Digi Power X Inc. (DGX) Earnings Call Transcript & Summary

Good day, and welcome to the IAccess Alpha Virtual Best Ideas Summer Investment Conference 2025. The next presenting company is Digi Power X Inc. [Operator Instructions]. I'd now like to turn the floor over to today's host, Edward Carr of Digi Power X, Inc. Sir, the floor is yours.

Great. Thanks. Thank you so much. Thanks for that warm introduction. It's a real pleasure to be here presenting virtually at the IAccess Alpha Virtual Best Ideas Summer Conference. This is our first time presenting at this conference, so we are quite excited about having the opportunity to have an audience learn more about Digi Power X. So we have the presentation up online. I hope you guys can all see this well. This presentation is available on our website. I'm not going to read every slide. I'm just going to run through it quite quickly, give you a nice overview and introduction to Digi Power X. So as you can see from this introduction slide, we are a publicly traded company. We are a Canadian company, originally listed up in Canada on the TSX Venture. The symbol up in Canada is DGX, and we're also traded on the NASDAQ, our symbol there is DGXX. And during the course of my presentation, I am going to be making some forward-looking statements. So I will certainly draw your attention to this slide. So Digi Power X, when we look at the company today at a glance, what are we? Well, Digi Power X is an energy infrastructure company, and we've got a really what we're calling a robust portfolio of assets. So it includes our own wholly-owned and operated combined cycle power plant. Yes, we own our own power plant. And we've got additional Bitcoin Mining operations, both Self-mining and Colocation. So we are managing all of this infrastructure for Bitcoin Mining, what we call Tier 1, and we are transitioning into Tier 3. These are data centers, high-performance computing for artificial intelligence, a very exciting sector. If you look at the company and just that box on the upper right of this slide, give you a little idea, a high-level overview of the capitalization and cap structure. The recent share price, when I looked, I think it closed yesterday about $2.37 a share. As of the end of May, there were 36.3 million shares out. So that gives us in realtime, about an $87 million market cap, nice cash and cash equivalent. That cash equivalent is made up of Bitcoin that we mine and hold on the balance sheet as well. And importantly, look at that, no long-term debt whatsoever in the company, insider ownership of approximately 20%. And I want to spend just a moment talking on that because our Chairman, Founder and CEO is a gentleman named Michel Amar. Michel is a very successful entrepreneur, has had successful careers in a number of industries, and he got originally into the Bitcoin mining space through his son, Alec. Alec is our President. And when Alec was a teenager at home, he was mining Bitcoin on his own home computer, which originally got him into it. So we're talking in the very, very early days. Alec went on to get a degree in computer science from the University of Southern California, then did the blockchain course at MIT, so has a good technical background and convinced his father, Michel that, "Hey, dad, this Bitcoin space, there's a real business to build". So they started going out and building some bigger Bitcoin mining farms. They became the foundation of this company, listed the company up in Canada, and we are where we are today. Importantly, that insider ownership of 20%, so that is Michel. Michel is a very significant shareholder in Digi Power. I think Michel has approximately $8 million or so of his own money. To my knowledge, he has never sold a share. He really believes in the company, and he's run this company quite conservatively. A lot of the Bitcoin miners, they take on tremendous amounts of debt and they lever up. That has not been Michel. He has really funded the company out of equity going forward. So key highlights, you look down below, predictable revenue, both through our utility assets and through our Bitcoin mining. We are growing our megawatts in hash rate. We are certainly looking at Colocation at many of our facilities. We're growing that. And we are pivoting the company right now, a real exciting transition time for us towards Tier 3 data centers. And this industry, when you look at it, Tier 3 data centers, just growingly rapidly by leaps and bounds. Let's look a little at the company history on this Slide 3. The company founded around 2020, 2021, it went public, starts trading up in Canada. 