SDIG - Earnings call transcript Q1 2022 | Stronghold Digital Mining, Inc.

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Operator

Good evening, and welcome to Stronghold Digital Mining's Conference Call for the First Quarter ended March 31, 2022. My name is Carroll, and I will be your operator this afternoon.

Before this call, Stronghold issued its results for the first quarter 2022 in a press release, which is available in the Investors section of the Company's website at www.strongholddigitalmining.com.

You can find the link to the Investors section at the top of the homepage.

Joining us on today's call are Stronghold's Co-Chairman and CEO, Greg Beard; and CFO, Matt Smith.

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

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

Jeff Grampp

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

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

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

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

identified sets Securities including circumstances, but of which the the well with will consider today, and and on metrics, XX-Q Risk earnings and Exchange risks caption you carefully, disclosures our you other read variable our in We metrics. tables XX-K. and the not uncertainties forth descriptions report GAAP release as financial and also reconciliation discuss disclosures to in detailed our to as encourage our under applicable Commission, We Factors quarterly our to uncertainties filed business, in these as non-GAAP measures Form limited

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

Beard. Greg and over the Sir, to stronghold's would CEO, I call like to turn please Now, Co-Chairman proceed.

Gregory Beard

quarter you, call. joining Thank and evening, you right. XXXX earnings and Jeff, good everyone, thank first for All our on us

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a I'm Stronghold So numbered called X, on at glance. Slide now

with overview comments. an is there So some introductory

prices coupled beneficial, an but highlighted integrated As year, integrations apparent in a costs didn't in public integrated power with vertically vertically model lowest as some the run value. Bitcoin expect environmentally pricing power are the up decline for We recent Bitcoin importance reminder, of miner the the be the has another with relevance we to in business and the of industry. vertical

We earnings steps call regarding this our Additionally, March. on recent of on we taken liquidity, performance will addressed operating any walk that to we QX through our extinguish have our call. in doubt much

quarter mining approximately along we with XX% last generated ramped sequential as associated miner represented and the $XX we and nearly While as deliveries we have first increase quarter progress capacity, in a revenue, million our datacenter datacenter power with commissioning, from faced operations. difficulties

per the earnings just second fourth communicated we call. under in line one During Bitcoin, with XXX quarter a on averaging rate the quarter, we mined guidance exahash hash our

quarter mined with through have We May. first mining the second over of operations in Bitcoin XXX over Bitcoin our May further scaling we XX, as up XX in are the XXX days

continued beneficial tons refuse the by coal of quarter. environmentally during We approximately our XXX,XXX reclaiming mission also

we by year-end. to capacity rate we of per rate been sure is miners. not This receive to as major and has miners assumes in I and hash a any us exahash keenly XX that of last Our exahash a bring do few capacity weeks, volatility May Cryptocurrency per MinerVa approximately additional headline the everyone was aware. X.X am approximately hash second contracted have three second,

that have seen availability We and fund scale external of capital the were oftentimes peers on projections near-term long-term predicated growth. several back growth to

selling private we will a miners. steps hear, you and liquidity, strategically excess raising including placement As have taken up to shore

expect in be strength and for may putting a XXXX we arise, after the look having future that opportunities of XXXX. business in self-funded as on We go-forward us basis, event a to a position especially

benefit the from from actually power Bitcoin. that believe power most to Now and this protection selling Slide less downside superior and own power Bitcoin economics Bitcoin Downside We scenarios business, other mining in X, the Integration focused that to company are periods to volatility Risk. of to of material When this of be potential through and but to an our clear, created integrated to of is on but concern. sentiment build Stronghold, have we titled sell vertically when prices. we grid. miners selling Slide upside by grid, was But aim turning to times more Bitcoin we mining, the We the to demonstrates of downside our Mitigates provide grid. believe be importantly, exposure will X, capable there both under the would those from our higher flexibility more tied and also that To Vertical and a power be persevering a would time remains to business had component differs suffer at being pricing hence buy strategy. the assets bullish the of grid especially markets underappreciated impact our Bitcoin, owning

blue $XXX to average the basis. pricing approximately forward Bitcoin the hour to On the grid. zones Bitcoin dollar gray line the of mining The implies for represents shows $XX,XXX chart, $XX,XXX power shaded $XX a per hour. megawatt our region on megawatt revenue per

a Over the megawatt next price months, which approximately $XXX average, Bitcoin implies of on exceed $XX,XXX. XX these per hour

effectively have we we if the us average, $XX,XXX. What is Bitcoin distinguishes most pivot Bitcoin miners. on power on at grid, falls this which that other to So to from floor will below selling means $XX,XXX a

addition In we pricing. to capture the additional value this downside protection, of by to advantage of volatile plan selling nature seasonal through taking and to grid grid this

