LM Funding (LMFA) Q4 2024 Earnings Call Transcript

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DATE

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

CALL PARTICIPANTS

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

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TAKEAWAYS

• Bitcoin Mined -- 170.6 Bitcoin in 2024, with 21.7 Bitcoin in the fourth quarter and 16.1 Bitcoin mined through February 2025.
• Revenue -- $11 million for 2024 and $2 million for the fourth quarter; fourth-quarter revenue decreased from $4.1 million in the prior year due to the April 2024 Bitcoin halving event and delayed machine activation at the Oklahoma site.
• Core EBITDA -- $3.9 million in 2024 and $3.3 million in the fourth quarter, almost tenfold year-over-year growth for the latest quarter.
• Net Income -- $2 million in the fourth quarter, in contrast to a net loss of $1.6 million a year earlier; the increase is attributed to $4.3 million in fair value gains on Bitcoin holdings, which exceeded operating expenses.
• Average Bitcoin Price -- Approximately $61,000 for 2024 and $83,000 in the fourth quarter.
• Bitcoin Holdings -- 150.2 Bitcoin as of December 31, 2024, increasing to 165.8 Bitcoin by the end of February 2025, with Bitcoin holdings valued at $14.4 million as of March 26, 2025.
• Hash Rate -- 560 petahash per second as of February 2025, with the installed base not yet reflecting the 256 new Bitmain S21 plus machines on order.
• Operational Efficiency -- Staff, payroll, professional fees, and SG&A expenses fell by 18% year over year in the fourth quarter.
• Capital Structure -- Cash grew 40% to $3.4 million during 2024; $5 million of Bitcoin is held as collateral for a $5 million secured loan at 12% over two years.
• Technology Upgrades -- Firmwide deployment of LuxOS firmware on the Calumet mining fleet is expected to improve mining efficiency 10%-15% without hardware expansion.
• Vertical Integration -- Transitioned to operating and owning infrastructure via acquisition of a 15 megawatt Oklahoma facility, reducing energy costs and dependency on third-party hosting.
• Expansion Plans -- Actively seeking additional power assets in the 2-15 megawatt range, prioritizing sites with attractive power rates and contracts enabling power resale to the grid.

SUMMARY

LM Funding America (NASDAQ:LMFA) emphasized that vertical integration and disciplined cost controls delivered core EBITDA profitability and growth in both Bitcoin holdings and operational efficiency. Management highlighted that company-held Bitcoin valued at $14.4 million as of March 26, 2025, exceeds the company's market cap, resulting in what it characterized as a "significant discount" to peer valuations. Leadership also signaled that ongoing hardware and software upgrades, plus focused acquisition of modular power assets, underpin future mining scalability while offsetting industry volatility.

• Richard Russell explained the $5 million secured loan structure, noting, "it’s secured by a $5 million Bitcoin as custody," with refinancing or payoff options dependent on future Bitcoin prices.
• Ryan Duran stated that deployment of the LuxOS firmware is expected to "increase our mining efficiency by an overall 10% to 15%," and this upgrade covers the Calumet site but not machines hosted at core.
• The Oklahoma site retains roughly two megawatt expansion headroom, with management anticipating new container installation "within 90 days no matter what."
• Management reported that, despite evaluating AI-related opportunities, it will remain "focused on Bitcoin," citing insufficient experience, capital capacity, and customer reach for AI infrastructure.

INDUSTRY GLOSSARY

• Petahash: A measurement unit representing one quadrillion (1015) cryptographic hash computations per second, used to quantify Bitcoin mining processing power.
• HODL: Industry slang for “hold,” signifying the company’s practice of retaining Bitcoin rather than selling mined coins.
• SG&A: Selling, General, and Administrative expenses—overhead costs not directly attributable to mining operations.
• Core EBITDA: Earnings before interest, taxes, depreciation, and amortization, excluding certain non-core or one-time items, as specifically indicated by company management.
• Vertical Integration: Business strategy whereby the company owns and operates the infrastructure necessary for its primary business activities instead of relying on third parties.

