SportsQuest, Inc. Q2 FY2023 earnings call

Key Priorities: Focus on financial discipline/deleveraging, operational excellence/growth, and strategic partnerships. ### Q2 Performance: Generated $12.6 million revenue, 36% mining margin. Helios' fixed price PPA provides power cost certainty and power credits from curtailment. Reduced non-mining operating expenses by 21% in Q2, with a 75% cut since H2 2022. Reduced debt by $3 million in Q2, expecting further $5 million reduction in Q3. Sold Ethereum in May and raised $7.5 million via share placement in July, using proceeds to pay down debt. Installed 1,242 BlockMiners in July '23, expecting remaining to be deployed by end of 2023. Collaborating with Galaxy to improve Helios fleet efficiency. Exploring sale of non-core assets.

In the second quarter, Argo Blockchain mined 456 Bitcoin and generated revenue of $12.6 million, a 10% increase from Q1. The mining margin percentage was 36%, down from 49% in Q1. Helios has a fixed price PPA, generating $1.1 million worth of power credits in Q2, equivalent to an additional 38 Bitcoin mined. The average power and hosting cost for the first half of the year was slightly over $0.05 per kilowatt hour. Adjusted EBITDA for Q2 was $1.1 million, with half-year adjusted EBITDA at $2.3 million. Cash on the balance sheet ended Q2 at just over $9 million.

Power Credits: Expect significant power credits from economic curtailment in Q3. ### Debt Reduction: Expect further $5 million debt reduction in Q3. ### Mining Capacity: Confident of deploying remaining BlockMiners by end of 2023, potentially earlier, aiming for ~2.8 exahash by year-end.

Power Costs: Higher power costs in Q2 compared to Q1. ### Market Dependence: Dependence on Bitcoin price affecting mining profitability. ### Asset Sales: Uncertainties around the success of non-core asset sales impacting financials.

Q: Can you give us some color on the details of your arrangement with Galaxy in terms of the size of the markup on the pass-through cost of power and how you go about sharing the economics of curtailment?

A: Under the current hosting agreement with Galaxy, there is no markup on the power cost. It's a pass-through power agreement with a fixed power price and hosting charge. For curtailment, they split the proceeds from economic curtailment evenly.

Q: How is management positioning itself ahead of the halving next year?

A: Management is focused on minimizing fixed costs, reducing OpEx, leveraging the fixed price PPA with Galaxy, and focusing on balance sheet health and market share from a hashrate perspective.

Q: Can you give an update on the asset divestitures that you mentioned?

A: In advanced discussions regarding the sale of certain non-core assets, with plans to provide more details soon.

Q: What impact does the hot temperatures have on mining Bitcoin in Texas?

A: High temperatures lead to high power prices, allowing Helios to curtail operations and sell power back to the grid for power credits, lowering opportunity costs when Bitcoin prices are low.

Q: Can you give some more color on our current cash balance and liquidity?

A: Cash balance at end of June was $9.1 million. Completed a $7.5 million share placement in July, with ~25% of proceeds used to pay down Galaxy debt, making pro forma cash balance at June 30th $14.5 million.

Q: Can you give an update on Argo’s investment in Pluto/Emergent?

A: Argo has taken a more active role, joining the board of Emergent and will provide updates moving forward.

Q: You mentioned getting to 2.8 exahash by the end of the year. Could this come earlier? What sort of time range are you targeting internally?

A: The ops team is deploying miners at a good pace. Current capacity is around 2.6 exahash, confident of deploying remaining miners by end of 2023, potentially before Q4.