Tesla reports mixed Q2 results as softer demand dents sales
DMG Blockchain Solutions Inc. reported its second-quarter fiscal year 2025 earnings, revealing a net loss of $0.02 per share, slightly missing the forecast of $0.0167 loss. The company’s revenue reached $12.6 million, surpassing the forecast of $11.37 million. Following the earnings release, DMGI’s stock price fell by 3.33%, closing at $0.29 after hours, reflecting investor concerns over the earnings miss. According to InvestingPro analysis, the company appears undervalued at its current market capitalization of $42.51 million, despite showing a strong revenue growth of 17.11% over the last twelve months.
Key Takeaways
- Revenue for Q2 FY2025 was $12.6 million, a 9% increase from the previous quarter.
- The company reported a net loss of $3.3 million, or $0.02 per share, slightly missing expectations.
- Stock price dropped by 3.33% in after-hours trading.
- DMG Blockchain is focusing on AI infrastructure, with plans to expand its Bitcoin mining capacity.
Company Performance
DMG Blockchain Solutions demonstrated robust revenue growth in Q2 FY2025, with a 9% increase from the previous quarter. Despite this growth, the company faced challenges, including a decrease in Bitcoin mining output and a slight decline in operating margin. The focus on developing AI infrastructure and partnerships with indigenous communities positions DMGI uniquely in the market, setting it apart from competitors like Hive and Mara.
Financial Highlights
- Revenue: $12.6 million, up 9% from the previous quarter.
- Earnings per share: -$0.02, compared to a forecast of -$0.0167.
- Cash, short-term investments, and digital currencies totaled $62 million.
- Total assets stood at $130 million.
- Operating margin decreased to 40% from 43% in the previous quarter.
Earnings vs. Forecast
DMG Blockchain’s actual earnings per share of -$0.02 slightly missed the forecast of -$0.0167. However, the company exceeded revenue expectations, reporting $12.6 million against a forecast of $11.37 million. This mixed performance reflects both the company’s growth potential and the challenges it faces in the current market environment.
Market Reaction
Following the earnings announcement, DMGI’s stock price dropped by 3.33% in after-hours trading, closing at $0.29. This decline reflects investor concerns over the earnings miss, despite the positive revenue surprise. While the stock has shown significant volatility, with a 31% decline over the past six months, it has demonstrated recent momentum with a 5.26% gain in the past week. The stock currently trades between its 52-week range of $0.13 to $0.47, highlighting the typical volatility in the blockchain sector. InvestingPro subscribers can access comprehensive volatility metrics and trading patterns through our detailed Pro Research Report, one of 1,400+ company deep-dives available on the platform.
Outlook & Guidance
Looking ahead, DMG Blockchain aims to expand its Bitcoin mining capacity to 3 exahash by the end of the year. The company is also targeting AI infrastructure agreements and plans to grow its capabilities with minimal headcount increases. Despite the current challenges, DMGI remains optimistic about securing long-term government and enterprise contracts.
Executive Commentary
CEO Sheldon Bennett emphasized the company’s strategic focus, stating, "We are positioning DMG to expand into AI in a meaningful way with a differentiated strategy." He highlighted Canada’s leadership in AI, noting, "Canada has appointed a federal minister of AI... ahead of any other G7 nation." COO Steven Ilescu added, "We are now in a much different position than we were even six months ago," underscoring the company’s progress.
Risks and Challenges
- Decreased Bitcoin mining output could impact future revenue.
- The high cost of Bitcoin mining, at approximately $55,000 per Bitcoin, remains a concern.
- Market volatility and regulatory changes in the blockchain sector could affect operations.
- The need to improve investor relations and marketing is acknowledged by the company.
- Achieving AI infrastructure growth with minimal headcount increases poses operational challenges.
Q&A
During the earnings call, analysts inquired about DMG Blockchain’s prospects for securing Canadian government AI contracts. Executives expressed optimism, emphasizing ongoing discussions and the potential for significant partnerships. Additionally, questions were raised about the company’s approach to non-dilutive financing for expansion, with management reaffirming their commitment to this strategy.
Full transcript - Dmg Blockchain Solutions Inc (DMGI) Q2 2025:
Chantel, Conference Call Operator: Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the DMG Blockchain Solutions q two twenty twenty five update conference call. Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A webcast replay of the call will be available on the company’s website. Joining us today from DMG Blockchain Solutions is Sheldon Bennett, the company’s Chief Executive Officer and Steven Illescu, Chief Operating Officer.
During this call, management will be making forward looking statements, including statements that address DMG Blockchain Solutions’ expectations for future performance or operational results. Forward looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in DMG Blockchain Solutions most recently filed periodic reports and the company’s recent press releases, particularly the cautionary statements within. The content of this call contains time sensitive information that is accurate only as of today, 05/22/2025. Except as required by law, DMG Blockchain Solutions disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.
