Recent Operational and Financial Highlights
- Stronghold’s Beneficial Use Ash Can Capture Carbon Dioxide (CO2). Following four months of extensive testing, third-party lab results indicate that Stronghold’s beneficial use ash, a natural byproduct of its mining-waste-to-power process, can capture CO2 from ambient air at a capacity of up to 12% by weight of starting ash. The process results in permanent and stable storage of the CO2.
- Initial Phase of Carbon Capture Project Underway at the Scrubgrass Plant. Stronghold and third-party engineering, design, and construction partners have developed direct air capture (“DAC”) technology to utilize the beneficial use ash to capture CO2. Field testing is in progress with initial results expected by December of 2023.
- Reiterating Q4 2023 Hash Rate Guidance. The Company is committed to Bitcoin mining and expects at least 20% sequential growth in hash rate going into the fourth quarter of 2023.
- Procured 3,135 High-Spec Bitcoin Miners (358 PH/s, >114 TH/s per miner, 28.7 J/T) Since the End of Q2 2023. The Company is taking a disciplined approach to the Bitcoin event in April of 2024, with no incremental capital currently committed to purchase additional miners.
- Signed Managed Services Agreement with Frontier Outpost 8, LLC (“Frontier Mining”) to optimize Bitcoin mining operations and profitability of Stronghold’s data centers.
- Fixed Costs Were Down
~$31 Million for the First Three Quarters of 2023 Versus the First Three Quarters of 2022, Representing a ~56% Reduction. Fixed costs include operations & maintenance expense and general & administrative expense, excluding stock-based compensation and a one-time accounts receivable adjustment. - Generated 620 Bitcoin during the third quarter of 2023, which was nearly flat versus the second quarter of 2023 and represented approximately 9% and 41% growth compared to the third and fourth quarters of 2022, respectively.
- The Company generated revenues of
$17.7 million , net loss of$22.3 million , and non-GAAP Adjusted EBITDA loss of$2.4 million during the third quarter of 2023. Excluding the adjustment to accounts receivable, the non-GAAP Adjusted EBITDA loss would have been$1.6 million . Revenues comprised$12.7 million from cryptocurrency self-mining,$3.8 million from cryptocurrency hosting, and$1.2 million from the sale of energy.1
Stronghold Carbon Capture Initiative
On
Stronghold’s two mining-waste-to-power facilities produce approximately 800,000 to 900,000 tons of beneficial use ash per year at baseload capacity utilization. Extrapolating the potential 12% CO2 capture capacity from Scrubgrass ash lab tests, this would imply potential to capture approximately 100,000 tons of CO2 per year. In September of 2023, Stronghold engaged third-party consultant Carbonomics to advise on the verification of its carbon removals for private-market monetization. The Company believes that its process will qualify for the Carbonated Materials Methodology for CO2 Removal on the Puro Registry, and the average transaction price for Puro’s Carbon Removal Certificates has ranged from approximately
“Our focus on improving the environment is a key component of our business,” said
“While it is early, if the lab results are replicable in the field using direct air capture technology, when scaled, our carbon capture deployment has the potential to be one of the ten largest DAC projects currently announced in the U.S.,” Beard continued. “We are optimistic that this meaningful project can become operational for a fraction of the cost of the other announced projects and believe that it could be deployed at scale on a shorter timeline. We look forward to providing updates as we receive test results and the project progresses.”
Bitcoin Mining Update
Stronghold generated 620 Bitcoin during the third quarter of 2023, which was nearly flat versus the second quarter 2023 and represented approximately 9% and 41% growth compared to the third and fourth quarters of 2022, respectively. The Company achieved this growth despite the average network hash rate in the third quarter of 2023 being 83% and 52% higher than the average network hash rate in the third quarter and fourth quarter of 2022, respectively. Network hash rate grew ~9% sequentially from the second quarter of 2023 to the third quarter 2023.
The Panther Creek Plant entered its planned 15-day outage on
Liquidity and Capital Resources
As of
Analyst & Investor Day
On
Conference Call
Stronghold will host a conference call today,
To participate, a live webcast of the call will be available on the Investor Relations page of the Company’s website at ir.strongholddigitalmining.com. To access the call by phone, please use the following link Stronghold Digital Mining Third Quarter 2023 Earnings Call. After registering, an email will be sent, including dial-in details and a unique conference call access code required to join the live call. To ensure you are connected prior to the beginning of the call, please register a minimum of 15 minutes before the start of the call.
