Mawson Infrastructure Group Inc (MIGI) 2021 Q4 法說會逐字稿

Ladies and gentlemen, the conference will now begin. I would like to turn the call over to management.

Hello, everybody, and thanks for taking the time to hear about Mawson Infrastructure Group. My name is Nick Hughes-Jones, Chief Commercial Officer of Mawson, and I'll be taking you through the investor presentation today. But first, I need to read you a short disclaimer around forward-looking statements. Please be aware today we'll be making forward-looking statements. These statements are based on current expectations and assumptions and are subject to risks that could cause actual results to differ materially from those expected. Please be sure to refer to the cautionary text regarding forward-looking statements contained in this presentation on slide 2.

Okay. With that out of the way, Mawson at a glance. As it further nice close, Mawson has a market cap of approximately $340 million, is listed on the NASDAQ under the code MIGI, M-I-G-I, and has 4 Bitcoin mining sites across the USA and Australia.

Now, for those of you that aren't aware of what an Exahash abbreviated as EH in the slides, currently speaking, an Exahash is a measure of computing power. The more Exahash you have online, the more Bitcoins you produce on a daily basis. As at the end of March 2022, we expect to be producing at approximately 1.5 Exahash or approximately 7 Bitcoin per day. Based on a current network difficulty and a Bitcoin price for $40,000 is equates to around $102 million in annualized revenue.

Today, we are pleased to announce we are upgrading our Exahash targets from 3.35 Exahash in Q2 of 2022 to 4 Exahash in Q3 2022. And from 5 Exahash in early Q1 2023, 5.5 Exahash by the same date. You can see the respective number of Bitcoin produced per day at 4 and 5.5 Exahash on slide 3, based on current network difficulty.

We've also upgraded our contracted energy infrastructure capacity from 220 megawatts to 350 megawatts, and we are a net zero-carbon minor; something I'll touch on later in the presentation.

With that, I'll hand over to CEO and Founder, James Manning.

Thanks, Nick. Q4 was an incredibly busy period for the Mawson team. Financially, we had a very solid quarter with revenue of $9.6 million, up 79% compared to Q3 2021. Gross profit rose to $16 million, up 89% compared to Q3 2021. And EBITDA rose $10 million, up 203% compared to Q3 2021.

Operationally, we hit several major milestones in Q4. Our self-mining hit a record of 0.83 Exahash in December. We added 200 megawatts of energy infrastructure capacity and we purchased an additional 4,000 latest-generation ASIC Bitcoin miners, and a very exciting news post period end.

We announced the expansion of our Sandersville, Georgia facility to 230 megawatts, which is capable of producing up to 7.5 Exahash of operational capacity. We also materially expanded our hosting co-location business, led by a 12-megawatt hosting contract with Foundry Digital and 100-megawatt hosting contract with Celsius Mining. We will host a mine -- that Bitcoin mining facilities, generating additional revenue history to Mawson. We also secured $20 million debt facility with Celsius Mining to accelerate the rollout of our energy infrastructure.

Turning to the full year results, 2021 was a transformational year for Mawson. Mawson generated a record of $43.9 million in revenue in 2021, up 886% compared to 2020. Our gross profit came in at a record $34 million, up 2,526% compared to 2020. And pleasingly, our EBITDA also came in at a record, $17.9 million.

Some of our operational highlights in 2021 included contracted hash rate grew up to 3.35 Exahash. We expanded our energy portfolio by 220 megawatts. We added over 33,000 ASIC Bitcoin miners to our fleet, with our current fleet, sitting at approximately 45,000 Bitcoin miners. We generated $850,000 in a hosting co-location revenue of approximately 2 megawatts hosting customers.

And as a reminder, we have recently signed hosting for a total of 116 megawatts or 58 times the 2021 number, providing additional revenue stream for the business as we head into 2022.

