Title

Presentation

Gryphon Digital Mining, Inc. beats earnings expectations. Reported EPS is $0.07, expectations were $-0.16.

Operator: Greetings and welcome to the Gryphon Digital Mining Fourth Quarter and Full Year 2024 Earnings Call. On the call are Steve Gutterman, Chief Executive Officer of the company; and Sim Salzman, Chief Financial Officer of the company. Before I turn the call over to Mr. Gutterman, please note that the statements made on this call that are not historical facts may be forward-looking statements from the company’s management made within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended, concerning future events. Words such as may, should, projects, expects, intends, plans, believes, anticipates, hopes, estimates and variations of such words and similar expressions are intended to identify forward-looking statements.

These statements are subject to numerous conditions, many of which are beyond the control of the company, including those set forth in the Risk Factors section of the company’s Form 10-Q and 10-K as updated by the company’s subsequent disclosures filed with the SEC. Copies of these documents are available on the SEC’s website at www.sec.gov. Actual results may differ materially from those expressed or implied by such forward-looking statements. Any forward-looking statements made on this call are made only as of today’s date and that company does not undertake any obligation to update or supplement any such statements to reflect subsequent developments. Now I would like to turn the call over to Steve Gutterman. Steve, please proceed.

Steve Gutterman: Thank you, operator. Good afternoon shareholders. Thank you for joining us today for our earnings call. I’m excited to share our progress and vision for positioning Griffin at the forefront of the rapidly growing demand for high performance computing driven by artificial intelligence. I’ll walk you through a brief company history and our evolution through a series of deliberate actions supporting our growth plans moving forward and how we’re positioning ourselves for significant growth. Griffin Digital Mining was founded with a mission to mine Bitcoin profitably and sustainably. A key milestone last year was our reverse takeover of Akerna [ph] and public listing on the NASDAQ. 2024 was a good year for mining.

We mined 334 coins. But as many of you know, Bitcoin mining is a highly competitive industry subject to several variables that are largely outside miners control, namely Bitcoin price, min, network hash rate and energy costs. With global hash rate continually rising and an ever decreasing number of Bitcoins to be mined, we recognize the need to differentiate and focus on what we can control. Our energy strategy, the cost and availability of power is critical to mining profitably and more generally Power is becoming an incredibly increasingly scarce and valuable resource well beyond crypto mining. We believe that the currency of the next decade will be power, and the rapid advancement of artificial intelligence is driving an explosion in demand for high performance computing infrastructure.

Industry reports estimate incremental power demand over the next five years in North America alone, equating to 50% to 70% of current U.S. household consumption. Building the energy infrastructure to meet that demand is akin to recreating half or more of the current power grid in a fraction of the time it took to build originally. Recognizing this need, we’ve seen a broader trend in our industry of Bitcoin miners acquiring energy assets to vertically integrate and control power costs. As a Bitcoin miner, we are well equipped to apply the expertise in identifying energy sources and deploying computing equipment to serve the growing demand for AI computing infrastructure. Therefore, as we look to the future, our corporate focus has shifted. While we view Bitcoin mining as a revenue bridge, our efforts over the last six months have been and will continue to be to develop world class power assets that can be used to operate HPC and AI data centers.

To that end, over the last six months we’ve expanded our team, strengthened our balance sheet and evaluated a range of energy assets to acquire and develop. We ultimately determined that natural gas presents the optimal combination of abundance, cost efficiency and reliability. Specifically, in September, my role was expanded from Director to CEO. We added Jimmy Vaiopoulos, the former Hut 8 CFO, as Chairman and in a massive win for the company, we announced that Sim Salzman, former Marathon CFO, would be continuing his role as CFO. Then in October, we announced a transformative debt restructuring with Anchorage Digital, converting $13 million of debt to equity at a premium to our stock price. We restructured the $5 million of debt on favorable terms.

Jim will describe that in more detail. The impact on our cash flow has been substantial. Instead of having to sweep the majority of our mined Bitcoin to Anchorage, we now pay a nominal monthly interest payment of $17,708 on the remaining debt. And perhaps more importantly, Anchorage has become our largest shareholder and a key advisor. We appointed Dan Grigorin from Anchorage Digital to our board. In December, we added Eric Gallie, formerly of Luminous Capital Management, as SVP of Energy Strategy. Recognizing the immense opportunity ahead, 100% of our management team and the majority of our board invested personally in our $2.8 million January equity raise, a testament to our collective conviction. The capstone of our strategic shift is the definitive agreement to acquire Captus, which we signed in January.

