Mr. Geoff Morphy reports

BITFARMS REPORTS FOURTH QUARTER AND FULL YEAR 2023 RESULTS

Bitfarms Ltd. has released its financial results for the fourth quarter and year ended Dec. 31, 2023. All financial references are in United States dollars.

"In 2023, we set the foundation to drive significant growth through our transformational fleet upgrade and mining facility expansion," said Geoff Morphy, president and chief executive officer of Bitfarms. "To that end, we secured 35,888 ultraefficient Bitmain T21 miners to be installed in the first half of 2024, and signed an option to purchase up to an additional 28,000 T21s for delivery in the second-half 2024. Our 2024 plan targets tripling our hashrate to 21 EH/s [exahashes per second], at least a 63-per-cent increase in operating capacity to 391 MW [megawatts], and improving our fleet efficiency by 34 per cent to 23 w/TH [watts per terahash].

"New farm development in Paraguay will drive much of this growth. In Yguazu, we purchased land for our 100 MW project in January, 2024. In Paso Pe, the infrastructure and electrical equipment are nearly ready for us to begin installing Bitmain T21 and new hydro-miners at our 70 MW project, which we expect to begin energizing in March. In addition, we are actively evaluating the best use of capital to secure further low-cost production growth opportunities via miner redeployment, acquisitions and farm development," added Mr. Morphy.

Jeff Lucas, Bitfarms' chief financial officer, said: "In 2023, we strengthened our balance sheet and improved our liquidity, lowering our debt obligations from a peak of $165-million in June, 2022, to fully debt free two weeks ago, except for our lease obligations. By further enhancing financial flexibility and liquidity, we can better support our aggressive growth plans for 2024.

"Following a highly disciplined capital allocation strategy, we have locked in lower-cost electricity -- fundamental to our long-term success -- and eliminated debt to prepare for active business development in new and low-cost locations," concluded Mr. Lucas.

Q4 2023 and recent 2024 operating highlights:

• Increased hashrate by 7 per cent to 6.5 EH/s at Dec. 31, 2023, through the installation of 2,300 miners, compared with 6.1 EH/s at the end of Q3 2023.
• Installed 12 Bitmain T21 miners for testing in mid-February, 2024, which outperformed the manufacturer's specifications in both normal and high-energy modes.
• At Rio Cuarto, Argentina:
  • Installed approximately 600 MicroBT M50 WhatsMiners and 200 Bitmain S19j Pro+ Antminers, which increased capacity to 54 MW and added 0.1 EH/s, bringing the farm's total hashrate to approximately 1.6 EH/s.
• At Paso Pe, Paraguay:
  • Amended the energy contract, adding 20 MW to the air-cooled warehouse portion of the project, increasing its operating capacity to 50 MW and the farm's total capacity to 70 MW.
• At Yguazu, Paraguay:
  • In January, purchased land for development of an up to 100 MW hydro-powered facility.
  • In February, signed the engineering, procurement and construction contract for the substation and transmission line to energize the facility.
• At Baie-Comeau, Que.:
  • Cleared the site to house the 11 MW expansion planned for H2 2024 and poured the building's concrete footings ahead of schedule.

Q4 2023 financial highlights (2022 comparisons as restated):

• Total revenue was $46-million, an increase of 34 per cent compared with $35-million in Q3 2023, as a 5-per-cent increase in bitcoin (BTC) earned and 30 per cent higher average BTC prices contributed to higher revenue.
• Gross mining profit and gross mining margin were $23-million and 52 per cent, respectively, compared with $13-million and 38 per cent in Q3 2023, respectively.
• General and administrative expenses were $13-million, up 12 per cent from Q4 2022 and up 60 per cent from Q3 2023. The increase from the third quarter reflects higher headcount to support the targeted infrastructure growth, as well as one-time and recurring performance achievement payments, merit and market-based adjustments, and $4-million non-cash share-based payment expense.
• Operating loss of $13-million, which included a $1-million non-cash reversal of revaluation loss on digital assets and a $2-million non-cash impairment on impairment on PPE equipment. In Q4 2022, incurred a $20-million operating loss which included a $9-million non-cash impairment reversal, a $29-million realized loss on disposition of digital assets and a $23-million non-cash reversal of revaluation loss on digital assets.
• Net loss of $57-million, or negative 19 cents per basic and diluted share, which included a $38-million non-cash expense for revaluation of warrant liability issued in connection with 2021 and 2023 financing activities. This compares with a net loss of $13-million, or negative six cents per basic and diluted share, in Q4 2022, which included $4-million of non-cash gain on revaluation of warrant liability.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $14-million, or 30 per cent of revenue, compared with $2-million, or 7 per cent of revenue, in Q4 2022, with the increase driven largely by the average BTC price approximately doubling the average BTC price in the prior-year quarter.
• The company earned 1,236 BTC at an average direct cost of production per BTC of $16,200, compared with $16,900 in Q3 2023.
• Total cash cost of production per BTC was $25,200 in Q4 2023, up from $22,700 in Q3 2023, reflecting one-time and non-recurring fixed operating expenses, including infrastructure enhancement and compensation.