Turning to the strategic highlights of 2021. At Mawson, we signed 100-megawatt facility in Midland, Pennsylvania, capable of accommodating approximately 3.3 Exahash of Bitcoin mining capacity, which in turn is capable of producing 15 Bitcoin per day based on the current network difficulty. We kicked off 100-megawatt expansion in our Sandersville, Georgia facility, which is pictured here on slide 5. I'm also proud to say we delivered our first Australian Bitcoin mining facility in late 2021, in partnership with Quinbrook Infrastructure Partners.

As many of you know, we listed on NASDAQ in September of 2021 and joined the Bitcoin Mining Council shortly thereafter. I encourage you to have a look at the sustainable energy use data that the Bitcoin Mining Council produces on a quarterly basis; something else we will touch on later in this deck.

And with that, I'll hand over to our CFO, Hetal Majithia, to run through the financials in a little bit more data.

Thanks, James. Okay. Turning to the balance sheet. Property and equipment rose to $76.9 million in quarter four, up from $7 million 12 months ago, reflecting our ongoing expansion of our Bitcoin mining fleet and energy infrastructure across our Australian and US facilities. Equipment deposits rose to $51.4 million in quarter four, up from nil 12 months ago, reflecting the ramp-up and investment in our future Bitcoin mining capacity. The mining deliveries related to these deposits have been delivered consistently throughout quarter one to date in 2022, with a batch of Avalon A1246 we delivered in February.

Our total assets grew materially from $9.8 million includes for 2022 to $145 million at the end of quarter four 2021. Borrowing and other liabilities rose in Q4 from $300,000 to $18.7 million, up from nil to $4.3 million, respectively, split between an equipment finance facility and a corporate level debt facility entered into over the period.

We expect to continue to use equipment finance facilities where appropriate. This is a very capital efficient way of expanding our Bitcoin mining fleet and expanding our facilities, and in turn increasing the number of Bitcoin we produce on a daily basis.

Subsequent to the full trend, we have also secured a $20 million debt facility with Celsius Mining LLC. The proceeds of which will be used to accelerate the rollout of our energy and hosting co-location infrastructure.

With that, I'll hand it back to CEO, James Manning.

Thanks, Hetal. Okay, I'll spend some time on this slide as it is an important one to understand. As you can see, between March 2022 and Q3 of 2022, Mawson will deliver a large increase in our operational footprint, moving from 1.5 Exahash to 4 Exahash; that's 166% increase in our hash rate in just over six months.

As slide 7 demonstrates, this would increase the daily Bitcoin production from approximately 7 Bitcoin per day at the end of March to approximately 18 produce per day by the end of Q3 2022. It's important to note that this is based on current network difficulty, Bitcoin at $40,000 and current expectations around mining and energy infrastructure deployment.

What's really exciting to us is as we move out into early Q1 2023, we expect to hit our 5.5 Exahash target. At the 5.5 Exahash level, we would expect to be producing approximately 25 Bitcoin per day or $365 million in annualized revenue based on the current network difficulty and Bitcoin at $40,000.

Pleasingly, our hosting co-location business has continued its rapid expansion. At Mawson, we have focused on building up our energy infrastructure from very early on in the journey. It's in our DNA. Given we have energy infrastructure surplus to our own self mining requirements, we are able to use this surplus infrastructure to generate additional revenue stream for the group.

You might say we are turning our competitors into our customers. We now have 116 megawatts of hosting customer agreements in place, making us one of the larger NASDAQ-listed hosting co-location providers and expect this to expand further to 140 megawatts by the end of 2022 and then up to 220 megawatts in 2023.

In terms of hosting economics, we are permitted to reveal the individual metrics of our underlying customers given their size, but we have been and will continue to report our hosting revenue and cost of hosting revenues at the end of each quarter, enabling you to work out just how positive and profitable this additional business segment is to Mawson Infrastructure.

Further in 2021, we generated $850,000 in hosting revenue from just 2 megawatts of customer hosting contract. As of today, we have 116 megawatts of customer contracts, we have a healthy pipeline of future customer demand.