2021 to 2022, the price of Bitcoin had a pretty nice run. And a lot of these publicly traded Bitcoin miners, their stocks had big runs as well, including at the time, it was called Digihost. Michel was very fortuitous. He took advantage of that rising stock price. He had an effective shelf registration statement in Canada. He raised a bunch of equity, almost $80 million, and he put that money to work in infrastructure. So he went and he bought that power plant. He bought all of our assets that I'll talk more about, bought the computers to actually go in there and a lot of other infrastructure from transformers to generators to all of the infrastructure you need to build out these facilities. Fast forward all the way to the right side of the slide, and we are today, capitalizing on this Tier 3 data center trend. We're transitioning one of our sites right now in Alabama from a Bitcoin mining operation to a Tier 3 data center. So real exciting time for us. Our core business at Digi Power, so we are driving consistent revenues. We have our own power plant located just outside of Buffalo, New York. So that's really nice. In addition, we have Bitcoin Mining operations, both our own Self-mining and Colocation partnerships. And finally, that third point on this slide, we are using our existing know-how to expedite the deployment of Tier 3 data centers. This is so key to our story because our power plant just outside of Buffalo, we have a very strong management and operational team, more than 30 employees with deep, deep experience, electrical engineers, plant managers that they know how to run federally regulated power plants. They know how to build-out these Tier 3 data centers. And we think that, that is very, very valuable for us, our team and our bench. When we look at this industry and the industry that we operate in, I've been talking here about AI data centers. And not an hour goes by in these days that I can't look at my Bloomberg or The Wall Street Journal, and I see an article about new data centers and new build-out. Especially, you see the administration we currently have in Washington, D.C. with the Trump presidency, Make America Great Again. He really wants to onshore manufacturing. He wants to make very high-end value-added jobs in the technology sector. President Trump was over in the Middle East 1.5 months ago, talking to a lot of those Gulf sovereign wealth funds to bring in big amounts of capital. They've announced some massive partnerships with the likes of SoftBank and Oracle, a project called Stargate to build out $1 trillion worth of data centers. So this industry is growing by leaps and bounds. The United States really wants to become a leader, both in Bitcoin mining, maybe even making a strategic Bitcoin reserve and certainly in Tier 3 data centers, high-performance computing. So this sector is set to grow very, very strongly in the future, and we believe we are well positioned to take advantage of that. In addition, we are well positioned to take advantage of the Bitcoin mining trends and especially in Colocation. We like Colocation because there, we provide the infrastructure, the power, the facilities, and we partner up with much larger firms to actually bring in the computers. So it's kind of a CapEx-light model, and we have a nice revenue share. Well, the price of Bitcoin, we are very, very bullish on it in the future or else we would not be in this space. Today, $105,000, holding in quite well, and we think that this is a trend that's going to continue on for the future. When you look at the company today, Digi Power X, even though we're publicly traded, we are a microcap company at our $87 million to $90 million market cap. And we just wanted to put together a little slide to try and show how undervalued we believe we are, compared to our larger competitors. So a teeny little universe of some of the publicly traded Bitcoin mining cryptocurrency miners out there. You can see their market caps on the left, average market cap of our competitors, $2.5 billion, so much larger than us, makes them bigger and more liquid. And look down that bottom right, a very, very simple way, I think, to look at this universe is looking at enterprise value to megawatts. And our current market cap, 100 megawatts we have at Digi Power currently energized, $87 million market cap. So we're about $0.87 per megawatt compared to $5.64 for this universe. So if we just came in line with this universe valuation, we're 5x to 6x undervalued at these current valuation rates. When you look at our power portfolio distribution within the company today, so the majority of our power on that left pie chart are going towards Tier 1 colocation agreements. We do have utility power sales and a small amount of self-mining. You see our forward-looking projections on the pie chart on the right, we believe we are going to pivot and bring in these Tier 3 data center colocation revenues. We are building out one of our facilities that I'm going to talk a lot more about. So that is a very, very exciting future business line for us. As we look more into the company, let's really nail down and talk about our operational footprint and what do we have in Digi Power today. So today on this slide, you can clearly see we have 3 energized assets in the company. On the left, in Alabama, this is a Bitcoin mining operation, 22-megawatts. We do importantly have a load study approved for in Alabama of 55 megawatts. Here in Alabama, we have both Colocation and Self-mining. Alabama is a fantastic state. We really like working there. It is what we would call regulatory-light. They are very pro-business. And this is going to be our first facility that we are going to