LM Funding (LMFA) Q1 2025 Earnings Call Transcript

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DATE

Monday, March 31, 2025 at 8 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Bruce Rodgers
• President, U.S. Digital Mining — Ryan Duran
• Chief Financial Officer — Richard Russell

TAKEAWAYS

• Bitcoin Mined -- 24.3 Bitcoin produced, up 12% sequentially, indicating ongoing improvements in operational efficiency.
• Revenue -- $2.3 million from Bitcoin mining, marking a 25% increase sequentially but a 50.5% decline year over year, attributed to the April 2024 halving event.
• Bitcoin Mining Margin -- Improved to 38.5% from 31.2% in the previous quarter, supported by cost controls and power sales.
• Power Sales -- Generated $150,000 in the quarter and $120,000 in April by selling energy back to the grid, reducing mining costs and providing a partial hedge against Bitcoin price volatility.
• Operational Scale -- Achieved 560 petahash of mining capacity and completed LuxOS upgrades across the Oklahoma fleet.
• Immersion Mining Expansion -- Purchased and initiated construction on two 1 megawatt immersion containers for a 2 megawatt Oklahoma site expansion, with completion targeted by the third quarter pending shipping timelines.
• Equipment Strategy -- Sold 256 Bitmain S21 machines, anticipating a cash-neutral outcome due to stable pricing.
• Cost Reductions -- Lowered staff, SG&A, and professional fees by 7.7% year over year through a leaner operating model.
• Net Loss and EBITDA -- Reported a net loss of $5.4 million and core EBITDA loss of $2.8 million, both affected by a $1.8 million non-cash write-down in Bitcoin holdings as of March 31, 2025.
• Bitcoin Holdings -- Held 160.2 Bitcoin (valued at $13.2 million) at quarter-end and 148.7 Bitcoin, valued at $15.5 million with a May 13, 2025 price of $104,000 per Bitcoin.
• Liquidity -- Ended the quarter with $1 million in cash.
• Treasury and Leverage -- Outstanding $5 million loan secured by Bitcoin holdings, with management indicating an open stance on further balance sheet expansion via debt or equity.

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RISKS

• Richard Russell stated, "Net loss for the quarter was $5.4 million, with a core EBITDA loss of $2.8 million, both driven by a $1.8 million Bitcoin non-cash write-down for fair market value of our Bitcoin, held as of March 31, 2025."
• Year-over-year revenue declined by 50.5%, attributed to the Bitcoin halving event in April 2024.

SUMMARY

The earnings call articulated LM Funding America (NASDAQ:LMFA)'s continued operational progress in both mining volume and power sales, culminating in an improved mining margin. The Oklahoma expansion leverages immersion technology, positioning the company to pursue growth in specialized mining environments. Management underscored the market value of its Bitcoin holdings relative to market capitalization while affirming long-term commitment to Bitcoin accumulation and balance sheet optimization through potential additional debt or equity measures.

• Management highlighted that their Bitcoin holdings as of May 13, 2025, were "currently valued at more than 1.5x our market capitalization."
• Bruce Rodgers described Oklahoma energy agreements as a structural hedge: "our energy agreement in Oklahoma allows us to sell curtailed energy back to the grid at market prices."
• Expansion into immersion cooling is designed to improve reliability, access lower-cost power, and open new site selection opportunities among Greenfield and Brownfield facilities.

INDUSTRY GLOSSARY

• Immersion Mining: A data center cooling technique in which mining hardware is submerged in a non-conductive liquid, reducing thermal stress and enabling higher equipment efficiency, longevity, and operational flexibility.
• Curtailment: The voluntary reduction of electricity usage by a Bitcoin miner, often selling unused power back to the grid during periods of high market demand.
• LuxOS: Custom firmware or software platform used to enhance the efficiency and management of Bitcoin mining equipment.
• Petahash: A unit of computational power used to quantify the speed of cryptocurrency mining operations; one petahash equals one quadrillion (1015) hashes per second.
• Bitcoin Halving: A pre-programmed event in the Bitcoin protocol that reduces mining rewards by 50%, which impacts mining economics and revenue potential.

