Bit Digital Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 14, 2025

There are 12 speakers on the call.

Operator

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

Operator

Following the officers' update, we'll open the floor for a question and answer session. If you have a question at that time, 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 Bit Digital. Cameron, the floor is yours.

Speaker 1

Thank you. Good morning, and welcome to the Bit Digital twenty twenty four 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.

Speaker 1

I therefore refer you to today's 10 K filing and our other SEC filings. Our comments today may also include non GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our 10 K 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.

Speaker 1

Sam?

Speaker 2

Thank you, Cam. Ladies and gentlemen, thank you for joining us on the call today. Today, I'll walk through our 2024 results, highlight key milestones from a transformational year and provide insight into the strategic direction of Bit Digital as we scale our HPC operations. 2024 was a fantastic year for Bit Digital. Revenues grew exponentially by 141, margins expanded and adjusted EBITDA reached $73,000,000 This was driven by the rapid growth of our HPC business, which started in 2024 with one customer and by early January of this year, we surpassed 20 customers.

Speaker 2

HPC revenue made up over 40% of full year revenue and more than half of Q4 revenue. The Innovium acquisition was a major leap forward. This acquisition vertically integrated our data center operations, added a strong customer base and brought in a highly experienced team. This team gives us a huge advantage in scaling our infrastructure business. We also built out our organization.

Speaker 2

Headcount has been focused on hiring seasoned value creators, all focused either on data center operations or cloud services. These aren't businesses you could just throw capital at. You need the right talent. We now have specialized teams leading both divisions. We have a lot to cover today.

Speaker 2

I'll walk through each part of the business. Eric will then walk you through the financials before we open the line for questions. First, let's start with our cloud services business. As we scale our AI infrastructure, we recently launched WiFiber, our new HPC platform that integrates GPU cloud services and data center operations. As part of this evolution, we have updated our segment reporting to better reflect our business structure.

Speaker 2

What was previously referred to as high performance computing services is now categorized under HPC, the umbrella term for our entire white fiber business. Cloud services represent our GPU cloud platform, while colocation services includes our data center business from Envum. Cloud services did not exist in 2023 and it became our largest business in terms of revenue generation by the second half of twenty twenty four producing $13,000,000 of revenue in the fourth quarter of twenty twenty four. This segment contributed 50% of total revenue in Q4 and 64% of gross profit. Gross profits contracted slightly in Q4 as we added new GPUs and leased additional data center capacity ahead of revenue generation.

Speaker 2

We viewed this as temporary as we expect margins to normalize over time. A key factor was GPU leasing expenses, particularly the H100 sale leaseback from early twenty twenty four, which accounted for 70% of cost of revenue for that segment. That was a unique structure reflecting our risk tolerance at that time. Going forward, as we own more GPUs outright or deploy more traditional financing structures, we expect margins to expand. We currently have nine active customers in our cloud segments of white fiber.

Speaker 2

The majority are running single digit servers with annualized revenue or ARR below $1,000,000 but most were won in the past few months. And this aligns with our strategy of onboarding customers and scaling deployments over time. We are happy to start with smaller initial deployments to earn trust, demonstrate performance and expand contract sizes as the relationships grow. Our cloud services run rate is approximately $62,000,000 This will increase to around $72,000,000 later this month when the H200 contract of DNA Fund begins generating revenue. Revenue generation on the contract was pushed out by a month as we ensured full reliability before going live, a decision made deliberately to prioritize customer experience and long term satisfaction.

Speaker 2

Additionally, we have a $15,000,000 in ARR expected to start at the June when we deploy five twelve B200 GPUs for our Anker customer. And separately, we received our first five twelve B200 GPUs, which are being deployed in Iceland. We expect this cluster to go live in April and plan to offer these GPUs through an on demand pool via third party platform. This would be an interim step as we internally as we work internally on developing our own on demand platform. While we see strong demand for reserved B200 contracts, we believe on demand deployment effectively pulls forward revenue and sortens payback periods.

Speaker 2

Based on current market dynamics, this cluster could generate approximately $25,000,000 in additional ARR. We also have about 113 H200 servers or nine zero eight GPUs currently being configured and we are evaluating reserve contract options for those units. Illustratively, at $2 per hour, that is another $16,000,000 in ARR once contracted. Overall, our customer pipeline remains strong and dynamic. Demand for B200s is surging.

