DMG Blockchain Solutions Inc. (DMGI) Earnings Call Transcript & Summary

Sheldon, your last quarter results were fantastic. They were up, what, 26% higher than your first quarter last year.

Can you give us an update on how these numbers are looking for your next quarter results?

Yes. I think next quarter should be a pleasant quarter for everyone. There's been no major issues in the company's operations. We are continuing to build out hashrate. The mining operation is running quite smoothly. Bitcoin price has been helping with its gains as well. So when we look at our operations overall, we are sort of a low-cost provider of hashing and our HODL has been growing. We've sold a little bit for some of our CapEx needs. But in general, our HODL is doing very well. Our cost of operation is very low, and we're expecting another strong quarter.

I ran your name by about a good dozen investors, and none of them had ever heard of DMG Blockchain before. And of course, you're considered one of the godfathers of cryptocurrency. So can you tell us why it's so hard to find out information on DMG Blockchain?

So I think there's a couple of reasons for that. One, most investors look at U.S. markets when they look at Bitcoin miners. And we're not a U.S.-listed stock, we're a Canadian stock. And so most Canadian Bitcoin miners have migrated to the U.S. over the last -- call it, 2 to 3 years. You'll see that with HIVE and Bitfarms and a few others. We've stayed in Canada. All of our operations are in Canada. We've stayed on the Toronto Venture Exchange. We've debated a few times moving to the U.S. but a lot of information starts coming out when you're U.S. listed, it gets picked up on Bloomberg, you get a lot more media coverage just by being on a U.S. exchange. And so I think that's kind of one of the reasons that not a lot of people in the investment community know us. It is a bit odd, though, because we are actually the first public Bitcoin miner. So HIVE was the first sort of digital asset miner. They started in Ethereum that went public. We went public a few weeks later as a Bitcoin miner. We didn't do GPU operations in Ethereum and other coins. And so we've been around about as long as HIVE has. However, we've stayed Canadian-centric and focused on Canada as where we want to grow our business. We're still doing that. Obviously, we know that capital markets are interested in us. We have lots of discussions about moving to the U.S. And we think that's on the road map for us to do in the future. On the Canadian side, it's really a retail play in Canada. So a lot of retail knows us. We have a large retail shareholder base. But there's not so many institutions like there in the U.S. operating in Canada on the Canadian market. So that's one of the reasons why we are kind of a Canadian retail stock versus a U.S. more institutional investor stock.

And of course, you said earlier in that answer that you were the first digital asset miner. Did I hear you correctly?

The first on Bitcoin. So the first digital asset mining was HIVE that went public. They were focused on GPUs that are used for Ethereum and other Altcoins. We were a pure Bitcoin, and we've always been a pure Bitcoin company.

And of course, you've also really kind of stayed under the radar. You haven't been very PR-centric.

That is true. There's a few different reasons for that. Some people say it because I'm in the wrong generation. My kids are very PR-centric and they're on their phones all the time. But I think one of the key issues for us at DMG is we're very operationally focused on execution. So we just kind of keep growing and growing and growing. And in some ways, we need to spend a bit more time on letting the market know what we're doing. We do have a strong following of people that have been with us for a long time. Obviously, it's in our interest to grow that base out and be more well known. So we're working on different ideas what to do. We also have split our company into a couple of different areas that make it interesting. So some of the company -- and the core of the company is a Bitcoin mining company, but we also have our trust company, Systemic Trust, which is a fully regulated trust company in Canada that can hold digital assets for anyone. There's only 3 of those in Canada, so it's a bit unique. We've also made our inlays into AI. We have a great position for AI. AI is really getting very interesting in Canada. It's already interesting in the U.S. and other parts of the world. But definitely, the amount of execution we are focused on, sometimes that takes away from us getting out and telling our story in a way that would be more beneficial to those who are looking for information on DMG.

That's one take. Another one might argue in doing your due diligence on you is that you're just so committed to your expansion and your growth. Could one make an argument about that? I mean I was reading your news release flow. And when you put out news, you put out news. Can you comment on one of your -- recent milestones. I mean I'm reading through them, but I think we'd love to hear your opinions on what those are.