Full Conference Call Transcript

Bruce M. Rodgers: Thanks Cody, good morning. And thanks for joining us today. Since we entered the bitcoin mining business in 2021 LM Funding has steadily advanced our strategy to become a successful participant in the digital asset sector. Our early focus was on an asset-light model to minimize initial cutbacks by leveraging third-party hosting arrangements while we gain market insights and establish our operational footprint. Last year, through careful planning and execution, we transitioned to a vertically integrated model, one where we managed the infrastructure ourselves, ensuring better margins and mitigating risks associated to third-party hosting agreements. Today, we own and directly manage our mining infrastructure with our inaugural 15 megawatt site in Oklahoma.

This vertical integration reduces our fleet-wide energy costs and improves our operations for enhanced uptime and mining efficiencies. Throughout our expansion, we have continued our commitment to disciplined OPEX control by actively maintaining a low-cost structure from power sourcing and infrastructure investments to staffing and equipment, we were able to successfully navigate a challenging year for the industry and our first Bitcoin having event, which occurred in April 2024. This strategic cost control enabled us to achieve profitability in 2024 on a core-EBITDA basis, as well as retain more Bitcoin on our balance sheet, which is a significant piece of our long-term strategy.

By retaining a portion of our mined Bitcoin, we not only capture potential upside-for-our shareholders, but also deepen our alignment with the broader Bitcoin industry. This approach combined with selective financing during advantageous market windows helps us maximize value and ensure sufficient liquidity to fund future expansion. In terms of our financial and operational highlights, in 2024 we mined 170.6 Bitcoin, which generated approximately $11 million of revenue and $3.9 million in core EBITDA. This represents strong growth on the bottom line as well as steadily growing our Bitcoin HODL balance to 150.2 Bitcoin at the December 2024 from 95.1 Bitcoin at the end of December 2023.

At the end of February 2025, we expanded our total energized hash rate to 560 petahash per second and we held 165.8 Bitcoin on our balance sheet, which equates to approximately $2.81 per share as of Wednesday 26th. We believe our current market cap relative to our Bitcoin holdings presents compelling value. As of March 26th, our share price of $1.49 per share reflects a market cap of $7.6 million. Yet our Bitcoin holdings alone are valued at $14.4 million or $2.81 per share. This nearly 2x disparity between our market cap and Bitcoin holdings demonstrates a compelling opportunity in our opinion and values us at significant discount to our Bitcoin mining peers.

As we look forward to 2025, our emphasis on vertical integration, disciplined cost management, strategic infrastructure expansion, and strong Bitcoin treasury remain crucial to our success. Our lean operations and strengthened balance sheet position us to capitalize on the evolving Bitcoin mining landscape. We plan to invest in next generation mining hardware, energy efficiency initiatives, and strategic site acquisitions to grow our company. 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. The fourth quarter of 2024 was marked by significant operational achievements that support our ongoing vertical integration strategy. Notably, we acquired a 15 megawatt mining facility in Oklahoma, which represents a major step forward in our efforts to control our mining infrastructure. In line with our focus on operating efficiency, we placed orders for 256 new Bitmain S21 plus mining machines. With these new generation miners, we’re aiming to improve our fleet efficiency, enabling us to mine more Bitcoin at a lower cost per coin. In Q1 twenty 2025, we partnered with Luxor Technology Corporation and installed their proprietary LuxOS firmware on our existing fleet.

The new firmware will allow us to mine at higher margins and increase profitability without adding more machines or using more power. We expect the benefits from this upgrade to increase our mining efficiency by an overall 10% to 15%. Finally, as Bruce mentioned, we mined 170.6 Bitcoin in 2024 and have mined 16.1 through February 2025. I look forward to providing more updates as we expand in a cost efficient manner. Our CFO, Rick Russell, will now provide a review of the financial highlights for the fourth quarter of 2024. Rick?