Speaker 2

Also, since DeepSeq, we've seen renewed enthusiasm for H100s and H200s because one can do less with more or rather one can do more with less. We're consistently engaging new prospective customers and demand continues to outstrip supply. While we see significant growth opportunities, we are taking a disciplined approach to GPU procurement, carefully managing capital deployment to avoid excess inventory risk. Our focus is on growing at a pace that aligns with customer trust, ensuring that as relationships deepened, we scale deployments accordingly. We've also invested in top tier technical talent to build a robust software driven infrastructure that enhances performance, reliability and scalability.

Speaker 2

Customers don't just need access to GPUs. They need a trusted high performance platform that ensures seamless deployment and maximal performance. Our investment in this technology layer to deliver just that is a key differentiator, helping us drive customer trust, retention and long term growth. Also with Boosteroid, the third largest cloud gaming provider in the world, we continue to expand our partnership. Currently, we have just under 500 GPUs contracted, represented approximately $1,600,000 in annual revenue over the five year term.

Speaker 2

We are in process of finalizing an agreement to deploy an additional 700 GPUs, which if completed would generate an additional $2,400,000 in annual revenue from Boosteroid. And we expect the deployment cadence to accelerate throughout 2025. Our GPU procurement strategy is a balancing act between growth and risk. We are focused on scaling customer deployments and expanding GPU capacity to meet growing demand. Several live opportunities are substantial with contracts representing 9 figure annual revenue and three to four year locked up terms.

Speaker 2

Executing these would require the right financing structures and we are actively evaluating lease financing and other capital efficient options. We are firmly in the mix for blue chip deals. As our AI compute grows, our focus remains on execution, efficiency and customer relationships. White Fiber is scaling rapidly and we believe we are well positioned to be a leader in AI infrastructure. Turning to our co location services segment of White Fiber.

Speaker 2

This business was established with our acquisition of Innovem in October 2024, marking a major step in our evolution as an HPC platform. Before the acquisition, we had no co location business. Now, we operate a Tier three data center with a full roster of clients, which currently stands at 14 active customers. We added a recurring revenue stream and expanded our expertise. Beyond its immediate contribution, Innovent provides a scalable foundation for future growth, backed by an experienced team and a very robust development pipeline.

Speaker 2

The Inuvim acquisition is a gift that keeps on giving. Since closing the acquisition, we had moved quickly to expand our co location capacity and secure strategic customer segments or customer agreements. In Q4, we acquired Montreal II, a 160,000 square foot industrial site in Montreal for approximately $23,000,000 as part of our planned expansion to 32 megawatts by 2025. Montreal II is being developed into a five megawatt Tier three data center expected to go live in mid-twenty twenty five. The facility will be powered by 100% renewable hydroelectricity and will feature direct to chip liquid cooling.

Speaker 2

This the site provides key advantages in accelerating our development pipeline. The property was well suited for a retrofit and includes transferable HVAC infrastructure, allowing us to reduce costs and bring capacity online faster, a core tenant of our growth strategy. We still expect to complete the retrofit for approximately $19,000,000 We are also in the process of securing cost effective mortgage financing to support the build out in a non dilutive manner. We plan on announcing the customer for Montreal II at a later date. In February, we announced a multi year co location agreement with a leading AI hardware innovator.

Speaker 2

This client is Cerebras, the manufacturer of the fastest inference LMM processor in the world. Cerebras is launching six new data center sites in North America and chose us to be their partner for their first ever Canadian data center. This agreement is a major validation of our co location strategy, reinforcing our ability to provide high performance, build to suit infrastructure for industry leaders. Under this contract, we will provide five megawatts of customized high density colocation capacity over a five year term. The location for the development has been selected and we are in the process of finalizing legal ownership of the site.

Speaker 2

Once that process is complete, we will formally announce the location. We expect the contract to commence in mid-twenty twenty five. Cerebras is pioneering wafer scale technology, which enables ultrafast AI infrastructure for some of the largest and most complex AI workloads in the world. Their deployment with us will be the first of its kind in Canada, expanding AI compute access to enterprises, research institutions and government entities. This deployment required a highly customized high density solution validating our ability to design infrastructure for next generation AI workloads with very unique technical requirements.

Speaker 2

Beyond this initial deployment, we see significant potential for future expansion as Cerebras continues to scale its infrastructure. Their rapid growth reflects the increasing demand for high density AI optimized co location. Our ability to meet their highly specialized requirements underscores the strength and adaptability of our platform. We are super excited to support them in their next phase of development. As mentioned, we are deep in the mix for blue chip deals and that's a prime example of one.

Speaker 2

Stay tuned for more. Beyond Montreal II, our development pipeline has expanded significantly, now totaling five ten megawatts, including 156 megawatts under exclusive LOI. This includes sites in both Canada and The U. S, with six locations under exclusive LOI ranging from eight megawatts to 100 megawatts. The major driver for the pipeline expansion was the addition of locations in The United States.