represent the above on see the and power the One to the we market Bitcoin largely In the ability business do adjusted sold next comparison this green to any to the than the various when past our a over integrated capacity simplifying advantage model. current us business the three can to power the we be grid, could to sales any line Bitcoin generation in even note, to currently in shaded we being next assumptions of $XX,XXX EBITDA the grid. would if downturn. Bitcoin natural such prices, looks additional the we to you of to ability we make not observed As guidance EBITDA XX And to their prepared otherwise like allocated to if to with context demonstrates forward over to form. the more the grid better the we operations final a presented prolonged $XX range, we generation expect selling we think midpoint over generate sell able mining take blend these weeks, pivot mine moves we at to it's region, million chart, the mining anticipate among think of gray million scenarios, believe At in to ensure $XX generate the what market of apples-to-apples XX to The to opportunities We XX% ability about months power of only comparisons. economics. the the illustrate that power themselves In with figures to we vertically adjusted would achieve continue summary, value about in present sell our power. few don't Bitcoin give generate be markets, Bitcoin. while economics an months without any power power and have the had spared

Scrubgrass moving to outage has first completed upgrades and progressing higher mining has rate are than in average X been The Now have updates. was April Bitcoin power plant the repairs Slide quarter recent our select and to plant schedule. forced to The Improvements power grid. operations as XX% the dropped supplying on discuss average. successfully and both power output been our

were full after swing venture initial delays last datacenter the is quarter. joint discussed in commissioning Our

of May four for additional datacenter As of renegotiated were our there have the the XX now you joint pods are more had this addressed. commissioned. fourth venture call, quarter joint while recall, will XX favorable as time At pods delays and we operational, of the being terms an XX, venture

datacenter remaining the to containers next operational two We be months. within the expect

employment Lastly, our since of Smith CFO. and Committees of as on Compensation January. had Matt on Chair Audit April served as Matt the the Board the XX, we announced our

So energy, years Deep he investment value founded We and Basin to than with the position. with I'll And turn Capital and financials. more previously is with of and familiar utility the the and very Matt in sectors. team the Stronghold, XX has CleanTech, experience With very discuss been has team. over financial to how I've hit mindset our impressed management capabilities. Matt running Matt's the it deeply ground analytical that, he power

Matthew Smith

and Greg, everyone. Thank you, good evening,

The all you Slide joining convert X has a more well improved as equity The our XX through of and our earnings basis. for coupon the preferred executed bolster looking of positioned. raise XX% at to a taken to to We've coupon. call. look definitive to this other drops recent warrants, that believe going XXX upon now million structured we cash frequent forward our you are by conversion liquidity, $XX September a we steps to interacting our terms, year. Yesterday, very note among profile. an market note a transaction Thank million is we and cap agreement are note and of regarding reaches that will X% I'm plus placement. liquidity if private into on a a proceeds with We few

made million. to of without forma fleet a growth lays we In second when Additionally, lower Approximately capacity in financial page approximately our to per returns trajectory rate CapEx cash million. out optimize The impacting million we've in our This with petahash been $XX approximately approximately flexibility. up and three $XX guidance. to miners we and pro hash be reduction a working to XXX miners order $XX minor $X of our to of for bridge sold on approximately contracted decision transactions, sold liquidity in X,XXX some the go-forward of bottom million. the focus freed our

and cash had placement $XX approximately for we Adjusting sale pro As sheet. approximately balance Bitcoin to our million. of of a private on and balance proceeds, million our Bitcoin miner May forma we XX, in cash and get $XX

With $XX to Bitcoin, that now to association liquidity flexibility. agreement anticipated capacity and under sale on finance our the increased puts $X we backing spare with total it million, I'll with repaid flow of our get approximately out in equipment back offense be of back million when cash financial us Greg. turn which combined with will over forward

Gregory Beard

Matt. Thanks,

Slide our the progress March X reviews earnings call. we during our on out laid objectives So XXXX

completion Panther Panther is expected we datacenter overall the at the initial Creek discussed previously. some with Our after on at that with we delays Creek. datacenter operations have and of very Scrubgrass commissioned end been May is track fully satisfied nearly JV commissioning at

in identified, of which also downtime are sources the detail improve we to momentarily. more uptime with initiatives progressing several our We of discuss on will datacenters

complete Scrubgrass We QX. second the upgrades as at track plant on we upgrades made expect the to working at load have remain of full necessary by to progress consistently the complete half to largely XXXX, in have early be significant and

always have focused capital generating per value been share shareholders. return We on and on for

immediate market growth, acquisition such, actively plant do given miners, still in environment. we not and Accordingly, new not current and in on engaged any plan are of while assets, the make future. conditions we the cost power power for As deemphasizing potential the are capital we we are macro to in

operational hash close would second the that X Now to Right today. between have Slide are our of discuss operational are exahash hash rate now, improvements. actual gap rate. capacity to we and only X.X our We three capacity, on like but we making exahash per

our the we identified much a of in coming more delivered our through capacity select total line expect be miners, rate with months rate capacity. hash equipment hash repairing electrical installing combination Over miners, will and installed upgrading

