Recent Operational and Financial Highlights
- Accelerated hash rate guidance. We now expect to achieve hash rate capacity of 4 EH/s by
September 1, 2023 , which is one month earlier than our previous guidance and four months earlier than our guidance provided onMarch 29, 2023 . - Procured over 14,000 high-spec Bitcoin miners between
April 2023 andJuly 2023 . These miners provide aggregate hash rate capacity of nearly 1.6 EH/s, and we expect that all will be energized bySeptember 1, 2023 . Over 8,000 of the miners are wholly owned, and 6,000 of the miners are hosted as a part of the Canaan Bitcoin Mining Agreement, where Stronghold participates in the Bitcoin mining and curtailment economics. - First half of 2023 fixed costs down
~$15 million , or ~34%, compared to first half of 2022. Fixed costs include operations & maintenance expense and general & administrative expense, excluding stock-based compensation. - Stronghold mined 626 Bitcoin during the second quarter of 2023, which represents approximately 43% growth compared to the fourth quarter of 2022 and 1% sequential growth compared to the first quarter of 2023, despite Bitcoin network hash rate growth of 39% and 23% during the same periods, respectively.
- The Company generated revenue of
$18.2 million , net loss of$11.7 million , and non-GAAP Adjusted EBITDA loss of$2.6 million in the second quarter of 2023. Revenue comprised$13.8 million from cryptocurrency self-mining,$3.1 million from cryptocurrency hosting,$0.7 million from the sale of energy, and$0.6 million from capacity sales.1
1 See Non-GAAP Reconciliations.
Management Commentary
“We expect to have 4 EH/s of installed hash rate capacity at our
“Additionally, we think it is critically important for the industry to focus on capital efficiency, or the productivity of capital deployed, and returns on capital deployed. We believe that the payback periods for all Stronghold miner purchases in 2023, which we have intentionally limited to purchases of high-spec MicroBT WhatsMiner M50 and M50S and
“Lastly, with recent miner purchases and the expansion of our Canaan Bitcoin Mining Agreement, we will have more Bitcoin miners than we can plug in at the data centers at our
Liquidity and Capital Resources
As of
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 Second 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
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. 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
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(UNAUDITED) | |||||||
ASSETS: | |||||||
Cash and cash equivalents | $ | 5,104,192 | $ | 13,296,703 | |||
Digital currencies | 1,429,653 | 109,827 | |||||
Accounts receivable | 2,338,099 | 10,837,126 | |||||
Inventory | 4,168,189 | 4,471,657 | |||||
Prepaid insurance | 3,311,214 | 5,471,498 | |||||
Due from related parties | 69,947 | 73,122 | |||||
Other current assets | 1,047,731 | 1,381,737 | |||||
Total current assets | 17,469,025 | 35,641,670 | |||||
Equipment deposits | 5,422,338 | 10,081,307 | |||||
Property, plant and equipment, net | 160,398,999 | 167,204,681 | |||||
Operating lease right-of-use assets | 1,722,900 | 1,719,037 | |||||
Land | 1,748,440 | 1,748,440 | |||||
Road bond | 211,958 | 211,958 | |||||
Security deposits | 348,888 | 348,888 | |||||
TOTAL ASSETS | $ | 187,322,548 | $ | 216,955,981 | |||
LIABILITIES: | |||||||
Accounts payable | $ | 16,158,911 | $ | 27,540,317 | |||
Accrued liabilities | 8,630,165 | 8,893,248 | |||||
Financed insurance premiums | 1,993,120 | 4,587,935 | |||||
Current portion of long-term debt, net of discounts and issuance fees | 796,668 | 17,422,546 | |||||
Current portion of operating lease liabilities | 724,539 | 593,063 | |||||
Due to related parties | 910,376 | 1,375,049 | |||||
Total current liabilities | 29,213,779 | 60,412,158 | |||||
Asset retirement obligation | 1,049,626 | 1,023,524 | |||||
Warrant liabilities | 5,253,582 | 2,131,959 | |||||
Long-term debt, net of discounts and issuance fees | 57,965,960 | 57,027,118 | |||||
Long-term operating lease liabilities | 1,095,116 | 1,230,001 | |||||
Contract liabilities | 456,582 | 351,490 | |||||
Total liabilities | 95,034,645 | 122,176,250 | |||||
COMMITMENTS AND CONTINGENCIES (NOTE 10) | |||||||
REDEEMABLE COMMON STOCK: | |||||||
Common Stock – Class V; | 9,947,656 | 11,754,587 | |||||
Total redeemable common stock | 9,947,656 | 11,754,587 | |||||