Speaker 2

We recently brought a U. S. Site under LOI that could redefine our data center platform. If developed, it could be our largest project to date, significantly expanding our scale and market position. Even with our planned capacity expansions, we continue to receive more customer demand than we can currently accommodate.

Speaker 2

This underscores the urgent need for additional high performance data center space and reinforces our approach of prioritizing execution speed and customer alignment. Everyone knows about the current tariff wars that are playing out. We're currently monitoring and assessing their potential impact on our data centers build out. Many critical components such as generators, HVAC systems and electrical infrastructure are imported from The United States, Canada and Mexico and new tariffs could increase build costs. We are evaluating strategies to mitigate potential increases, including diversifying supply chains and optimizing procurement, while monitoring if, how and when these tariff policies may take place.

Speaker 2

Looking ahead, we believe inference will be the largest driver for long term AI compute demand. And we are positioning our data centers to capture this shift. Strategically, we are developing in metropolitan areas where we expect the broadest customer appeal over time. This ensures we can meet the needs of enterprise, government and research institutions seeking low latency, high performance AI infrastructure. Turning to our Bitcoin mining business.

Speaker 2

We remain focused on maintaining a cost efficient and optimized fleet rather than growing hash rate for the sale for the sake of expansion. Mining accounts for 54 of revenue in 2024, down from 98% in 2023 as we prioritize investments in HPC. That said, mining remains an important part of our business and we are taking targeted steps to improve efficiency and reduce costs. Our active mining fleet is currently around 1.6 ex the hash with an efficiency of approximately 25 to 26 joules per terahash. We have now fully exited all claimant facilities and are refreshing our fleet with more efficient miners at new hosting sites.

Speaker 2

To replace lost claimant capacity, we secured 30 megawatts of new hosting, 19 megawatts with Art Digital and 11 megawatts with LUNA. The 11 megawatt site was filled with 1,800 redeployed K PROs and about 1,400 S21s and S21 plus units. The 19 megawatt site will support some redeployed assets as well as 3,800 S21 plus miners adding eight twenty Pentahash to our fleet. To date, we have deployed nine forty one S21 minuteers and 500 S21 plus units improving overall fleet efficiency. These upgrades are expected to bring our operational hash rate to approximately 2.5x a hash by May with pro form a efficiency to around 22 duels per tera hash.

Speaker 2

Reaching three extra hash would require securing an additional 6.6 megawatts of hosting and acquiring approximately 1,800 more S21 plus miners. The power is available from multiple sources and we are actively evaluating the best path forward. Our strategy remains unchanged. We are not allocating significant growth capital to mining. Instead, we are structuring the business to maintain Bitcoin exposure on a capital efficient way, focusing on fleet optimization and cost reductions, while keeping a disciplined approach to capital deployment.

Speaker 2

Mining remains a part of our portfolio, but our investment priority remains on scaling our HPC business. I'll now hand over the line to Eric, who will discuss our financial results.

Speaker 3

Thank you, Sam. I will now discuss our financial results for 2024. As a note, we completed our transition to domestic issuer status and filed our first Form 10 ks with SEC this morning. Total revenue for the year was $108,000,000 a 141% increase from 2023. Revenue increased across all business lines.

Speaker 3

Bitcoin mining revenue was $58,600,000 up 32% year over year. Our Bitcoin production declined 37% to $9.50 Bitcoin due to higher network difficulty and the April happening event. However, higher Bitcoin prices and increased Hash rate led to overall revenue growth. Ethereum's staking revenue more than doubled to 1,800,000 for 2024 as we earned approximately $5.66 ETH in staking rewards for the year. Cloud services generated $45,700,000 in its first year of operations.

Speaker 3

Starting revenue in Jan twenty twenty four, colocation services acquired through M and M contributed $1,400,000 from October 12 through the year end. Our total cost of revenue, excluding depreciation and amortization, was $62,400,000 compared to $29,600,000 in the prior year. The increase was driven by a larger mining fleet, higher network difficulty and the launch of our cloud and colocation businesses. Cloud services costs were $19,500,000 dollars with $13,600,000 from AgentHunter server lease expenses. Gross profit was $45,700,000 a nearly threefold increase from 2023.

Speaker 3

Gross margins expanded approximately 500 basis points to 42.3% driven by cloud and colocation revenue, which offset lower mining margins due to the block rewards reductions and higher network difficulty. General and administrative expenses were $41,500,000 up from $27,700,000 The increase was mainly due to higher payroll and professional fees. A large portion of these fees were tied to the Eminem acquisition and are not expected to recur. Depreciation and amortization was $32,300,000 compared to $14,400,000 in 2023, reflecting a larger miner and GPU fleet. 2024 adjusted EBITDA was $73,000,000 compared to $12,400,000 in 2023.

