Mawson Infrastructure Group, Inc. (NASDAQ:MIGI) Q1 2023 Earnings Call Transcript May 15, 2023

Mawson Infrastructure Group, Inc. misses on earnings expectations. Reported EPS is $-0.8 EPS, expectations were $-0.48.

Operator: Good afternoon! And welcome to the Mawson Infrastructure Group First Quarter 2023 Earnings Results Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tim Broadfoot, Chief Corporate Officer. Thank you, Tim. You may begin.

Tim Broadfoot: Welcome ladies and gentlemen, to the Q1 presentation for Mawson Infrastructure Group. In this presentation we look forward to updating you to the operating and financial performance of the company. In today’s presentation we may make forward-looking statements. We bring your attention to the disclosures on Slide 2 regarding these statements, and encourage you to read our full disclosures in our most recently filed 10-K and 10-Q. In addition, some of the metrics in today’s presentation use non-GAAP financial metrics. We bring your attention to Slide 13 for a reconciliation of those metrics. Mawson utilizes a dynamic three-pillar approach to revenue generation in its standard business operations. This allows for a robust revenue model, to navigate the volatility in all associated markets within our industry.

Firstly, we have our self-mining operation. Mawson currently has 13,500 miners deployed and hashing at its facilities. Secondly, we are entering into long-term hosting contracts, with 50 megawatts deployed and additional 70 megawatts planned over the remaining of the year. Lastly, we have our Energy Markets program. That enables Mawson to mitigate energy pricing risk, support the local grid, and also earn high margin returns by strategically reducing load during high demand periods. I will now hand over to our Chief Operating Officer, Liam Wilson to take you through the operational updates from the quarter.

Liam Wilson: Thanks Tim. Mawson has started 2023 with a bang. We announced the sale of our Greenfield Texas land leaseand transformers to $8.5 million. We complemented the strategic sale of Texas with the addition of our new facility in Corning, Ohio. This 24 megawatts facility has a further 26 megawatts of capacity, capable of holding just under 15,000 miners, with two exahash equipment. We are actively looking for the right hosting partner for this site. The site will be a mixture of self-mining and hosting. On top of Corning, Ohio, we have secured an additional 20 megawatts at our live facility in Midland, Pennsylvania. Operationally, during the month we have begun the build out of the next 70 megawatts at the Midland, Pennsylvania facility, as well as the first 12 megawatts with our Sharon facility. We are looking forward to having that power come online through Q2, 2023.

-: What makes our sites more impressive is that they are both carbon free, being 100% nuclear, and also sit within Pennsylvania and Ohio with cool winters and mild summers. The average temperature through Q1 was 43 Fahrenheit or 6 Celsius, which is perfect peak point mining weather. Mawson strategically locates and acquires assets in specific locations, which provide optimal operating conditions, in a variety of different ways. We like our sites to be located in deregulated markets where curtailment is an option. However, we need a reliable grid. We like our energy low and accessible to a readily accessible workforce near major cities. Most importantly, we love a cool climate, which means air cool is the preferable operating model at both inflated and deflated BTC prices.

Our strategic decisions to operate in cooler climates in certain parts of the U.S. allows us the advantage of not having to concentrate our efforts on immersion. This is a huge advantage when it comes to the efficient deployment of capital. Our in-house designed MDC solution is manufactured in-store for $527 per miner, which is a market leading price. This is in comparison to approximately $3,635 per miner, the immersion systems needed to effectively operate mining farms in warmer climates. Mawson has one of the most solid and robust energy pipelines in the industry. Our flagship facility in Midland Pennsylvania is supported by the Sharon and [inaudible] facilities. We are also in deep final discussions for additional sites in our region, which we’re excited about hopefully announcing to the market soon.

Not only is our pipeline solid, but our history of execution is reliable and market leading. With our secure energy pipeline and ability to execute, Mawson has set itself up for a very successful and fruitful 2023 and beyond. We are aiming to 7.2 Exahash units installed by the end of 2023, with our targets set on 10 Exahash in 2024. Our mining fleet consists of 20,000 units at the moment, which is capable of producing up to 1.7 Exahash of computing power, which translates to approximately 4.45 Bitcoin per day. This equates to $124,000 a day at the current price of Bitcoin or $45 million per year in revenue. We are actively looking to test new units at the moment, as we decide when and where to place our next large order. We have space in our pipeline for additional miners to be deployed, and look forward to updating the market on this in due course.

