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LF

LM FUNDING AMERICA, INC. (LMFA)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 revenue fell sharply to $1.26M, driven by April’s Bitcoin halving and miner repositioning; quarterly digital mining revenue was $1.13M and the consolidated net loss was $4.80M, while net loss attributable to shareholders widened to $6.40M due to a $1.70M deemed dividend from warrant repricing .
  • Mining economics improved: management highlighted gross mining margin of 35% in Q3 versus 18% in the prior-year quarter, as the company executed a vertical-integration strategy and secured lower-cost power sites around ~$0.04/kWh in Oklahoma .
  • Strategic pivot accelerated post-quarter: LMFA signed an asset purchase agreement to acquire a 15 MW Oklahoma mining site and outlined plans to deploy ~800 S21/XPs and ~640 S19j Pros and pursue a 60 MW expansion starting in Q1 2025, materially increasing self-hosted capacity .
  • Management tone was constructive and tied to BTC price strength (recent ATH references near $87k–$92k), reiterating a “mine-and-hold” strategy and optimism around cash and Bitcoin balances (~$14.9M at quarter end including BTC, per CFO) as a near-term catalyst .
  • No formal guidance or Wall Street consensus estimates were available through S&P Global for Q3 2024; comparisons to Street expectations are therefore unavailable (S&P Global data unavailable) [GetEstimates error].

What Went Well and What Went Wrong

What Went Well

  • Gross mining margin improved to 35% in Q3, reflecting lower-cost power and operational relocation aligned to expiring hosting contracts, versus 18% in the prior-year quarter .
  • Operating expenses decreased year over year to $5.7M, primarily due to lower digital mining costs and Bitcoin fair-value impact, partially offset by higher D&A, indicating active cost actions and portfolio repositioning .
  • CEO reinforced strategy and confidence: “Following the April halving event, we initiated a vertical integration strategy…secure lower-cost power sources…excited to see Bitcoin recently reach an all-time high above $87,000” .

What Went Wrong

  • Top line compressed: total revenue declined to $1.26M (vs. $3.42M YoY and $3.01M QoQ) due to halving and miner transitions; quarterly Core EBITDA loss widened to $1.62M vs. $0.62M in Q3 2023 .
  • Net loss attributable to shareholders increased to $6.40M, including $1.70M of deemed dividends tied to warrant repricing and a $0.35M unrealized loss on investment and equity securities .
  • Elevated D&A and continued BTC network difficulty weighed on profitability; management noted D&A increase (~$0.8M YoY) and repositioning impacts during the quarter .

Financial Results

Consolidated Results vs Prior Quarters

MetricQ1 2024Q2 2024Q3 2024
Total Revenues ($USD)$4,747,604 $3,011,347 $1,255,473
Digital Mining Revenues ($USD)$4,597,908 $2,893,073 $1,127,455
Specialty Finance Revenues ($USD)$116,628 $89,036 $97,558
Rental Revenue ($USD)$33,068 $29,238 $30,460
Net Income (Loss) ($USD)$1,903,966 $(6,647,329) $(4,803,117)
Net Income (Loss) Attributable to LMFA ($USD)$1,489,745 $(6,072,855) $(6,402,379)
Basic EPS ($USD)$0.61 $(2.44) $(2.41)
Diluted EPS ($USD)$0.61 $(2.44) $(2.41)

Mining Margin (Non-GAAP KPI from management)

MetricQ1 2024Q2 2024Q3 2024
Gross Mining Margin (%)Not disclosedNot disclosed35%

Segment Revenue Breakdown

SegmentQ1 2024Q2 2024Q3 2024
Digital Mining ($USD)$4,597,908 $2,893,073 $1,127,455
Specialty Finance ($USD)$116,628 $89,036 $97,558
Rental ($USD)$33,068 $29,238 $30,460

KPIs

KPIQ1 2024Q2 2024Q3 2024
Bitcoin Mined (units)86.4 44.1 18.5
BTC Holdings at Quarter End (units)163.4 160.4 142.3
Avg BTC Price Recognized/Referenced ($USD)~$53,000 ~$65,600 ~$60,870
Potential Hash Rate (PH/s)~639 ~639 ~639
Cash ($USD)$827,366 $145,648 $5,913,215