Captus would position us to become one of the largest dedicated HPC and AI computing infrastructure providers with up to 4 gigawatts of potential power. I’ll dive more deeply into Captus, but first I’ll pass it over to Sim who to walk through the financials. Sim?

Sim Salzman: Thank you, Steve. I will now highlight our financial results for 2024. For the year ending December 31, 2024, we mined approximately $3.34 Bitcoin and generated mining revenues of approximately $20.5 million compared to approximately $7.40 Bitcoin and generated revenues of approximately $21.1 million for the year ending December 31, 2023. Breakeven costs per Bitcoin for the year ending December 31, 2024 were $47,359 compared to $18,192 for the year ending December 31, 2023. The change in breakeven costs year-over-year reflect the halving event that occurred in 2024 where the Bitcoin rewards decreased by 50% combined with the increase in global hash rate of approximately 66%. From an energy perspective, the company’s net cost of producing a Bitcoin for 2024 was approximately $0.0697 [ph] per kilowatt hour.

Our adjusted EBITDA stood at approximately negative $5.5 million for the year ending December 31, 2024 compared to $94,000 for the year ended December 31, 2023. I’d also like to note that included in our adjusted EBITDA numbers were approximately $6 million in legal and marketing fees associated primarily with one time deal costs and going public. Absent these fees, our adjusted EBITDA would have been above breakeven. We believe breakeven costs and adjusted EBITDA are important gauges of our operational effectiveness, and then highlighting these metrics gives investors and analysts better transparency for comparative analysis across mining companies. Reconciliations to the nearest GAAP measures can be found in our earnings release disseminated prior to this call.

The Company recognized net income of approximately $401,000 for the three month period ending December 31, 2024, which includes net non-cash expenses of approximately negative $2.4 million. Net non-cash expenses consist of items including depreciation, employee stock based compensation expense, fair market value of common stock issued to consultants, change in fair value of notes payable, gain on restructuring of Bitcoin, denominated note payable and unrealized gain or loss on the marketable equity securities. This compares to a net loss of approximately $10.9 million for the three month period ending December 31, 2023 which included net non-cash expenses of approximately $9 million. The company recognized a net loss of approximately $21.3 million for the year ended December 31, 2024 which included net non-cash expenses of approximately $14.9 million.

Net non-cash expenses consisted of depreciation, employee stock-based compensation expense, fair market value of common stock issued to consultants, change in fair value of notes payable, gain on restructuring of Bitcoin denominated note payable and unrealized gain or loss on the marketable equity securities. This compares to a net loss of approximately $28.6 million for the year ending December 31, 2023 which included net non-cash expenses of approximately $27.9 million. As of December 31, 2024 our balance sheet reported approximately $0.7 million of cash and cash equivalent, $1 million in Bitcoin and approximately $5.6 million due for the note payable. As Steve noted, we completed a debt restructuring with Anchorage Digital converting $19.6 million of debt to equity.

As of December 31, 2023 our balance sheet reported approximately $0.9 million in cash and cash equivalent, $2 million in Bitcoin and $14.9 million due for the note denominated Bitcoin. As mentioned during prior quarters, the change in the fair value of note denominated Bitcoin reflected a direct correlation to the price of Bitcoin as of the period end. Following the restructuring, the remaining debt due to Anchorage is no longer denominated in Bitcoin. Before I turn it over to Steve, I’d like to take a moment to highlight the dramatic improvements we have made since Steve became CEO in late September. By our key metrics, we exited Q4 2024 in a stronger financial position than we entered it. During the fourth quarter, we increased cash and cash equivalents from $368,000 to $735,000.

We reduced total liabilities by approximately $13 million by completing the restructuring of the Anchorage note. We improved accumulated shareholders equity from a deficit of 18.9 million to a deficit of 7 million. We improved the average trading volume of our Stock from approximately 249,000 shares per day in Q3 to approximately 874,000 shares per day in Q4. With that, I’ll turn it back to Steve for some additional comments.

Steve Gutterman: Thanks Sam. We’re excited about the improvements we’ve made to the business and how these improvements are going to position us to complete our shift towards power generation. Taking a closer look at Captus the asset itself is an ideal site for an HPC and AI Data center campus consisting of 850 acres in Alberta, it has ample access to natural gas. It has access to the grid for redundancy, power transmission, non-potable water and on site carbon sequestration. Once closed, we will contemplate a staged development where we aim to bring the first 130 megawatts online in 2026 with the opportunity to expand up to 4 gigawatts over time. We feel the value creation opportunity by closing this acquisition will be immense, based on the 500,000 to $3 million per megawatt valuation of comparable computing infrastructure companies.

