Stronghold Digital Mining, Inc. (NASDAQ:
SDIG) (“Stronghold”, or the “Company”) provided the
following updates regarding its operations and financial
performance:
Second Quarter 2023 Estimated Financial
Performance
- Preliminary
revenue of $18.2 million, net loss of $11.7 million, and non-GAAP
adjusted EBITDA loss of $2.6 million1.
- Preliminary
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.
- Generated 626
Bitcoin, which represents approximately 43% growth compared to 4Q
2022 and 1% sequential growth compared to 1Q 2023, despite Bitcoin
network hash rate growth of 39% and 23% during the same periods,
respectively.
July Bitcoin Mining Update
Power markets have been weak for the majority of
2023, and the Company was able to benefit by importing power during
the second quarter. However, summer heat and a modest seasonal
improvement in power prices arrived over the second half of July.
Stronghold believes that its integrated business model once again
demonstrated the flexibility to optimize between Bitcoin mining
revenue and power revenue. Stronghold mined 205 Bitcoin in July,
and the Company generated approximately $0.6 million in energy
revenue from curtailment operations over the course of the month,
which represents the equivalent of an additional approximately 20
Bitcoin based on the average price of Bitcoin in July.
Accelerating 2023 Hash Rate
Guidance
During the month of July, Stronghold purchased
over 1,000 additional MicroBT Whatsminer M50 and M50S miners, with
aggregate hash rate capacity of ~130 PH/s, for approximately $2.1
million with cash on hand. These miners are expected to be plugged
in by the end of August.
With the recent announcements of the purchase of
2,000 Canaan Avalon A1346 Bitcoin miners (~220 PH/s), the addition
of 2,000 Canaan Avalon A1346 Bitcoin miners to the Canaan Bitcoin
Mining Agreement (~210 PH/s), and the purchase of additional
MicroBT Whatsminer M50 and M50S miners (~130 PH/s), Stronghold
expects to add ~560 PH/s to its existing hash rate capacity by
September 1, 2023. This would allow Stronghold to reach its
previously announced 4.0 EH/s hash rate capacity guidance one month
sooner than expected. “Following the delivery of the new miners
associated with recent purchases and the Canaan Bitcoin Mining
Agreement, we expect to achieve our installed hash rate capacity
guidance on a faster timeline than previously communicated,” said
Greg Beard, the chairman and chief executive officer of Stronghold.
“As these miners are delivered during the third quarter, and our
existing Panther Creek and Scrubgrass data centers are filled, we
look forward to optimizing our hash rate and energy efficiency. We
also continue to expect to make a decision on a prospective third
data center site by the end of the third quarter.”
Liquidity and Capital Resources
Update
As of June 30, 2023, and August 1,
2023, the Company had approximately $6.5 million and
$6.1 million, respectively, of cash and cash equivalents and
Bitcoin on the Company’s balance sheet, which included 47 Bitcoin
and 50 Bitcoin, respectively. As of June 30, 2023, and
August 1, 2023, the Company had principal amount of
outstanding indebtedness of approximately $59 million. As of
August 1, 2023, the Company had received net proceeds of
approximately $6.0 million from the sale of 781,438 shares of
its Class A common stock under the at-the-market offering agreement
with H.C. Wainwright & Co., LLC, of which approximately $5.3
million, or 88%, was used for the aforementioned MicroBT Whatsminer
M50 and M50S and Canaan Avalon A1346 purchases.
Conference Call
Stronghold is rescheduling its second quarter
2023 earnings conference call to Thursday, August 10 at 10:00 a.m.
Eastern Time to discuss its operations and financial results from
the second quarter ended June 30, 2023. A press release detailing
these results will be issued before the market opens on the same
day.
Stronghold management will provide prepared
remarks, followed by a question-and-answer period.
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.
Use and Reconciliation of Non-GAAP
Financial Measures
This press release contains 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, impairment of 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, gain on extinguishment of debt,]
realized gain or loss on sale of digital currencies, [waste coal
credits, commission on sale of ash,] 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,
impairment, and realized gains and losses on sale of long-term
assets) and other items (such as one-time transaction costs,
expenses related to stock-based compensation, and unrealized 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
contained in our filings with the Securities and Exchange
Commission. Because Adjusted EBITDA may be defined differently by
other companies in our industry, our definition of this non-GAAP
financial measure may not be comparable to similarly titled
measures of other companies, thereby diminishing its utility.
Preliminary Non-GAAP
Reconciliations:
A reconciliation of the Company’s net earnings
(loss), the closest GAAP measure, to adjusted EBITDA is presented
in the following table:
|
Three months
ended |
|
(in
millions) |
June 30,
2023 |
|
Net Loss (GAAP) |
$ |
(11.7 |
) |
|
Plus: |
|
|
Interest expense |
|
2.6 |
|
|
Depreciation and amortization |
|
8.6 |
|
|
Stock-based compensation |
|
4.4 |
|
|
Impairments on digital currencies |
|
0.3 |
|
|
Realized gain on sale of digital currencies |
|
(0.3 |
) |
|
Changes in fair value of warrant liabilities |
|
(6.5 |
) |
|
Adjusted EBITDA (Non-GAAP) |
$ |
(2.6 |
) |
|
About Stronghold Digital Mining,
Inc.
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 Plant and Panther Creek Plant, both of which
are low-cost, environmentally beneficial coal refuse power
generation facilities in Pennsylvania.
Investor Contact:Matt Glover or
Alex KovtunGateway Group,
Inc.SDIG@gateway-grp.com1-949-574-3860
Media
Contactcontact@strongholddigitalmining.com
Forward Looking Statements of
Stronghold:
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, including 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
Financial Crimes Enforcement Network under the authority of the
U.S. Bank Secrecy Act and the Investment Company Act; the future
acceptance and/or widespread use of, and demand for, Bitcoin and
other crypto assets; our ability to respond to price fluctuations
and rapidly changing technology; our ability to operate our coal
refuse power generation facilities as planned; our ability to
remain listed on a stock exchange and maintain an active trading
market; our ability to avail ourselves of tax credits for the
clean-up of coal refuse piles; and legislative or regulatory
changes, and liability under, or any future inability to comply
with, existing or future energy regulations or requirements. More
information on these risks and other potential factors that could
affect our financial results is included in our filings with the
Securities and Exchange Commission, including in the “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” sections of our Annual Report on Form
10-K filed on April 3, 2023 and in our subsequently filed Quarterly
Reports on Form 10-Q. Any forward-looking statement or guidance
speaks only as of the date as of which such statement is made, and,
except as required by law, we undertake no obligation to update or
revise publicly any forward-looking statements or guidance, whether
because of new information, future events, or otherwise.
_________________1 See Preliminary Non-GAAP
Reconciliations
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