Turning back to our own self mining business. At Mawson, we have a very disciplined approach to infrastructure to ensure that we can deliver our expansion on time and on budget.

Slide 9 shows the more granular detail expected ramp-up schedule at the Q3 2022 and there onto early 2023. Having focused on securing energy infrastructure early, this is ensured we are now amongst the lowest quartile cost producers of Bitcoin, as well as one of the lowest costs deploys of infrastructure now at NASDAQ-listed peers. The Mawson team is now focused on substantial operational expansion ahead of us.

Turning to slide 10. At Mawson, we spent considerable time and resource focusing on our energy and energy infrastructure. In an industry where energy infrastructure is in very high demand, this puts us at a strategic advantage. Central to our infrastructure first thesis, we spent a lot of time focusing on securing long-term high quality and low-cost energy infrastructure. Evidenced by the 7-to-26-year terms, we have across our global facilities with the option to buy facilities in some locations.

Our current energy infrastructure sits at 350 megawatts, with a pipeline of over 1,000 megawatts. Providing Mawson with one of the largest genuine energy pipelines in the industry. It's no accident we are at the front of the package in the energy infrastructure space, given the depth of experience at both boarder management levels inside of Mawson.

As a reminder, our Chairman, Greg Martin, who is the CEO of Australia's largest energy infrastructure company, AGL for five years, and [we beg yield] for 25 years. At Mawson, we understand the importance of building a solid infrastructure platform upon which to expand our Bitcoins self-money and hosting co-location, evidenced by today's upgrade of our self-mining targets.

Now, securing infrastructure pipeline is about more than just locking in land and energy.

Slide 11 illustrates how we have focused on locking in the ancillary energy infrastructure required to stand up large scale, low cost, and highlight efficient data centers in the Bitcoin mining industry. We are in a very strong position to not only deliver on our guidance, but critically, we had underlying infrastructure in place to take us to 5.5 Exahash and beyond.

We now have agreements in place for over 45,000 ASIC Bitcoin miners. We have purchased over 250 modular data center units, which could accommodate up to 20 Exahash of ASIC Bitcoin miners. And we have purchased over 160 low sign electrical transformers, which could accommodate up to 13 Exahash of ASIC Bitcoin miners. As you can see, we had the infrastructure in place to scale well beyond our 5.5 Exahash.

With that, I'll hand back to Nick to take you through our current mining facilities profile, as well as our ESG and community engagement priorities.

Thanks, James. Expanding on our established energy pipeline from slide 10, our current Exahash capacity plus potential brownfield expansion opportunities at current sites, leave us with the potential to be producing at approximately 17.8 Exahash over time. Critically, Mawson is committed to being a long-term sustainable Bitcoin miner. We've target carbon-free and renewable energy at our sites with our current mix of over 75% carbon-free energy.

In Pennsylvania, we're using 100% nuclear energy, and we source our nuclear power from Energy Harbor who are on three of the local nuclear power plants in Ohio in Pennsylvania, Beaver Valley, Davis-Besse, and Perry nuclear plants. The Beaver Valley nuclear power plant is a mile from our Midland, Pennsylvania facility. In Georgia, the vast bulk of our energy comes from nuclear and hydro. Importantly, at our largest facility in Sandersville, Georgia, which at the end of March we'll be operating at 80 megawatts, was recently approved for expansion to 230 megawatts, which would make it one of the largest Bitcoin mining facilities in the state of Georgia and in the United States.

As a reminder, there are two brand new nuclear reactors coming online in the state of Georgia in the next 12 months: Vogtle 3 and Vogtle 4; two 1,100-megawatt Westinghouse pressure water reactors. One of the major reasons why we selected this site as we expect a lower carbon footprint and potentially lower energy prices as these new reactors come [along].