STOCKHOLDERS’ EQUITY (DEFICIT): | |||||||
Common Stock – Class A; | 606 | 317 | |||||
Series C convertible preferred stock; | 2 | — | |||||
Accumulated deficits | (298,199,062 | ) | (240,443,302 | ) | |||
Additional paid-in capital | 380,538,701 | 323,468,129 | |||||
Total stockholders' equity | 82,340,247 | 83,025,144 | |||||
Total redeemable common stock and stockholders' equity | 92,287,903 | 94,779,731 | |||||
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY | $ | 187,322,548 | $ | 216,955,981 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
(UNAUDITED) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
OPERATING REVENUES: | |||||||||||||||
Cryptocurrency mining | $ | 13,782,798 | $ | 20,227,536 | $ | 25,080,096 | $ | 38,431,729 | |||||||
Energy | 740,793 | 7,691,226 | 3,471,779 | 16,735,618 | |||||||||||
Cryptocurrency hosting | 3,079,701 | 121,172 | 5,405,697 | 189,048 | |||||||||||
Capacity | 582,557 | 1,668,001 | 1,442,067 | 3,712,428 | |||||||||||
Other | 47,892 | 32,008 | 100,317 | 52,770 | |||||||||||
Total operating revenues | 18,233,741 | 29,739,943 | 35,499,956 | 59,121,593 | |||||||||||
OPERATING EXPENSES: | |||||||||||||||
Fuel | 6,291,501 | 9,188,165 | 13,705,515 | 19,208,150 | |||||||||||
Operations and maintenance | 8,804,097 | 16,586,756 | 17,245,020 | 27,921,089 | |||||||||||
General and administrative | 10,077,738 | 10,903,876 | 18,546,493 | 21,514,079 | |||||||||||
Depreciation and amortization | 8,634,967 | 12,667,300 | 16,357,808 | 24,986,881 | |||||||||||
Loss on disposal of fixed assets | 17,281 | 1,724,642 | 108,367 | 1,769,600 | |||||||||||
Realized gain on sale of digital currencies | (266,665 | ) | — | (593,433 | ) | (751,110 | ) | ||||||||
Realized loss on sale of miner assets | — | 8,012,248 | — | 8,012,248 | |||||||||||
Impairments on miner assets | — | 4,990,000 | — | 4,990,000 | |||||||||||
Impairments on digital currencies | 254,353 | 5,205,045 | 325,830 | 7,711,217 | |||||||||||
Impairments on equipment deposits | — | — | — | 12,228,742 | |||||||||||
Total operating expenses | 33,813,272 | 69,278,032 | 65,695,600 | 127,590,896 | |||||||||||
NET OPERATING LOSS | (15,579,531 | ) | (39,538,089 | ) | (30,195,644 | ) | (68,469,303 | ) | |||||||
OTHER INCOME (EXPENSE): | |||||||||||||||
Interest expense | (2,603,478 | ) | (4,508,782 | ) | (4,987,391 | ) | (7,420,235 | ) | |||||||
Loss on debt extinguishment | — | — | (28,960,947 | ) | — | ||||||||||
Gain on extinguishment of PPP loan | — | 841,670 | — | 841,670 | |||||||||||
Changes in fair value of warrant liabilities | 6,475,880 | — | 5,761,291 | — | |||||||||||
Changes in fair value of forward sale derivative | — | 3,919,388 | — | 3,435,639 | |||||||||||
Changes in fair value of convertible note | — | (962,761 | ) | — | (962,761 | ) | |||||||||
Other | 15,000 | 10,000 | 30,000 | 30,000 | |||||||||||
Total other income (expense) | 3,887,402 | (700,485 | ) | (28,157,047 | ) | (4,075,687 | ) | ||||||||
NET LOSS | $ | (11,692,129 | ) | $ | (40,238,574 | ) | $ | (58,352,691 | ) | $ | (72,544,990 | ) | |||
NET LOSS attributable to noncontrolling interest | (3,355,873 | ) | (23,537,554 | ) | (21,475,004 | ) | (42,435,192 | ) | |||||||
NET LOSS attributable to | $ | (8,336,256 | ) | $ | (16,701,020 | ) | $ | (36,877,687 | ) | $ | (30,109,798 | ) | |||
NET LOSS attributable to Class A common shareholders: | |||||||||||||||
Basic | $ | (1.35 | ) | $ | (8.21 | ) | $ | (6.99 | ) | $ | (14.85 | ) | |||
Diluted | $ | (1.35 | ) | $ | (8.21 | ) | $ | (6.99 | ) | $ | (14.85 | ) | |||
Weighted average number of Class A common shares outstanding: | |||||||||||||||
Basic | 6,163,450 | 2,034,107 | 5,274,471 | 2,027,468 | |||||||||||
Diluted | 6,163,450 | 2,034,107 | 5,274,471 | 2,027,468 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(UNAUDITED) | |||||||
Six Months Ended, | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net loss | $ | (58,352,691 | ) | $ | (72,544,990 | ) | |
Adjustments to reconcile net loss to cash flows from operating activities: | |||||||
Depreciation and amortization | 16,357,808 | 24,986,881 | |||||
Accretion of asset retirement obligation | 26,102 | 12,169 | |||||
Gain on extinguishment of PPP loan | — | (841,670 | ) | ||||
Loss on disposal of fixed assets | 108,367 | 1,769,600 | |||||
Realized loss on sale of miner assets | — | 8,012,248 | |||||
Change in value of accounts receivable | 1,142,750 | — | |||||