It is now my pleasure to turn the call over to Sheldon and Stephen. Sheldon?
Sheldon Bennett, CEO and Founder, DMG Blockchain Solutions: Thank you, Chantel. Good afternoon, and thanks to everyone who has joined the call today. My name is Sheldon Bennett. I am the CEO and founder of DMG Blockchain Solutions. With the similar format as recent quarters, first, I will provide an overview of the company’s achievements in the past quarter.
I will then pass the call to Steven, who will review the company’s performance. We will end the call with our q and a session based on questions submitted to us prior to the call as well as those using Zoom chat. So now to our highlights of recent achievements. First, our core plus software and services strategy. As an update on Centemic Trust, we recently reported in a press release, Alvin Young has been appointed interim CEO on the departure of his predecessor.
As Alvin’s prior role was chief revenue officer, his primary goal remains customer acquisition and onboarding new clients by mid calendar year with a with a revenue ramp up expected exiting the year. We continue to focus on partnering with crypto trading platforms, including Bosonic, with which we are also aiming to realize value from our investment. We have completed the testing phase of utilizing Fireblocks wallets that incorporate DMG’s petro technology so that Bitcoin held by systemic trust can maintain its carbon neutral status by being sent through Terra Pool for transaction processing. This is the last remaining component we have needed to enable DMG’s carbon neutral Bitcoin ecosystem. For Terra Pool, we are focused on partnerships and client acquisition.
Our focus is to work with a limited number of larger mining entities looking to leverage the portion of their energy mix that is carbon neutral to have the opportunity to increase their revenue. The value proposition of Terra Pool becomes even greater when we can offer a suite of complementary products, including Helm, Reactor and Explorer. Now a few words on each. First, Helm, DMG’s data center infrastructure management software, continues to be enhanced to be best in class software for maximizing the profitability of Bitcoin mining. We are utilizing Helm in house to to ensure the software scales to manage tens of thousands of air cooled and direct liquid cooled mining servers.
We plan to incorporate AI features not only with respect to our code development, but also as how to maximize the productivity of the mining technicians on the floor. We plan to deploy Helm with beta customers by the end of this quarter and offer general availability in the September. For Terabool clients, we see Helm as an upgrade to their existing solutions, which are either general purpose offerings built on antiquated software stacks or were built for in house use only. Next, Reactor is our proprietary software for assuring the delivery of hash rate over the term of a hash rate contract and gives Terra pool clients the option to sell hash rate and be paid upfront for delivering hash rate over the term of a contract, which is a useful treasury management tool that is unique for any pool to offer. We have relationships with several brokers of Hashrate that can readily supply us with a market of buyers, including those who may pay a premium for carbon neutral Hashrate.
Optimization of Reactor continues to be a key capability we plan to offer concurrently with Helm as we plan to integrate Reactor along with Terapool and Helm in a single seamless environment. Lastly, Explorer, which is the original software we acquired from Blocks here purchased back in 2018. We have pulled in our development of Explorer to this quarter to be a product initially to offer downloadable reports for the blockchain the for the Bitcoin blockchain, a level of basic functionality that seems to have disappeared from any provider. We initially did this for ourselves but decided to offer it to the market. Longer term, we plan to add more advanced analytics capabilities to explore.
With our schedule for launching all of these products in the next few months, we will soon have a critical mass of products to be able to realize our vision of monetizing a carbon neutral Bitcoin ecosystem where Terra Pool supplies carbon neutral blocks that are in turn filled by Systemic Trust, a digital asset custodian subsidiary with transactions from financial institutions that want the option to have a regulatory compliant and carbon neutral way of sending Bitcoin. This is a monumental achievement for DMG as we finally are now able to match the vision we have discussed with you for years with a comprehensive product offering that can enable us to achieve this goal. Beyond the next few months, we have no shortage of ideas for further building our software and service offerings. More important for us than adding more new products is first to gain new customers to drive revenue while we incrementally add capabilities to existing products to build and strengthen our moat. Regarding our core data center infrastructure.
First, for AI, we purchased two megawatts of prefabricated data center infrastructure from a party that we had announced previously in an MOU to acquire a full 10 megawatts of infrastructure. While we did not disclose the purchase price, the fact that our unaudited Bitcoin balance declined in April should give an indication that we are serious about investing into AI computing. We’re encouraged by our discussions with public sector entities and enterprises regarding potential colocation and direct offtake agreements. There’s tremendous appetite not only for AI compute in Canada, but to keep the data in Canada, the infrastructure, and as much of the IP within Canada in light of the uncomfortable geopolitical dialogue between The US and Canadian heads of state. How quickly we can translate our discussion to agreements remains to be seen.
