Earnings call transcript: LM Funding America Q4 2024 sees revenue drop, net income rise

LM Funding America Inc (LMFA) reported its fourth-quarter earnings for 2024, revealing a mixed financial performance. The company saw a significant decline in revenue but an impressive improvement in net income. With a current market capitalization of $6.83 million, InvestingPro analysis suggests the stock is trading below its Fair Value. The stock experienced a slight pre-market uptick despite the revenue shortfall, reflecting investor optimism about the company’s strategic initiatives and future prospects.

Key Takeaways

• Revenue for Q4 2024 was $2 million, down from $4.1 million in Q4 2023.
• Net income increased by 220% year-over-year, reaching $2 million.
• The company mined 21.7 Bitcoins in Q4, with Bitcoin holdings valued at $14 million.
• LMFA acquired a 15-megawatt mining facility and ordered new mining machines.
• The stock price showed a 4.51% increase in pre-market trading.

Company Performance

LM Funding America’s performance in the fourth quarter of 2024 was marked by contrasting financial metrics. While revenue halved compared to the previous year, the company managed to more than double its net income. This contrast highlights the company’s ability to optimize operations and reduce costs, even in the face of declining revenue from its Bitcoin mining activities.

Financial Highlights

• Revenue: $2 million, a 51% decrease from Q4 2023.
• Net income: $2 million, up 220% year-over-year.
• Cash reserves grew by 40% to $3.4 million.
• Bitcoin holdings increased to 150.2 Bitcoins, valued at $14 million.

Outlook & Guidance

Looking ahead, LM Funding America plans to continue investing in next-generation mining hardware and energy efficiency initiatives. The company is exploring strategic site acquisitions in the 2-15 megawatt range and intends to maintain a Bitcoin retention strategy. These efforts aim to enhance operational efficiency and capitalize on the evolving Bitcoin mining landscape. With a moderate debt-to-equity ratio of 0.21 and an overall Financial Health Score rated as ’WEAK’ by InvestingPro, the company’s strategic execution will be crucial for future growth.

Executive Commentary

Bruce Rogers, CEO of LM Funding America, remarked, "We believe our current market cap relative to our Bitcoin holdings presents compelling value." He emphasized the company’s focus on the power market, stating, "We view our customer in the world as being the grid and trying to position ourselves in the power market."

Risks and Challenges

• Volatility in Bitcoin prices could impact revenue and profitability.
• Energy costs remain a critical factor in mining operations.
• Competition from larger Bitcoin mining operators could pressure margins.
• Regulatory changes in cryptocurrency markets may pose compliance challenges.

LM Funding America’s strategic initiatives and focus on operational efficiency have positioned it for potential growth, despite current revenue challenges. The company’s commitment to technological advancements and market adaptability will be crucial in navigating the competitive Bitcoin mining industry.

Full transcript - LM Funding America Inc (LMFA) Q4 2024:

Conference Operator: Good day, and thank you for standing by. Welcome to the LM Funding America Fourth Quarter and Full Year twenty twenty four Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your speaker today, Cody Fletcher, Investor Relations. Please go ahead.

Cody Fletcher, Investor Relations, LM Funding America: Thank you, operator, and thank you all for joining LM Funding Americas fourth quarter and full year twenty twenty four earnings conference call. Joining us today are Chairman and CEO, Bruce Rogers President of U. S. Digital Mining, Brian Duran and CFO, Richard Russell. For today’s call, we’ve uploaded an accompanying supplemental investor presentation, which can be found under the Events section of LM Funding’s Investor Relations website.

Before we get started, please note that our remarks today may include forward looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. We will also reference certain non GAAP financial measures today. Please refer to our 10 K filing and our website for a full reconciliation of these non GAAP performance measures to the most comparable GAAP measures. For a more comprehensive discussion of these and other risks, please refer to our filings with the SEC available on www.sec.gov and in the Investors section of our website at www.lmfunding.com/investors.

I’ll now turn the call over to our CEO, Bruce Rogers. Bruce?

Bruce Rogers, Chairman and CEO, LM Funding America: 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 CapEx 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 manage the infrastructure ourselves, ensuring better margins and mitigating risks associated to third party hosting agreements.

Today, we own and directly manage our mining inaugural 15 megawatt site in Oklahoma. This vertical integration reduces our fleet wide energy costs and improves our operations for enhanced uptime and mining efficiency. 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 in our first Bitcoin halving 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 $11,000,000 of revenue and $3,900,000 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 December 2023. At the February 2025, we expanded our total energized hash rate to five sixty petahash per second and we held 165.8 Bitcoin on our balance sheet, which equates to approximately 2.81 per share as of Wednesday, the twenty sixth.