Amortization of debt issuance costs | 109,620 | 2,060,806 | |||||
Stock-based compensation | 6,816,048 | 5,745,625 | |||||
Loss on debt extinguishment | 28,960,947 | — | |||||
Impairments on equipment deposits | — | 12,228,742 | |||||
Impairments on miner assets | — | 4,990,000 | |||||
Changes in fair value of warrant liabilities | (5,761,291 | ) | — | ||||
Changes in fair value of forward sale derivative | — | (3,435,639 | ) | ||||
Forward sale contract prepayment | — | 970,000 | |||||
Changes in fair value of convertible note | — | 962,761 | |||||
Other | (532,880 | ) | — | ||||
(Increase) decrease in digital currencies: | |||||||
Mining revenue | (28,709,950 | ) | (38,431,729 | ) | |||
Net proceeds from sales of digital currencies | 27,064,294 | 36,006,390 | |||||
Impairments on digital currencies | 325,830 | 7,711,217 | |||||
(Increase) decrease in assets: | |||||||
Accounts receivable | 7,140,368 | 260,136 | |||||
Prepaid insurance | 542,828 | 3,945,290 | |||||
Due from related parties | (64,276 | ) | (848,150 | ) | |||
Inventory | 303,468 | (233,279 | ) | ||||
Other assets | 306,998 | (1,072,267 | ) | ||||
Increase (decrease) in liabilities: | |||||||
Accounts payable | (145,649 | ) | (4,763,351 | ) | |||
Due to related parties | 219,778 | 543,639 | |||||
Accrued liabilities | 27,326 | 4,393,075 | |||||
Other liabilities, including contract liabilities | (78,849 | ) | (55,742 | ) | |||
NET CASH FLOWS USED IN OPERATING ACTIVITIES | (4,193,054 | ) | (7,628,238 | ) | |||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of property, plant and equipment | (10,581,332 | ) | (57,074,647 | ) | |||
Proceeds from sale of equipment deposits | — | 13,844,780 | |||||
Equipment purchase deposits - net of future commitments | — | (12,073,928 | ) | ||||
NET CASH FLOWS USED IN INVESTING ACTIVITIES | (10,581,332 | ) | (55,303,795 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Repayments of debt | (2,446,953 | ) | (24,022,738 | ) | |||
Repayments of financed insurance premiums | (651,495 | ) | (3,906,462 | ) | |||
Proceeds from debt, net of issuance costs paid in cash | (147,385 | ) | 92,058,299 | ||||
Proceeds from private placements, net of issuance costs paid in cash | 9,824,567 | — | |||||
Proceeds from ATM, net of issuance costs paid in cash | 2,825 | — | |||||
Proceeds from exercise of warrants | 316 | — | |||||
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 6,581,875 | 64,129,099 | |||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (8,192,511 | ) | 1,197,066 | ||||
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 13,296,703 | 31,790,115 | |||||
CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 5,104,192 | $ | 32,987,181 | |||
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 the generally accepted accounting principles (“GAAP”) in
RECONCILIATION OF ADJUSTED EBITDA | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
(in thousands) | |||||||||||||||
Net Loss (GAAP) | $ | (11,692 | ) | $ | (40,239 | ) | $ | (58,353 | ) | $ | (72,545 | ) | |||
Plus: | |||||||||||||||
Interest expense | 2,603 | 4,509 | 4,987 | 7,420 | |||||||||||
Depreciation and amortization | 8,635 | 12,667 | 16,358 | 24,987 | |||||||||||
Loss on debt extinguishment | — | — | 28,961 | — | |||||||||||
Impairments on equipment deposits | — | — | — | 12,229 | |||||||||||
Impairments on miner assets | — | 4,990 | — | 4,990 | |||||||||||
Impairments on digital currencies | 254 | 5,205 | 326 | 7,711 | |||||||||||
Non-recurring (benefits) expenses1 | (46 | ) | 2,799 | 636 | 6,563 | ||||||||||
Stock-based compensation | 4,367 | 3,153 | 6,816 | 5,746 | |||||||||||
Loss on disposal of fixed assets | 17 | 1,725 | 108 | 1,770 | |||||||||||
Realized loss on sale of miner assets | — | 8,012 | — | 8,012 | |||||||||||
Realized gain on sale of digital currencies | (267 | ) | — | (593 | ) | (751 | ) | ||||||||
Changes in fair value of forward sale derivative | — | (3,919 | ) | — | (3,436 | ) | |||||||||
Gain on extinguishment of PPP loan | — | (842 | ) | — | (842 | ) | |||||||||
Changes in fair value of convertible note | — | 963 | — | 963 | |||||||||||
Changes in fair value of warrant liabilities | (6,476 | ) | — | (5,761 | ) | — | |||||||||
Accretion of asset retirement obligation | 13 | — | 26 | — | |||||||||||
Adjusted EBITDA (Non-GAAP) | $ | (2,591 | ) | $ | (977 | ) | $ | (6,489 | ) | $ | 2,817 |
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