Speaker 3

Adjusted EBITDA for 2024 includes $55,700,000 of gain on digital assets, which are predominantly unrealized gains. GAAP earnings per share was $0.19 for 2024 on a fully diluted basis compared to a loss of $0.16 in 2023. Turning to our balance sheet, We held approximately $98,900,000 of cash and restricted cash as of 12/31/2024, and our digital assets positions was worth approximately $161,400,000 Total assets were $538,000,000 and shareholders' equity was $463,000,000 We remain debt free, but are actively exploring financing options for our HPC business. Capital expenditures for 2024 totaled $94,000,000 The majority of the CapEx was deployed in the fourth quarter and was used to fund GPU purchases and the acquisition of Montreal II. I will now turn the call back to Sam for closing remarks.

Speaker 2

Thank you, Eric. Before we open the line for questions, I want to touch on the broader trends that we're seeing across our business. We are experiencing significant and sustained demand for compute infrastructure, far exceeding the capacity we are currently bringing online. The need for high performance computing continues to expand and we believe we are well positioned to capitalize on this long term trend. This demand stands in stark contrast to broader market sentiment, where we've seen risk assets, including our own stock, come under pressure.

Speaker 2

Specifically for Bit Digital, the bigger our HPC business gets, the more our stock seems to trade like a pure play Bitcoin miner, which is ridiculous. We believe that we are deeply misunderstood, but time is our friend and eventually we believe we will be valued properly. While we can't control the macro environment, we are focused on what we can control, executing our strategy, expanding our infrastructure and positioning our business for long term value creation. We believe we are well on our way. A key advantage for our model is the synergistic nature of our co location and cloud business.

Speaker 2

These segments are complementary, serving different stages of the AI infrastructure value chain with distinct earnings profile and payback periods. Colocation provides long term contracted revenue streams. Cloud services offer high margin, shorter duration contracts with greater flexibility. Together, they create a durable and diversified cash flow that supports sustainable growth. From a capital allocation perspective, we've taken a pragmatic approach to financing growth.

Speaker 2

In the past, we have used equity issuance as a bridge financing tool to fund our expansion while we evaluated longer term cost effective capital solutions. Given our current valuations, we recognize that issuing equity is clearly less attractive than ever. Our focus is on securing alternative financing options that allow us to scale in a non dilutive manner that's much more sustainable. On the data center side, we are actively pursuing commercial mortgage financing to support our build out. We are making progress on the front on this front and have finally received an attractive term sheet that we can move forward with and continue to explore the best terms before finalizing an agreement.

Speaker 2

For our cloud services business, we are also exploring vendor financing and leasing structures to optimize our GPU investments. Given the rapid evolution of AI hardware, we are structuring our GPU procurement strategy to balance growth and risk management. We are seeing compelling opportunities to scale and our approach ensures that we remain nimble while preserving capital efficiency. As our business continues to evolve, we are assessing the best structure to highlight the value of each of our business lines. We remain committed to making decisions that drive long term value creation and position Bit Digital for growth.

Speaker 2

With that, I would like to open the line for some questions. As a note, we have Billy Krasopoulas, who leads our data center business and Ben Lampson, Head of Revenue for White Fiber, on the line for some Q and A.

Operator

Thank you. If you would like to

Speaker 2

oh, I'm sorry. Go ahead. No. I was just suggesting that we should open the line for some Q and A now. Thank you.

Operator

Thank you. And our first question will come from Mike Grondahl with Northland Securities.

Speaker 4

Hey guys, thanks. First question is just on cloud services. Sam, I think you said the current run rate is $62,000,000 and you have a contracted customer that's coming on late March. Have you named that customer? That gets you to $72,000,000 run rate.

Speaker 2

Yes, that's D and A funds.

Speaker 4

Okay. D and A funds. Okay. And then I think there is another the five twelve GPUs come on, I'll say roughly July 1 for a $15,000,000 ARR that gets you to $87,000,000 run rate. Is there anything else contracted to come on right now?

Speaker 4

I guess that's the first question. Anything else we should be aware of that's contracted that lifts that $87,000,000

Speaker 2

Well, we're already well past $100,000,000 from a contracted basis. Our white fiber business includes both the GPU and data center business. Sure. So we are well we go ahead.

Speaker 4

Great. So let me ask this question then. You also talked about setting up this on demand pool and I think you said that as the potential for $25,000,000 of ARR once it's contracted. And then there was another, I'll call it GPU pool of nine zero eight that has a $16,000,000 ARR once it's contracted. Did I hear those right?

