Bitfarms mined 1,257 bitcoin in Q2, up 31% from our first quarter of 2022 and we followed that by mining another 500 bitcoin in July alone. Our increase in production momentum completely offset weaker bitcoin prices, allowing us to grow revenue sequentially to $42 million. We also generated cash from mining operations, as defined by Adjusted EBITDA, of $19 million. Compared to the results of other publicly traded bitcoin miners, our results ranked significantly higher than most.

The Bitcoin mining industry has experienced challenging trends in thus far in 2022, including the accelerating decline in bitcoin price since November 2021, with the most severe impact to prices starting in early May 2022. Yet, Bitfarms continued our growth trajectory and expanded operations.

We increased our corporate hashrate 33% from the end of Q1 to 3.6 exahash per second at the end of Q2. We are now just shy of 4 exahash per second, which means we continued to gain market share. We estimate we now represent approximately 2% of the Network hashrate—a company record.

In June and July, we took decisive actions to maintain our financial flexibility and increase our liquidity. In doing so, we reduced the balance of our bitcoin-backed loan facility from $100 million to $23 million as of the end of July and secured new equipment financing of $37 million.

Farm Progression

Since quarter end, we increased total electrical capacity across all locations by 29 megawatts to 166 megawatts. Today, we are approaching 18 bitcoin/day in daily production, and we are running at 135 bitcoin per average exahash per second in July, which is in the top quartile of efficiency and performance.

We ended the quarter with 9 locations and 137 megawatts in capacity, up from 8 locations and 121 megawatts in capacity in March 2022. Leger started production in April, initially adding 16 megawatts of capacity, which has since expanded to its full capacity of 30 megawatts and, in conjunction with The Bunker Phase 2, increased our total corporate capacity to 166 megawatts as of August 2022. Construction continues on two facilities in Canada and the first two warehouses in Argentina.

We continued expanding operations in Q2 by bringing online The Bunker Phase 2 in the City of Sherbrooke, Quebec, which added 18 megawatts of new capacity, and installing 10,300 miners. These key contributing factors boosted production in the quarter and led to a total of 1,257 bitcoin mined in Q2. Our contracted power with Hydro-Sherbrooke within the City of Sherbrooke is for a total of 96 megawatts. With the creation of The Bunker, Leger and Garlock, we expect to be fully operational at these farms by the end of December, two months ahead of schedule.

The Bunker, first activated in March 2022, is currently drawing 36 megawatts, and running 9,000 miners from its first two Phases. Phase 3, which is targeted for completion in the fourth quarter of this year, will add another 12-megawatts. Leger contributes 30 megawatts and is operating 7,400 miners delivering over 740 petahash per second. With Garlock, we completed the warehouse clean-up and building improvements, and plan for electrical infrastructure, louvers, fans, racks, and miners to follow in September. We expect Garlock to be fully operational by year end. With 18 megawatts at Garlock, 48 megawatts at The Bunker, and 30 megawatts at Leger, we will fully utilize our 96-megawatt power contract in the City of Sherbrooke.

De la Point is presently operating at 18 megawatts and is planned to come offline, coincident with the commissioning of Garlock, by the end of 2022, two months ahead of schedule. With its earlier than expected termination, we can begin the sale process for this property and plan to convert this unencumbered real estate into cash in early 2023.

In Rio Cuarto, Argentina, we are building out the first two warehouses of the contracted plans for up to 210 megawatts. Two other warehouses remain under consideration for future expansion, utilizing available capacity and otherwise stranded power.

During Q2, we made significant progress on construction of our first two 50-megawatt warehouses and associated infrastructure. The initial electrical supply line is nearing completion, with the connection expected to take place soon. We have already imported over 4,800 miners, and the installation of racking, miners, servers, and data cabling in the first warehouse is underway, with miners expected to be installed in mid-September. We anticipate beginning production at the first 50-megawatt warehouse in the fourth quarter of 2022 and expect to complete construction at the second 50-megawatt warehouse in the first quarter of 2023.

To better align our capital plan with our production schedule, we successfully renegotiated the timing of some miner deliveries for our second 50-megawatt warehouse. The net effect shifted $39 million in scheduled capex from Q4 2022 to the first nine months of 2023.