May unchanged XX. of exahash from approximately first last Now turning to of are X as Side quarter the largely X. is XXXX at communicated This quarter. entered per second per we approximately hash exahash second of with rate what X.X we and We capacity

More which remain capacity track centers. based year-end on exahash we data capacity, of our importantly, per on of is to of target current the X.X second our hit installed

second downtime, estimate negatively April failure at at operations we when X.X in impacted approximately to rate in days downtime event resumed in switch negative generated quarter revenue time, the XX, similar sold in Creek net that Normal that gear order downtime, to of second grid Panther inventory exahash datacenter switch an occurred on future. gear mining hash operating At a the the of the by hold the selling was on avoid mining and impact this Our grid. is ordered on and we similar a of power have to backup we power X.X resulting million. instead per equipment approximately Panther to April from XX XX, and Creek was the

modest venture for observed datacenter have placed of proprietary delay. previously miners we joint that we our Recall the had the with discussed the associated containers commissioning venture commissioning strong datacenter. boxes of given earmarked joint downtime batches into Additionally,

the datacenter call back one venture these I now take This resolved be JV joint to are Matt containers. them the in of to review fully next should results. first being for As months. over move commissioned, our two offline quarter containers hand into to will a we miners must

Matthew Smith

and Revenue a Thanks, the our which level first totaled associated EBITDA recorded averaging $X.X we MinerVa Bitcoin of deposits. impairment quarter increase million approximately million, guidance a per second a were XX XX% note would met results, in quarter, provides mined with high first and non-cash sequential quarter line Greg. our exahash our nearly X.X expectations. Slide XXX our of that We quarter. $XX during during I million. adjusted the for about was the $XX equipment with overview

of taking receive XX,XXX to discussions MinerVa impairment we delays end miners to appropriate deliveries owed was future While approximately us, about the value and contractually for the some tons returned will per call piles. approximately now we our mission, and refuse to options related uncertainties over capacity with the have and second. turn exahash beneficial quarter the line continued of felt coal X.X the to during quarter, and rate XXX,XXX with removed approximately hash deliveries. with At of environmental hash Also, conservative to XXX,XXX we continue delivered other future the active I remarks. the back in remediate from given to a approximately the use to the we tons toxic of had environment these Greg final treatment

Gregory Beard

making Matt. operations again, are here XX, progress up Thanks to our miner right. operator. Wrapping to All on Bitcoin Slide a power leading continuing and improving we Stronghold be and on notable build

costs value both integrated in us Our and low with Bitcoin flexibility vertically markets. model provides and business opportunistically create power to

the on execute We also our and financial upon goals. have based contracted capitalization our scale growth significant to

everyone aligned ownership Thank with taking you, for to track a XXXX Stronghold. remain We the has time highly to team dial-in. management are majority on achieve our shareholders and in objectives key as the

are take ready to your now Operator? questions. We

Operator

comes first of line [Operator Please with Securities. from Instructions] Pipes B. question. Thank the ask Our Lucas Riley your question you.

Lucas Pipes

mid-XXs ask the at April, X.X rate. so or into when you rate. rate I much, Greg, good afternoon, Thank production, utilization of wanted first and quarter-to-date think X out a is at of everyone. mentioned about then May kind you utilization the I looked I And utilization backed current to so.

we're factors these to for rate, you've wondered So could levels? the kind keeping it or much. XX%, you example, would closed What like percent would utilization made the – I very what be from the are at XX% you if Thank down between difference? JV, break come switch other of so after

Gregory Beard

Yes.

presentation. slide a in the So I think had we

I we're to and are not number miners say think highlight X, components delta, publicly that the should would it's disclosing plugged them I what the in. timing about delivered, in but are that that online. which just yet Slide get biggest installing back two

this, be what you with those, have and longer. miner still we inventory. month, replace repair, it's building miner hey, think can you're which repairs, do. take a won't I if of we get the toward expect – as why a we couple it to we excess also to a we and from think bit supplies, and PDUs, we'd are it repairs for in, what have of miners in more the say That we to batch offline process So that's put the and certain would out describe us some miner of shelf will what's takes as have reasons. next happening miners a the and of daily, we on the then month, do we of ones sort we're like new datacenter. in variety trouble And have the we then either or as have And as we're the inventory And of our PDUs moving that room anyway, and moved pods tier but excess it I up warranty Then a for are unplug JV showing getting But like had I And miners that power I diagnosable important the X a minors get that with sold than bridge. months on are of those year, a of of end within it, the that's repairing have we're that also model, replacing a if happening working is SXXj receiving us. that to problems that the for time well. weeks XXXX we've sort a Pro part months, into have them a that note find would run, otherwise of would plugging sort little with just

your that answer Lucas helps question. hopefully, So

Lucas Pipes

super helpful. This is

at this end assume X of and similar end kind X.X more as should now June? on between from ramp X.X go So quarter, a to incremental miners the the exahash that there's add of you of and we that