To give you an idea of how difficult it is to bring our large-scale energy infrastructure in this industry, and while we think having a large energy infrastructure pipeline, is such a strategic advantage. Vogtle 3 and 4 are budgeted at $14 billion in CapEx in 10 years and counting on the construction side.

Our third facility is located in Australia, and it is a 100% renewable energy asset where we are co-located next to the power generation asset. As we've said before, Quinbrook is a green energy infrastructure funds, and they have 17 gigawatts of green energy across their global portfolio through our fantastic partner for us to be jointly developing green energy sites with over the coming years.

Turning to slide 13. Our strict selection process ensures we are targeting long life, low cost, and high-quality sites. We have long-term leases on all of our sites: 26 years in Sandersville, Georgia; 15 years in Midland, Pennsylvania; and seven years in Australia. We use our internally designed modular data centers, which makes us one of the lowest costs deployed in the industry. And we look at all our sites through our Net Zero Carbon 2030 and ESG strategy lens, ensuring our energy mix is low carbon.

At Mawson, ESG is a core priority for us, our integrated model is based on a long-term strategy to assist in the global transition to a digital and decarbonized society. We've already touched briefly on our focus on carbon-free energy. In addition to these, we offset any residual carbon footprint using carbon offset credits. In 2020, we offset over 22,000 tonnes of carbon, supporting wind and native biodiversity projects in the process. We are now in the process of assessing and offsetting our 2021 carbon footprint. By the end of 2022, we will have planted over 100,000 trees across the US and Australia, with 75,000 trees planted in 2022 alone; t hat's approximately 1.5 trees planted e very time a block is created on the Bitcoin blockchain.

Mawson is also a very active member of the local communities in which we operate. We sponsored both the school football team in Sandersville, Georgia of academic scholarship programs in place, and a record supporter of the Washington County Regional Medical Centre for COVID relief, as well as the local Chamber of Commerce. In late 2021, we sponsored Buhl Park in Midland, Pennsylvania, as well as supporting the local community College of Beaver County, the Lincoln Park Performing Arts Centre, Beaver Falls Park, as well as the Heritage Valley Health System.

Importantly, in Pennsylvania, we recently announced a partnership with Voltus, whereby Mawson has committed to deliver up to 100 megawatts back into the local electricity grid in times of need, further supporting the local communities in which we operate.

Slide 15 touches on our team briefly. Our US team is led by our Chief Operating Officer, Liam Wilson and a recent high-quality addition is Craig Hibbard who oversees development of our portfolio of facilities in the US. Joining us here are Hetal Majithia in Sydney office; two recent additions to our expanding team are Tom Hughes, our General Counsel, he joins us from Macquarie Bank, ANZ Bank, HUB24; and Heath Donald, our Chief Marketing Officer, who joins us from No Names Digital and brings with him 20 years of experience across IT and telecom and marketing. Our Board is chaired by Greg Martin, who was a CEO of Australia's largest energy business, AGL Energy; Michael Hughes, another of our independent non-executive directors who has extensive experience across capital markets, governance, and audit; and Yossi Keret who has substantial experience across NASDAQ-listed businesses.

With that, I'll hand it back to James to bring the presentation home and run through the last couple of slides.

Thanks, Nick. Slide 16 spelled out some of the achievements we've had recently across our innovation portfolio. As we alluded to earlier, in February, we announced two large co-location customers, a 100-megawatt agreement with Celsius Mining, and 12 megawatts to Foundry Digital. These two deals illustrate the tightness in the industry around energy infrastructure at present and how well placed we are to capitalize on them.

Secondly, following on from the listing of Cosmos Asset Management's first [product] in the Australian market in late 2021, the Cosmos Global Digital Miners ETF. Cosmos recently announced a partnership with Purpose Investment, Inc., a $14 billion asset manager, who is the world's first spot Bitcoin ETF.

For our penultimate slide, I wanted to highlight just how Mawson's Board and senior management are with our fellow shareholders Board and management currently own approximately 24% of Mawson. So, we all have huge amount of skin in the game. This is unique among our NASDAQ-listed peers and ensures we are extremely focused on shareholder returns.