We have dedicated staff who understand the public sector agencies focused on this effort, which is stable stakes to participating in delivering solar urban AI. Last October, we signed a memorandum of understanding with the Malahat nation to build out 30 megawatts of generative AI compute capacity split between both parties. We’re now focused on executing agreements with the Malahat as well as more actively pursuing the financing of smaller projects ahead of a larger AI data center project financing, which could be several hundred million dollars just for infrastructure. Next, for Bitcoin mining, with a portion of our hydro miners energized during the quarter, we realized 1.76 exahash with a fleet efficiency of 22.8 joules a terahash. We were negatively impacted by three days of curtailment in February during which we operated with only about 15 megawatts of firm power at a Christian Lake facility.
At the very May, we reached our short term hash rate goal of 2.1 exahash. As disclosed in our recent press release, we are likely to operate under 2.1 exahash through the spring and summer months as we optimize our fleet to operate in higher ambient temperature environments. Regarding Bitcoin mining site expansion, we remain focused on lowering our cost of energy, which includes expanding the use of non firm energy in Christina Lake and finding new sites with low cost energy. Regarding the site that DMG announced in May of twenty twenty three, we’re still working towards concluding an agreement. We continue to evaluate locating Bitcoin miners at other locations.
We’ll provide updates when we sign definitive agreements at these locations. Regarding our three x Hash goal by the end of this calendar year, we are looking to achieve this goal with nondilutive financing. We plan to achieve this goal by converting a portion of our Christine Lake facility into hydro mining. We are in the planning stage of making this conversion. We have somewhat shifted our stance on keeping Bitcoin mining at Christina Lake as we encourage that for the near term, nonfirm power provides us with more competitive pricing.
We are now looking into calendar twenty twenty six for expansion to other sites, which would most likely be in Canada. And now for a summary of our strategy. First, DMG’s core plus software and services. As we have stated previously in calendar twenty twenty five, we are focused on customer acquisition, a platform expansion for both systemic trust and Terra pool. We need very limited headcount expansion to do this as for both platforms, we are initially focused on onboarding relatively few large customers.
We remain focused on onboarding first systemic trust clients by midyear along with Terapool throughout the rest of the year. Regarding platform expansion, we plan to add all the needed pieces that clients are demanding by midyear, a more exhaustive platform for our systemic trust along with a critical mass of software for TerraFull, including custodial wallets for clients by systemic trust, Helm Data Center Infrastructure Management, Reactor for Bitcoin treasury management, and Block Seer Explorer. For DMG’s core data center infrastructure, over the past quarter, we’ve had our heads down focused on client acquisition for our AI infrastructure. As we now physically own two megawatts of infrastructure, we see this as a catalyst for winning deals with a focus on public sector clients where the skipped military grade rating is a key selling feature. Given that we are past the election of Canada’s new prime minister, we’re now working with the respective ministries that actually procure AI infrastructure and their new leadership.
Even with a big portion of our attention on AI, Bitcoin mining remains foundational to our core strategy, and hence, we are still planning to grow to three exahash by the end of the calendar year and to do this in a nondilutive way. Now I’ll hand it over to Steven to review the company’s performance.
Steven Ilescu, Chief Operating Officer, DMG Blockchain Solutions: Thank you, Sheldon. I’m Steven Ilescu, DMG’s COO. First, a few words about the company’s overall position. In the March, our cash, short term investments plus Bitcoin balance was 61,900,000.0 a decrease of 3% sequentially and up 42% year over year. We are utilizing more than half our Bitcoin balance as collateral for our Signum Bank loan facility, which we utilize which we have utilized for capital purchases.
Note that while our Signum loan balance was unchanged at $20,000,000 in the March versus the prior quarter, we previously guided that we intended to reduce our loan balance, a process we began in April and have continued in May. We believe we should lower our level of debt in light of what could be a lot more market volatility ahead. While some may have already forgotten the Liberation Day exacerbated Bitcoin price pullback and subsequent recovery with Bitcoin now at all time highs, we still remain cautious about the macro environment and will likely continue to gradually sell Bitcoin to pay down the loan at least for this quarter. For our mining operations, we reached our 2.1 exahash goal at the May. As we believe hydro mining and direct liquid cooled AI servers are the future of high performance computing, This deployment positions us to execute on that future.
We have learned much about hydro infrastructure for which we have had issues in part that delayed our deployment. By and large, we are pleased with the operation of the hydro miners themselves, which have run as expected, although we’ve yet to see how they run-in the heat of summer. We were also negatively impacted by increased energy rates in the March related to seasonality. This was DMG’s first full quarter of operating about half its fleet on non firm power. As we’re now subject to seasonality, we expect the winter months to be a high cost period.