transition to a Tier 3 data center. And I'm going to talk a lot more about that. In the middle part of this slide, North Tonawanda, New York, this is our power plant, our flagship asset, currently a 60-megawatt steam Nat gas turbine power plant. This is about 10 minutes located outside of Buffalo, New York. So we generate revenues here at our power plant in three different ways. Number one, we get upfront payments from the grid just to be on standby. Number two, we can sell electricity back to the grid and number three, through Bitcoin mining. I'll talk more on this as well. Very, very valuable asset because we own it outright and have a fantastic management team here. On the right, Buffalo, small 19-megawatt Bitcoin mining operation, both Colocation and Self-mining. That is powered by hydropower from Niagara Falls. So good power rate and nice clean, green hydro energy. On the far right of this slide, you will see as well that we do have a development project. Now this is just a piece of land, raw land currently. It is not developed, but it has a lot of value. The reason is, this piece of land is located right at a Duke, that's the major utility in North Carolina, a Duke switchyard. So you've got your substations, you got your transformers, you got everything right there, huge infrastructure. And our next door neighbor, we are located right next to a state-of-the-art brand-new Google Tier 3 data center. They spent $1.2 billion building that out. So very, very valuable piece of land. If you look, we have a load study here in North Carolina, and we are rated for 200-megawatts of capacity. So that is significant in the future to build out either Bitcoin mining or a potential Tier 3 data center, one of the two. Let's talk -- let me talk a little bit more about our North Tonawanda power plant, again, our flagship asset. So Michel had the vision and foresight to buy this asset when he raised all that money that I talked about when the stock had done well back 2021 to 2022. So this asset, if I were to take you on a site visit and you wanted to come visit us, you would fly into Buffalo, New York, we could pick you up in Buffalo, drive you down this main road, you hook a left up our driveway, you can see in the picture, pass those nice Christmas trees and you would pull right into -- you can see the containers on our front lawn. So those containers on the front lawn are currently mining Bitcoin. These are Colocation, state-of-the-art Bitcoin mining rigs that we manage for a partner. And in the background, you can see the power plant. You see the steam coming out. This is a natural gas, co-gen 60-megawatt power generation plant. Actually it can go up to 120-megawatts. We are currently rated right now for 60-megawatts. We have a load study underway to increase our output to 120-megawatts. We have been working on that load study for approximately 18 months. The State of New York does take time, and these are big files that you have to submit to the local municipality, the state regulators, et cetera. We believe we have just about everything signed off, and we are very close to getting this approval. That's an exciting catalyst for the company and definitely a forward-looking statement. But once we get it, we will be able to potentially double our Bitcoin mining operations from this site. In addition to Bitcoin mining, we make other revenues here through Digi Power. So being a power plant, and what's called behind-the-meter generation, we actually get capacity payments from the New York Independent System Operator from the grid just to be on standby. And up here in Buffalo, the grid tends to get very stressed 2 times a year. The first time a year is in the winter. In February, when one of those big Canadian Arctic high-pressure systems comes over to New York, it goes down to 30 degrees below 0, gets extremely cold. And guess what, everyone turns up their heat, so the grid gets a little stressed. And usually, what happens in those periods, there's a big demand for electricity, the spot price of electricity spikes, Digi Power can sell electricity back to the grid, and we make some very, very nice revenues. I would invite everyone to go look at our press releases from February of this year, 2025. You can see that we made millions of dollars just in the month of February doing this. The other time of the year that this tends to happen is August. August, it can get very hot and humid. You get one of those southern systems. There's a big heat dome, I know on the East Coast right now. So maybe it's happening in June, not August, but when it's hot, humid goes up to 100 degrees and everyone is cranking their air conditioner, that can also stress out the grid. When we're not selling power back to the grid, we are producing it at about $0.04 per kilowatt. That is quite competitive. I'm sure everyone on this presentation knows that in the Bitcoin mining space, your price of electricity is your most important factor because it's a very, very electricity-intensive industry. And this is competitive. Today, at $105,000 per Bitcoin, it's quite profitable with a $0.04 per kilowatt. So very, very valuable asset for Digi