And lastly, for me, before we move to questions in summary, why invest in Mawson Infrastructure Group? Well, over the next 12 months, we expect to grow our operational footprint, 400%. We are an infrastructure first business, a strategic advantage in the current environment. We are one of the most sustainable Bitcoin miners on the NASDAQ, with those 75% of our energy coming from sustainable sources. We have strategic partnerships in place with Quinbrook Infrastructure, Purpose Investments, Celsius Mining, Canaan, and Foundry Digital. We are one of the most efficient and lowest cost operators in the industry; and we have very high insider ownership, meaning we are incredibly focused on shareholder returns.

With the bulk of the presentation now complete, we wanted to take this opportunity to thank all of our shareholders for their ongoing support in 2021.

I'll now hand back to the floor for any questions.

And that's our final slide before we will hand it back to questions. Thank you, operator.

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions)

Kevin Dede, H.C. Wainwright.

Gentlemen, James, Nick, thanks so much for having me.

Thanks, Kevin. We always love to hear from you.

Okay. Can you just talk a little bit about your hosting objectives, James? I think you said, if I understood correctly, that you're targeting 220 megawatts, is that by the end of 2023? And if so, can you talk about what you might need to do to facilities beyond what you've discussed in order to accommodate that?

Sure. So, yeah, the 220 megawatts hosting is the 2023 target. As we alluded to, we currently have a pipeline of sites in late-stage negotiations or under LOIs that we'd be looking forward to bringing to the market and letting everyone know about in the near future. And the combination of the existing infrastructure, we've got an order plus the additional sites that we've got near term that we envisage bringing on between now and the end of 2023, gets us well and truly comfortable to that 320 megawatts. But it also gives us the expansion capacity for our own self mining at the same time.

Okay. Now, I understand that at least -- I think I understand, James, that you wanted us to maybe sit back and see financials as they come up in order to get a better read on the profitability. But I was wondering if you could speak to some of the deals that you've announced Celsius and Foundry, are they rev share at all? Or how do they sort of work in a broad line?

Yes, they're not revenue shares. Their traditional hosting co-location agreements is much like those traditional data center in the year to date. We have a cost-plus model where we understand our costs and our infrastructure costs. We see the cost recovery and a healthy margin on those. So ultimately, to develop that hosting business.

So, we're very much look at them on a conservative basis, the hosting business. And while we won't go out to contract specifics, we're really comfortable building out the first 116 megawatts that we've got, which are in Celsius and Foundry; and in fact, we've already delivered for Foundry, a bunch of that equipment is already online and Celsius will be coming online this month as well, some of that equipment. So, they staggered deploys over the next couple of months, and we're very comfortable about what they'll do and what they'll add to the bottom line. And I think that will help diversify our revenue streams and reduce some -- any dispute or Bitcoin risk, as attached to a traditional hosting business.

Last question from me, James. Thank you for that. Last question from me. Just on Quinbrook, your relationship there. How has Quinbrook embraced the flexibility that Bitcoin mining's offer a power producer and maybe reducing your costs in exchange for the flexibility that you can offer and controlling their load?

That's a great question. The way the Quinbrook PPA works, and I think the same is evolved in a lot of mining, PPA is their ability to curtail, and we have an ability to curtail, and that curtailment had helped the value proposition from both of us as a miner, and from Quinbrook as a power provider. So, they understand that and that ability to curtail power and hit spot demand. And I think it's not just about a power and the power price, it's also about power miners interact with the community because when power price is a high, it's a good thing to be able give that power back to the grid in times they need it.

I think you've seen that with our Voltus agreement in the US, and we've definitely got that with Quinbrook in Australia. So that curtailment process, I think, is important, not just from a economic perspective, but from a good active perspective in the broader industry because you don't want to see yourself [pits of the prices] keeping mom and dad power bills high at night.