Richard Russell: Thanks, Ryan. For the fourth quarter of 2024, we mined 21.7 Bitcoins. The average Bitcoin price during the fourth quarter was approximately $83,000 while the average price for the full year 2024 was approximately $61,000. Total revenue for the fourth quarter of 2024 was approximately $2 million, this compares with $4.1 million for the fourth quarter of 2023. The year-over-year decrease in revenue primarily reflects the effects of the April 2024 Bitcoin halving event and moving mining machines into a storage until such machines became active at our Oklahoma site. Our direct mining margins for the fourth quarter were essentially flat to the prior year.

We increased our operational efficiency year-over-year with staff costs, payroll, professional fees, and SG&A expenses down 18%. Fourth quarter net income attributable to LM shareholders was $2 million and over 220% improvement versus a net loss of $1.6 million a year ago. The transition from total revenues to positive net income was primarily driven by the $4.3 million gains on fair value of our Bitcoin holdings, which more than offset operating expenses. Lastly, our core EBITDA increased to $3.3 million this quarter, nearly 10x what we generated a year ago. Turning to our balance sheet, I’m pleased to report that our combined cash and Bitcoin holdings increased by 200% in fiscal year 2024.

Our cash grew 40% to $3.4 million while our Bitcoin holdings surged over 300% to $14 million. As of December 31, 2024, we held 150.2 Bitcoin. Of our 14 million Bitcoin, 5 million sits in a custody account as collateral for the 5 million seen secured loan. We believe our debt financing strategy differentiates us from competitors as we are bullish on Bitcoin’s price momentum, which allows us to capitalize on positive arbitrage compared to traditional USD loans. Bruce will now provide some thoughts on our outlook and strategy heading into 2025.

Bruce M. Rodgers: Thanks, Rick. In conclusion, even as a relatively small player in the sector, LM Funding has demonstrated an ability to navigate industry volatility. With the recent halving behind us and our vertical integration strategy and practice, we’re well positioned to capitalize on the opportunities ahead. Looking ahead, we’re focused on acquiring greenfield and brownfield power assets in the 5 megawatts to 20 megawatt range, facilities that typically fall below the acquisition thresholds of larger operators. By targeting these opportunities, we continue to scale while maintaining our operational efficiency. Several key advantages underpin this approach.

Our lean cost structure, a healthy balance sheet, the flexibility to leverage Bitcoin backed debt when favorable, and a willingness to pursue mergers and acquisitions aligned with our core objective of efficient Bitcoin line. We believe this strategy will foster ongoing growth and generate lasting value for our shareholders. Thank you for your continued support. We’re excited to advance into our next phase of growth and remain committed to driving LM Funding towards even greater success in the digital asset space. I’ll now turn the call over to the operator to take your questions.

Operator: Thank you, Bruce. [Operator Instructions]. Our first question comes from the line of Kevin Dede with H.C. Wainwright. Your line is now open.

Kevin Dede: Hi, good morning, gentlemen. Thanks for hosting the call and having me on it. I appreciate it. I was hoping maybe we could just make sure that the current operating stats are straight in my head, I mean, and whether or not that 256 new machines is included in the 560 petahash?

Richard Russell: Hi, Kevin. This is Rick. Those new machines have not yet arrived. So they’ll be added to it once they’re installed.

Kevin Dede: Okay. So are there open sockets within the 15 megawatts, are you deploying new boxes there, or you’re just going to change out machines, how should we think about that?

Richard Russell: We have space alright well, we have space to add about two more megawatts there is what we’re looking at the sockets. Right now, all of our sockets there are filled.

Kevin Dede: Okay. So then the new machines are going to replace less efficient ones in those sockets then, is that what you’re thinking?

Richard Russell: Well, we’re looking to add the 2 megawatts fairly quickly and just plug it in.

Kevin Dede: Okay, okay, okay. What do you think is a good timeline for us to assume that happens?

Richard Russell: I think, Ryan, do we have a thought on what it would take to get that those two new containers in place?