That would imply that Griffin’s 4 gigawatt potential that Captus once developed could be worth billions. After closing on the Captus acquisition and bringing the asset online, we expect rapidly growing high margin recurring revenues from co located customers complementing our baseline Bitcoin mining revenues. Captus will serve as an anchor site to attract additional power intensive computing customers including AI, machine learning, scientific computing and more. So in summary, we believe that the fourth quarter of 2024 and in fact the last six months and year-to-date marks the beginning of a new chapter for Griffin. Our definitive agreement to acquire Captus and the anticipated development after the closing of the transaction we feel will create extraordinary shareholder value, generating significant revenue growth and positioning us as a leader in sustainable computing infrastructure and positioning Griffin as a substantial player in the HPC and AI energy economy.

Our focus now is on execution, closing the acquisition, advancing development, securing strategic partnerships and achieving key milestones that will drive exceptional shareholder returns. Still, I would acknowledge that it has not been all roses to get here. The stock has come under pressure and the market is volatile and that has been hard. But we believe in where we’re going and we continue to build the company to create and maximize shareholder value. On behalf of the Board and the management team, we’d like to thank our shareholders for continuing to support us. We are laser focused on maximizing the value of your stock. We look forward to sharing updates on the progress and working together to build a world class company. And with that operator, let’s open up the line for questions.

Thanks.

Operator: [Operator Instructions] And the first question today is coming from Kevin Dede from H.C. Wainwright. Kevin, your line is live.

Kevin Dede: Thank you for having me, Steve. Sam, appreciate it. Lots of talk about Captus, but no mention of Ericsson in BC. Could you kind of give us the status there, Steve, and what you’re thinking?

Steve Gutterman: Yes. Thanks, Kevin. Good to talk to you, Ericsson. As we’ve publicly disclosed, we terminated our original agreement there, which was to acquire 500 wells in British Columbia. What we found is that we are still interested in Ericsson and we are still engaged in conversations to acquire a subset of those assets. Because what we found in our diligence process is that there are a handful of wells that have significant production and less associated liabilities. And then on the other end of the spectrum, there are some wells that have limited production and excessive liabilities associated with them. So the course of action was to, one, terminate the agreement, two, continue to engage with relevant parties so that, three, we can end up with a subset of those wells that can get us to the same or a better place in terms of power available to us.

Kevin Dede: Okay, could we do a little deeper dive on Captus? You mentioned Alberta, but is it within, say, 10 milliseconds of latency of Calgary or?

Steve Gutterman: Yes, yes. So great question. Sorry I cut you off with that. You want to talk solely about the latency, or do you want to talk more generally about capital?

Kevin Dede: Yes, latency is a big deal. Also, you reference partnerships. Development like this requires a ton of capital, as you well know. Give us a little insight and maybe some comfort in how you see that progressing.

Steve Gutterman: Yes. First, let me talk specifically to latency. So we actually have fiber from Rogers and from TELUS that are extremely close to the asset. The asset itself is about an hour outside of Calgary and Pincher Creek. So we’ve got great latency. And as a matter of fact, that’s one of the key elements to assessing how, how good your site is going to be, because exactly to your question and to your point, if you don’t have good latency, if you don’t have good connectivity, it’s not going to be an effective site. So we feel really good about that. It’s one of the reasons we picked it. More generally about Captus, we, as you know, spent months combing North America or an ideal site. So what does an ideal site mean? Number one, we should talk about the power source, because as I mentioned in my opening comments, according to some experts, like you, by the way there is going to be a dramatic increase in the demand for power and so up to 50, 60, 70 gigawatts, potentially 100 gigawatts of incremental power that’s necessary over the next five to 10 years for AI related data centers.

And so the question, the first question is where is that going to come from? What’s the power source? And our belief is that the answer is that there’s going to be a mix of things. There’s probably going to be some nuclear, although there’s obviously regulatory and not in my backyard problems with that. There could be some solar, wind or geothermal, although no one’s really cracked the code on how to do that efficiently. But for our money, we believe that natural gas is the very non sexy, low tech, tried and true solution to how to generate incremental power. And so the thing that we really love about Captus is that it has a couple of different pipelines for natural gas and it has grid connectivity for redundancy. So we have abundant natural gas and importantly, there is a depleted reservoir and a saline aquifer on-site with which we could conduct carbon sequestration.