With that, I will pass it to the Chief Financial Officer, Ariel Sivikofsky for further. Thank you.

Ariel Sivikofsky: Thanks, Liam and thank you to everybody who has joined the call today. Following on from the operational measures discussed already, some of the financial highlights of quarter one 2023, Mawson generated mining revenues of $2.8 million. Pleasingly, our co-hosting business continues to generate solid revenue growth at $4.3 million for the quarter, with the Energy Markets program contributing another $400,000 at a gross margin of 84%. The sale of assets contributed $1.59 million of revenue, primarily being the sale of marketable securities, being the CleanSpark stock. The cost of revenue amounted to $4.7 million. The net EBITDA result was a minor loss of $2 million, and adjusted EBITDA loss of $400,000. Quarter one, U.S. GAAP net loss was $11.4 million, being a similar result for the same period last year.

Moving to the balance sheet, as that quarter one closed, the total assets in the group amounted to $116.7 million, primarily made up of fair value fixed assets of $84.6 million, derivative assets of $10.6 million, relating to the energy markets program, and trade and other receivables of $10.6 million. The liabilities amounted to $50 million, with trade and other payables and borrowing being $24.2 million and $22.9 million respectively. This results in a net asset position at quarter end of $66.7 million. Now, as a summary of the previous two slides, and in reconciling to our statutory reporting, from a net loss of $11.4 million, similar to the same period last year, a minor adjusted EBITDA loss of $400,000 was achieved. Further, from total revenues of $7.7 million, and cost of revenues of $4.7 million, an overall growth with profit margin at 40% or $3 million was achieved.

As detailed previously, as at quarter one end, total net assets amounted to $66.7 million from an asset base of $116.7 million, and total liabilities of $50 million. It must be noted that our liability is reduced by $8 million in this quarter, and with the subsequent events highlighted earlier by Liam, being the close of the Texas out transaction, and the successful $5 million capital raising, that strengthens our balance sheet further Now, I hand over to Tim Broadfoot.

Tim Broadfoot: During Mawson’s site development and operations, we like to have a responsible, corporate perspective to decision making. This has led to an operational model that utilizes 100% nuclear, non-carbon emitting power for its mining and hosting operations. We also partner and support local initiatives that we believe align Mawson with the local community and support the people who support us in our mission to grow. At Mawson, we are very grateful for the local community, supplies, shareholders and employees that enable us to be the company that we are today. I’ll now hand you over to our CEO and Founder, James Manning.

James Manning: Thanks Tim. The cornerstone of our success at Mawson, is the employees and the leadership team. The deep knowledge base of our diversified experience and expertise starts at the board level and takes down through the executive team to create a robust management team that drives the business. Each and every member brings a valuable addition to the operations of the company and we are excited to be able to drive the company through 2023 and beyond with this support in place. The shareholder base we have at Mawson is very important to us, and we are grateful for the support and trust that they provide us with. The team at Mawson brings real value to the company we have and the market is undervaluing that. As we highlight on this slide, the trading value of the MIGI stock is at a 39% discount for the net assets, and there’s a large resources and tracking from the value of the base which they recovered.

We believe there is a solid opportunity to be invested in Mawson. In summary, we look forward to the continued growth of Mawson, which Mawson has been working very hard on, and we hope to deliver value deployment to our shareholders in the next quarter and year. We look forward to achieving our forecasted operational goals the same way as we have historically and we started to grow our relations with all our stakeholders of the company. With the presentation now complete, we’d like to take this opportunity to thank all our employees, suppliers and shareholder for their ongoing support throughout 2022 and into 2023. We will now take any questions.

Q&A Session

Operator: Thank you. [Operator Instructions]. And our first question is from the line of Josh Siegler with Cantor Fitzgerald. Please proceed with your question.

Operator: [Operator Instructions]

James Manning : That’s great. Thanks Liam. I’ve got no other questions coming through guys. So, unless someone else pops one though, at this point I think we’ll be wrapping up the call. I’ll just leave it a minute to see if there’s anyone, any other questions that are coming through. No, and on that basis I think we will wrap up the investor call today. Just wanted to thank those investors and analysts that have jumped on the call. We really appreciate your continued support and we look forward to presenting the next call results in the near future. Thank you very much.

Operator: That does conclude your conference call for today. We thank you for your participation and ask that you please disconnect your lines.