Supporting this expectation, we have seen significant declines in our blended energy rates in March and April. Finally, as Sheldon detailed in his update on AI, we’re making material progress towards securing offtake agreements with our focus on Canadian public sector and private enterprise clients. Additionally, as we purchase two megawatts of prefabricated data center infrastructure, this will add to our asset base that we will report in the June. Now to review our financial results. In our March, our revenue increased 9% to $12,600,000 from $11,600,000 the prior quarter, mainly as self mining revenue increased a similar percentage on 8% higher average realized hash rate.
We’ve mined 91 bitcoin, down from 97 the prior quarter as our hash rate increase was more than offset by a 14% in the network’s bitcoin Porexahash generation. Our hosting revenue decreased 4% sequentially to 200,000 in our March quarter. We expect hosting revenue to decline to near zero this calendar year as our existing customers retire their fleets, and we utilize our capacity for self mining and AI. Operating and maintenance costs increased 14% to $7,600,000 from the prior quarter as we operated 8% more hash rate on slightly improved efficiency of 22.8 joules of terahash. The balance of the increase was caused by higher seasonal energy rates.
Note that our non firm power is subject to curtailment. And as we disclosed in our financial statements and the press release, we curtailed once in the March for three consecutive days. We have had no subsequent curtailment events and believe our Christina Lake energy rates may end up slightly lower this calendar year than if we operated solely on firm power, and they should be sequentially down in the current quarter. Also note that the 15 megawatts of firm power we have will ultimately support our AI venture with the Malahat, and we are working with our utility to secure additional firm power for future AI growth. Our margin percentage on our revenue less operating and maintenance cost was 40% in the March, down from 43% prior quarter, mainly on higher energy rates.
Consequently, our energy cost to mine a bitcoin was about 55 k US. As we will likely utilize non firm power for much of our energy mix going forward, we will experience more volatility in our mining costs than we’ve had historically. As a proxy for cash flow from our business, which assumes we are selling 100% of our generated Bitcoin, our earnings before other items, excluding depreciation, amortization and stock based comp, was $2,500,000 or 20% on a percentage basis in the March, a decrease from $2,600,000 and 22% the prior quarter, again due in large part due to higher energy rates. Our cash flow from operations was minus $1,000,000 in the March as we sold $7,100,000 less bitcoin than we earned. Our cash balance declined by 3,500,000.0 as we funded much of our capital needs through our cash balance, which allowed our Bitcoin balance to rise 13% from the prior quarter to $4.58 Bitcoin.
As we already reported, our bitcoin balance subsequently declined in April to an unaudited amount of $3.51 bitcoin. Investors should not expect our bitcoin balance for the remainder of the current quarter to rise from April levels as we liquidate Bitcoin for operational expenses and paying down debt. Non mine expenses, excluding depreciation, amortization and stock based comp, were $2,500,000 in the March, down 4% from the prior quarter of $2,600,000 And our 2025 financial year, given lower expected interest expense on our Signum loan for the balance of the year and cost control on headcount, we now expect non mine expenses to rise only modestly this year. We’re adding headcount to support program management, especially given what we need to accomplish on AI, business development for our software initiatives, and operations. For at least the near term, these are targeted hires, helping us to ensure operational execution and make the needed transition from being a company that historically did not need to have marketing and sales talent.
Depreciation expense of $4,300,000 in the March was flat from the prior quarter. As a percentage of revenue, our depreciation expense was 34%, which we believe is among the lowest of our peers and demonstrates a rapid improvement in capital efficiency as we have grown hash rate. We’re believe we believe we are making good choices to balance the need to maximize cash generation while minimizing our total cost of mining by having purchased near leading edge miners, which includes the T21 and S21 series of hydro miners at approximately $1,000,000 a megawatt or less while underclocking our legacy miners to extend their useful life. Our earnings before other items was minus $2,600,000 in the March, similar to the minus $2,500,000 in the prior quarter. Our net income was minus 3 point 3 million dollars or minus $02 a share versus minus $3,100,000 and minus $02 a share of the prior quarter.
Regarding our balance sheet, our cash, short term investments plus Bitcoin Holdings decreased 3% to $61,900,000 from the prior quarter and increased 42 from the prior year. The value of our property and equipment and long term deposits decreased 8% to $55,900,000 from the prior quarter as depreciation exceeded our capital additions. Accordingly, our total asset base decreased 6% to 129,500,000 from the prior quarter and increased by 9% from the prior year. In the March, we sold 39 bitcoin, generating $5,100,000 of cash. Thus, we sold 43% of the bitcoin amount mined versus the prior quarter of selling 81% of the bitcoin mined.
It is possible that with our Bitcoin sales this quarter, DMG will sell more than 100% of its mined Bitcoin in fiscal twenty twenty five. And as a treasury policy, investors should continue to expect us to sell most or all of the Bitcoin we mine and that our Bitcoin holdings should decline as a percentage of our total asset base over time. We do not expect to purchase Bitcoin on the open market as investors are free to do so independently of their investment in DMG. Regarding raising new capital, as for a future where AI could be a major component of our business, our capital raising would most likely be debt instruments tied to offtake and colocation contracts. For Bitcoin mining expansion, we are most likely to continue to utilize Bitcoin backed loans as well as other forms of debt financing.