Full Conference Call Transcript

Bruce Rodgers: Thanks, Cody. Good morning and thank you for joining us today. The first quarter of 2025 marked another period of strong execution and strategic progress for LM Funding. Since entering the Bitcoin mining business in 2021, we have transitioned from an asset-like model to a vertically integrated operator, gaining full control of our fleet, improving margins, and reducing operational risks. We mined 24.3 Bitcoin for the quarter, continuing to scale our production capabilities while improving our operational efficiency. In parallel, we've begun monetizing our curtailment energy sales by selling energy back to the grid during periods of peak demand, creating a natural hedge against Bitcoin price volatility, and further reducing our cost of operations.

Our disciplined approach to cost management also drove a meaningful reduction in operating expenses as we continue to build a leaner, more agile, vertically integrated business without compromising performance. Rick will cover this in more detail shortly. We're seeing progress in margin improvements and cost control, furthering our disciplined growth strategy. Finally, we again call attention to the disparity between the value of our Bitcoin held versus our market cap. On April 30th, we held 148.7 Bitcoin. Given a market price of $104,000 per Bitcoin, our Bitcoin holdings would be worth $15.5 million or approximately $3.01 per share, when our stock is trading at $1.87 as of May 13th close.

I'll now turn the call over to Ryan Duran, our President of U.S. Digital Mining, to review our operational highlights in more detail. Ryan?

Ryan Duran: Thank you, Bruce. In the first quarter, we focused on maximizing the operational efficiency of our existing infrastructure while targeting strategic growth opportunities. We achieved 560 petahash at the end of March, deployed LuxOS upgrades across our Oklahoma fleet, and executed our first power sales back to the grid. In May, we ordered two 1 megawatt immersion mining containers for our previously announced 2 megawatt expansion of our Oklahoma site. We expect to complete construction and energization by the end of third quarter, pending international shipping timelines. We believe the shift to immersion cooling marks a meaningful advancement in our operational strategy. This technology will allow us to operate in crowded and harsh environments that offer access to lower-cost power.

Immersion technology reduces dust, heat, and humidity, leading to a more consistent performance with longer equipment lifespan and improved reliability. We expect immersion technology to expand our operational horizons and add shareholder value. Our shift to immersion cooling led to the strategic decision to sell the 256 Bitmain S21 machines ordered last December and delivered this April. Machine prices have been relatively stable throughout this period, so we anticipate this transaction to be cash-neutral. Lastly, as mentioned in our April production update, we began relocating our 800 machines from our hosting partner site to our wholly-owned Oklahoma site. Once installed, these machines will operate with lower power costs, enabling us to mine Bitcoins more cost-effectively.

Our CFO, Rick Russell, will now provide a review of the financial highlights for the first quarter of 2025. Rick?

Richard Russell: Thank you, Ryan. In the first quarter of 2025, we mined 24.3 Bitcoins at an average price of $93,500, which was 12% more Bitcoins mined sequentially. Bitcoin mining revenue for the quarter was approximately $2.3 million, up 25% sequentially, reflecting the success of our infrastructure investments and improved machine efficiency from the LuxOS upgrades. Year-over-year, revenue declined 50.5%, largely due to the impact of the April 2024 having. Additionally, we have made significant strides in our operational strategy. As Bruce mentioned, during the first quarter, we generated approximately $150,000 from power sales back to the grid, offsetting our mining cost of revenue. This contributed to an improvement in mining margins from 31.2% in Q4, 2024 to 38.5% in Q1, 2025.

In April, we generated approximately $120,000 in power sales, demonstrating early momentum in this initiative. By incorporating curtailment into our operational models, we aim to stabilize operating costs by establishing a partial hedge against Bitcoin price volatility. As Bruce also mentioned, another highlight for the quarter was the reduction in our staff costs, professional fees, SG&A, and other costs by 7.7% year-over-year. This improvement was driven by our transition to a leaner operational model, while maintaining output and efficiency. Net loss for the quarter was $5.4 million, with a core EBITDA loss of $2.8 million, both driven by a $1.8 million Bitcoin non-cash write-down for fair market value of our Bitcoin, held as of March 31, 2025.

