LM Funding America, Inc. (NASDAQ:LMFA) Q3 2023 Earnings Call Transcript November 17, 2023
Operator: Greetings! Welcome to the LM Funding America, Inc. Third Quarter 2023 Business Update Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the conference over to your host, Ted Ayvas, Investor Relations. Ted, you may begin.
Ted Ayvas : Good morning and thank you for joining LM Funding America’s third quarter 2023 conference call. On the call with us today are Bruce Rodgers, Chief Executive Officer; and Richard Russell, Chief Financial Officer of LM Funding. This morning the company announced its operating results for the quarter ended September 30, 2023, and its financial condition as of last date. The press release is posted on the company’s website, lmfunding.com. In addition, the company has filed its quarterly report on Form 10-Q with the U.S. Securities and Exchange Commission, which can also be accessed on the company’s website as well as the SEC’s website at www.sec.gov. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at 212-671-1020.
Before management reviews the company’s operating results for the quarter ended September 30, 2023, and its financial condition as of that date, we would like to remind everyone that this conference call may contain forward-looking statements. All statements other than statements of historical fact contained in this conference call, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. These forward-looking statements are based largely on the company’s current expectations and projections about future events and trends that it believes may affect its financial condition, results of operations, strategy, short-term and long-term business operations and objectives, and financial needs.
These forward-looking statements are subject to various risks, uncertainties, and assumptions as described in the company’s Form 10-K, followed with the U.S. Securities and Exchange Commission on March 31, 2023. Because of these risks, uncertainties, and assumptions, the forward-looking event and circumstances discussed in this conference call may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although the company believes that expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, level of activity, performance, or achievement.
In addition, neither the company nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The company disclaims any duty to update any of these forward-looking statements. All forward-looking statements attributable to the company are expressly qualified in their entirety by these cautionary statements, as well as others made in this conference call. You should evaluate all forward-looking statements made by the company in the context of these risks and uncertainties. In addition, today’s discussion will include references to non-GAAP measures. The company believes that such information provides an additional measurement and consistent historical comparison of its performance.
A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available in today’s news release on our website. Having said that, I would now like to turn the call over to Bruce Rodgers. Bruce?
Bruce Rodgers: Thanks Ted. Good morning, and thanks to everyone for joining us today. On behalf of the LM Funding team, I want to thank our shareholders for your continued support despite the volatility and weakness in the market. Nevertheless, our company has made significant progress executing on our business model, including advancing our Bitcoin mining strategy and other key strategic activities. We believe the steps we are taking today will lead to considerable long-term value for our shareholders. As of September 30, 2023, our Bitcoin mining operation has included about 5,900 mining machines actively engaged in mining at various hosting facilities, providing approximately 614 PH/s of mining capacity. During the quarter ended September 30, 2023, the company mined 117.1 Bitcoin, marking a 10% sequential increase from the 106.6 Bitcoin mined in the second quarter of 2023, at an average market revenue value of approximately $28,000 per Bitcoin.
The current Bitcoin price has been higher, fluctuating between $35,000 and $37,000 over the last several weeks. As most people likely know, Bitcoin halving is an event where the reward for mining new Bitcoin blocks is cut in half, resulting in miners receiving 50% fewer blocks for verifying transactions. Halving is built into the Bitcoin algorithm and designed to limit the supply of new Bitcoin. It is expected that the next halving will occur in the first half of 2024. Historically, Bitcoin prices have tended to increase as a halving event nears, often reaching record highs in the six months following the event. Likewise, the value of Bitcoin mining machines has typically peaked between halvings. LM Funding is actively implementing an infrastructure-light approach to our Bitcoin mining business that seeks to mitigate risk and volatility in the market by focusing our capital investments on Bitcoin and Bitcoin mining machines that track the value of Bitcoin.
The success of our infrastructure-light strategy depends upon deploying capital to acquire our assets best correlated to the price of Bitcoin, which we believe will appreciate. If history repeats and the anticipated events unfold as expected, we expect to create meaningful value for shareholders, reflecting both the value of our Bitcoin holdings, as well as the increased value of our mining equipment. Overall, we are quite encouraged by the recent performance of the Bitcoin market, as well as the outlook for Bitcoin pricing. The company installed Braiins OS+ software on approximately 1,000 of our mining machines. It is expected this will increase the hashrate of these machines by as much as 25%, which should lead to an increase in the number of Bitcoins the company can mine.
A further advantage to mining Bitcoin with machines operating Braiins OS+ software is that machines equipped with this software may mine with any pool or mine with the Braiins pool, without having to pay pool fees to the Braiins pool. We believe the best use of our capital is to increase hashrate production through the purchase of additional miners and enhancements to their hashing capabilities. With respect to our legacy business, which involves offering funding to nonprofit community associations, the business has remained fairly stable since the conclusion of 2022. We share our investors’ frustration that there is such a significant GAAP between our stockholders’ equity, valued at $35.9 million or $2.45 per share as of September 30, 2023, and the recent trading price of our shares at $0.40, representing an approximately 85% discount from book value.
We recognize the broader downturn in the stock market, particularly the disproportionate impact on the microcap sector. However, we remain extremely optimistic about the outlook for the business. Our confidence lies in our commitment to our strategic goals, increased prudent Bitcoin mining efforts, which we believe will ultimately be recognized by the market. On that note, I’d like to turn the call over to Rick Russell, Chief Financial Officer of LM Funding, who will review the financial results for the three-month period ending September 30, 2023. Rick?
Rick Russell : Thanks, Bruce, and good morning everyone. Total revenues for the three-month ended September 30, 2023 increased by approximately $3.2 million to $3.4 million from the $200,000 generated in the three-month ended September 30, 2022. Beyond our year-over-year quarterly revenue growth, we also have experienced sequential quarterly revenue growth of 7% compared to the second quarter of 2023. Revenues for the third quarter of 2023 include digital mining revenue of $3.3 million due to the mine of 117.1 Bitcoins during the third quarter of 2023 compared to 2.2 Bitcoins for the third quarter ended 2022 since our Bitcoin mining operations had begun late in September 2022. Operating expenses totaled $6.6 million for the third quarter of 2023 compared to $5.5 million for the third quarter of 2022.
The change is primarily attributable to a $2.7 million increase in digital mining costs and a $1.5 million increase in depreciation, partially offset by a $3 million decrease in stock compensation and a $300,000 decrease in professional fees as compared to the third quarter of 2022. For the third quarter of 2023, the net loss attributable to LM Funding shareholders was $3.7 million, which included an $800,000 non-cash unrealized loss on investment and equity securities and an $800,000 non-cash impairment charge on long-lived and tangible assets, as compared overall to a net loss of $6.7 million for the third quarter of 2022, which included a $200,000 non-cash unrealized loss on investment and equity securities. Core EBITDA loss for the quarter ended September 30 2023 was approximately $600,000 compared to a loss of $1.5 million in the 2023 comparable quarter primarily due the increase of our Bitcoin mining operations.
Turning to our balance sheet. We ended the quarter with $500,000 in cash, mining [ph] Bitcoin valued at approximately $2.2 million and working capital of $4.5 million, which we believe provides us with sufficient liquidity to execute on our current Bitcoin mining strategy. In addition, we have minimal long-term debt and ended the quarter with stockholders’ equity of $35.9 million or $2.45 [ph] per share. That concludes our prepared remarks. I would now like to open the call for questions. Operator, could you please assist us with that?
See also 10 Best Investments for Beginners According to Experts and 30 Smartest Animals in the World.
To continue reading the Q&A session, please click here.