Power. We own it outright. In addition, this site could potentially in the future, make a fantastic location for an additional Tier 3 data center. And why is that? Well, number one, look at our driveway as you drive in the driveway towards the power plant. And you see on the right side of that picture, there is some undeveloped forest and land. Well, Digi Power owns 14 acres there. So we have a nice land footprint. Number two, we have both power that we generate from our power plant plus a direct grid connection. So we got power and we have backup power. So a Tier 3 data center, it might be a wonderful location. Maybe we could even partner up with maybe the University of Buffalo. They are really trying to make that an Artificial Intelligence Excellence Center of Learning within the whole State University of New York system. And excitingly, Digi Power, if you look at our prior press releases, we've announced a strategic collaboration with a small modular reactor nuclear company called Nano Nuclear. They trade on the NASDAQ, their symbol is NNE. So we were thinking maybe at some point in the future, we could put one of their small modular reactors at this facility, maybe in conjunction with the University of Buffalo, a lot of opportunities when you look at the infrastructure we already have in place. So very, very valuable asset. Now moving on, talking a little bit more. We put together this Tier 3 data center backgrounder because I just want to let everyone know. All the talk about artificial intelligence and data centers, if we wanted to go out and build a new data center from scratch. Well, the first thing we have to do is find a good location. So that can take time. You probably don't want to go right now to Northern Virginia because all the good locations are taken. But you got to be close to the switchyard, you need the substation, you need the transformer, you need the electricity. You want to be pretty close probably to a metropolitan area. You don't want to be geological considerations. You don't want to be on a flood plane. You don't want to be in an earthquake zone. You don't want to be in tornado alley. You got to look at security. Do you have access to fiber. So a lot of things go into this. Then you look at the regulatory approval. And that in the United States varies tremendously state by state. States like California are much more regulatory-intense than a state like Alabama. So that can take time. You have to get your load study approved. Then you've got to build out the infrastructure. So the infrastructure, you got to go out and you got to purchase transformers. You might have to create a substation. You got to bring in a high-voltage feed. Well, everyone is trying to build data centers right now. So the supply line, the supply chain in this industry is as dry as the Sahara desert. If you went out to try and buy a transformer, you pick up the phone today and you call Siemens, they would take the order gladly, and they might deliver it 24 months down the road because that's how sold-out their production lines are. Then finally, you got to find the customer. The customer tends to be these -- right now, we've been hearing about the Big Mag 7 tenants, but that customer becomes vital to the whole business plan. So a big part of our Digi Power story and our transition towards Tier 3, these big artificial intelligence data centers is we have the infrastructure. We have a leg up on just starting off from scratch. We are going to start with our Alabama facility. And this is a picture of it. You can see today that we have Bitcoin mining containers out there, Colocation and Self-mining. You can see the transformers, you can see the power lines, and we're in Alabama. So a really good southern deep-ridge state. We've got all the existing infrastructure in place, everything that we're going to need to transition. So as we build out this Tier 3 data center, as we transition this facility, the first thing we'll do, and we've already done is a very detailed feasibility level engineering study. We have one of the top global firms that have helped us do that 180-page document, shows all the costs, the engineering, the detailed schematics and timelines. So we know exactly what we have to do. Then we start building out the facility. A lot of these Tier 3 data centers, their shelve are buildings like a Costco warehouse distribution center, Walmart distribution center that you see in any industrial park in America. So it's a concrete slab, steel girders, corrugated metal with some roll-o-doors. The value comes on the inside. And the important thing, as I keep stressing with Digi Power is our operational and management team. That power plant that we own in North Tonawanda, New York, that was built in 1992. A lot of our management team has been working at that power plant since 1992. So over 30 years' worth of experience, electrical engineers and managers, they know how to do this. We've got a very deep bench. If we're successful in transitioning our current Bitcoin mining operation to a Tier 3 data center, well, the upside is really, really interesting because currently right now, Bitcoin mining operations