Note that as we look to our next phase of expansion towards 3xahash, we now believe we can source near leading edge 13 to 16 joule per terahash equipment later this year that should cost in the $1,000,000 range $1,000,000 per megawatt range, significantly lower than the $2,000,000 to $2,500,000 per megawatt that we expected prior. I will now hand the call back to Sheldon to summarize our prepared comments, and we will answer questions. Sheldon?
Sheldon Bennett, CEO and Founder, DMG Blockchain Solutions: Thank you, Steven. First, to reiterate our key results and outlook. We are positioning DMG to expand into AI in a meaningful way with a differentiated strategy based on unique strong relationships with indigenous communities, uptake agreements along with execution partners. Systemic Trust is focused this year on acquiring clients and ramping revenue. Therapool is evolving into a complete platform with Helm Reactor and Explorer.
We are focused this year on building partnerships and acquiring clients. DMG mined 91 Bitcoin in the March on a hash rate of 1.76 exahash and a fleet efficiency of 22.8 joules. Our hash rate goal is to grow to three exahash this calendar year, but to do so only in a nondilutive way. Cash, short term investments, and digital currencies at quarter end were 62,000,000 with total assets of a hundred and 30,000,000. On a net income basis, we had a 2¢ per share net loss in the March.
In addition to maximizing the cash generation of our Bitcoin mining operations, we are focused on realizing revenue from our AI or plus software and services initiatives that can help return us to profitability and drive shareholder value. In summary, we are proud of the accomplishments we have made this past quarter, demonstrating additional progress towards realizing a substantive AI revenue stream, positioning ourselves with a complete platform to generate revenue from our core plus strategy based on systemic trust and Terra pool, and having deployed hydro mining, which will allow us to remain competitive and grow as a Bitcoin miner. We continue to make real progress, and we are highly focused on our initiatives that can significantly grow our revenue and cash generation. As always, we appreciate your continued support. So now on to our q and a.
As with past q and a’s, Steven and I normally split the questions up a bit, and we take them both sent to us earlier, over the last few days. And, if there are some that come in over the chat, we’ll try and read through some of them and answer those questions as well. The first question that we have is how long is it going to take to secure AI agreements? In particular, doesn’t it take a really long time with government given all the bureaucracy? It’s a great question.
And, as we all know, it can take a long time with any government, especially, you know, when we’re new to government, procurement and especially when we’re focused on skiff rated or military grade data center, infrastructure, which, requires additional security clearances to participate in some of the tenders and procurement opportunities that the Canadian Department of National Defense has. So, you know, we are actively working through this process, but we do remain optimistic that we can secure agreements in the coming months. Months, I say, not years. Months. Mainly because the Canadian government now has a sense of urgency to achieve AI self sufficiency and sovereignty.
Through our discussions with various agencies, we understand their sense of urgency. We understand their process, and, they’ve been very helpful in helping us get through the types of qualifications, certifications, information they need to to be able to to have us as a potential vendor. We do know that working through all these issues with these various agencies can pay huge dividends down the road with, you know, what we see as large multiyear agreements that will command a premium. So we are very much focused on this. There is an alternative that we are trying to avoid, which is to go after sort of shorter term agreements that are revenue right now, but they could, you know, sort of fall short in paying off the cost of the very high cost, the very high capital cost of the physical, you know, GPU hardware that we would need to purchase.
So we are really, you know, in the first instance, really looking at more long term, you know, focus on government prefer government, if possible, contracts to start our AI our AI expansion. Hopefully, that answers that question. There’s another one, and it’s not much different. If the military just wanted to buy the prefab data center from you, would you just sell it assuming a good markup? And, you know, yes.
I mean, business is business. That’s this is possible. We could just sell it, mark it up, let them take it, and, you know, take the money and move on and continue with our strategy. But it’s not really what we wanna do. We do wanna try and lock up an agency or multiple agencies so that we don’t just sell them a piece of infrastructure and and be done, but we sell them a service based on that infrastructure, you know, whether it’s us procuring GPUs or whether they co locate their equipment they want into our infrastructure.
But we see trying to get long term contracts based on infrastructure that we could provide is a more practical business plan for us than just, you know, finding a data center infrastructure and and reselling it. So, it doesn’t really meet our strategy of getting into implementing Sovereign AI, quickly in Canada if we just sell the equipment. So it’s kind of a roundabout answer. I mean, yes, if the price is right, we’ll sell it, but this is not what we’re trying to do. This is not our strategy.