We believe our current market cap relative to our Bitcoin holdings presents compelling value. As of March 26, our share price of $1.49 per share reflects a market cap of $7,600,000 Yet our Bitcoin holdings alone are valued at $14,400,000 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?

Brian Duran, President of U.S. Digital Mining, LM Funding America: Thank you, Bruce. The fourth quarter of twenty twenty four 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 two fifty six 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 twenty five, 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 twenty twenty four. Rick?

Richard Russell, CFO, LM Funding America: Thanks, Ryan. For the fourth quarter of twenty twenty four, 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 twenty twenty four was approximately $61,000 Total revenue for the fourth quarter of twenty twenty four was approximately $2,000,000 This compares with $4,100,000 for the fourth quarter of twenty twenty three. The year over year decrease in revenue primarily reflects the effects of the April twenty twenty four 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 and A expenses down 18%. Fourth quarter net income attributable to LMS shareholders was $2,000,000 and over 220% improvement versus a net loss of $1,600,000 a year ago. The transition from total revenues to positive net income was primarily driven by the $4,300,000 gain on fair value of our Bitcoin holdings, which more than offset operating expenses. Lastly, our core EBITDA increased to $3,300,000 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 twenty twenty four.

Our cash grew 40% to $3,400,000 while our Bitcoin holdings surged over 300% to $14,000,000 As of 12/31/2024, we held 150.2 Bitcoin. Of our 14,000,000 Bitcoin, 5 million dollars sits in a custody account as collateral for the $5,000,000 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 Rogers, Chairman and CEO, LM Funding America: 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 having 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 five 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 LN Funding toward even greater success in the digital asset space. I’ll now turn the call over to the operator to take your questions.

Conference Operator: Thank you, Bruce. Our first question comes from the line of Kevin Dede with H. C. Wainwright.

Conference Line Operator: Your line is now open.

Kevin Dede, Analyst, H.C. Wainwright: 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 two fifty six new machines is included in the five sixty pet

Rick Russell, CFO, LM Funding America: Kevin, this is Rick. Those new machines have not yet arrived. So they’ll be added to it once they’re installed.

Kevin Dede, Analyst, H.C. Wainwright: 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?

Rick Russell, CFO, LM Funding America: We have space or right 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, Analyst, H.C. Wainwright: Okay. So then the new machines are going to replace less efficient ones in those sockets then. Is that what you’re thinking?

Rick Russell, CFO, LM Funding America: Well, we’re looking to add the two megawatts fairly quickly and just plug it in.

Kevin Dede, Analyst, H.C. Wainwright: Okay, okay, okay.

Conference Operator: What do you think is a good timeline for

Kevin Dede, Analyst, H.C. Wainwright: us to assume that happens?

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

Brian Duran, President of U.S. Digital Mining, LM Funding America: 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 ninety days no matter what.

Kevin Dede, Analyst, H.C. Wainwright: Okay. 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 Rogers, Chairman and CEO, LM Funding America: Brian, why don’t you respond to that?

Brian Duran, President of U.S. Digital Mining, LM Funding America: 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, Analyst, H.C. Wainwright: Okay. The 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?

Brian Duran, President of U.S. Digital Mining, LM Funding America: 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, Analyst, H.C. Wainwright: 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?

Rick Russell, CFO, LM Funding America: Sure. The $5,000,000 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

Richard Russell, CFO, LM Funding America: term asset,

Rick Russell, CFO, LM Funding America: 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, Analyst, H.C. Wainwright: Okay.

Conference Operator: So it’s not it’s a function of value and not number of Bitcoin?

Matthew Galinko, Analyst, Maxim Group: Well, it’s secured

Rick Russell, CFO, LM Funding America: by a $5,000,000 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, Analyst, H.C. Wainwright: Okay. Okay. Thank you, gentlemen. Appreciate the insight and color. Thank you.

Conference Operator: Thank you. Our next question comes from the line of Matthew Galinko with Maxim Group.

Conference Line Operator: Your line is now open.

Matthew Galinko, Analyst, Maxim Group: 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 Rogers, Chairman and CEO, LM Funding America: Sure, Matt. Like we said in the presentation, we’re looking at somewhere between two and fifteen 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 definitive agreement.

Matthew Galinko, Analyst, Maxim Group: All right. 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 Rogers, Chairman and CEO, LM Funding America: 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, Analyst, Maxim Group: Great. All right. Thank you.

Conference 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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