Gregory Beard

Yes.

but should our that actually the can assumption – give as a are delivery model. miners think as that of analyst is have coverage help that that, for dates I we growth build arriving assume ordered you expected of you sort should you of the the one we and

Lucas Pipes

to And question. ask I I wanted then clarification that. appreciate a

net the kind of JV, kind the Are about think be Slide net it numbers split line operation? what and think for we between and about roughly that X gross what's X the and gross bottom the matters? to the to is With or going of as or best mining way those for

Gregory Beard

Yes. to from I'm VP Tom certainly have – so let is of Finance, the going we Tyree one him.

Thomas Tyree

Hey, Lucas. The JV. I Yes, are the the will will so here about, XX% presented the JV ultimately numbers just be the X.X split represent under that ultimate to and gross exahash. are on JV think

how would that's the run math. So I

Lucas Pipes

exahash this end X.X that's year, so And of XX? December

Thomas Tyree

in starting yes, but I that would think it Well, will be way, QX. that about –

Lucas Pipes

do Got and so industry very not now. what that. for it. – for think And are of that there? about and And Thank structure lot as you power PJM advantages. with commented question much. may you on brings some of player Could environment Super. an that Greg, you said, for prices and final hold peers one Thank an I'll you're that the fortunate? appeal very you M&A be very a your out integrated integrated much ask robust the

Gregory Beard

years it has would be think relevance integrated the I would we I consolidation and apparent. the view advantages industry. thought that in that before being Obviously, so be will been is And – today and Yes. of there our be vertically said,

companies giant to at you're big embedded we're we a trade us. seeing, option trading power have as discount So Bitcoin would where and a in

of – in hopefully we're what market my offence. think value we position in And I putting begins public hope on the will is so happen being be us a that way. that now is ourselves to And can that

known doubled relevant kind until the market – most as in the we markets. down happens pricing what prices miners Bitcoin it hope, with have to underwrote. power power liquidity, is was was now. capital if really and the the I Bitcoin, relevant as then doesn't but Most really Because being people and just of all power to vertically – it for of to of these that's slides where wouldn't just the ask, the So probably and clearly is created the the what emphasize along, to are integrated having, hey, wouldn't that be it belief but [indiscernible] Bitcoin have doesn't extremely what same below XX,XXX access strained have goes market we access

terms it aggressive this take in – doing just just we weren't So a – And of market to we that to and the in dislocations placement, model like super private view miners our year. be coming. of sold advantage for are be we're to – our taking be back to did that

we're in think position you hey, think seeing So leaders I time us dislocation, would from of those I in I it, And M&A think just a any hope that market see you you activity. like are like, be that. expect can strength

Lucas Pipes

I color. and to And team, Greg, luck. to appreciate best all you the really of the

Gregory Beard

you. Thank

Matthew Smith

Thanks, Lucas.

Operator

Please next proceed. with Compass Point. Chase question White Our from comes

Chase White

Thanks guys.

So on least any ways in issues? what's fix or out it? there Thanks. I situation a that. value at some have latest to And resolving Like, follow-up this general, the MinerVa the get creative after of thinking are

Gregory Beard

Yes.

we're amongst MinerVa we hey, to debate ourselves, question. So MinerVa, sort going how handle of

talked we me, we're time you were just to said, we it, hey, something. that we presume hey, to get if last the nothing. going So about But hypnotize get

And than getting so model we're so gotten keeping but hopefully far, nothing. nothing, your that just more far, we've

from far far, what than so the but but they point, problem. quit the better litigate problem, the with the to results with MinerVa And vantage it time are MinerVa fix to are trying is show so communications I've a guided right the courtroom when our to hey, And the they I think far to up And from fixed, when and in to. so phone, answering fix far, like stop. is trying

different is with we've to and bad next to gotten precision, of from want put the idea hopefully, I customers. commercial received don't we more. be talk, don't a would say, other want on I we've absolutely kind just So it's hey, that The a a disclose everything pressure think with to we'll you standpoint, I tell MinerVa time and everything slightly that forthcoming reason our –

So to saying I got talked disclose that and comfortable issue. fix point, we've I'm nothing everything it's –so we've far is not good conversation this idea presume not think to the than about But slightly every this it's that. a just – to and try answer better at

Matthew Smith

Chase, quality just Hey, to a On think to X, us of Matt. the it's fleet overall. misperception I follow-up. Slide our about it's want there's I clear

