

Yep. Yeah. We still remain the same strategy. Try to, you know, sign contracts and tie it to a procurement so that you minimize our exposure to speculative procurement. But at the same time, we did, you know, procure some GPUs prior of signing a definitive agreements that would allow us to do some r and d and do some, you know, benchmarking and testing as well.

[Erke Huang, CFO & Director at Bit Digital]

So we had completed our deployments in Iceland. Right now, there's a couple of deployment we're working on in Canada at different sites as well. And and a higher level, if I may add and a higher level, if I may add, we tend to procure those, you know, most advanced technologies or GPUs and which are more attractive to end users at our new stage as well. And we had those relationships with OEMs and the media to get those chips at a faster or more accelerated timeline.

[Kevin Dede, MD & Senior Technology Analyst at H.C. Wainwright & Co.]

Right. Thank you. I appreciate it. Thanks, Sam.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Yeah.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Thank you.

[Operator]

Thank you. It appears that we have no further questions at this time. Mister Tabar, I'll hand the call back to you for closing remarks.

[Samir Tabar, Chief Executive Officer at Bit Digital]

Okay. Well, then that's that's it then. Thank you for joining us on the call today, everybody. We appreciate your continued interest and support. We look forward to speaking with you again in the next quarter.

[Samir Tabar, Chief Executive Officer at Bit Digital]

This officially concludes our call, and have a great day, everybody.

[Operator]

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

Participants

Executives

• Cameron Schnier, Head of Investor Relations
• Samir Tabar, Chief Executive Officer
• Erke Huang, CFO & Director
• Benjamin Lamson, Head of Revenue

Analysts

• George Sutton, Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC
• Brian Dobson, Managing Director & Senior Research Analyst at Clear Street LLC
• Billy Krassakopoulos, CEO at Enovum Data Centers
• Mike Grondahl, Head of Equities & Director of Research at Northland Capital Markets
• Nick Giles, Senior Research Analyst at B.Riley Securities
• Joe Gomes, Senior Generalist Analyst at Noble Capital Markets
• Kevin Dede, MD & Senior Technology Analyst at H.C. Wainwright & Co.