Excusme me. I lied, James. One last one. Could you just offer a little more insight on, I guess, just for those of us who are less familiar with Quinbrook, what their core competencies are and how you think they might be looking at expanding their own power development operations?

So, Quinbrook are a global green energy infrastructure fund. They've got approximately [16, just a main] gigawatts of energy that they manage their own and operate. I mean, I'd encourage you to jump on their website, i t's quite comprehensive information about what they have in their pipeline. They are in the US, they're in Australia. They do truly global, they are in UK, they're around the world. So, working with them to develop some future sites out that are green renewable energy project is one of our key focuses in 2022 and 2023.

Thanks very much, James. Appreciate the opportunity to speak with you again, congratulations on the results.

Thanks, Kevin.

Michael Khorassani, Orion.

Michael, your line is now live. There's nobody on Michael's line and there are no further questions. I'll hand the call back to management.

Thank you. We might take a couple of questions that have popped up on the chat here. So there's a big jump in hash rate in June, what drives this?

So, in June, we see delivery of some equipment that we've already contracted coming online and some deliveries arriving. So, consumers will see that large jump and that's equipment that will be installed in -- is installed or it's being installed in May. So, we expect that to be fully online in our operation in June.

Okay. We've also got, what are you seeing in terms of miner pricing and delivery schedules?

What we're seeing in terms of miner pricing and delivery schedule? So, I think from a delivery schedule perspective, we're seeing large tera hash prices and spot was historically; and we definitely seeing an early delivery. So, we're getting out deliveries coming through from the existing orders that came in on time and on budget, obviously, because it's contracted. But we're seeing more of those -- more opportunities to pick up additional tera hash at appropriate pricing as well.

Okay. And then we've also got recent news articles have brought attention to noise issues impacting other crypto mining facilities, has Mawson encountered any of their sites?

Yes, that's a great question. We haven't had any noise issues at our mining facilities. That's partly to do with the way we approach planning on the site. We make sure, at Georgia site, if you've seen any videos online, you'll see that there is -- they're in a large forest and there's a lot of trade buffers. We do use special expenses to buffer noise.

Up in [code on], we've got appropriate earth mounting and fencing in place, as well as the modifications to our traditional container designed to baffle noise. And then in Pennsylvania, we are in these industrial sites where we are not neighboring residential areas, and that helps manage that noise risk as well.

All right. Can you comment on Georgia's proposed energy tax incentives to Bitcoin mining? Does the change accelerate your plans in Georgia?

That was from Curtis. Thanks, Curtis. Look, the energy tax incentives are really interesting, and there's already some existing incentives to operate in Georgia, but everything that helps with the tax and tax effectiveness of operating a jurisdiction makes it more competitive in the long term.

We're really fortunate to be -- our primary site was in Sandersville in Georgia. And we've got a very strong relationship there, and we recently announced that we've commenced work to expand that next stage of the Georgia facility. We had some opportunities to take that well until we pass the -- it relates to the 250 megawatts that's already approved and expand that over time.

There are other opportunities that we've got within Georgia. It's all of that phenomenal relationship we have there, and we'll be looking to pursue those over the next 12 months as part of our energy pipeline.

Okay. And last question before I hand it back to the moderator. I see four sites mentioned in the first page of the deck, but only detail on three. What's the fourth sites?

That's a good pick up there from you, Matthew, thank you.

We signed a lease for a second site in Pennsylvania. We haven't completed the -- we've completed preliminary load study, but we haven't finalized that until we've got those -- that load study finalized and locked in a PPA. We won't be publicly discussing the total capacity of the site. But we're very happy with the preliminary results and it definitely goes some part of the pipeline and ability to expand and take additional hosting in mining on the near future.

And that's all the questions there. I will h and it back to you. Thank you, moderator.

Thank you. This concludes today's conference. Thank you very much for your participation. You may now disconnect.

Thank you.

Thank you.

Thank you.