And so X%, to we wanted to make sure the company's to we our so at drive is issues of home work the any since and surface. another at scenes XX% point, and the hard problem the point behind represented than sustainability exit quality which XXXX, And down obviously, get is, hash really if miner improve it today But smaller of fleet. MinerVa then represents for materially as about to X% capacity. been rate that's overall MinerVa us

that's hopefully helpful. So

Chase White

many of all not to details. and give And sold plan is it on how what's of in year, understood you sales? have then kind able forward game terms going No, being the monthly Bitcoin of this the the appreciate guys

Gregory Beard

your here, We out, the I'll can't one. question? precise the answer in you seconds have answer one if can't. to dig give you we that What's next

Chase White

Well, a it hosting I like prior quarters, pretty looks decline. versus around substantial there just revenues mean, was

what drove Just trying that? understand to

Gregory Beard

or our out bought cancelled one of but hosting basically contracts. all, We either

should on have the you in will think for presume because basis and you roughly nothing to just a at that our And are did other go-forward a it's we And we really to – hostings, I that have ourselves. gone capacity megawatt say use customers safe of so request. wanted hosting that

Matthew Smith

be to looked sell you we'll through But far just footed to we've obviously, follow-up we Bitcoin, want the cycle your as when the XXX Bitcoin. CapEx. came really get to projected, thoughtful growth obviously with about your we with answer of our now we XXX out liquidity the gate Chase, like working a year-to-date. The front we to And first to so cover but on how is sell capital question, sold the answer that. Bitcoin you're year-to-date, that situation,

Chase White

whatever May sold Is is – date you that like that does through kind Or that forward? the include through that are guys like getting? of and or – XXth XXX you

Matthew Smith

That's through XXth. the

Chase White

Got it.

Matthew Smith

the – side excludes on it side it are other of the the restricted And hedge. on the XXX of currently other that

Chase White

Very helpful. you. it. Got Thank

Operator

next Our question Mike Northland with Securities. from Please of Grondahl comes the line proceed.

Michael Grondahl

Panther just kind plant Hey. during compared trying at XXX%? to you and thought those and for Scrubgrass, understand the do hit to run sort Creek I'm where Thanks are guys. expecting maybe it March run? they how of did a the level quarter of XQ they'd How you when

Gregory Beard

Yes.

do $X Panther well. installing as upgrades, So plant past, about datacenter. power as a as We the I to that. same in Panther, Creek we disclose time Panther described think Creek, bought running And at we is were we've in made the million when offline the the we plant and plant was

it's a And plant, very run well. so as

I brand to bad of with an think that power the datacenter break new quality where was so be and sort as plant that XX we had going one break think circumstance, but we made failed. I sort that's in datacenter gear operating datacenter. a datacenter unusual and took our that a offline event expect the it's piece had Panther, of from issue days company we in for had of That as As datacenter, one the got it's switch, been a And apart But the did from we a a high a a few switch part. well we as were there's not reason people long year when these the and past once installing histories. mostly benefit trained, – it investment the facility. months you hired had in good expected, plant operating duplicate and prior because plants plants. not And it's the as uptime systems systems a and success few running Panther and peaking you in same no at these been it condition simply the why can't for the have in working have is power years – datacenter it Scrubgrass

improve, as completed. disclosed, upgrades – sort we're and you as now and are we're the Scrubgrass would making now of final those we're those now upgrades expect seeing as of So power we've performance

completing, I think should three they the are left got third we that just done projects be we've different in about and quarter.

would performance operational to weren't not these time perform designed that. were year similar that load, designed data base really run XX those so load base because to focused of that expanding Scrubgrass And peakers, just Panther that that we they to load, shows run I to this of they're run over can and to base But plants later share – you as expect investments, years on were actually as look at see better we're as we with as make they contracting. designed

If to it in see with amount person, these facilities you a are giant tremendous steel. of come were

plant So operational XX% hey, you data think Does saying, with and be uptime, power better as is tell to question? grid that it were to makes your better the it it not than better we in So the around running, wouldn't should economic the the mind grid sense, to we're would I that And Panther would expecting still think this QX, at we and plant are same. connected in Keep expected. answer if offline, lacking as the describe the too, from but running the year buy share we I we're was QX, in progresses materially can certainly the power be I datacenter. that can date. the utilization still if just Scrubgrass,

offline, the energized. from that's to keep the power are the that just to prices low determine an that So plant algorithm to datacenter if grid we trips power justify run if the buying – enough

Michael Grondahl

miners issues repairing with it. there X, Slide them? had with any Got X.X that or themes identified the the the miners common issues. you've with exahash Is

Gregory Beard

What the power supply. theme I a common would say is

Matthew Smith

And failures. then fan maybe

Michael Grondahl

you. Thank Okay.