In Paraguay, we are building on our experience from constructing 8 farms in North America and continue to believe this jurisdiction is ripe with opportunities for expansion.

In total, we have 9 farms in production in three countries and are drawing power from five hydro-electricity providers. Today, we have a capacity of 166 megawatts and an additional 63 megawatts under development that are expected to come online this year, for a total planned capacity of 229 megawatts by the end of the year, representing 89% growth in nine months.

Operational Achievements

One of our tools for continuous improvement is our recently revamped proprietary miner management system, called MGMT-2. It enables us to manage at an individual miner level the hundreds of thousands of miners across our globally decentralized farms with a focus on maximizing uptime.

MGMT-2 features improved controls, tracking, sensors, alarms, visualizations, and performance metrics, enabling increased efficiency in operations. As noted earlier, we are at 135 bitcoin per average exahash per second in July, which is top quartile efficiency and performance. Another measure of efficiency, Joules per terahash is realizing steady improvements. At the end of July 2022, we were at 40.6, improving 17% compared to 49.1 in June 2021.

Looking ahead, we plan to further optimize the performance of our fleet by prioritizing the most economic repairs, thus maximizing cash flow. Additional features, such as variable load, hashrate control and under clocking are under development. Along with integrating bitcoin mining economics, we also will be incorporating external data to better optimize our operations, such as grid load balancing and market pricing, taking our operational control to the next level.

Fleet Status

Regarding fleet activity during the quarter, we installed 10,300 latest generation miners. The first 4,800 were imported into Argentina and are being staged for our first 50-megawatt warehouse, which will be made operational in the coming months. Year to date, we have installed over 25,000 miners, bringing our total installed base to over 44,000 active miners. 4,000 miners currently in transit, in addition to the 25,000 installed, account for approximately 80% of our planned miner deliveries for 2022.

Based on current infrastructure construction and miner deliveries schedules, we are targeting:

●    4.2 exahash per second as of September 30, 2022

●    6.0 exahash per second as of December 31, 2022

In addition, with the contracted miner deliveries scheduled we expect to add 1.2 exahash per second when fully operational in the first half of 2023.

Q2 Financial Results

Growth in mining operations and strong execution benefitted our top and bottom lines in a difficult bitcoin market environment. We executed certain financing activities to maintain financial liquidity and flexibility to best sustain our growth plan.

Our quarterly revenue was $42 million, up 4% from the prior quarter as our higher bitcoin production offset the decline in bitcoin prices. In comparison to the prior year quarter, our revenues were up 14%, reflecting almost 500 more BTC mined than the prior year period.

Bitfarms' average direct cost of production per bitcoin in Q2 2022 was $9,900, among the lowest reported in the industry. This is a 14% increase in production cost from $8,700 in Q1 2022. Gross mining profit was $27 million, impacted by the decline in the price of bitcoin, compared to $28 million in Q2 2021.

We continued to generate cash from mining operations, with Adjusted EBITDA margin of 45% of revenue and Adjusted EBITDA of $19 million. Our financing strategy continues to focus on maintaining the strength and flexibility of our balance sheet and protecting shareholders' investment, while supporting our key financial goal of funding our planned growth at a relatively lost overall cost of capital.

As part of this, we adjusted our bitcoin management strategy to sell a portion of our bitcoin production and treasury holdings to partially fund our operating needs and ongoing growth investments. We also secured $37 million in equipment financing during the quarter, which is in addition to the $32 million in equipment financing we obtained in February. We raised $9.6 million in net proceeds from the judicious application of our ATM program that we launched a year ago.

In all, we ended the second quarter with cash of $46 million and 3,144 bitcoin valued as of June 30th at $62 million, for total liquidity of $108 million. In addition, after quarter end, we paid down a further $15 million on our bitcoin-backed facility and raised another $4.1 million, net of expenses, under our ATM.

The End of Bitfarms' Second Quarter

Bitfarms was able to maintain a strong market position and maintain our growth strategy even during market volatility this past quarter. While other bitcoin mining companies struggled to keep a lid on costs of electricity fueled by commodities, our long-term hydroelectric contracts sustained the cost of production among the lowest in the industry, giving us the edge we needed to stay ahead of the curve.

