Stronghold Digital Mining Reports Second Quarter 2023 Results and Provides Operational Update

Recent Operational and Financial Highlights

 

 

 

 

 

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¹ See Non-GAAP Reconciliations.

“We expect to have 4 EH/s of installed hash rate capacity at our Panther Creek and Scrubgrass data centers in the coming weeks,” said Greg Beard, the chairman and chief executive officer of Stronghold. “This represents a significant milestone for the Company, and we believe that we are well positioned to grow revenue and cash flow and create equity value going forward. We continue to expect that our vertically integrated business model, with wholly owned power plants and data centers, will demonstrate its advantages going into the Bitcoin halving that is projected to take place in April 2024.

“Additionally, we think it is critically important for the industry to focus on capital efficiency, or the productivity of capital deployed, and returns on capital deployed. We believe that the payback periods for all Stronghold miner purchases in 2023, which we have intentionally limited to purchases of high-spec MicroBT WhatsMiner M50 and M50S and Canaan Avalon A1346 Bitcoin miners, will be approximately one year, if not faster. This payback would mean that the miners generate enough cash flow to fully recover the invested capital in 12 months. This compares favorably to our team’s current assessment of the paybacks on other popular, higher-efficiency miners, which, given a materially higher price per terahash, exhibit paybacks that are over 35% longer. We believe that, at current prices, MicroBT WhatsMiner M50 and M50S and Canaan Avalon A1346 miners present more compelling value, and we have invested accordingly after significant research and analysis.

“Lastly, with recent miner purchases and the expansion of our Canaan Bitcoin Mining Agreement, we will have more Bitcoin miners than we can plug in at the data centers at our Panther Creek and Scrubgrass plants. As we have disclosed, we are currently evaluating opportunities to deploy our approximately 25 megawatts of end-to-end data center equipment at a prospective third site, and we expect to deploy any excess miners at this site. We look forward to providing an update on this initiative by the end of the third quarter of this year.”

Liquidity and Capital Resources

As of June 30, 2023, and August 7, 2023, the Company had approximately $6.5 million and $5.6 million, respectively, of cash and cash equivalents and Bitcoin on its balance sheet, which included 47 Bitcoin and 35 Bitcoin, respectively. As of June 30, 2023, and August 7, 2023, the Company had principal amount of outstanding indebtedness of approximately $59 million. As of August 7, 2023, the Company had received net proceeds of approximately $6.1 million from the sale of 798,944 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 87%, was used for miner purchases.

Conference Call

Stronghold will host a conference call today, August 10, 2023, at 10:00 a.m. Eastern Time (7:00 a.m. Pacific Time) with an accompanying presentation to discuss these results. A question-and-answer session will follow management's presentation.

A replay will be available on the Company's Investor Relations website shortly after the event at ir.strongholddigitalmining.com.

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 and Panther Creek plants, both of which are low-cost, environmentally beneficial coal refuse power generation facilities in Pennsylvania.

Cautionary Statement Concerning Forward-Looking Statements

STRONGHOLD DIGITAL MINING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

STRONGHOLD DIGITAL MINING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

STRONGHOLD DIGITAL MINING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Use and Reconciliation of Non-GAAP Financial Measures

This press release and our related earnings call contain 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, impairments on 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, gains or losses on extinguishment of debt, realized gains or losses on sale of digital currencies, 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, impairments, and realized gains and losses on the sale of long-term assets) and other items (such as one-time transaction costs, expenses related to stock-based compensation, and 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 the generally accepted accounting principles (“GAAP”) in the United States. 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 furnished in our Form 10-Q for the quarter ended June 30, 2023, expected to be filed on or prior to August 11, 2023. 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.

STRONGHOLD DIGITAL MINING, INC.

RECONCILIATION OF ADJUSTED EBITDA

 

¹ Includes the following non-recurring expenses: out-of-the-ordinary major repairs and upgrades to the power plant and other one-time items.

Investor Contact:

Matt Glover or Alex Kovtun

Gateway Group, Inc.

1-949-574-3860

Media Contact:

contact@strongholddigitalmining.com

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