Speaker 2

Yes, I would love to pass you over to Ben, who heads our revenue for that division. Ben?

Speaker 5

Yes. Thanks, Sam. So I want to be clear on this. On demand is not contracted, but it commands a much higher price per hour than the contracted rates. So that $25,000,000 number for the B200s that are coming online at the April, that is an annualized run rate based on those GPUs reaching full capacity on demand.

Speaker 5

Now we may choose to sell some or all of those onto reserved contracts one, two or three years as that derisks things long term. But in the short term, we expect demand to be so high that we may choose to keep those on demand for a much higher price per hour.

Speaker 4

Got it. And that $25,000,000 and then the $16,000,000 dollars do you think those are going to be, I don't know, generating revenue in the next quarter or two or three? Like how should we think of them contributing or adding to the $87,000,000 a rough timeline?

Speaker 5

Yes. We expect the B200s to start generating revenue in April. As for the H200s, I want to be careful to give a date on those as those are part of some R and D around some product developments and technological developments we'll be talking about later this year. So we're going to hold on to those for a little bit to run some R and D around some pretty cool stuff that we're building. And because of that, I don't want to give a hard date on when they're going to start generating revenue.

Speaker 5

But we'll be talking about some of that in our product roadmap later this year.

Speaker 4

Great. Okay. And then just one more. On the colocation or data center business, I don't think I heard what fourth quarter revenue was. And then once we have that number, could we kind of walk through what's contracted and how that's ramping in 2025 just like what we did for the cloud services business?

Speaker 2

Yes. We have Billy on the line who leads our colocation data center division.

Speaker 1

This is Ken. Let me just jump in to that first one. Mike, it was $1,400,000 was the co location revenue we recognized, but that was from the date of the acquisition. So like you can annualize that and for Montreal One that would be the prevailing run rate until the new capacity comes online.

Speaker 4

Got it. And then I think you guys talked about Cerebras coming online and that's a $10,000,000 run rate. Is there anything else we should be factoring in today?

Speaker 1

I don't think we specified the run rate for that beyond just it being five megawatts and you could sort of extrapolate the market rate there.

Speaker 4

Got it. But just the tariffs are the only one we should layer in for data center right now? Okay.

Speaker 1

Well, Montreal too, which would be a separate customer that we have not announced, which would also start in the middle of twenty twenty five. And then just beyond that, the planned deployments for the second half, which has come on later in the year.

Speaker 4

Got it. Okay. Thank you.

Operator

And the next question will come from Nick Giles with B. Riley.

Speaker 6

Hey, thank you, operator. Good morning, everyone. Guys, congrats on the progress thus far. My first question, you mentioned 100 megawatt site under LOI that would obviously be transformative. So I was hoping to get some additional color on when this capacity could come online.

Speaker 6

Is there any existing power infrastructure in place at the site? And then would there be a desire for a larger anchor tenant? Or how should we think about customer mix? Thanks very much.

Speaker 2

I'm happy to answer that question in a preliminary way. But Billy, would you like to give some more deep down color on that?

Speaker 7

Sure thing. So we've identified sites in The United States that we are under LOI presently. There is currently 24 megawatts of power available at this location with a very easy path to 48 basically double within sixty to ninety days. And additionally, we have discussions with the utility provider to get us another 100 megawatts towards the end of twenty twenty five.

Speaker 6

Got it. Billy, that's very helpful. And so maybe just to follow-up on that. How much of this would be included in your 156 megawatts of exclusive LOI capacity?

Speaker 7

This is about 90% of that right now.

Speaker 8

Got it.

Speaker 2

100%.

Speaker 1

One hundred %, I think that is.

Speaker 6

Okay, great. That's very helpful. My next question was just on some of the GPU contracts. What kind of extension options are embedded in these some of these smaller six to twelve month contracts? I mean, should we think about all of these customers as very likely to further expand or could some rotate out and you would plan to backfill that capacity?

Speaker 6

I'm just trying to get a better sense for GPU utilization.

Speaker 2

Absolutely. That's a great question for Ben.

Speaker 5

Yes. I mean, we always with these customers, most of the time we're expecting them to both expand the amount of GPUs that they're using and the term. We've seen just broadly across the industry that customers prefer to start with especially earlier stage companies prefer to start with shorter deployments as they become comfortable with a new provider. And as we show improve in those that shorter deployment term, they end up renewing for a longer and or larger term.

Speaker 6

Very helpful. Guys, I'll turn it over for now, but keep up the good work.