A replay will be available on the Company's Investor Relations website shortly after the event at ir.strongholddigitalmining.com.
About
Stronghold is a vertically integrated Bitcoin mining company with an emphasis on environmentally beneficial operations. Stronghold houses its miners at its wholly owned and operated Scrubgrass and
Cautionary Statement Concerning Forward-Looking Statements and Disclaimer
Certain statements contained in this press release, including guidance, constitute “forward-looking statements.” within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Forward-looking statements and the business prospects of Stronghold are subject to a number of risks and uncertainties that may cause Stronghold’s actual results in future periods to differ materially from the forward-looking statements, including with respect to its potential carbon capture initiative. These risks and uncertainties include, among other things: the hybrid nature of our business model, which is highly dependent on the price of Bitcoin; our dependence on the level of demand and financial performance of the crypto asset industry; our ability to manage growth, business, financial results and results of operations; uncertainty regarding our evolving business model; our ability to retain management and key personnel and the integration of new management; our ability to raise capital to fund business growth; our ability to maintain sufficient liquidity to fund operations, growth and acquisitions; our substantial indebtedness and its effect on our results of operations and our financial condition; uncertainty regarding the outcomes of any investigations or proceedings; our ability to enter into purchase agreements, acquisitions and financing transactions; public health crises, epidemics, and pandemics such as the coronavirus pandemic; our ability to procure crypto asset mining equipment from foreign-based suppliers; our ability to maintain our relationships with our third party brokers and our dependence on their performance; our ability to procure crypto asset mining equipment; developments and changes in laws and regulations, including increased regulation of the crypto asset industry through legislative action and revised rules and standards applied by The
In
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(UNAUDITED) | |||||||
ASSETS: | |||||||
Cash and cash equivalents | $ | 4,979,299 | $ | 13,296,703 | |||
Digital currencies | 641,999 | 109,827 | |||||
Accounts receivable | 486,706 | 10,837,126 | |||||
Inventory | 3,143,284 | 4,471,657 | |||||
Prepaid insurance | 1,842,250 | 5,471,498 | |||||
Due from related parties | 97,288 | 73,122 | |||||
Other current assets | 1,137,834 | 1,381,737 | |||||
Total current assets | 12,328,660 | 35,641,670 | |||||
Equipment deposits | — | 10,081,307 | |||||
Property, plant and equipment, net | 156,481,678 | 167,204,681 | |||||
Operating lease right-of-use assets | 1,552,735 | 1,719,037 | |||||
Land | 1,748,440 | 1,748,440 | |||||
Road bond | 211,958 | 211,958 | |||||
Security deposits | 348,888 | 348,888 | |||||
Other noncurrent assets | 155,992 | — | |||||
TOTAL ASSETS | $ | 172,828,351 | $ | 216,955,981 | |||
LIABILITIES: | |||||||
Accounts payable | $ | 14,666,753 | $ | 27,540,317 | |||
Accrued liabilities | 9,638,819 | 8,893,248 | |||||
Financed insurance premiums | 1,112,558 | 4,587,935 | |||||
Current portion of long-term debt, net of discounts and issuance fees | 1,654,634 | 17,422,546 | |||||
Current portion of operating lease liabilities | 748,369 | 593,063 | |||||
Due to related parties | 451,367 | 1,375,049 | |||||
Total current liabilities | 28,272,500 | 60,412,158 | |||||
Asset retirement obligation | 1,062,677 | 1,023,524 | |||||
Warrant liabilities | 5,434,420 | 2,131,959 | |||||
Long-term debt, net of discounts and issuance fees | 57,653,823 | 57,027,118 | |||||
Long-term operating lease liabilities | 899,576 | 1,230,001 | |||||
Contract liabilities | 560,510 | 351,490 | |||||
Total liabilities | 93,883,506 | 122,176,250 | |||||
COMMITMENTS AND CONTINGENCIES (NOTE 10) | |||||||
REDEEMABLE COMMON STOCK: | |||||||
Common Stock – Class V; | 10,563,277 | 11,754,587 | |||||