Another question. Why didn’t you use debt financing to fund AI equipment purchase? It appears you liquidated Bitcoin to pay for two megawatts. Yes. So why we didn’t use debt?
So the nature of a debt instrument is that it requires a revenue source to backstop it in in general. So if we want to to to to get some money, normally, the debt source will say, well, how are you gonna pay it back? What’s your cash flow from the money you’re borrowing to pay it back? With this purchase of this two megawatts, there is no cash flow coming out of it. It’s really, we bought the two megawatts to sort of jump start our movement into AI, and there was no cash flow behind it.
So it wasn’t really something we could go to a financier and say, hey. You know, give us some money because we wanna buy this. And and by the way, it has no cash generation. So, this is sort of why, we we looked at using our own funds to finance this two megawatts. Hopefully, that answers it.
Another question. How do you see the new Canadian government acting on its talk about sovereign AI? Well, that’s a great question, and especially that we’re talking. Lots of governments like to talk. We’ll we’ll see what the actions are.
But it’s kind of important that, you know, Canada has appointed a federal minister of AI. That’s Evan Solomon. And they’ve done this ahead of any other g seven nation. And so this sort of gives us an idea that Canada is really taking AI under the Carney leadership, as a serious effort and something that they want to deploy quickly. So as we have on our staff, a former Canadian government employee, we are quite well connected with senior government officials and have reached out all the way up to the prime minister Carney’s office.
And, you know, we’re finding out, you know, what they’re saying, how much they’re supporting this, what they’re planning on doing. We’re learning more about Canada’s sovereign AI and its self sufficiency initiatives. And and we’re just kind of learning that, you know, Canada, at least under this prime minister, does not wanna be dependent on The US or or other countries for that for for AI sovereignty. While we still sort of need to follow the protocol protocols to be part of an actual AI pyramid process, which I alluded to in an earlier question, we do believe that, you know, our work with the new government in power now, is is going quite well and that, you know, we have a very strong position to potentially win some sovereign AI projects. Another question.
Why do you seem to be more optimistic about long term Bitcoin mining at your Christine Lake facility? Have you given up on finding other sites? So, yes, we are more optimistic about a longer term Bitcoin mining in Christina Lake. And just to put that in a bit of a context for people that don’t watch the Christina Lake site that closely, as as we’ve said, we’ve always been on firm power. So this is power that’s delivered to us, and it’s the same price for everybody in our territory that is a commercial large commercial customer.
So we’re no different than pulp mills and and and lumber mills and things like that, which is great. The the power the power rate’s always the same. We’ve always looked at and always thought about having, you know, what people call market power or wholesale power or, you know, we we call nonfirm power, or some people call PPAs. You know, the Texas miners, have PPAs. It’s normally, some type of contract where they can buy in the market.
And so in our market, which is called mid sea or mid Colombian, for the last few years, that price has been, in general, higher than what we would buy at our fixed price. And so we’ve been very focused on not deviating and taking the bulk of our power or all of our power up till recently on on, on our fixed rate power. However, power prices have dropped. They started dropping, and the future price of power for our Mid Sea area is looking very advantageous. So we’re quite happy to move over to taking more of our power.
I think we’re around 50% of it right now, and we may increase that on what we call non firm power or or or wholesale power, just because as as Steve said in his comments, our overall blended cost is becoming lower. And we think that even riding out the seasonality, we’ll end up getting a lower cost per kilowatt than if we were to stay solely on fixed power as we have done in the past. So that’s one, and I’ll give you another another reason why we are is when we talk about our sort of move away from air cool to hydro, we have about 36 megawatts of power infrastructure that’s inside our building. All of that is air cooled, and our plan is to retrofit all of that air cooled into hydro, which will be really a low cost because we won’t have to change our power distribution and racking and all that. We’ll just be adding in some of the piping and pumping and dry coolers.
And so this allows us to increase our hash rate in in the building. It allows us to, no longer deal with the seasonality of the hot temperatures that we experience. And sometimes we’ve experienced some of these heat domes in the past that, that make air cooled mining a bit more difficult in in our location. And so there’s a couple couple good things about Christina Lake that have kinda popped up, and one is this lower overall cost even with seasonality of of of market power. And two is just the very low cost for us to be able to convert our air cooled into hydro cooled.
So that’s great. And there was a second part of this question. You know, have you given up on finding other sites? And and the answer is no. We are, always actively looking at, pockets of low cost energy, where we can make inter incremental additions to our mining capacity.
You know, we’ll we’ll continue to give updates on that. You know, it’s it’s it’s it’s in some ways, it’s really easy to find, you know, power on natural gas, you know, Alberta, Texas, sort of higher carbon areas. It’s a little bit harder to find it if we wanna stay as a carbon neutral company. Not impossible, but it it takes a little bit more work, and we gotta do a little bit more due diligence and and takes takes a bit longer to get to get those things done where it, it makes material difference and and it’s worth doing. Probably a lot on on that question.