do not get massive valuations. And that's because the price of Bitcoin is volatile. It takes a tremendous amount of electricity, and they just don't carry these huge valuations. But Tier 3 data centers do. So currently, right now, if we can -- we have the 22-megawatts at our Alabama facility that's energized. If we can convert that over to Tier 3, these Tier 3 data centers are trading at around 15x enterprise value to EBITDA multiples. So 22-megawatts, we transition that to a Tier 3. This asset in Alabama alone could be worth up to $330 million of market cap. That is a big, big valuation looking at us right now. In addition, we have a very exciting time for Digi Power, a lot of things going on, a lot of changes and momentum. So we announced in February of this year that we formed a new wholly owned subsidiary. It's called U.S. Data Centers. You can see our website here, usdataacenters.ai. I'd invite everyone to go look at that. We also have a small presentation online to give you a little better feel. And the reason we are doing a brand-new subsidiary is there's a lot of institutions out there in the United States that still because of limitations on their investment policy statements, cannot invest directly in crypto, cryptocurrency or Bitcoin mining, but they can invest in artificial intelligence infrastructure and Tier 3 data centers. So we think by having a new pure-play subsidiary, this can unlock tremendous value for the current Digi Power shareholders. Digi Power is the sole shareholder of the subsidiary today. But as we build this out, our intention in the future could be to potentially spin-off U.S. Data Centers, do its own NASDAQ IPO as we can build some value in this thing in the future. So we're going to start with that facility in Alabama. We are going to retrofit that 22-megawatt facility, turn it into a state-of-the-art Tier 3 data center. And very recently, we put out a press release on this and Michel as well in addition, pend a shareholder update letter, I'd invite everyone to go out and look at. We've announced a strategic collaboration with super microcomputers. I'm sure everyone knows SMCI. This is a $24 billion company. And what we're going to do is build these Tier 3 data centers together. Starting with our facility in Alabama, we are going to use SMCI's liquid-cooled server infrastructure. It's called ARMS. This is really exciting technology because these liquid-cooled servers are about 6x as efficient as normal servers. They're getting tremendous productivity out of them. And the ARMS, that's an acronym, which means AI-ready Modular Solutions. You can see a couple of renditions in the photos on this slide. These are modular units so we can scale up and build out our future data centers. So a lot of these data centers, and I talked about on a previous slide that Google, $1.2 billion facility next to our North Carolina property, these data centers cost a lot of money. They can cost up to $25 million per megawatt if you're building them out with the chips. Well, 22-megawatts in Alabama, if Digi Power was going to build it out on its own and $25 million per megawatt, that's $550 million in capital, significant amounts of money. With this joint venture here with Super Micro, we can build out slower. And we could start literally with 0.5 megawatt or 1 megawatt. We could start with a 1-megawatt unit, start our Tier 3 data center, just bring in one of these modular solutions, announce a tenant, get a 5- to 10-year long-term lease, show predictability of revenues and cash flows. We think that will lead to a re-rating of the valuation of Digi Power X stock. In addition, we think once we build it and we can announce a credible tenant in our facility, that could also unlock in the future, some very favorable debt lending. There are massive infrastructure funds focused on this sector right now. I'm sure everyone's heard about some of the names like BlackRock, Blackstone, Apollo, UBS, JPMorgan, they all have big infrastructure debt lending funds. So this is going to allow us to start smaller, 1-megawatt, scale up very slowly. Maybe we have demand for 5 megawatts. It becomes a true plug-and-play scalable solution. Very, very excited about this, and I think it's going to be a real exciting business opportunity. So continue to watch the press releases on this collaboration with Super Micro Computers going forward. Just looking quickly at some of the milestones. We think second half of this year, we're going to have some more MOUs with Tier 3 Colocation customers, definitely up at North Tonawanda, we can double our Colocation capacity there once we get that load study from 60- to 120 megawatts. Then we're going to hopefully announce second half of this year a Tier 1 Colocation agreement. So exciting. We're going to continue to move forward our Alabama project to a Tier 3 data center. We are looking at the approval of the 60-megawatt additional load study, develop the other 33-megawatt in Alabama. So we're taking that up to 55 megawatts and then begin development of our North Carolina site. So that becomes a nice upside, too. And if we're successful making this transition, here's