Cipher Mining Inc. — Q1 2024 Form 10-Q
Filing identity: The supplied filing is for Cipher Mining Inc. (Nasdaq: CIFR), not Cipher Digital Inc. It covers the unaudited quarter ended March 31, 2024, with comparisons to Q1 2023.
Business context and outlook
Cipher develops and operates bitcoin-mining data centers in Texas: one wholly owned facility and three facilities held through 49% joint-venture interests. Its largest site is the 207 MW Odessa facility. The company is developing the wholly owned Black Pearl facility in Winkler County, planned for up to 300 MW, with operations expected to begin in 2025. As of April 30, 2024, reported aggregate hashrate capacity was approximately 8.7 EH/s, including 7.7 EH/s owned by Cipher.
Key financial results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Bitcoin-mining revenue | $48.1 million | $21.9 million |
| Operating income (loss) | $46.8 million | $(4.1) million |
| Net income (loss) | $39.9 million | $(4.6) million |
| Net income (loss) per diluted share | $0.13 | $(0.02) |
| Net cash used in operating activities | $(26.6) million | $(10.1) million |
| Net cash used in investing activities | $(31.0) million | Net cash provided: $2.6 million |
| Net cash provided by (used in) financing activities | $60.2 million | $(0.5) million |
Revenue rose about 120%, although mined production was slightly lower: 924 bitcoin versus 943. Management attributed the revenue increase primarily to a higher average bitcoin price—about $52,100 versus $23,200—and production maintained despite increased network hashrate. Cost of revenue was $14.8 million, implying a roughly 69% mining revenue margin before other operating expenses (calculated as revenue less cost of revenue, divided by revenue). Cost of revenue included $1.1 million of non-recurring miner-upgrade parts.
Reported profit was materially affected by non-cash fair-value gains: $40.6 million on bitcoin and $7.4 million on the Luminant power-agreement derivative. The derivative gain reflects changes in power-market forward prices and uses significant unobservable valuation inputs. The company also reported $1.9 million of realized losses on derivative trading in other expense. Management’s non-GAAP Adjusted Earnings were $63.0 million, versus $8.4 million in Q1 2023; this measure excludes certain items but retains bitcoin fair-value gains.
Balance sheet, liquidity and capital
At March 31, 2024, cash and cash equivalents were $88.7 million, bitcoin was $123.3 million, working capital was approximately $219.3 million, total assets were $677.1 million, and stockholders’ equity was $600.9 million. Cipher held approximately 1,730 bitcoin, with a reported fair value of $123.3 million and cost basis of $80.7 million. Cash increased $2.6 million during the quarter, but operating cash use increased to $26.6 million.
Total liabilities were $76.2 million. Finance lease liabilities totaled approximately $13.7 million, and operating lease liabilities totaled approximately $7.2 million. The company had not drawn on its secured Coinbase credit facility of up to $10 million; borrowings would be collateralized by bitcoin. It raised approximately $64.5 million net through an at-the-market equity offering, issuing 14.2 million shares at an average net price of $4.53. After quarter-end, it reported an additional $17.8 million net from 3.36 million shares sold.
Investing cash use included $18.3 million invested in equity investees, primarily for Bear and Chief expansions, and $7.9 million of property and equipment purchases. Cipher stated that existing resources, expected cash and bitcoin inflows, and the ability to sell bitcoin should fund operating and capital needs for at least 12 months from issuance of the statements.
Material changes, risks and unusual items
- Bitcoin halving: The April 2024 halving reduced the block reward by 50%. Management cautioned that, if bitcoin prices and network hashrate were otherwise unchanged, revenue from newly mined bitcoin could fall by 50%, significantly affecting profit.
- Expansion and equipment: Black Pearl development added approximately $7.7 million to construction in progress during the quarter. Miner deliveries under one Bitmain agreement were expected by June 2024; a separate order for 7.1 EH/s was scheduled for the first half of 2025. An option for an additional 8.7 EH/s had not been exercised.
- Funding and dilution: The quarter’s positive financing cash flow depended on equity issuance. Further equity financing could dilute shareholders; future borrowing may carry restrictive terms. Management noted that it had not sold bitcoin to fund operations during the quarter.
- Internal controls: Management concluded disclosure controls were not effective as of March 31, 2024, due to a previously identified material weakness in IT general controls involving user access, segregation of duties and change management. Remediation was ongoing, with no assurance it would be successful.
- Operational and market risks: Results are exposed to bitcoin price and network difficulty, energy costs and availability, Texas/ ERCOT conditions, severe weather, equipment supply and obsolescence, and regulatory or cybersecurity developments. The company operates in a concentrated Texas footprint.
- Legal matters: The filing says there were no material pending legal proceedings and no reasonable possibility of material loss identified from ordinary-course claims. A previously disclosed Luminant dispute was settled in August 2023; $1.5 million of the related $2.0 million accrual had been paid by quarter-end.
- Comparability: Q1 2023 included $2.3 million of non-recurring coupon-sale gains and disclosed out-of-period power-cost and power-sales adjustments that management deemed immaterial. Q1 2024’s results also benefited from the newly adopted bitcoin fair-value accounting, which records price changes in earnings.
No formal full-year revenue or earnings guidance is provided in the supplied filing. Management’s stated outlook is continued development and expansion, including expected Black Pearl operations in 2025; actual results remain subject to the risks described above.
Important facts for investors to verify
- Confirm Cipher Mining Inc. is the intended issuer, given the request metadata names Cipher Digital Inc.
- Assess how the post-halving bitcoin reward reduction, bitcoin prices and network hashrate affect mined revenue and cash generation.
- Separate operating performance from bitcoin and derivative fair-value gains when evaluating Q1 profit and the company’s non-GAAP Adjusted Earnings.
- Track Black Pearl’s schedule, expected 300 MW capacity, capital requirements and equipment deliveries, as well as any exercise of the additional miner-purchase option.
- Monitor cash burn, bitcoin holdings and sales, equity issuance and dilution, and whether the $10 million secured credit facility is drawn.
- Review progress and independent evidence of remediation of the material weakness in internal controls.