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal Financial Guidance (Revenue, EPS, Margins)Q4 2024 / FY 2024None providedNone providedMaintained (no formal guidance)
Power Cost (Oklahoma)OngoingN/A~$0.04/kWh; expected range $0.038–$0.042/kWh monthly floatIntroduced operational benchmark
Capacity Plan (Oklahoma 15 MW site)Close Dec 2024; deploy by Jan 2025N/AAcquire 15 MW site; vacate third-party miner; deploy ~800 S21/XPs + ~640 S19j ProsIntroduced expansion plan
Further Expansion (Oklahoma)Q1 2025 startN/APlan to commence 60 MW expansion; ~9-month lead for substation expansionIntroduced expansion plan
Hosting/Vertical Integration StrategyOngoingInfrastructure-lightVertical integration aligned to expiring hosting contracts; relocation to cost-effective sitesStrategic shift confirmed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2024)Previous Mentions (Q2 2024)Current Period (Q3 2024)Trend
Vertical Integration / Hosting StrategyConsidering ownership to reduce deposit risk; pivoting to mining-first focus LOI for Texas site; Oklahoma 15 MW at-cost hosting; debt raised to fund expansion Strategy executed; 15 MW Oklahoma acquisition; relocation and margin improvement Strengthening
Power Cost OptimizationNot detailedExpect at-cost hosting for 10 months; immersion containers in Texas; Oklahoma air-cooled Oklahoma power around ~$0.04/kWh; stable outlook Improving economics
Equipment Refresh (S21, XPs)Purchased 300 S21s; increased hash rate to ~639 PH/s 800 S21/XPs at Core; 3,000 S19j Pro relocated Plan to deploy ~800 S21/XPs + 640 S19j Pros at Oklahoma by Jan 2025 Scaling
Bitcoin Holding StrategyMine-and-hold, optimistic on BTC Continue reinvestment and holding stance Reiterate mine-and-hold; ATH references $87k–$92k Persistent
Specialty Finance (Condo/HOA)Growth opportunity tied to 2025 FL legislation Stable; legislative timing may delay urgency “Wait and see”; opportunities expected but timing uncertain Neutral/Deferred
M&A OpportunitiesNot highlightedNot highlightedOpen to distressed miner M&A; no deals yet Exploring

Management Commentary

  • CEO: “We initiated a vertical integration strategy…secure lower-cost power sources…relocate miners…This resulted in gross mining margin improvements to 35% for the quarter as compared to 18% in the prior year.”
  • CEO: “Excited to see Bitcoin recently reach an all-time high above $87,000—a milestone that reinforces our strategy of mining and holding Bitcoin.”
  • CFO: “We closed the quarter with approximately $14.9 million in cash and Bitcoin…very optimistic about the financial prospects of Bitcoin and our business outlook.”
  • Strategy execution: signed APA to acquire 15 MW Oklahoma site; plan deployment of ~800 S21/XPs and ~640 S19j Pros; escrow structured to clear third-party hosting by Jan 2025 .

Q&A Highlights

  • Focus shifting toward vertical integration and Bitcoin mining; specialty finance remains opportunistic pending 2025 legislation changes, with management pursuing additional low-cost power sites (~$0.04/kWh) and funding flexibility via loans and equity .
  • Expansion roadmap: Oklahoma site expandable by ~60 MW with ~9-month substation timeline; management considering parallel pursuit of ready-to-go sites while planning Oklahoma expansion .
  • Equipment strategy: purchase decisions centered on payback periods; evaluating newer models (e.g., S21) versus refreshing older fleets as space becomes available .
  • M&A optionality: discussions with privately held miners under stress; no transactions completed yet .
  • Hosting/immersion vs air-cooled: Oklahoma air-cooled containers; Texas immersion contemplated in prior quarter; transformers and tranche build-outs required for scaling .

Estimates Context

  • Wall Street consensus estimates (EPS, revenue) for Q3 2024 were unavailable via S&P Global during this analysis due to system limits; thus, beat/miss vs consensus cannot be determined at this time (Values would be retrieved from S&P Global if available).

Key Takeaways for Investors

  • Revenue compression is cyclical post-halving; management’s margin improvement to 35% and ~$0.04/kWh power access indicate a credible path to better unit economics even at elevated network difficulty .
  • Near-term catalysts: closing the 15 MW Oklahoma acquisition (Dec 2024), redeploying miners by Jan 2025, and commencing 60 MW expansion in Q1 2025; expect step-ups in self-hosted capacity and reduced third-party dependency .
  • BTC sensitivity remains high; CFO/CEO commentary ties confidence to recent BTC ATHs and a mine-and-hold policy, which can amplify equity volatility alongside BTC price moves .
  • Non-GAAP considerations: Core EBITDA loss of $1.62M in Q3 and deemed dividends from warrant repricing ($1.70M) materially impacted net loss attributable; monitor future capital actions and non-cash effects on per-share metrics .
  • D&A and equipment refresh cycles will remain prominent; management prioritizes payback-driven purchases and software efficiency to boost hash rate from existing machines .
  • Specialty finance is a call option on Florida reserve funding changes; timing likely skewed to 2025; the equity story remains predominantly a Bitcoin mining vertical integration thesis .
  • Trading implication: stock likely tracks BTC and execution milestones (site acquisition/expansion, power cost realization); event-driven opportunities around December close and Q1 expansion start could re-rate operational narrative .