Speaker 3

Thank you.

Operator

And the next question comes from George Sutton with Craig Hallum.

Speaker 9

Thank you. And an impressive range of opportunities in front of you. So, first on the more traditional financing structures that you're working on, that seems to be the primary governor to further growth. Can you just give us a sense of where those discussions are currently?

Speaker 2

With respect to the mortgage financing, I think you're referring to, we don't want to get too deep into it so that we don't jinx it, but we have a very attractive term sheet that we are currently planning on making the terms even better. But this is definitely a really strong start for us. And, should we proceed, this would be the most cost effective way to tap into sources of financing without diluting our equity and which is correct because we couldn't do that with Bitcoin mining. You could easily do that with data center and real estate. So we look forward to proving to the markets that we can do this and now we have finally going after going through a process, a term sheet that we really like and once we finalize that we will be able to discuss it publicly.

Speaker 9

Got you. So relative to Boosteroid, I'm curious if you could just talk about what determines the deployment cadence there?

Speaker 1

It's a mix of their GPU needs and also our own, I guess, how we want to deploy the capital. I mean, there's only so much runway we have from the balance sheet, so we couldn't realistically do a $200,000,000 deployment for them tomorrow. So it's measured, but we see a lot of opportunity to expand that with Brewster Drug throughout the year and we expect that to gradually increase.

Speaker 9

Got you. And then just a question for Ben relative to white fiber. Can you just give us a sense of the response that you've gotten from the rebranding? And it sounds like you could now do an on demand platform. I wasn't aware that you could do that yet with your platform.

Speaker 9

Is that a little bit of an update on this call?

Speaker 5

Yes. So let me clarify there. So we're going to be offering on demand instances through a partner. So we do not yet have our on demand platform live. I don't want to take a I don't want to put a ticket on when that will be, but we're looking definitely end of this year, early next year for our on demand platform.

Speaker 5

So we'll be leveraging a third party to put those instances into an on demand pool. And in terms of the response on the rebrand, it's been really positive. I think the way that we're positioning our offering is really well received. We've had more demand than we've been able to capture due to lack of supply being live, which is a champagne problem. So we're really excited about how the rest of this year is going to go.

Speaker 9

All right, perfect. Thanks guys.

Speaker 8

Thank you.

Operator

And the next question will come from Kevin Eady with H. C. Wainwright.

Speaker 2

Hi, Kevin.

Speaker 10

Hey, Sam. Great to talk to you. Thanks for having me on. Let me echo Georgia's sentiments, impressive array of opportunity. I think as I take

Operator

a step back and look at

Speaker 10

it though, Sam, it's hard to get arms around all the moving parts that you have obviously and

Operator

I think that's what most people have

Speaker 10

been asking about. But beyond that is the equipment, I know you referenced tariffs, but I guess what I'm wondering is how comfortable are you in the sourcing the infrastructure equipment you're going to need to support all these efforts, number one? And number two, is there a contract recourse for Cerberus or for the eventual tenant of Montreal II to push back on the contract if you're not able to deliver on time?

Speaker 2

Yes. So there are three things you mentioned there. There are a lot of moving parts of our story and our business. I think that sometimes that's a weakness and not a strength because we have a lot of great things happening and so we're not exactly a one trick pure play Bitcoin miner. So we're not a one trick pony.

Speaker 2

We're doing a lot of different good things on different fronts. So sometimes that story and that narrative gets a little bit lost. So we appreciate when analysts tease out every all the moving parts and provide a good report in terms of like the information of what's happening with respect to our businesses. So just wanted to comment on that initial statement you made. Your second question, is it more on the financing side or on the operational side in terms of the logistics potential disruption of tariffs?

Speaker 2

Just wanted to understand if you're looking at it from an equipment sourcing perspective or financing sourcing perspective?

Speaker 10

More on the equipment side, honestly, Sam, because there's I mean, obviously, all the demand that you're seeing is echoed throughout the industry throughout North America. So that's the question, right? Are you will you be able to source? Are you comfortable there? And then there's a recourse for your potential tenants?

Speaker 2

Yes. Billy is going to give an answer to that. But just before he does, I do want to mention one of the main reasons we acquired End of M and that team is because they've been doing this their entire careers and have established logistics supply systems and contingencies. So none of this is the it's just not their first rodeo. And that's why it was really important for us not just to acquire that two or three data center, but really the team and the pipeline because they know what they're doing.

Speaker 2

And frankly, before we acquired them, we didn't know what we were doing in colocation services. And I salute the others who are trying it for the first time, but we just didn't have that courage and that's why we acquired that team because they know what they're doing. So anyway, with having said that, I would love to turn it to Billy to answer the question more deeply.