So not only would we be producing the energy from natural gas there, but we have a mechanism to make sure that the whole project is green and we avoid carbon taxes or carbon transportation costs.

Kevin Dede: The subset of the inquiry, Steve to was just about how you’re developing things outside of, power and those resources, but instead obviously new relationships with a construction team and an eventual customer. So how are you thinking about this? Would this become a site that you use to host other people’s machines or do you expect that Griffin would run its own fleet? How is the team thinking about it?

Steve Gutterman: Yes, great question. And there’s a couple pieces to that question. Number one, let me talk a little bit about the Captus management team, which is part of the transaction. Really one of the things that we were most excited about. The A plus team led by Harry Anderson, who is the former COO of Penba Pipeline, which is one of the largest pipeline companies in Canada. And then so he and his team collectively have over 100 years of relevant experience. They’re true experts in developing power assets. So we really wouldn’t be doing this project like this without a team like that. And I’m really excited to get Harry and the crew aboard. There’s actually two other parts of your question. One is about potential customers and then one is about capital.

So let me address both of those. On customers, it’s really interesting. We’re not ready to make any announcements yet? But the amount of inbound calls that we have received since we announced the definitive agreement has been surprising, frankly, to me. And it points to the fact that the bottleneck is power. And so we believe that we will be able to, after we secure the acquisition, be able to make subsequent announcements about partners and customers. Stay tuned for that. That brings me to the last part of your question, which is about capital. And to your point, it is costly to develop megawatts, let alone gigawatts of power. And so we are going to take a very deliberate approach to this. Step number one, and this seems obvious, but I’ll state it is we acquire the asset.

And the total acquisition cost, as we’ve announced, is about $19 million U.S. of which 17 million is in cash. So that’s step number one, making that acquisition. Step number two, we will continue to go through the FID process to get all of the regulatory approvals that we need. And currently with that, we will be developing the first six, 30 and 100 megawatts, kind of in that order. So 136 megawatts. And we will be announcing various capital partners, which should include project management types of sources as we develop that. So step number one, secure the asset and the management team. Step number two, begin to develop the first 136 megawatts while having these very interesting conversations with potential customers. And then step number three, to your question of whether we’re going to host or whether we’re going to actually provide the services, we’ll see how the market develops after we’ve kind of gone through those sequential steps.

Does that make sense?

Kevin Dede: Perfect sense. Absolutely. Last question for me is how competitive was the process to secure Captus? And your letter of intent?

Steve Gutterman: Yes, there has been significant interest around Captus. And I think that one of the reasons that we were able to secure the asset is because Harry and his team believe in what we are doing here. The whole team is getting Griffin stock as part of this transaction. And I think they and we are excited to go build this thing together. I think that was a critical piece of why we won the bid.

Kevin Dede: Perfect. Thank you, gentlemen. I will remove myself to the end of the queue.

Steve Gutterman: Awesome. Thanks, Kevin.

Operator: Thank you. [Operator Instructions] The next question is coming from Jon Hickman from Ladenburg Thalmann. John, your line is live.

Jon Hickman: Hi, Steve. Could you elaborate a little bit more on the timing of the 136 megawatts? Did you say the end of 2006?

Steve Gutterman: Yes. And actually, we’re still nailing down all of the timelines, so I don’t want to blurt them out here, but we’re hoping to get the first megawatts, the first six actually, out there, by the end of this year or the very beginning of next year, with the 30 coming shortly after that and then the 100 towards the end of 2026.

Jon Hickman: Okay. And then the financing. Are you — can you give us any timeline on that?

Steve Gutterman: Yes, that. We expect to announce details on that imminently, and I think that that’s probably, all I will say right now on that, but we. That’s — that’s kind of.

Jon Hickman: Okay. Imminently. Okay, thank you. Congratulations on that. And then I can expect to hear a little more on the British Columbia thing down the line, since you haven’t given up on that.

Steve Gutterman: Okay, yes, absolutely. Thanks, Jon.

Jon Hickman: Okay, bye.

Operator: Thank you. And there were no other questions in queue at this time. I would now like to hand the call back to Steve Gutterman for closing remarks.

Steve Gutterman: Okay, great. I don’t think I have anything to add other than what we’ve said. We’re excited about where we are. We expect to make subsequent announcements about Captus over the coming days and weeks, and we are excited to have all of you aboard. So thanks, everyone.

Operator: Thank you. This does conclude today’s conference, and you may disconnect your lines at this time. Thank you for your participation.