Ryan Duran: Yes, Rick. We should -- Kevin, we’re looking at groundwork would be about three weeks and it depends on infrastructure. So that’s going to be our holdup, but it should be within 90 days no matter what.

Kevin Dede: Okay, helpful. Thanks, gentlemen. I’m also wondering about your expectations. I know there was some talk about opportunities in Texas. So maybe you could spend a little time updating us on where those things stand?

Bruce M. Rodgers: Ryan, why don’t you respond to that?

Ryan Duran: Yes. Kevin, I’m assuming we’re referring to the -- well, we’ve had a couple of sites we’ve looked at in Texas. A couple of LOIs have been presented, none of them currently outstanding right now in the state of Texas.

Kevin Dede: Okay. Then maybe a little more on the Luxor OS too while I have you, Ryan. Did you deploy that across all your machines at this point and will that you’ll also be able to run it on your S21s?

Ryan Duran: Yes, it’s deployed on all of our machines that are Calumet mining site. It is not on the machines that are mining at core, just to be clear on that. And yes, we can deploy those on newer machines as well.

Kevin Dede: Okay. Last question for me. Rick, on the secured loan, you I guess what I thought I understood is that you see it the way that you structured that loan as an advantage. I know you guys are really good at that. Could you just run through the details on that for me, so it’s clear, please?

Richard Russell: Sure. The $5 million secured loan is used mainly to help pay for the hosting side that we just purchased the mine site in Oklahoma. And since that’s a long term asset, we think that’s why we did a loan there versus liquidating our Bitcoin, which we think has more up to increase in value from where it is at year end. The loan is like 12% for two years. So we can either refinance that when the time comes or pay it off with hopefully higher Bitcoin balances.

Kevin Dede: Okay. So it’s not -- it’s a function of value and not number of Bitcoin?

Richard Russell: Well, it’s secured by a $5 million Bitcoin as custody. And that would the number of bitcoin would free up if the bitcoin price jumps to $50,000 it would yes.

Kevin Dede: Okay. Okay. Thank you, gentlemen. Appreciate the insight and color. Thank you.

Operator: Thank you. Our next question comes from the line of Matthew Galinko with Maxim Group. Your line is now open.

Matthew Galinko: Hey, good morning guys. Thanks for taking my question. I wanted to go a little bit further into the pipeline for new data center and power assets. I know you touched on Texas, but are you continuing to evaluate other assets beyond that? And what sorts of megawatt capacity are you looking at, maybe give us some sense of what you’re seeing? Thanks.

Bruce M. Rodgers: Sure, Matt. Like we said in the presentation, we’re looking at somewhere between 2 and 15 megawatts. We look at the main thing is the price of electricity and then the real important thing is the terms of the contract. And so in Oklahoma, we’re very happy with our situation where it treats us as a power provider, which allows us when we curtail to actually sell the unused power back to the grid. So it’s that type of favorable situation that we’re seeking in these smaller contracts that seem to have been left by the wayside.

So there’s a number of them out there and we’re kicking tires on each and every one we can find and we’ll have something announced when we bring it to a definitive agreement.

Matthew Galinko: Alright, thank you. And then maybe if you could touch on if there’s any change or how you’re thinking about the AI opportunity in 2025, are you continuing to be exclusively focused on Bitcoin for your data center and power, or are there any discussions to diversify the use? Thanks.

Bruce M. Rodgers: We’re focused on Bitcoin. We have looked at the AI proposition and simply do not see that we would have capital lift necessary to build an AI facility. We don’t have the customer reach to secure a customer for a Davis facility. We don’t have the experience in running a Davis facility for AI. So that’s off the charts for us. We view our customer in the world as being the grid and trying to position ourselves in the power market such that we either make money on the Bitcoin or we make money selling power back to the grid.

Matthew Galinko: Great. Alright. Thank you.

Operator: Thank you. And I’m currently showing no further questions at this time. Thank you for joining today’s earnings call. You may now disconnect.

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