Total redeemable common stock | 10,563,277 | 11,754,587 | |||||
STOCKHOLDERS’ EQUITY (DEFICIT): | |||||||
Common Stock – Class A; | 788 | 317 | |||||
Series C convertible preferred stock; | 2 | — | |||||
Accumulated deficits | (321,126,596 | ) | (240,443,302 | ) | |||
Additional paid-in capital | 389,507,374 | 323,468,129 | |||||
Total stockholders' equity | 68,381,568 | 83,025,144 | |||||
Total redeemable common stock and stockholders' equity | 78,944,845 | 94,779,731 | |||||
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY | $ | 172,828,351 | $ | 216,955,981 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
(UNAUDITED) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
OPERATING REVENUES: | |||||||||||||||
Cryptocurrency mining | $ | 12,684,894 | $ | 12,283,695 | $ | 37,764,990 | $ | 50,715,424 | |||||||
Energy | 1,210,811 | 13,071,894 | 4,682,590 | 29,807,512 | |||||||||||
Cryptocurrency hosting | 3,789,375 | 93,279 | 9,195,072 | 282,327 | |||||||||||
Capacity | — | 878,610 | 1,442,067 | 4,591,038 | |||||||||||
Other | 41,877 | 39,171 | 142,194 | 91,941 | |||||||||||
Total operating revenues | 17,726,957 | 26,366,649 | 53,226,913 | 85,488,242 | |||||||||||
OPERATING EXPENSES: | |||||||||||||||
Fuel | 8,556,626 | 10,084,466 | 22,262,141 | 29,292,616 | |||||||||||
Operations and maintenance | 6,961,060 | 19,528,088 | 24,206,080 | 47,449,177 | |||||||||||
General and administrative | 6,598,951 | 11,334,212 | 25,145,444 | 32,848,291 | |||||||||||
Depreciation and amortization | 9,667,213 | 12,247,245 | 26,025,021 | 37,234,126 | |||||||||||
Loss on disposal of fixed assets | — | 461,940 | 108,367 | 2,231,540 | |||||||||||
Realized gain on sale of digital currencies | (131,706 | ) | (185,396 | ) | (725,139 | ) | (936,506 | ) | |||||||
Realized loss on sale of miner assets | — | — | — | 8,012,248 | |||||||||||
Impairments on miner assets | — | 11,610,000 | — | 16,600,000 | |||||||||||
Impairments on digital currencies | 357,411 | 465,651 | 683,241 | 8,176,868 | |||||||||||
Impairments on equipment deposits | 5,422,338 | — | 5,422,338 | 12,228,742 | |||||||||||
Total operating expenses | 37,431,893 | 65,546,206 | 103,127,493 | 193,137,102 | |||||||||||
NET OPERATING LOSS | (19,704,936 | ) | (39,179,557 | ) | (49,900,580 | ) | (107,648,860 | ) | |||||||
OTHER INCOME (EXPENSE): | |||||||||||||||
Interest expense | (2,441,139 | ) | (3,393,067 | ) | (7,428,530 | ) | (10,813,302 | ) | |||||||
Loss on debt extinguishment | — | (28,697,021 | ) | (28,960,947 | ) | (28,697,021 | ) | ||||||||
Impairment on assets held for sale | — | (4,159,004 | ) | — | (4,159,004 | ) | |||||||||
Gain on extinguishment of PPP loan | — | — | — | 841,670 | |||||||||||
Changes in fair value of warrant liabilities | (180,838 | ) | 1,302,065 | 5,580,453 | 1,302,065 | ||||||||||
Realized gain on sale of derivative contract | — | 90,953 | — | 90,953 | |||||||||||
Changes in fair value of forward sale derivative | — | — | — | 3,435,639 | |||||||||||
Changes in fair value of convertible note | — | (1,204,739 | ) | — | (2,167,500 | ) | |||||||||
Other | 15,000 | 20,000 | 45,000 | 50,000 | |||||||||||
Total other income (expense) | (2,606,977 | ) | (36,040,813 | ) | (30,764,024 | ) | (40,116,500 | ) | |||||||
NET LOSS | $ | (22,311,913 | ) | $ | (75,220,370 | ) | $ | (80,664,604 | ) | $ | (147,765,360 | ) | |||
NET LOSS attributable to noncontrolling interest | (5,188,727 | ) | (44,000,155 | ) | (26,663,731 | ) | (86,435,347 | ) | |||||||
NET LOSS attributable to | $ | (17,123,186 | ) | $ | (31,220,215 | ) | $ | (54,000,873 | ) | $ | (61,330,013 | ) | |||
NET LOSS attributable to Class A common shareholders: | |||||||||||||||
Basic | $ | (2.26 | ) | $ | (12.67 | ) | $ | (8.93 | ) | $ | (28.17 | ) | |||
Diluted | $ | (2.26 | ) | $ | (12.67 | ) | $ | (8.93 | ) | $ | (28.17 | ) | |||
Weighted average number of Class A common shares outstanding: | |||||||||||||||
Basic | 7,569,511 | 2,463,163 | 6,047,891 | 2,177,206 | |||||||||||
Diluted | 7,569,511 | 2,463,163 | 6,047,891 | 2,177,206 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(UNAUDITED) | |||||||