Bitfarms is following a path of growth with discipline, and as evidenced by our track record of operating excellence, we are well positioned to take advantage of emerging opportunities and be a consolidator in the industry.

We look forward to our future industry events coming up, including the Needham 2nd Annual Virtual Crypto Conference on September 8, the HC Wainwright 24th Annual Global Investment Conference from September 12-14, BTIG 2nd Annual Digital Assets Conference from September 19-20, and the B. Riley 2nd Annual Crypto Conference on September 29.

We will also be launching our new website soon. In addition to an improved look and feel and easier navigation, it includes many metrics from our operations and monthly production reports that will be useful in tracking our results and progress. Additional functionality is envisioned and will be added to the website in the future. Please be sure to visit Bitfarms.com in the next several days.

We look forward to updating you with our monthly production reports as well as other developments and on our Q3 conference call in November.

Disclaimer Regarding Forward-Looking Information:

This blog presentation has been issued as a matter of interest to investors and other followers of Bitfarms Ltd. This presentation contains forward-looking information and Bitfarms cautions readers that forward-looking information is based on certain assumptions and risk factors that could cause actual results to differ materially from the expectations of Bitfarms. Readers should not place undue reliance on forward-looking information. Please refer to those risks set out in the public documents of Bitfarms filed on https://www.sedar.com/. Securities regulators including the Toronto Stock Exchange and Nasdaq have not reviewed the information disclosed in this blog presentation and no securities regulator accepts responsibility for the adequacy or accuracy of this content.

The post Bitfarms Second Quarter 2022 Financial Results Recap appeared first on Bitfarms Ltd. (BITF).

This past week's presentation covered Bitfarms' first quarter financial results, the status of our current operating locations and an update on the company's expansion projects. We also discussed recent external challenges given the price erosion in Bitcoin (BTC) and higher natural gas prices and as such, we discussed how the company is either addressing them or adjusting our operations to minimize risks and maximize returns.

Bitfarms is one of the largest and most profitable BTC miners in the world. In the first quarter of 2022, we generated revenues of $42 million; gross mining profit of $30 million which represents a gross mining margin of 76%, and an Adjusted EBITDA of $32 million, which is 80% of Revenues.

On April 5th, we were pleased to announce that we surpassed 3.0 Exahash (EH/s) per second of computational throughput. Achieving this corporate milestone mere days after our stated target of March 31st is a testament to our advanced planning and the efforts of our experienced and talented construction and electrical teams. This is up 36% from 2.2 EH/s on December 31st, 2021. Recently, our hashrate grew to 3.4 EH/s, representing approximately 1.5% market share. The growth in Bitfarms' corporate hashrate continues to accelerate faster than the BTC network, which is required if we are going to continue to expand revenues, cash flow, and increase the value of the company.

During the first quarter, we mined 961 BTC at an average cost of $8,700 per BTC. We were successful with keeping costs low by remaining consistent with our performance at the start of 2021 and keeping our cost of production at a fraction of the cost of our peers. We have recognized and committed to the importance of having low-cost production due to risks and scenarios such as the recent drop in BTC price. Despite the drop and due to our low production cost, we have maintained healthy margins. As a vertically integrated BTC mining company, we have always taken pride in being an efficient operator. To this end, we have kept our direct cost of mining a BTC at under $9,000 for the past five fiscal quarters.

We ended the first quarter with $77 million in cash and 5,244 BTC valued at $230 million as of March 31st. As of recently, we hold just over 5,900 BTC. Having adequate cash and BTC reserves is important as it allows Bitfarms to 1) continue growing the company without resorting to raising dilutive capital and 2) respond to new opportunities as they arise.

Despite the quarter's declining BTC prices, we maintained healthy margins. Bitfarms emerged from Q1 2022 with profitable results, including a reported net income of $5 million, and we exited with a healthy balance sheet. Our Adjusted EBITDA acts as a proxy for cash flow

generated from operations. Our EBITDA margin consistently comes in at a percentage of revenues well beyond many of our peers and most other industries.

