Riot Platforms, Inc. — Form 10-Q Summary
Business context and reporting period
Riot Platforms is a vertically integrated Bitcoin mining company with three reportable segments: Bitcoin Mining, Data Center Hosting, and Engineering. The filing covers the three and six months ended June 30, 2023, compared with the corresponding 2022 periods.
- The Rockdale, Texas facility had 700 MW of developed capacity at quarter-end.
- The Corsicana, Texas facility is under development, with an expected total capacity of approximately one gigawatt. The initial phase includes 400 MW of immersion-cooled infrastructure.
- Riot had 95,904 miners deployed with 10.7 EH/s of hash-rate capacity; 17,040 miners remained offline because of December 2022 winter-storm damage.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $76.7 million | $72.9 million | $150.0 million | $152.7 million |
| Bitcoin Mining revenue | $49.7 million | $46.2 million | $97.8 million | $104.1 million |
| Data Center Hosting revenue | $7.7 million | $9.8 million | $16.7 million | $19.5 million |
| Engineering revenue | $19.3 million | $16.9 million | $35.5 million | $29.1 million |
| Operating income (loss) | $(32.5) million | $(353.2) million | $(89.3) million | $(314.4) million |
| Net income (loss) | $(27.7) million | $(353.6) million | $(83.4) million | $(317.0) million |
| Adjusted EBITDA | $24.0 million | $(65.9) million | $31.5 million | $(53.2) million |
| Net cash used in operating activities | Not separately presented | Not separately presented | $(5.8) million | $(14.4) million |
- Q2 basic and diluted loss per share was $0.17, compared with $2.71 in the prior-year quarter. Six-month loss per share was $0.51, compared with $2.56.
- Bitcoin Mining revenue increased in Q2 because production rose by 380 Bitcoin, despite a lower average Bitcoin value of approximately $28,024 versus $33,083. For the six-month period, revenue declined because the average Bitcoin value was approximately $25,132 versus $37,177.
- Q2 Bitcoin Mining cost of revenue was 47.5% of segment revenue versus 39.0% in the prior-year quarter. After power curtailment credits, the reported net cost ratio improved to 29.9% from 34.2%.
- Data Center Hosting remained loss-making before corporate costs and other items: revenue less cost of revenue, net of power credits, was $(9.8) million in Q2 and $(25.1) million for the six-month period.
- Power curtailment credits totaled $13.5 million in Q2 and $16.5 million for the six months, compared with $5.7 million and $8.3 million, respectively, in the prior-year periods.
- Depreciation and amortization increased to $66.2 million in Q2 and $125.5 million for the six months, compared with $20.6 million and $34.8 million, respectively, primarily because of the expanded facility and larger miner fleet.
- At June 30, 2023, cash and cash equivalents were $289.2 million, working capital was approximately $408.4 million, total assets were $1.36 billion, and stockholders’ equity was $1.24 billion.
- Bitcoin holdings were 7,265 coins with a carrying value of $140.9 million. The estimated fair value at the June 30 Bitcoin price of approximately $30,477 was $221.4 million.
- Total liabilities were $118.0 million. Debt was immaterial relative to the balance sheet: approximately $0.4 million of equipment term loans was outstanding, and the company reported compliance with facility covenants.
Material changes versus the prior comparable periods
- Net loss improved substantially from Q2 2022 and the first six months of 2022, primarily because the prior-year periods included a $335.6 million goodwill impairment and significantly larger Bitcoin impairment charges.
- Bitcoin production increased 38.9% to 3,890 coins for the first six months, from 2,800 coins in the prior-year period. Riot sold 3,575 Bitcoin for approximately $89.2 million.
- Engineering revenue increased, while Data Center Hosting revenue declined because of fewer hosting customers, lower Bitcoin values, and legacy contracts with below-market terms.
- Cash increased by $58.8 million during the first six months, principally because of $184.7 million in net ATM equity proceeds, partly offset by $107.5 million of investing cash outflows and $5.8 million of operating cash use.
- Riot issued 15.9 million common shares through its ATM offering for net proceeds of approximately $184.7 million. The company completed the remaining capacity of that $500 million ATM program with an additional $6.6 million of net proceeds in July 2023.
- The company received approximately $27.1 million released from escrow following a favorable independent-accountant determination in the Northern Data working-capital dispute and recognized a $26.0 million deferred gain related to the settlement.
Guidance, outlook, commentary, risks and unusual items
- Management expected to restore storm-affected mining capacity in the second half of 2023 and targeted 12.5 EH/s of self-mining capacity during that period.
- Riot agreed to purchase 33,280 MicroBT miners for approximately $162.9 million, with deliveries expected from December 2023 through mid-2024. Full deployment was expected to increase self-mining capacity to approximately 20.1 EH/s. The agreement also includes an option for up to 66,560 additional miners.
- The first phase of Corsicana was estimated to cost approximately $333 million through the first quarter of 2024. Approximately $102 million had been incurred through June 30, 2023; management expected approximately $150 million of additional spending during the remainder of 2023 and $81 million in the first quarter of 2024.
- Riot purchased 200 MW of immersion-cooling systems from Midas in July 2023 and paid deposits of $20.8 million to Midas and $48.9 million to MicroBT. Remaining commitments were approximately $31.2 million and $114.0 million, respectively.
- Riot terminated the GMO legacy hosting agreement effective June 29, 2023, expected to free approximately 75 MW at Rockdale for more efficient miners or more accretive hosting arrangements.
- Key risks include Bitcoin price and network difficulty volatility, Bitcoin impairment, dependence on equity financing and potential dilution, power-market and ERCOT exposure, construction and supply-chain delays, inflation, facility damage, regulatory developments, and the profitability of legacy hosting contracts.
- Material legal matters include disputes with Northern Data, Rhodium, SBI Crypto, and GMO. Claimed amounts include more than $26 million from Rhodium, at least $31 million in claims by SBI, and more than $150 million sought by GMO; the filing states that outcomes and potential losses generally cannot be reasonably estimated.
- The filing states that Riot had no exposure to failed digital-asset lenders or exchanges and transferred deposits formerly held at Signature Bank without loss or interruption.
- Management concluded that disclosure controls and procedures were effective at the reasonable-assurance level as of June 30, 2023. The filing states that there were no material changes to the risk factors disclosed in the 2022 Form 10-K.
Important facts for investors to verify
- Whether Bitcoin prices, network difficulty, and power prices support the projected mining economics and planned 20.1 EH/s capacity.
- The timing, total cost, financing, and commissioning of the Corsicana facility, including the remaining approximately $231 million of estimated first-phase spending.
- Whether the 17,040 storm-affected miners are returned to service as expected and whether the 12.5 EH/s second-half target is achieved.
- The sustainability of power curtailment credits and their effect on reported and economic mining costs.
- The profitability and resolution of the GMO, Rhodium, SBI Crypto, and Northern Data disputes, including possible cash exposure and capacity recovery.
- Future equity issuance, dilution, and Riot’s ability to fund expansion while operating cash flow remains negative.
- The carrying value and accounting treatment of Bitcoin, the Level 3 power derivative asset, and related sensitivity to market assumptions.