Gregory Beard

you. Thank Sure.

Operator

from Roberts Jacob question with next TPH. will proceed. come Please Our

Jacob Roberts

guys. Good Hey. afternoon,

Gregory Beard

Hi, Jacob.

Jacob Roberts

if to offence, commentary being trying a in position I market – in purchasing additional is longer on move to to was your you taking just asset. no in hear, to that wondering break the the and you're an balance power which from a the that of kind great with disclosure slide

of what offensive kind So what I'm here you're if wondering just push that. on expand you know, and you from and could how thinking about that is

Gregory Beard

I can expand on Yes. that.

for paying Bitcoin the miners them in taking today and hindsight essentially it's So risk would and I be. all market think that buying on pricing forward where

regret most people have probably decision. that done that that think I

to don't want Bitcoin that, then taking I so risk sort say be will so to it where today of, we as for create buying way to to want margins position suffer at future. the pricing and And don't the It's hardware. sort the that, in in in to Bitcoin and think on forward for risk you opportunities Bitcoin be hardware probably miners forward if to for be market easier could should the this a prices with buy expand and were market is right in and we to suffer, I a would the discount it of market buy hardware much will describe – hey,

evaluate I advantage. I think are in power say we're power careful And like, continuing think then belief, we just think volatile hey, market. a going to hey, the doing to put leverage to and of plant liquidity we a on, finance to the much That bad an in that ourselves market a stop Bitcoin don't be and in really to that do absolutely I today. want and that's But too of by we on position our is we're purchase never a mining market. the is And and energy what's core having asset taking power ours, side, looking to strength that. volatile as going power how

front the market they're potential think in really probably if and survive don't, because And our the foot a anybody that power peers a this the and – Bitcoin – So I to optionality whereas being and just just we our our of we market, by know I call to our coming we're forming markets opportunities having and opportunism if synonym can't by they way, of suffer. so, that extended would is if else. hey, that design model. as we inevitably have downturn such an more be to power, the gets between way, that being the opportunistic, That is the tougher, aggressive, hey, is can lead position would much be benefit as they will for

with price this margin, quarter in felt opposed rate how hey, not. high that's position So be And and in we it I like let the growth that to aggressive yourself the been us not answer it we hope doing remedy is we is it – position should past to stock might by defensive it's a – great trying happen. and aggressive, might to going a which how one, a sort while a in and by number as showing really we've it we're do put think reflected be, survive which liquidity downturn, to private placement the a come like, be of aggressively

I So position pricing future not is better we're health promising just a to ensure and mystery. a think expenditures liquidity to future when ensure make margin by in

Jacob Roberts

enough. I Fair that. appreciate

Matthew Smith

network from those the leverage think, that out, through by you also just you period with I numbers. there's Yes. of take an we anticipated. Bitcoin, investment this out flat or cash go out extraordinary model And in progresses, those model And is extraordinary you going model to if the cash embedded rate rate Bitcoin model the but the growth even we're XX when miners And EBITDA expectation there's how industry. go public here if that mean, model network higher I or you XX out

market that we're I that our closed. this think the get go liquidity to so ways. IPO intents I maximum ways strike be just we demonstrated talk being and through with we flexibility, but footed mean, model, number about a would – I accretive is be and maintaining to and able to be And period financial point to we could this front obviously do And in prudent, the purposes evening. all when what of or want it – want we

is market secondary closed. The

see from downside. as trading to peer investors was are potential were in mitigating the focuses earnings the perspective. the the we Our frankly, a bonds the And the the And have on some power to of a yield notably of model. business, most factor grateful XXs merit integrated of

of miner offsetting getting reduced the this months about so next through it mitigating we'll of six that or obviously sale about think call this, CapEx. when when some And we committed we CapEx, talked which evening, was

where You to of free see starts conversation. any cash the a and into explicit be can flow XXXX giving guidance, you part look material without

see to starts take place. deleveraging where can You

that talk to. may we And shares a without mean also maximum so could – what into maintaining our at mean if could we look different the way may flexibility It and to getting strike and that have force remain I XXXX that we to market us Greg about details. think flexibility this referred when in financial to depressed, that

we into plants that that that look about shares to we'll acquire are assets the as think power numerator, if your there, you at and think guys. we having sort those I so you can the And reducing get by can forward I'll And would you conversations acquire and your of leave of look denominator with in you but denominator. XXXX, miners,

Jacob Roberts

the really appreciate seen And maybe topic, you hear things. pretty last I of any opine the pretty network have side reaction that. maybe you haven't we guys weeks low on Bitcoin Great. for that if to obviously volatile, been of kind – I'd for guys and like on, on two hash price

remainder so into what for on maybe And maybe that or wondering mean if this picture means talk of you things? about could to that the year the bigger I'm what side could guys XXXX just you

