Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stronghold Digital Mining Inc (SDIG, Financial) received numerous bids for parts or all of the company, indicating strong market interest.
- PJM's capacity market base residual auction cleared at $270 per megawatt day, significantly up from last year, which will drive approximately $7 million of incremental revenue at Panther Creek.
- The waste coal tax credit in Pennsylvania was doubled from $4 per ton to $8 per ton through 2036, potentially adding $2 million to $4 million in annual cash flow starting in 2025.
- Bitcoin mining operations qualify for PJM's demand response and sync reserve programs, which could provide additional revenue streams.
- Stronghold Digital Mining Inc (SDIG) is exploring data center opportunities, leveraging its extensive land, power, fiber, and water resources, with potential for significant expansion.
Negative Points
- Revenue for the second quarter was $19.1 million, which may be considered low for some investors.
- GAAP net loss for the second quarter was $21.3 million, indicating financial challenges.
- Non-GAAP adjusted EBITDA was negative $0.3 million, showing operational inefficiencies.
- Stronghold Digital Mining Inc (SDIG) exited 17 megawatts of the Scrubgrass commitment, which could be seen as a reduction in capacity.
- The company is still in the process of evaluating strategic alternatives, which may create uncertainty for investors.
Q & A Highlights
Q: Can you provide more details on the strategic alternatives you are considering?
A: (Gregory Beard, CEO) We are exploring a wide range of options to maximize shareholder value, including sales of all or parts of the company, mergers, strategic financings, and expanding our available power into other data center use cases. We have received numerous bids and are working with advisors to evaluate these alternatives.
Q: What impact will the recent PJM capacity market auction have on your financials?
A: (Gregory Beard, CEO) The PJM capacity market base residual auction cleared at $270 per megawatt day, significantly higher than last year. Panther Creek cleared 69 megawatts and Scrubgrass cleared 76 megawatts. We estimate that capacity payments at Panther Creek alone will drive approximately $7 million of incremental revenue between June 2025 and May 2026 at a 100% margin.
Q: How will the increase in waste coal tax credits affect your operations?
A: (Gregory Beard, CEO) The waste coal tax credit in Pennsylvania was doubled from $4 per ton to $8 per ton through 2036. This increase is expected to add $2 million to $4 million in additional cash flow per year for Stronghold starting in 2025, highlighting the importance of our reclamation activities.
Q: Can you elaborate on the potential for data center expansion at your current sites?
A: (Gregory Beard, CEO) We have engaged Appleby Strategy Group to explore data center opportunities. Our assets possess key value drivers such as access to land, power, fiber, and water. We own significant acreage at Scrubgrass and Panther Creek and have optioned additional land. Preliminary load studies are supportive of bringing in an additional 250 megawatts at Panther Creek.
Q: What were the key financial results for Q2 2024?
A: (Matthew Smith, CFO) Revenue for the second quarter was $19.1 million, with $18.8 million from cryptocurrency operations on 299 Bitcoin mined and $0.3 million from energy operations. GAAP net loss was $21.3 million, and non-GAAP adjusted EBITDA was negative $0.3 million.
Q: How are you positioning Stronghold in the current power market?
A: (Gregory Beard, CEO) We are at the intersection of a tight power market, increased capacity auction pricing, and rising demand for power from AI and HPC data center development. We are evaluating all strategic alternatives to leverage our valuable portfolio of hard assets.
Q: What is the status of your Bitcoin mining operations in relation to PJM's demand response and sync reserve programs?
A: (Gregory Beard, CEO) Based on PJM's updated guidance, we believe our Bitcoin mining operations qualify for demand response and sync reserve programs. We are in the process of registering the Scrubgrass data center for these programs.
Q: What are the next steps for evaluating the expansion potential of your assets?
A: (Gregory Beard, CEO) We are conducting load studies with local utilities to determine power access at both sites. The first preliminary load study at Panther Creek supports bringing in an additional 250 megawatts. We are evaluating the timing for potential expansion and site development.
Q: How does the recent legislation in Pennsylvania support your operations?
A: (Gregory Beard, CEO) The bipartisan budget in Pennsylvania, which doubled the waste coal tax credit, underscores the importance of our reclamation activities and the bipartisan support they have. This legislation will significantly enhance our cash flow starting in 2025.
Q: What are your closing remarks on the company's current position and future outlook?
A: (Gregory Beard, CEO) Stronghold owns a portfolio of increasingly valuable hard assets. We are positioned in a tight power market with increased demand from AI and data centers. We continue to evaluate strategic alternatives and look forward to updating stakeholders in the near future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