However, as of the date of this call, the $1.8 million write-down has nearly reversed given Bitcoin's price recovery to approximately $104,000 as of May 13, 2025. We finished the quarter with $1 million in cash, and our Bitcoin holdings increased to 160.2 Bitcoin valued at $13.2 million as of March 31, 2025, or approximately $2.58 per share. Using our April month-end holdings of 148.7 Bitcoin and a Bitcoin price of $104,000 as of May 13, 2025, the calculated value of our holdings would be approximately $15.5 million, or about $3 per share, compared to our May 13 stock price of $1.87 on the same date.

Bruce will now provide some thoughts on our outlook and strategy heading into the remainder of 2025.

Bruce Rodgers: Thanks, Rick. Looking ahead, as Ryan mentioned, we're excited to begin immersion mining with the expansion of our Oklahoma site. We believe immersion mining will produce immediate returns in Oklahoma and open up unique mining site selection opportunities to us. We're seeking to deploy immersion technology at Greenfield and Brownfield sites, offering 5 megawatts to 20 megawatts, facilities that typically fall below the acquisition thresholds of larger operators, or offer environments best suited for immersion mining. In Oklahoma, curtailment and energy sales complement our mining revenue and provide a natural hedge against Bitcoin price volatility.

By treating Bitcoin mining sites like ours as power producers, our energy agreement in Oklahoma allows us to sell curtailed energy back to the grid at market prices. We hope to build a sustainable business model around similar sites that can thrive in various market conditions, mining Bitcoin with greater flexibility and at lower costs. We remain bullish on Bitcoin and committed to our long-term Bitcoin accumulation strategy. We hobble. We began our treasury strategy in 2021. Holding and mining Bitcoin remains a logical continuation of this strategy. Recent news reports indicate we're not alone in our thinking. In 2024, we borrowed $5 million secured by our Bitcoin holdings.

So like others in the news, we may want to add Bitcoin to our balance sheet with debt and/or equity. In closing, we believe this approach to Bitcoin treasury management will create substantial long-term value for our shareholders, particularly given that our Bitcoin holdings are currently valued at more than 1.5x our market capitalization. Thank you for your time this morning and your continued support.

Operator: Thank you, Bruce. [Operator Instructions] Our first question coming from the line of Michael Donovan with H.C. Wainwright. Your line is open.

Michael Donovan: Hi, Bruce, Rick, Ryan. Thank you for taking my question. This is Michael Donovan calling in for Kevin Deedy. Can you guys talk a little bit more about the Oklahoma site build-out and what you are thinking about currently in Texas?

A - Bruce Rodgers: Sure. Texas has got a counterpart issue, so I don't think that there's anything in the short tries and force at this point. Oklahoma, we are up and running, and we will continue to move containers to expand by the year, and that is on the timetable that we discussed earlier, and we'll update you as the quarter progresses.

Richard Russell: Now, the two megawatts we expect, I think Ryan, the machines will be ready to ship to us. [Technical Difficulty]

Michael Donovan: Okay, I appreciate that. Now, after that April sales of the S21, so does that take care of all the machines that were in inventory and not plugged in?

A - Bruce Rodgers: Taking care of it, I don't know what that means. So, we did sell S21’s and [Technical Difficulty].

Michael Donovan: Okay. Now, then for, I guess, just a 20,000 foot perspective question with the new sites, do you have any geographies in mind targeting the 5 megawatt to 20 megawatt Greenfield, Brownfield build-outs or are you exploring? Still want to explore?

A - Bruce Rodgers: Michael, the geography, [Technical Difficulty] that’s taking us right now a lot of business in Oklahoma, [Technical Difficulty].

Michael Donovan: Okay, great. Well, thanks guys, and best of luck!

A - Bruce Rodgers: Thank you.

Operator: [Operator Instructions] Since there are no further questions in the queue, I would like to thank everyone for joining us on LM Funding Americas Inc. first quarter earnings call. Thank you for your participation and you may now disconnect.

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