Gregory Beard

Yes.

think hash obviously network daily. not I rate is adjusted

think you're – could economics the have rate. I your delivered unless Bitcoin are depending if greatest it it, ordered latest and is, still you and it we than adjustment machines have paying and see equipment paid an it and unless on will a for network still is power. so machine still in you're which still hash more so for be paying for profitable mining prices exorbitant good, you've But plug you And that and

a for. hash plugged of And was in. paid you'd so expect ordered rate be them lot and And to still

So is the lot was rate at think can ordered hey, same question paid will be the hash for. time, – not and was a but I of

potential – So and equity and see closed debt the the implications being side that's there I through. will the of debt to think financing the we ripple the on on to both going debt – expect markets the

Will and due get them and to they final that for get think someone But order So else? don't going machine I plugged expected you economic hey, its exists presumably the they sell MicroBT happen what's deliveries. to when Bitmain and that those for in? that's take to in. it plug themselves payment Will

at of expect we was that the a running, there's equipment see come probably should that like, same offline. to So lot SX hey, time, example, for

hash we're and I offline. And come less we gone, correlation, be economics machines is felt. the not on modeling will it's it economic is bigger grow And is much any older, So time out probably an say, global that to there that growth rate, hash absolutely businesses. once between relationship mining instant year's see will but tougher a much, rate how would capital I these next implication given it's think

and rate better a and off. yourself coupled make that to is for kind and a So you one, global winter I with liquidity think growing view a our survivors have sure position that these and moderately survive presume hash design the of the crypto just or flat should worst make a us ultimately

puts to that fun it and we just not in as well, witness. model us our So through – is, go as as painful think it's

weren't if markets margins if up financing I if than off and were in think better end things open we might the ultimately then – question.

answer, Sort of a long sorry.

Jacob Roberts

worries. No

Operator

Our Chris Davidson. come proceed. last Please Brendler from with will question D.A.

Christopher Brendler

other think side, know, start agreed, sort settle see can couple world. or have. sounds down significant Hi. in Thanks, sustain the how going flex the next and be and progress details just but is downside than it the of kind congratulations has increase and with your on wanted given normally the for you we years? soon, on is of here. just bigger to going revenue it power protection do side But didn't anytime Like, the interesting it's been to sustainable a business much back power Really a very temporary I this wanted where to is. nice business. like you we'd that this these just of I would to this prices in sense it think what's spike of there

Gregory Beard

market. the natural the into forward market, opine power is translates curve curve question on of gas That of which forward the in really every day the

The is that answer prices. the we the to are in is transactable that so is, And prices forward market our speaking. presentation have

today. prices have we power So not hedged

that sell a of Bitcoin some of be able takes optionality I a in in we hedge XXx me but always optionality, the still cash and not market want the to hedge, some the we power temptation hedged Bitcoin our unwind to we there we've use on business, my flow Xx it's we transact that call flow, portion not the put to right guess future and mining, growth we So power, the maybe hey, And around say, away power you that, where could probably companies, cash and future is power pricing tell but letting forward market to hey, it way it's to all know cash we in while keep flow of do that power think Xx a may lock if rate. and the multiple then could depending on I pricing. our revenue, Bitcoin. but

a think it. as a asset with as downside to protection from and power has associated power people encourage to a business with option that massive trying just massive business a we're think on us I Bitcoin or a Bitcoin So option having about

getting now, to we're lowest both, be that in seems of right minds. So unfair view and of our the sort

Christopher Brendler

Yes.

I think be going it's interesting to to watch.

showing important have investors I the you showing and execution think pivot you then uptime. at is that in of sort also that thing most point the can this

someone by that first So as a Panther? Or we still second is level the around quarter, end challenging will thinking you're But certainly than the time expecting. running from perspective more a the little Scrubgrass there be like quarter's is same sounds like, of that? are

Gregory Beard

Yes.

made need last we quarter the around us bit system Like just gives until world, hey, last get a of concerns sort the just third to the It done. the right. time that delivery to July. little given all these final are upgrades we're in of and like say running, of the of being last be chain the would so expecting that delivery it of process parts say, install supply to give I to the end that, So

we proud third the the a have it's certainly late of quarter, that should uptime passed. year, of end by are So like Scrubgrass looks that,

Christopher Brendler

Okay.

Gregory Beard

If can the isn't we still running, run the plant datacenter.

of thing should to like, you – okay, XX% does higher. that's So will not mean be plant uptime mean, it's guys, another the XX%. They sort datacenters not I that's hey of that have be lost, failed

Christopher Brendler

Great. Okay.

forward those improvements. to Looking

little clear rig we to the spoke a did it since of worse the better? a or just situation sort at of side, last little quo On the March, end gotten MinerVa status is or

Gregory Beard

that specific from it would is ongoing quarter to of and refunds presume are saying saga, but better I that MinerVa say every we that. delivered the we haven't no bit you MinerVa given doing no than the details we're we on asked just better last – miners,

So kind what that's we're of saying.