Liquidity

At Dec. 31, 2023, the company held $84-million in cash and 804 BTC valued at approximately $34-million, based upon a BTC price at that time of approximately $42,300, for total liquidity of $118-million.

Q4 2023 and recent 2024 financing activities:

• Raised $41-million in net proceeds through a private placement in November, 2023;
• Received $11-million in proceeds during December, 2023, and $6-million in proceeds during 2024 from exercise of warrants issued in the November, 2023, private placement;
• Eliminated debt as of Feb. 29, 2024, paying down $6-million in equipment-related indebtedness in Q4 2023 and another $4-million in Q1 2024;
• Initiated the Synthetic HODL strategy with the purchase of 135 long-dated BTC call options held by the company as of Dec. 31, 2023.

Financial results for the year ended Dec. 31, 2023, versus 2022 (2022 comparisons as restated)

In 2023, the company generated revenue of $146-million, compared with $142-million in 2022. Two thousand twenty-three gross loss was $22-million, or negative-15-per-cent gross margin, compared with gross profit of $11-million, or 7-per-cent gross margin, in 2022. Non-cash depreciation and amortization expense was $85-million and $72-million, respectively, for 2023 and 2022.

The company earned 4,928 BTC for an average direct cost of production per BTC of $15,200 in 2023 compared with 5,167 BTC earned, for an average direct cost of production per BTC of $10,000 in 2022, largely reflecting an approximate 74-per-cent increase in average network difficulty over the prior year.

Operating loss was $72-million in 2023, compared with an operating loss of $284-million in 2022. Two thousand twenty-three net loss was $104-million, or negative 40 cents per basic and diluted share, compared with a net loss of $176-million, or negative 85 cents per basic and diluted share, in 2022. Adjusted EBITDA was $35-million, with 24 per cent adjusted EBITDA margin, compared with $55-million of adjusted EBITDA, with 38 per cent adjusted EBITDA margin in 2022.

Conference call

Management will host a conference call today at 8 a.m. Eastern Time. A presentation of the Q4 2023 results will be accessible before the call on the investor website and can be accessed on-line.

Participants are asked to preregister for the event on-line. Please note that registered participants will receive their dial-in number upon registration and will dial directly into the call without delay. Those unable to preregister may dial in by calling: 1-866-777-2509 (domestic) or 1-412-317-5413 (international), and should do so 10 minutes prior to the start time.

The conference call will also be available through a live webcast.

The webcast replay will be available one hour after the end of the call and can be accessed in the events section of the company's investor website. An audio replay will be available through March 14, 2024, and can be accessed at 1-877-344-7529 (domestic), 1-412-317-0088 (international) or Canada (toll-free) 855-669-9658, using access code 4390159.

Non-IFRS (international financial reporting standards) measures

As a Canadian company, Bitfarms follows international financial reporting standards which are issued by the International Accounting Standard Board (IASB). Under IFRS rules, the company does not reflect the revaluation gains on the mark-to-market of its bitcoin holdings in its income statement. It also does not include the revaluation losses on the mark-to-market of its bitcoin holdings in adjusted EBITDA, which is a measure of the cash profitability of its operations and does not reflect the change in value of its assets and liabilities.

The company uses adjusted EBITDA to measure its operating activities' financial performance and cash-generating capability.

Two thousand twenty-two restatement

During the preparation of the company's financial statements for the year ended Dec. 31, 2023, the company reassessed the application of IFRS accounting standards on the accounting for warrants issued in connection with private placement financings conducted in 2021 and, as such, restated its consolidated statements of financial position as of Dec. 31, 2022, and Jan. 1, 2022, its consolidated statements of profit or loss, and comprehensive profit or loss for the year ended Dec. 31, 2022, and its consolidated statements of cash flows for the year ended Dec. 31, 2022, which were previously filed on SEDAR+ and EDGAR. For further details, consult Note 3e of the audited consolidated financial statements for the year ended Dec. 31, 2023, available on SEDAR+ and EDGAR. As described in the annual management's discussion and analysis (MD&A) for the year ended Dec. 31, 2023, available on SEDAR+ and EDGAR, the company is undertaking remediation efforts in light of the restatement and in order to improve the overall effectiveness of its internal control over financial reporting for the accounting of complex financial instruments.

About Bitfarms Ltd.

Founded in 2017, Bitfarms is a global bitcoin mining company that contributes its computational power to one or more mining pools from which it receives payment in bitcoin. Bitfarms develops, owns and operates vertically integrated mining farms with in-house management and company-owned electrical engineering, installation service, and multiple on-site technical repair centres. The company's proprietary data analytics system delivers best-in-class operational performance and uptime.

Bitfarms currently has 11 operating bitcoin mining facilities and two under development situated in four countries: Canada, the United States, Paraguay and Argentina. Powered predominantly by environmentally friendly hydroelectric and long-term power contracts, Bitfarms is committed to using sustainable and often underutilized energy infrastructure.

We seek Safe Harbor.