Nine Months Ended | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net loss | $ | (80,664,604 | ) | $ | (147,765,360 | ) | |
Adjustments to reconcile net loss to cash flows from operating activities: | |||||||
Depreciation and amortization | 26,025,021 | 37,234,126 | |||||
Accretion of asset retirement obligation | 39,153 | 18,253 | |||||
Gain on extinguishment of PPP loan | — | (841,670 | ) | ||||
Loss on disposal of fixed assets | 108,367 | 2,231,540 | |||||
Realized loss on sale of miner assets | — | 8,012,248 | |||||
Change in value of accounts receivable | 1,867,506 | — | |||||
Amortization of debt issuance costs | 161,093 | 2,681,039 | |||||
Stock-based compensation | 7,603,859 | 9,123,124 | |||||
Loss on debt extinguishment | 28,960,947 | 28,697,021 | |||||
Impairment on assets held for sale | — | 4,159,004 | |||||
Impairments on equipment deposits | 5,422,338 | 12,228,742 | |||||
Impairments on miner assets | — | 16,600,000 | |||||
Changes in fair value of warrant liabilities | (5,580,453 | ) | (1,302,065 | ) | |||
Changes in fair value of forward sale derivative | — | (3,435,639 | ) | ||||
Realized gain on sale of derivative contract | — | (90,953 | ) | ||||
Forward sale contract prepayment | — | 970,000 | |||||
Changes in fair value of convertible note | — | 2,167,500 | |||||
Other | (229,485 | ) | — | ||||
(Increase) decrease in digital currencies: | |||||||
Mining revenue | (43,778,958 | ) | (50,715,424 | ) | |||
Net proceeds from sale of digital currencies | 42,563,545 | 46,209,822 | |||||
Impairments on digital currencies | 683,241 | 8,176,868 | |||||
(Increase) decrease in assets: | |||||||
Accounts receivable | 8,129,033 | 1,336,817 | |||||
Prepaid insurance | 1,399,254 | 5,321,521 | |||||
Due from related parties | (91,617 | ) | (58,735 | ) | |||
Inventory | 1,328,373 | 55,538 | |||||
Other assets | 9,666 | (866,298 | ) | ||||
Increase (decrease) in liabilities: | |||||||
Accounts payable | (1,445,109 | ) | 4,878,600 | ||||
Due to related parties | (239,230 | ) | 781,485 | ||||
Accrued liabilities | 875,203 | (407,909 | ) | ||||
Other liabilities, including contract liabilities | (211,225 | ) | (55,742 | ) | |||
NET CASH FLOWS USED IN OPERATING ACTIVITIES | (7,064,082 | ) | (14,656,547 | ) | |||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of property, plant and equipment | (14,743,269 | ) | (68,052,422 | ) | |||
Proceeds from sale of equipment deposits | — | 13,844,780 | |||||
Equipment purchase deposits - net of future commitments | — | (13,656,428 | ) | ||||
NET CASH FLOWS USED IN INVESTING ACTIVITIES | (14,743,269 | ) | (67,864,070 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Repayments of debt | (3,196,644 | ) | (34,490,545 | ) | |||
Repayments of financed insurance premiums | (1,474,889 | ) | (3,992,336 | ) | |||
Proceeds from debt, net of issuance costs paid in cash | (147,385 | ) | 97,337,454 | ||||
Proceeds from private placements, net of issuance costs paid in cash | 9,824,567 | 8,599,440 | |||||
Proceeds from ATM, net of issuance costs paid in cash | 8,483,982 | — | |||||
Proceeds from exercise of warrants | 316 | — | |||||
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 13,489,947 | 67,454,013 | |||||
(8,317,404 | ) | (15,066,604 | ) | ||||
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 13,296,703 | 31,790,115 | |||||
CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 4,979,299 | $ | 16,723,511 | |||
Use and Reconciliation of Non-GAAP Financial Measures
This press release and our related earnings call contain certain non-GAAP financial measures, including Adjusted EBITDA, as a measure of our operating performance. Adjusted EBITDA is a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss) before interest, taxes, depreciation and amortization, further adjusted by the removal of one-time transaction costs, impairments on digital currencies, realized gains and losses on the sale of long-term assets, expenses related to stock-based compensation, gains or losses on derivative contracts, gains or losses on extinguishment of debt, realized gains or losses on sale of digital currencies, or changes in fair value of warrant liabilities in the period presented. See reconciliation below.