Speaker 7

Thanks, Sam. So the equipment for the two five megawatt deployments that we have coming online has all been secured. Some of it has actually delivered. A large portion of it is in the production line right now to be delivered within the next thirty to sixty days. Equipment for remainder of 2025, we have purchase orders out, deposits on equipment for the 20 or so megawatts that we forecasted for the remainder of 2025.

Speaker 7

So we're very confident on that. And we're looking to place orders for deliveries on equipment in 2026 right now on equipment that's site agnostic. So stuff like generators, HVAC equipment, battery equipment, even though we have sites that are under exclusivity LOI that we plan on closing on very shortly. The equipment has already been pre ordered. And to answer your other question, the two clients that are coming online in the next quarter or early third are do not have recourse because of our confidence in delivering.

Speaker 7

I mean, we have the equipment, we've secured the sites, the construction has begun. So there's no recourse for these clients if we do not meet the expected delivery date.

Speaker 10

Thanks very much, Guli. Appreciate it, Sam. On the Bitcoin mining side, you teased us a little bit with a 3x the Hash target. I guess what I'm wondering is why you would even bother. So that's like one question.

Speaker 10

The other one is on Boosteroid. I understand that you're if I have it correct, that is that you're leasing space in order to host them. And I'm wondering how you've seen that pricing dynamic change, say,

Speaker 1

I don't know, over

Operator

the past six months that you've been working with them?

Speaker 2

Sure. With respect to I mean, those are two questions. The first question is why bother with our Bitcoin mining business? And the other question is the pricing dynamics as the passage of time has gone on with respect to our relationship with Boosteroid. Is that correct?

Speaker 10

Yes, yes, yes. No, I understand the involvement in Bitcoin mining. I do understand that. But why would you boost from 2.5 or 2.6 to three? It just doesn't seem to correlate with all the other opportunities you have.

Speaker 2

I mean, look, that's a good question. Our priority is the HPC business. There's no doubt that's where our business is. We think three is somewhat of an arbitrary number. We do think there is magic in the number three.

Speaker 2

But we also don't want to give up on our Bitcoin mining business. We believe in the thesis of Bitcoin, especially these days with the institutionalization of Bitcoin at the FUD level and increasingly with financial institutions. And so we are actually really excited in the future to talk a little bit more about digital assets and what we will be doing on that front. But for the time being, we believe that when you're mining Bitcoin, you're getting that at a discount to open markets and that is an important thing to do. But we're not going to expand for expansion sake.

Speaker 2

We're optimizing our fleet, we're making it lean, we're reducing costs in the methods that I talked about earlier today. With respect to Boostrud, your question is kind of not clear to me. You're asking how has pricing changed during the course of time that it wasn't clear. I think what he's asked for.

Speaker 1

I can just interject Kevin. I mean the way that contract is structured, it's not like our traditional cloud services. It's structured effectively as an equipment lease, which basically means that all the data center expenses are effectively pass throughs or more specifically, we're not even billed. So it's pretty agnostic, like say directly pay the data center cost.

Speaker 10

Perfect Cam, thank you very much gentlemen. I appreciate you entertaining everything I had for you. Thank you.

Speaker 2

Thanks Kevin.

Speaker 3

Thanks Kevin. Thank you.

Operator

And the next question will come from Gregg Pindy with ClearStreet.

Speaker 8

Hi, Gregg. Thanks for taking my question. Hi, in for Brian Dobson. But just I guess a question, you're one of the only companies out there that I'm aware of that has deployed the Ethereum staking yield strategy, but we're hearing from a lot of the other miners and you said earlier, you're going to remain committed to having some Bitcoin mining, at least for now. But how are you evaluating the yield strategies that some of the pure play Bitcoin miners are looking to do on their HODL balance?

Speaker 8

And would that shift? Are you still going to very comfortable with staking Ethereum to get yield off the coin? Thanks.

Speaker 2

Yes. Well, the yield on Ethereum is higher than Bitcoin, Bitcoin. There is no real yield. There is the yield on Ethereum. But we want to talk about the future of digital assets and our strategy on that in the medium term future.

Speaker 2

I don't want to say too much about it right now, but we do believe that there is a very bright future with digital assets. We've seen, as mentioned earlier with Kevin, that Bitcoin is now an accepted part of the DNA of the financial structure of The United States. They're also now creating a digital asset stockpile for the long tail of other coins. I would imagine that will include Ethereum once that's announced. There are many technologies out there outside of Bitcoin with respect to Ethereum and other coins that are really worth looking at and also provide staking value and have their own merits.