Next question. What happened to Lauren Strong? No. Sorry. What happened as to why Lawrence Prong left as CEO of Systemic Trust?
So another good question. I I guess the simplest thing to say is that, you know, Lawrence decided to pursue other opportunities. You know, what we can say about this is that we’re still confident systemic trust will be a major digital asset custodian in Canada and that Alvin Long, is highly capable as our interim CEO. You know, systemic trust has already moved beyond the startup stages of building a team, building out a platform, and successfully working with the regulator, all things that Lawrence managed prior to his departure. You know, dear during Lawrence’s tenure in the background, Alvin was focused on customer development, defining what is needed to further build out the platform, which he continues, you know, to be executing on, with with the MG software team helping along the way.
So we anticipate the systemic trust going forward will not skip a beat. I think it’s going to add customers. I’ve been in a lot of the customer meetings with, Alvin. It’s it’s it’s kind of a small world in the world of crypto. I know a lot of the same people he knows, and, you know, I I don’t think he’s gonna have too many difficulties onboarding and getting people going and working on on the trust.
So I think, I think things will be fine. And maybe, since I’ve been rambling along here for a little bit, I’ll let Steven take over a few questions.
Steven Ilescu, Chief Operating Officer, DMG Blockchain Solutions: Yeah. Thanks, Sheldon. And one of the the ones we just got in is just asking us about us utilizing with our prefab data center with liquid cooling. And I think it’s important for investors to understand just how we’re thinking about deploying AI. And, initially, the prefabricated data center that we have purchased and plan to purchase more of is an air cooled asset.
It’s the skiff rating makes it very which is what the military wants. So, you can’t it’s very hard for third parties to come and try to listen in to what’s going on inside the the physical structure. If we were to modify it in any way to, let’s say, support direct liquid cooling, we would probably impair the ability to maintain that rating. So that initial asset should be looked at as an air cooled only asset. And especially as we’re gaining experience with direct liquid cooling, anything that we build greenfield going forward, would be based on direct liquid cooling technology.
We we think that’s the future. We think data centers, the way they’re built, the especially as a lot of them especially the ones we think in Canada are gonna be, for inference type workloads, gonna be relatively modest in size, actually quite physically small as we look to the next generation of of coming out next year with 600 kilowatt racks. The future data centers are gonna look very different, and we’re gonna intercept that future. For now, the the prefabricated data center is air cooled. It’s most likely gonna stay air cooled as we go forward.
That was a technology question. Let’s kind of switch gears here. And one of the questions that came in ahead of time was how does DMG compare to some of the other mining stocks like Hive and Mera, and what strategies going forward could lead us to all time highs? We appreciate that question. We know that on a EV to hash rate basis, we’ve been valued less than our larger peers as even as we’ve kept up more recently with hash rate growth and fleet efficiency.
We maintain a reasonable huddle. We’ve limited dilution. But we know we’ve been making these investments in software and services and AI more recently that have yet to show results. Our focus is to translate these investments into meaningful results as we believe that can be the catalyst for the stock. And for Bitcoin mining, we are gonna continue to talk about it because, but in a more subdued way because it does continue to generate cash for the business, and we need it for at least in the short term.
Next question is, DMG needs to learn how to market itself as a publicly traded company, investor relations needs to be much more higher on DMG’s priority list. Is there a plan to aggressively promote and market DMG’s transformation into an AI technology company? And we really appreciate the criticism and really appreciate the question. It’s, we’ve been hesitant over the past year to aggressively market ourselves regarding Core Plus software and services. And more recently, AI is we’re also cognizant of pushing a story too early and then having investors lose interest when it takes longer than expected, which given what we’re trying to do, it these things do take time.
We have we have held back. But we are now in a much different position than we were even six months ago. We’ve added two top tier sell side analysts who have increased our visibility with investors. But the question the the person who asked the question is right that we do broadly need to step up our IR, and it hasn’t been lost on Sheldon and myself. And just going forward, we do plan to invest more.
We are gonna be evaluating over the summer utilizing outside firms versus bringing in an a a dedicate an in house dedicated resource. And we’ll also look to other avenues to get our social media presence also to to step that up as well. Just related on asking about hydro, just do we can we use the same systems as we use in AI as Bitcoin mining? And the answer is no. And this is important for investors to understand in in general.
When Bitcoin miners talk about getting into AI and they talk about direct liquid cooling, it’s not the same direct liquid cooling. It’s much more expensive. An example is the water if it’s closed loop system like we’re currently using, the water that recirculates, probably, at least some part times of the year, needs to be actively refrigerated before it reenters and is used to cool the GPUs. That’s really expensive. There’s also a lot of redundancy.