Our board of directors and management team use Adjusted EBITDA to assess our financial performance because they believe it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense and income), asset base (such as depreciation, amortization, impairments, and realized gains and losses on the sale of long-term assets) and other items (such as one-time transaction costs, expenses related to stock-based compensation, and gains and losses on derivative contracts) that impact the comparability of financial results from period to period. We present Adjusted EBITDA because we believe it provides useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP. Adjusted EBITDA is not a financial measure presented in accordance with GAAP. We believe that the presentation of this non-GAAP financial measure will provide useful information to investors and analysts in assessing our financial performance and results of operations across reporting periods by excluding items we do not believe are indicative of our core operating performance. Net income (loss) is the GAAP measure most directly comparable to Adjusted EBITDA. Our non-GAAP financial measure should not be considered as an alternative to the most directly comparable GAAP financial measure. You are encouraged to evaluate each of these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in such presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of Adjusted EBITDA in the future, and any such modification may be material. Adjusted EBITDA has important limitations as an analytical tool, and you should not consider Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP and should be read in conjunction with the financial statements furnished in our Form 10-Q for the quarter ended
RECONCILIATION OF ADJUSTED EBITDA | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
(in thousands) | |||||||||||||||
Net Loss (GAAP) | $ | (22,312 | ) | $ | (75,220 | ) | $ | (80,665 | ) | $ | (147,765 | ) | |||
Plus: | |||||||||||||||
Interest expense | 2,441 | 3,393 | 7,429 | 10,813 | |||||||||||
Depreciation and amortization | 9,667 | 12,247 | 26,025 | 37,234 | |||||||||||
Loss on debt extinguishment | — | 28,697 | 28,961 | 28,697 | |||||||||||
Impairment on assets held for sale | — | 4,159 | — | 4,159 | |||||||||||
Impairments on equipment deposits | 5,422 | — | 5,422 | 12,229 | |||||||||||
Impairments on miner assets | — | 11,610 | — | 16,600 | |||||||||||
Impairments on digital currencies | 357 | 466 | 683 | 8,177 | |||||||||||
Non-recurring expenses1 | 1,216 | 8,218 | 1,853 | 14,781 | |||||||||||
Stock-based compensation | 788 | 3,377 | 7,604 | 9,123 | |||||||||||
Loss on disposal of fixed assets | — | 462 | 108 | 2,232 | |||||||||||
Realized loss on sale of miner assets | — | — | — | 8,012 | |||||||||||
Realized gain on sale of digital currencies | (132 | ) | (185 | ) | (725 | ) | (937 | ) | |||||||
Changes in fair value of forward sale derivative | — | — | — | (3,436 | ) | ||||||||||
Gain on extinguishment of PPP loan | — | — | — | (842 | ) | ||||||||||
Changes in fair value of convertible note | — | 1,205 | — | 2,168 | |||||||||||
Changes in fair value of warrant liabilities | 181 | (1,302 | ) | (5,580 | ) | (1,302 | ) | ||||||||
Realized gain (loss) on sale of derivative contract | — | (91 | ) | — | (91 | ) | |||||||||
Accretion of asset retirement obligation | 13 | — | 39 | — | |||||||||||
Adjusted EBITDA (Non-GAAP) | $ | (2,357 | ) | $ | (2,965 | ) | $ | (8,846 | ) | $ | (148 | ) |
1 Includes the following non-recurring expenses: out-of-the-ordinary major repairs and upgrades to the power plant and other one-time items.
Investor Contact:
SDIG@gateway-grp.com
1-949-574-3860
Media Contact:
contact@strongholddigitalmining.com
Source:
2023 GlobeNewswire, Inc., source