the opportunity. You currently see Digi Power X, our 2025 estimated enterprise value to EBITDA trading about 5.8x. Well, that's normal. We're right in line with that digital miner universe. But if we can transition to high-performance computing, look at their multiple, 21.9x. That's a 4x to 5x bump in upside. And that's where we're hopefully going to be moving towards by the end of this year. So when you look at the company and you kind of look at a sum of the parts for an asset valuation, that top line today, we are currently at 100-megawatts energized. We believe in the next 24 months, conservatively, we are moving to 220-megawatts. How does that breakdown? I talked about Alabama going from 22- to 55-megawatts. That load study is already approved. North Tonawanda, our power plant going from 60- to 120-megawatts Buffalo will stay exactly as it is, and we're going to be looking to bring on 20-megawatts in North Carolina. That might be Colocation, Bitcoin Mining. It could also be Tier 3 data center, depending on how the capital markets treat us in the future. When we look at how all this comes together, the sum of the parts, let's just look down below. We think that there's this big upside, making this shift, this transition from Bitcoin mining to high-performance computing. So if we get to that very, very bottom of the slide, if we get to that 220-megawatts, probably 90% of it is mining, colocation and self-mining, 10% of our megawatts are high-performance computing. How does that break down? You can see in that box on the right, it could potentially imply a valuation for the company in the future of up to $374 million. That would be very nice for our shareholders considering we are only an $87 million market cap today. So that's the big upside, and that is the story on the company. Very quickly on the financials. You can find our financials online on SEDAR. But cash balance, again, no debt in the company. The company has been run quite conservatively by Michel in that respect, very light CapEx model. Look at our segment analysis. I know this is from fiscal year '24, but you can see three different columns of revenue. Crypto Mining, which is our Self-mining, Energy Sales, that's selling power back to the grid at North Tonawanda and our Colocation revenues. So you see how it works out. We certainly anticipate this year, 2025, those revenues will be significantly higher because the price of Bitcoin is significantly higher this year and should also help on the profitability of the company overall. So that's pretty much the story. Great leadership team. I've spoken about Michel and his son, Alec, both our CEO and our President. Again, incredible management team at our power plant in North Tonawanda with the operational chops to really help us on this Tier 3 transition, an incredible portfolio of assets that we have. And I will close on this just to say that Michel is very, very much an entrepreneur. He is always looking for additional assets and acquisitions. And just keep your eyes on the press release on that because it's an exciting time. So that kind of brings me to the end of the presentation. I think I've just about used up my time, not sure if I have any time for any of our questions, but I am just going to look at some of these quite quickly.

Some of our questions that have come in while I was speaking, and thank you very much to everyone who has asked a question. One of them is how sensitive is our business to Bitcoin pricing versus AI infrastructure demand as a revenue driver? So great question. Certainly, all of the Bitcoin miners, publicly traded companies and private companies are sensitive to the Bitcoin price. It has been very volatile here at $105,000 of Bitcoin. We are all, I would think, highly profitable, depends on your price of electricity. But in the AI space, when you get into building a Tier 3 data center, the price of electricity, although important, is not as critical. Because on Tier 3 data centers, you tend to sign these long-term leases with very, very credible clients. Most of them up until this point have been The Mag 7, the big technology companies and names that you would know. And once companies that have been transitioning from Bitcoin miners to Tier 3 data center build-out companies, once they can announce the tenant, that's usually when you see the valuation re-rate and the upside of the company. So thank you for that question. One last question. What differentiates your Tier 3 modular AI data centers from competition in terms of performance and scalability? Certainly, the scalability I talked, we can start out with just 1-megawatt and scale up to sky is the limit and performance. These are the latest state-of-the-art B200 NVIDIA chips in liquid cooled. So we think it's very, very competitive. That's all the time that I have. I really, really thank everyone for your attention. Thank you for the questions. Appreciate the team at the IAccess Alpha Virtual Best Ideas Conference for having us. And if you have any further questions, feel free to reach out any time. Thanks so much.

Thank you. That concludes Digi Power X Inc.'s presentation. You may now disconnect.