And, also, if there’s a if there’s a leak of of the water, it’s catastrophic in the case of the AI servers just given the the amount of cost and future systems are probably upwards of a hundred million US per megawatt, that the these systems are gonna be built very differently. The experience we’re gaining is helpful, but the the the actual implementations are gonna be very different, and we’re very cognizant of that. And just also asking about just would we start with HPC with a nongovernment customer before scaling to potential government customers because of clearly, there’s a time frame associated, as Sheldon talked about, to to get government customers. Yes. I mean, we’re we’re in parallel.
We’re talking to enterprise, potential private enterprise clients, and we’ll be looking at that as an option as well. Just also just this we talked about getting to three x a hash. So if we’re not gonna raise equity and we wanna reduce our debt, then how are we gonna be able to raise the money for the to be able to buy new new miners? And that’s a good question. I mean, what we’re the view is that we take down the level of debt substantially, at least through this quarter.
We evaluate where we’re at. And, really, we may look towards later in the year, depending on the market conditions, as we’re really looking to some of the next generation equipment that isn’t available now but will be available later in the year at very cost effective price points, really looking more to that time frame. And at that time frame, market conditions may very well support us, growing our debt levels again as long as we feel they’re manageable. And we may utilize a Bitcoin backed loan. We may utilize other types of debt financing, but we’re gonna be very careful.
And it’s all dependent on the market conditions and what kind of ROI we think we can get. Let’s see. We have Sheldon, are are there any other questions that you wanted to take as we’re coming up on the hour?
Sheldon Bennett, CEO and Founder, DMG Blockchain Solutions: No. I’m just looking at the chat a little bit. What is the current outstanding balance of the loan?
Steven Ilescu, Chief Operating Officer, DMG Blockchain Solutions: We can’t disclose that until the end of the quarter.
Sheldon Bennett, CEO and Founder, DMG Blockchain Solutions: I can’t. I mean, it’s as we said, it’s coming down. It’s in our financials where it was at the end the quarter, but, you know, we’re kinda doing what what we’re saying we’re doing and and and we’re paying that down. Has systemic trust, added any clients other than DMG? So, again, you know, companies have the right to have privacy, so some of them will allow us to press release and say who they are, some will not.
And as we’re just starting client acquisition, we don’t really wanna say anything until we get the okay, and it it’ll come out in a press release. So I’m not too sure what we can say on that. I think you’re just gonna have to wait a little bit for some public announcements. But, hopefully, hopefully, someone will come out soon. Let’s see what else is in there.
Is there anything else? Buying more shares. Well, I bought a lot of shares in DMG. I guess we can can talk about yourself rather, Steven, but, I’m probably the happiest to buy more shares of DMG. It’s it’s actually getting harder because there’s a whole bunch of blackout periods that we have now in our governance that make it a bit harder for us to buy.
But, yeah, I bought some not too long ago, and probably we’ll be happy to buy more. And I hopefully you kinda answered a lot of this HPC.
Steven Ilescu, Chief Operating Officer, DMG Blockchain Solutions: There’s one more I’ll I’ll answer here is just the strategic rationale for buying the prefabricated data center. And I think, you know, we’ve indicated this. We think we need to have some amount of physical infrastructure that we own that’s in flight that gives us towards, we’ve said we may locate it on our Christina Lake property. We have other options as well. But for us, it’s it’s in in terms of the credibility that we establish when we have these conversations, actually owning the infrastructure and talking about time frames that we can deploy it make it we appear to be much more credible.
And hence, because we’re in a race with others to deploy sovereign AI in Canada, this, we believe, just gives us another, piece that, gives us that edge in terms of being able to deliver it first and win this race. We see there’s a limited window here for winning sovereign AI. And the prefabricated data center is a bridge to be able to versus these much more ambitious 15 megawatts direct liquid cooled next generation data centers. That is out in time. As we have said, it’s gonna take a while for us to build that.
That in turn, also, if we can win initial some smaller agreements with the prefabricated data center, that will give us the momentum to get us the off take agreements that, in turn, help us to fund the these, larger data centers. And, hopefully, I answered a couple questions in in that. And I think with that, we’re probably, nearing time. So, Sheldon, why don’t I just pass it back to you to finish our call?
Sheldon Bennett, CEO and Founder, DMG Blockchain Solutions: No. Thanks, Steven. I think that’s sort of a good explanation. We have been on a few calls where, you know, with different people responsible for AI asking about blockchain. Why are we talking to a blockchain company?
And we have an answer for that, why they’re talking about a blockchain company because there is a component on on the software layers why blockchain is important to AI. Well, that’s a different topic. So let’s now, officially end our q and a. As a reminder, both Steve and I will be participating in the upcoming Bitcoin twenty twenty five in Las Vegas next week. Please reach out to us if you would like to have an in person meeting with both of us or either of us.
Therefore, we thank everyone for attending, and our call is now over.
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