Speaker 2

And that's something we could get into in the medium term future. But for the time being, we're focused on white fiber, which includes our co location services with Billy and our cloud business with Ben.

Speaker 8

Okay. Thanks. And then just one more real quick one. Just we all we're hearing from a lot of people that the demand for HPC is out there, but how important is the location specifically near the metro areas? Because there's a lot of other miners out there that are teasing the idea of pivoting maybe some of their ax to HPC, but just from your discussions and what you're seeing in the environment, can you get more specific on what's drawing people?

Speaker 8

Is it location? Is it near metro areas or even near specific climate areas that are drawing people?

Speaker 2

Yes, Billy will certainly offer a more technical answer than mine, but clearly there is business that we have won and there are certain requirements, particularly on the inference side that require low latency, which means you have to be in cities or near cities in order to provide for such clients. And so we've always taken that view for a long time. Our thesis is proving correct. We understand that other Bitcoin miners are building in different places and we salute them and we hope we wish them the best. But with respect to our strategy, we prefer to have our Tier three data centers in metropolitan areas or near them, particularly with respect to inference.

Speaker 2

And it's one of the reasons why frankly won businesses like Cerebras. But Billy, do you have anything more to add to that? I'm sure you do. I'm not my technical powers is not as good as yours when it comes to this.

Speaker 7

We look for sure we prefer urban markets because latency is very important in these types of installations. But I mean the markets that we're looking at price per square foot is not in the high to extreme ranges. We always look for locations and we try to balance out our locations.

Speaker 8

That's very helpful. Thanks a lot.

Operator

And the next question will come from Joe Gomez with Noble Capital.

Speaker 1

Hi, Joe.

Speaker 11

Good morning. Thanks for taking my question. So I just wanted to circle back here to something you said, Sam, it sounds like given where the stock is, you're going to turn the ATM off. And last year you guys raised over $240,000,000 from that. And just kind of want to get your thoughts that you're comfortable that you can finance through other means that type of capital going forward here?

Speaker 2

Yes. At these current levels, there is no desire to tap into the ATM. And frankly, we don't want to. We don't. We it hurts us as shareholder owners, which is what we are to dilute the shareholding.

Speaker 2

And we one of the reasons why we decided to pivot and expand and aggressively pursue the HPC business through cloud, through co location services is that it is a much easier path to take on debt. Bit digital has had historically zero debt in the past. And the reason is because when you take on debt, you can't model for if you take on debt for Bitcoin mining, you can't model out your future cash flows unless you're using a different type of Excel spreadsheet that I'm used to. You just can't predict the future cash flows because you don't know where the price of Bitcoin is going to be. So when Bitcoin miners are taking on debt to finance their expansion, it's a wild gamble and that didn't exactly turn out very good for many Bitcoin miners.

Speaker 2

So we never took on debt historically. And most Bitcoin miners, they realize the risk of taking on debt there too and they are aggressive with their ATM. We decided if we're going to go towards a business that's non cyclical and we can tap into non deleted sources of capital, in other words, not touch the ATM, and which is exactly what we're doing now, particularly on the data center side, for example, we already have a very attractive term sheet from a Canadian bank lender where the terms are incredible and we don't have to use the ATM if that's the kind of financing terms that we can do. And it's easier to use those sources of financing because you can model future cash flows when it comes to co location services. You can model future cash flows when it comes to the cloud business.

Speaker 2

You can't do that with Bitcoin mining, which is why, as I said, we have zero debt because we were Bitcoin miners and now we've become something very different. And that's why we're ready to take on debt at very attractive terms in order to expand our businesses that are growing exponentially.

Speaker 11

Great. Thanks for that.

Speaker 8

And I

Speaker 2

would just say that

Speaker 1

equity financing is painful, Joe, but I mean, if you look at the platform we built in 2024, I mean, we feel very good about that. So

Speaker 8

I think it was

Speaker 1

a very good use of funds and near term as a source of funds, we would likely opt to sell some digital assets before equity.

Speaker 11

Okay. Appreciate that color. Thanks guys.

Speaker 2

Good question. Tough one, but happy to answer it.

Operator

Thank you. And that does conclude the question and answer session. I'll now turn the conference back over to you.

Speaker 2

Well, thank you very much, ladies and gentlemen. This concludes the call for Bit Digital. We look forward to the next quarterly call. Stay tuned for some more very interesting news. And that's it.

Speaker 2

Thank you so much. Have a great day.

Operator

And that does conclude today's conference. We do thank you for your participation. Have an excellent day.

Powered by Quartr
Earnings Conference Call
Bit Digital Q4 2024
00:00 / 00:00