Further Q1 2022 achievements include initiating production at both The Bunker and our Leger sites in Sherbrooke, Québec. This, along with commencing production at our 10-megawatt (MW) farm in Villarrica, Paraguay in January, increased our total farms in production to nine and our operational capacity to 137 MW. We have an additional 92 MW under development that are expected to come online in 2022, for a total planned capacity of 229 MW by December 31, 2022.

The Bunker is currently ramping up to 18 MW in its first phase of operations. As of today, we are currently drawing 12-MW. Equipment is now being installed to activate the remaining 6 MW in Phase One over the coming weeks. Phases Two and Three, which involve 18 MW and 12 MW respectively, are under construction. These phases are on track to reach completion in the second and third quarters of 2022. Upon full buildout, The Bunker is slated to be a 48 MW facility, housing 13,000 miners, and anticipated to deliver 1.3 EH/s per second.

Leger, which started production on April 6th, is currently running at 16 MW (with an expectation to achieve 30 MW). The facility is currently generating over 250 petahash per second (PH/s), and upon full build out, will be capable of delivering more than 740 PH/s per second.

Located strategically close to The Bunker and Leger farms, Garlock was acquired in mid-March. Combined with The Bunker and Leger facilities, it is intended to replace the de la Pointe facility and fully utilize Bitfarms' power contracts in the municipality, in accordance with the company's previously announced co-operation agreement with the City of Sherbrooke reached in September 2021.

We began production at our 10 MW farm in Villarrica, Paraguay in January. Like our farms in Canada and the US, this farm is run on low-cost hydropower. And, having established a foothold in the country and gained experience working there, we are increasingly optimistic about further and larger development opportunities within the country.

In Rio Cuarto, Argentina, we have contracted plans for up to 210 MW, which will power four warehouse-style buildings inside the gates of a private power company. These buildings will utilize available capacity and otherwise stranded power. There is a 4-Phase approach to this project. We anticipate completing Phase I, which is for a 50-megawatt facility, in October 2022. Progress on Warehouse One is clearly evident from the picture (taken on May 18th, 2022). Phase II, which is another 50 MW facility, is also under construction. Our revised timing for the activation of BTC mining in the second warehouse is Q1 2023. Together, these facilities are projected to deploy 27,500 miners. 

Given the adverse impact of recent geopolitical events on natural gas prices, we are reassessing the timing and scale of the potential full build-out of the Rio Cuarto farm. However, Argentina remains an attractive area for new development opportunities. We are active in the region and ultimately anticipate developing a diverse mix of farms within the country.

In Q1 2022, we received and installed more than 10,500 miners. And, in April 2022, an additional 5,900 new miners were installed, which added more than 590 PH/s per second to our online hashrate since the end of Q1.

We recently launched our revamped internal miner management system that has been in Beta for the last 9 months. This second-generation management software has been upgraded to enable the company to manage hundreds of thousands of miners across its globally decentralized mining farms, with a focus on maximizing uptime. The software features improved controls, tracking, sensors, alarms, visualizations, and performance metrics, which will ultimately increase operational efficiency.

Our current daily production now stands at about 14.5 BTC per day, which, based on recent prices of about $30,000 per BTC, equates to approximately $435,000 in daily revenue. This builds on the gains we reported in our last call and marks our highest production level since before the last halving event in May 2020. Further, with our low cash costs of production, mining BTC remains highly profitable and offers a short pay back on investments in miners and the related operating infrastructure.

Our strategy continues to focus on diversifying our mining portfolio by prioritizing locations with cost-effective and reliable electricity. With proven expertise, expanded infrastructure and a strong management team, we are better positioned than ever to execute on our growth plans for 2022 and beyond.

In upcoming events, we are excited to present at the HC Wainwright Global Investment Conference in Miami from May 23-26 and at the DA Davidson BTC & Blockchain conference on June 2nd in New York City. We are also planning an Analyst and Institutional Investor Day on June 22nd in Montreal, which will include a review of our global operations by our management team and a physical tour of some of our farms in Quebec.

To learn more about Bitfarms' events, developments, and online communities, visit:

• Link
• Facebook
• Twitter
• LinkedIn
• YouTube
• Instagram

The post Bitfarms First Quarter 2022 Financial Results Recap by Geoff Morphy appeared first on Bitfarms Ltd. (BITF).