Earnings Labs

Greenidge Generation Holdings Inc. (GREE)

Q2 2022 Earnings Call· Mon, Aug 15, 2022

$1.12

-5.08%

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Transcript

Operator

Operator

Good afternoon. I'm Tom Champion from Greenidg Generation Investor Relations, and thank you for joining us. Today, the company issued a press release announcing our second quarter 2022 financial results. A copy of the press release is available on Greenidg Generation’s Web site at ir.greenidg.com. With me today are Jeff Kirt, Chief Executive Officer; Bob Loughran, Chief Financial Officer; Terence Burke, General Counsel. Jeff will begin by providing a business update and Bob will then discuss our financial results for the quarter. Jeff will then provide closing remarks. Please note that this call will include forward-looking statements that involve risks and uncertainties. Factors that could cause actual results to differ materially from management's current expectations are set forth in the company's earnings release dated August 15, 2022 and in our SEC filings, including the company's most recent reports on forms 10-K and 10-Q. We encourage you to review the safe harbor statements contained in today's press release. Copies of our SEC filings maybe obtained by visiting our Web site or the SEC's Web site at sec.gov. It is now my pleasure to introduce Jeff Kirt, Chief Executive Officer. Jeff?

Jeff Kirt

Management

Thank you, Tom. And for those of you who have not met Tom, he joined us recently to head up our Investor Relations effort, as well as business development. Tom or Champ, as the name by which many of you know him, has several decades of experience on Wall Street on both the sell side and the buy side, and I hope you all have the opportunity to connect with him in the near future. I'd like to begin on Slide 5 with some opening remarks regarding the quarter. First of all, the team once again delivered strong operational performance in terms of bitcoin production and planned uptime, which we'll talk about in more detail. Clearly, we were in a challenging earnings environment for our industry, driven by price volatility in both bitcoin and in energy markets. Mining economics have changed significantly this year compared to the previous year or 18 months before the second quarter began. And as a result, we've pivoted our strategy for the time being to focus on liquidity in order to weather the storm versus a strategy of more aggressive growth. Therefore, we decided to concentrate our operations at our existing sites in South Carolina and New York where we have infrastructure in place and equipment on hand. Leveraging the existing infrastructure provides us with a better return on invested capital compared to developing new sites, and presents us with the lowest incremental cost per megawatt built compared to developing new sites. This strategy allows us to preserve liquidity while also allowing us to benefit if and when an uptick occurs in bitcoin pricing. Following this pivot in our strategy, we now expect at least 3.6 exahash of installed mining capacity by the first quarter of 2023 at our two locations. Substantially all the infrastructure…

Bob Loughran

Management

Thanks, Jeff. I'll give a brief overview of some financial highlights of our second quarter results and an update on liquidity. Our total revenue for the second quarter rose over 90% compared to the prior year second quarter. Cryptocurrency mining revenue increased 43% compared to the second quarter of 2021, as the increased number of bitcoins mined were significantly offset by an approximately 30% lower average bitcoin price. We produced 621 bitcoins during the quarter, which was almost 100% more than the prior year quarter. The increase in the bitcoin produced was driven by the expansion of our miner fleet as our quarter average hashrate increased almost 200% versus the prior year quarter average. The higher average hashrate was partially offset by increased average difficulty of over 30%. And we ended June with 2.5 exahash, which was over 210% greater than last year. Our adjusted EBITDA of $2.9 million in the second quarter was down from $8.1 million in the second quarter of 2021 and our adjusted EBITDA margin declined to 9.2% in the second quarter of 2022 compared to 49.9% in the prior year quarter, as the combination of the lower bitcoin price and higher energy costs, which was driven by significant rise in natural gas squeezed margins for the industry. Turning to Slide 12. This provides a picture of our liquidity at June 30th. We had approximately $67 million of cash and fair value of bitcoin. Additionally, we had $92 million of cash on deposit with Bitmain for future delivery of miners. As you have noted, given our nonfixed price contracts with Bitmain, we anticipate only minimal additional cash contribution for the remainder of our order book. We have approximately $176 million of debt on our balance sheet. This is net of our debt issue costs of approximately…

Terence Burke

Management

Thanks, Bob. I'd like to update now on the status of our Title V Air Permit for the Dresden facility. The State Administrative Procedure Act allows us to operate our plant under the existing air permit for four months after final agency action is taken. On June 30th, The New York DEC denied our renewal application, and had we done nothing that would have become final agency action. But because we made a timely filing asking for a hearing on the matter, that decision on June 30th is now nothing more than a statement of the staff’s position, and we'll move forward with a hearing before state administrative law judge. This slide shows the timeline that we might anticipate going forward. But the very first step is to have a meeting with the judge and to schedule a procedure or conference, and that has not happened at this point. That might happen in September, the judge will put out a notice for public comment possibly late September early October. Then there will be a public comment hearing maybe in October or November. And the issues conference maybe in January. And at that point, we start the timeline shown here, which is that it can take 12 to 14 months starting in January before we have a ruling on the party status and the adjudicable issues. Now the timeline is not set by law, it's set by the realities of the hearing, it’s set by the administrative law judge. And it can take anywhere on the short side from 20 months to 54 months beginning in January. Once the administrative law judge has come to a final decision, the judge will make a recommended decision to the New York State Department of Environmental Conservation Commissioner, who then will decide at that point we will have final agency action. The company then has four months in which to appeal. And during those four months, it can continue to operate under the existing air permit that it has today. Now sitting here now, we cannot estimate how long this process will take. But the point of this slide is to say that it's going to take a few years at a minimum. That said, I'll hand it back over to Jeff now. Thank you.

Jeff Kirt

Operator

Thank you, Terry. In closing, I'd like to begin by stating that the team once again delivered strong operational performance in the second quarter. As a result of changes in the market, we've refocused our strategy to maximize liquidity, while building two existing sites to operational scale with combined capacity of at least 3.6 exahash by the first quarter of 2023. The plant is fully funded with less than $7.5 million remaining infrastructure costs expected and minimal cash contributions required as final payment for the miners in our order book. We talked about the pending upgrade to the Spartanburg, South Carolina electrical service expected at first quarter of 2023. It's important to note that our plan has received strong lender support, which has provided us with additional liquidity as we complete our development plan. And the team will not let up in its continued relentless pursuit of maintaining superior operating results. I'd like to conclude by highlighting some upcoming events on the investor relations calendar. First of all, we expect to participate in a number of fall investor conferences, as well as to continue to provide monthly operational updates. And finally, our third quarter 2023 results will be available in November. So with that, I'd like to thank you for your attendance and your interest in Greenidge. End of Q&A: