DMG Blockchain Solutions Inc. Provides Q3 2022 and August Mining Results; Company to Present at H.C. Wainwright Global Investment Conference
Sep 8th, 2022 8:00 EST
- Provides 3Q22 Financial Results and Outlook Commentary
- Announces August Mining Results
- To Present at the 24th Annual H.C. Wainwright Global Investment Conference
VANCOUVER, British Columbia, Sept. 08, 2022 (GLOBE NEWSWIRE) -- DMG Blockchain Solutions Inc. (TSX-V: DMGI) (OTCQB: DMGGF) (FSE: 6AX) (“DMG” or the “Company”), a vertically integrated blockchain and cryptocurrency technology company provides updates on its third quarter results, monthly bitcoin production, and an upcoming investor conference.
DMG Q3 2022 Results Highlights
DMG Financial Statements and Management’s Discussion & Analysis (MD&A) are available for download on SEDAR at https://www.sedar.com/search/search_form_pc_en.htm
Readers are encouraged to review the Company’s complete Q3 2022 financial statements and management’s discussion and analysis thereof for a fulsome assessment of the Company’s performance and applicable risk factors.
The following provides a recap of our prepared commentary for our Third Quarter ended June 30, 2022 Financial Results and Corporate Update:
DMG continues to work towards its goals for building out 1 EH/s of self-mining capacity, as it increased hashrate 18% in the June quarter versus the prior quarter, and continues to build the foundation to execute upon our Core+ strategy. DMG’s balance sheet remains sound despite challenging market conditions.
Revenue: Revenue declined 12% versus the prior quarter to $10.5 million from $11.9 million in the prior quarter, mainly as revenue from self-mining declined a similar percentage to $9.0 million from $10.3 million. The average price of a mined bitcoin declined 19% versus the prior quarter to C$42,288.
Margins: Gross margin percentage was 66%, down from 73% the prior quarter ended March 31, 2022. As a proxy for cash flow from operations, our operating margin percentage less depreciation and amortization and stock-based compensation was 52%, down from 58% the prior quarter, and our operating margin percentage was -6%, down from 13% the prior quarter. With increased depreciation, operating margin fell into negative territory. Operating expenses excluding depreciation and amortization and stock-based compensation decreased 11% versus the prior quarter to $1.5 million, as we maintain tight control of cash expenses. Due largely to losses on digital currency, DMG swung to a net loss for the quarter of $12.2 million and for the year, a net loss of $7.1 million.
Depreciation: The Company expects depreciation to continue to rise as we deploy additional miners through the end of the calendar year. Even as the Company expects operating margin less depreciation and amortization, stock-based compensation to stay in strong positive territory through this crypto downturn, and hence allowing continued investment in its business, on the income statement, this result is likely to be more than offset on the operating margin line by rising depreciation in the near-term, assuming the current bitcoin price environment does not materially improve.
Balance Sheet: Cash plus bitcoin holdings value decreased to $11.9 million from $28.1 million in the prior quarter, as the price used to value our bitcoin on the balance sheet decreased 56% versus the prior quarter. Total asset base accordingly decreased to $106.6 million from $124.8 million.
Bitcoin mined: DMG mined 212 bitcoin, an 8% increase versus the prior quarter from 195 bitcoin, as our 18% increase in realized hashrate to an average of 0.55 EH/s was partly offset by a 9% reduction of the network BTCs per hash. In the quarter ended June 30, 2022, DMG operated approximately 10% below its installed mining capacity, as we dealt with reliability and heat issues with Bitmain’s S19j Pro miner, even as the Company planned to mitigate the summer heat with additional evaporative cooling capacity. Year-to-date, DMG has mined 592 bitcoin.
September quarter mining commentary: In the current quarter, this situation has worsened with summer temperatures, and as such, we expect only a very modest change in realized hashrate in the quarter to end September 30, 2022. DMG expects the situation to markedly improve in the December quarter as temperatures rapidly cool and we approach our expected calendar year end target of 1 EH/s of installed mining capacity, assuming Bitmain deliveries and installations stay on track.
Bitcoin sold: In the June quarter, DMG sold 171 bitcoin at an average bitcoin price of C$38,934 generating $6.7 million of cash. Thus, DMG sold 81% of the bitcoin amount it generated, down from the prior quarter of selling 133% of the bitcoin amount generated. Year-to-date, DMG has sold 508 bitcoin, 86% of what it has mined.
Hosting revenue: DMG hosting revenue declined by 3% versus the prior quarter to $0.9 million, and a more significant decline is expected in the back half of calendar 2022, as the Company focuses on expanding our self-mining capacity. That being said, we are eying specific strategic opportunities to provide hosting services for the purpose of expanding Terra Pool’s network share.
Debt raise update; use of proceeds: DMG has no debt, but continues to consider opportunities for raising debt, mainly to accelerate the deployment in its Christina Lake mining facility of the Company’s immersion cooling technology, which is expected to cost in the range of $10-15 million. Based on the benefits provided by immersion cooling, the deployment is expected to expand hashrate to 1.4 EH/s from 1.0 EH/s. DMG believes immersion cooling provides a very capital efficient way of growing hashrate and accordingly, Terra Pool’s hashrate.
August Preliminary Mining Results
In August 2022, DMG mined 69 bitcoin and added 87 PH/s of mining capacity. DMG’s bitcoin balance as of August 31, 2022 was 362 bitcoin. DMG is on-target with respect to its original schedule for received miner deliveries for growing its hashrate to 1 EH/s by the end of 2022, subject to the receipt, installation and operation of the additional miners.
24th Annual H.C. Wainwright Global Investment Conference
DMG announces that Sheldon Bennett, Chief Executive Officer and Steven Eliscu, Chief Operating Officer will present a corporate overview at the 24th Annual H.C. Wainwright Global Investment Conference being held on September 12-14, 2022.
|Presentation Date:||September 13, 2022|
|Time:||2:30 – 3:00 pm ET|
|Location:||Lotte New York Palace|
Mr. Bennett and Mr. Eliscu will be available for one-on-one meetings. To request a meeting and to register for the conference, click below: https://hcwevents.com/annualconference/
About DMG Blockchain Solutions Inc.
DMG is an environmentally friendly vertically integrated blockchain and cryptocurrency company that manages, operates, and develops end-to-end digital solutions to monetize the blockchain ecosystem. DMG's sustainable businesses are segmented into two business lines under the Core and Core+ strategies and unified through DMG's vertical integration.
Future changes in the Bitcoin network-wide mining difficulty rate or Bitcoin hashrate may materially affect the future performance of DMG's production of Bitcoin, and future operating results could also be materially affected by the price of Bitcoin and an increase in hashrate mining difficulty.
For more information on DMG Blockchain Solutions visit: www.dmgblockchain.com
On behalf of the Board of Directors, Sheldon Bennett, CEO and Director
For further information, please contact:
Investor Relations Contact: CORE IR (516) 222-2560
For Media Inquiries: Jules Abraham, Head of Communications CORE IR (917) 885-7378 [email protected]
Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
Cautionary Note Regarding Forward-Looking Information
This news release contains forward-looking information or statements based on current expectations. Forward-looking statements contained in this news release include statements regarding the increase in Bitcoin self-mining and achieving the year end target of 1 EH/s, Core+ strategies and plans, expectations that the quarter ending December 31, 2022 improves compared to the quarter ending September 30, 2022, strategies to provide hosting opportunities for the purpose of expanding Terra Pool’s network share, the potential benefits of immersion cooling technology, attending and presenting at the HCW conference, developing and executing on the Company's products and services, the expected arrival of new miners and the increased hashrate once the miners are installed and operating, the launch of products and services, events, courses of action, and the potential of the Company's technology and operations, among others, are all forward-looking information.
Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations, or intentions regarding the future. Such information can generally be identified by the use of forwarding-looking wording such as "may", "expect", "estimate", "anticipate", "intend", "believe" and "continue" or the negative thereof or similar variations. The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company, including but not limited to, market and other conditions, volatility in the trading price of the common shares of the Company, business, economic and capital market conditions; the ability to manage operating expenses, which may adversely affect the Company's financial condition; the ability to remain competitive as other better financed competitors develop and release competitive products; regulatory uncertainties; access to equipment; market conditions and the demand and pricing for products and services; the demand and pricing of bitcoin; security threats, including a loss/theft of DMG's bitcoin; DMG's relationships with its customers, distributors and business partners; the inability to add more power to DMG's facilities; DMG's ability to successfully define, design and release new products in a timely manner that meet customers' needs; the ability to attract, retain and motivate qualified personnel; competition in the industry; the impact of technology changes on the products and industry; failure to develop new and innovative products; the ability to successfully maintain and enforce our intellectual property rights and defend third-party claims of infringement of their intellectual property rights; the impact of intellectual property litigation that could materially and adversely affect the business; the ability to manage working capital; and the dependence on key personnel. DMG may not actually achieve its plans, projections, or expectations. Such statements and information are based on numerous assumptions regarding present and future business strategies and the environment in which the Company will operate in the future, including the demand for its products and services, the ability to successfully develop software, that there will be no regulation or law that will prevent the Company from operating its business, anticipated costs, the ability to secure sufficient capital to complete its business plans, the ability to achieve goals and the price of bitcoin. Given these risks, uncertainties, and assumptions, you should not place undue reliance on these forward-looking statements. The securities of DMG are considered highly speculative due to the nature of DMG's business. For further information concerning these and other risks and uncertainties, refer to the Company's filings on www.SEDAR.com. In addition, DMG's past financial performance may not be a reliable indicator of future performance.
Factors that could cause actual results to differ materially from those in forward-looking statements include, failure to obtain regulatory approval, the continued availability of capital and financing, equipment failures, lack of supply of equipment, power and infrastructure, adverse weather and climate events, failure to obtain any permits required to operate the business, the impact of technology changes on the industry, the impact of COVID-19 or other viruses and diseases on the Company's ability to operate, secure equipment, and hire personnel, competition, security threats including stolen bitcoin from DMG or its customers, consumer sentiment towards DMG's products, services and blockchain technology generally, failure to develop new and innovative products, litigation, increase in operating costs, increase in equipment and labor costs, decrease in the price of Bitcoin, failure of counterparties to perform their contractual obligations, government regulations, loss of key employees and consultants, and general economic, market or business conditions. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The reader is cautioned not to place undue reliance on any forward-looking information. The forward-looking statements contained in this news release are made as of the date of this news release. Except as required by law, the Company disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Additionally, the Company undertakes no obligation to comment on the expectations of or statements made by third parties in respect of the matters discussed above.