Christopher Brendler

Okay. And if can then just… he

Matthew Smith

asking a little were You about there. you It muffled Rex Are or MinerVa? – actually unclear. was it

Christopher Brendler

for was deliveries. asking new about MinerVa, I waiting

that Is is towards Or realize just related the more was question that is it Or the to to more potentially to plant? third to related miners that other decision to cash? selling more liners. long pivot power? raise you're and the sell The decision

Gregory Beard

think blended it's I a answer.

that puts don't now in better financing think our liquidity with fund us any business. position where additional, to it can I outside need we say like a we

say. to think thing I a powerful that's

be able have don't And to miners. that. to say want we won’t we So to

on have liquidity MinerVa’s warehouse of if full of And excess miners don't power think additional exahash we closing to just the a the delivered, I we were with instead We're would without running. two shelving. on-the-shelf. – next not off have of the all additional about plant, would we better have want miners, like miners

cash. So I to of lot going generating think, we're be a hey, ultimately,

financing advantage rate Or miners the relatively us and by world of our using just think we're grow a melt down that. in our in now sort peers, hey, an us hopefully to of that to flow. and cash use melts down the we that take advantage. world equipment if And an will strong some we'll we appropriate versus puts can position better selling it have free around We – if pay

Christopher Brendler

regular selling. be business – Yes. Makes don't sense. that's be expect like But of now not is to to course you a

long miracle. with a comes be to going not You're excess up miners MinerVa and

Gregory Beard

No.

And having fail, hey, of don't year. shelf level X.X a and modest storage. have I to if and us of expect don't by end of to guiding hundreds extra the the but we slots, inventory we to to like, situation think a our we're excess just petahash hundreds guide exahash empty of some the miners might to on have handle want

Christopher Brendler

Right.

Okay.

raise there this that I a they new you the some was know or to of but any like there of the part if guess So successful those to way power existing it given it's And protection seems would it's Is on investors? where capital. of downside sort prices kind story we already power to just downside is are I do, just big mentioned I downside, transaction decent are protection today? say congratulations hard wanted possible, equity benchmarked the to like are that transaction. investors

Matthew Smith

and company, to the getting the And get my to want work to footed on offence. Yes. that at And existing on again, focus private we past. there we had a just opportunities on In from are overstate on been my we placement – not each had word, that the some interest of were – successfully had offence been in reversing up investors these the in again. completed case been And early investors folks time feel self-help the yesterday, reason recent and but of has order come all front in liquidity. – order there some in initial for to perspective,

else opportunity that had it And gets capital minds and people's advantage fielding access do sense of we've made liquidity raise so one been given been that often. to a can off a way to in when really take it this question no

price do the EBITDA. that for generate time, the on power guidance. as we think into about to sustainable we far first slide important if that and are kind grid we can tonight back I I'd As you produced Bitcoin downside And hashing what to But able and are to the think you more the than mid it's not, that's protection the point illustrative of quantification, stop meaningfully think low-XXs that takeaway. that's that sell and others strip I

before looking that key Bitcoin just And a have then I and we're that's element at would you get shelf a to should go on is hard horizon, we're some you're sitting still sure making thing long sell a that illiquid and to disciplined, plug out financially relatively and not a hedge you're for to do add miners hedge to being receive trying your of to going so going sort the while. the underutilized is if present. first what basis, that for miners you And of are on you in Bitcoin while, not dated

and And through so should foreseeable flexibility you us And and about fleet trying for we to retain the winter. the to way do be our was we're upgrade asset when – to always to trying be going the look working to that management forward future. delayed that reversed pounced and savvy other some worked on we secondary miners hashing MinerVa it as market – were

can and prudent as we thoughtful the as And both you and ways we're asset so about should that. I going goes think be to management be expect

Christopher Brendler

Nice color. Matt. Thanks a lot, Congrats.

Operator

At question-and-answer Mr. this time, now to his over to remarks. session. the concludes this turn for call back our Beard I’d like closing

Gregory Beard

understood what to little it's committee say things good this with a want And just Thank you. have a look forward us to the earnings know first a little think I market, we quarter operational improvements bit Great. us about hopefully, again. before. about we favorably information, listening for more but and being Hey, when the actually showing to tough And continued time call. the in thank we maybe than, hopefully, to speak was differently additional we'll begin investment Operator? and quarter-over-quarter. can everyone bit to

Operator

today's you joining call. again Thank for conference Stronghold

You may now disconnect.

Stronghold Digital Mining (SDIG) 17 May 222022 Q1 Earnings call transcript