We don't put out a lot of news, especially kind of fluff or low-value news. We normally say something when we have something to say. And so you don't get a lot of press releases from us. But when we do press release, something has happened that we think is major enough that everybody should know about it. So that's kind of a little bit of the way that we operate. So we don't fill your inbox with a bunch of sort of fluff pieces of noninformation. But some of the big milestones is, we did break a 2 exahash. We have started the conversion of our Bitcoin mining fleet out of air cooling and into liquid cooling, which is really helping through the summer months. We did get our trust fully regulated, which is a big milestone for us. We have our clean energy ecosystem through Terra Pool. We've reinvigorated that with a major software update going along with our purchase of reactor, which allows hashrate purchasing of contracts. So we've done quite a bit in the last quarter or so. And as you said, overall, our revenue is up. Our costs are coming down. We have new revenue lines coming in that we're going to start reporting more and more information about. So the upside of the company is very high right now. We know that the market in general is sort of looking at crypto and sort of on the fence, what people think about crypto stocks. But we look at our stock and saying we are Bitcoin-centric, which is the #1 crypto. You can see so much news about how it's expanding and growing. And we have a lot of technology and transactional new revenue lines around Bitcoin and Bitcoin transactions.

The market also likes to compare you with major competitors, Marathon Digital, Riot Platforms. And of course, you've mentioned HIVE. You have quite a reputation as being ESG leaders. Can you comment a little bit on this right now and how you're taking that forward?

Yes. No, that's true. We do get compared to the sort of 20-ish large public crypto miners. Ourselves, we focused on sort of 2 parts to being in the crypto business. One part is the Bitcoin generation, which is creating Bitcoins through Bitcoin mining. The other part of it is the transacting of Bitcoin. And so normally, when you think of transacting Bitcoins, you think of exchanges buying and selling Bitcoins. There's a little bit more to it than just an exchange, but the second part is what makes us a little bit different. When you look at the pure-play Bitcoin miners like the Marathons out there and the HIVE's, none of them are working in the pool and software business and the transactional business like we are. So we sort of look at it is as a Bitcoin miner, you can make a Bitcoin and you can either sell it to fund your operations or you can hold it in your treasury and the idea of holding is that you believe it will be worth more money in the future. We look at it as a third option is you can make a Bitcoin as a Bitcoin miner and you can sell it or you can hold it or you can work in the transactional side of buying and selling it and making yield off of holding it. And this is why we got involved in building out STC, our systemic trust company, which is a digital trust company, which makes money off holding Bitcoin and working with exchanges that need to hold Bitcoins. On top of that, because we are on renewable energy, we, a few years ago, partnered with Argo Blockchain and created a pool called Terra Pool, which is only for clean energy. So if you are a Bitcoin miner and you sit at a dam or some type of clean energy, renewable energy, solar or geothermal, whatever it may be, you can apply to join that pool and put your hashrate onto our pool. With your hashrate being on our pool, there's a few things that happen. One, that hashrate is mixed with other hashrate that's carbon neutral. So the Bitcoins that are produced by the pool and paid out to you are carbon-neutral Bitcoins. So you actually have Bitcoin that has no carbon in it. And there's a lot of different organizations out there that are interested to meet their ESG policies in crypto that are looking for carbon-free or carbon-neutral Bitcoin. So that's one. Two, the transacting of Bitcoin from wallet A to wallet B on our pool is carbon-free as well. So if you're a fund or an exchange that wants to reduce the amount of carbon in their trading and their operations, you can put your transactions through our pool and they would be carbon-free. And so that's another point that's really interesting. As well, our pool SOC 2 type 2 certified. So banks and institutions are looking for that sort of certification that they require for their audit and their processes. On top of that, we are fully KYC and AML. So we have no hashrate coming from North Korea or Iran or these sort of groups that are profiting off the Bitcoin blockchain. And so we bring that compliance to anyone that wants to use our pool ecosystem. So again, when you look at financial institutions, it becomes quite interesting because we can give you a carbon-free AML, KYC total solution that meets the regulatory issues of ensuring that you're not dealing with bad actors through OFAC. And we're the only ones that do this. So there's no other pool out there that's OFAC compliant, AML compliant, KYC compliant and can do it all carbon neutral. And this is something that we created a few years ago, and we're continuing to grow that. We have some transactions coming up that are showing a premium. So there are people willing to pay more for hashrate from D&G because it is carbon-free. And we have a registry of carbon-free Bitcoins that have been mined over the years that people are interested in buying those Bitcoins and putting them into their storage and into their sort of HODL, as you call it, for different institutions and private offices.

It is unique. And of course, it's listed both on the TSX Venture and the OTCQB, an outstanding website. I recommend everybody go do their due diligence immediately on DMG Blockchain by going to the following website. Thank you for joining us today.

Thank you.