CleanSpark, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended September 30, 2023, compared with fiscal 2022. Although the request metadata says “2022 Q4,” this filing is an annual report for fiscal 2023, not a standalone quarter.
Business context
CleanSpark is a bitcoin miner; it discontinued its energy business in June 2022 and reported bitcoin mining as its sole operating segment. At fiscal year-end, it operated five owned Georgia data centers with 230 MW of developed capacity and hosted miners at a partner facility in New York. Its operating fleet was approximately 88,954 machines, with about 9.6 EH/s of hashrate and 28.4 J/TH efficiency. It mined 6,903 bitcoin during the year.
Financial and operating performance
Amounts below are in U.S. dollars; financial statement amounts are rounded to millions.
| Metric | FY2023 | FY2022 |
|---|---|---|
| Total revenue | $168.4 million | $131.5 million |
| Bitcoin mining revenue | $168.1 million | $131.0 million |
| Operating loss | $131.0 million | $37.9 million |
| Net loss | $136.6 million | $57.3 million |
| Adjusted EBITDA (non-GAAP) | $25.0 million | $56.1 million |
| Net cash from (used in) continuing operating activities | $(31.7) million | $77.8 million |
| Net cash used in investing activities | $(334.2) million | $(211.0) million |
| Net cash from financing activities | $371.1 million | $142.0 million |
- Revenue increased 28%, while bitcoin mined rose 84% to 6,903. Management attributed the production increase mainly to a near doubling of miners in operation.
- Average revenue per bitcoin mined fell to $24,355 from $34,916. Weighted-average direct cost to mine one bitcoin rose to $13,498 from $10,825; this was 55.4% of average mining revenue, versus 31.0% in FY2022. Owned-facility energy costs were $65.8 million, or 51.5% of owned-facility mining revenue.
- Gross profit before depreciation and amortization was approximately $74.8 million, a 44.4% margin. Depreciation and amortization increased to $120.7 million, including $32.7 million of accelerated depreciation on replaced miners, contributing to the larger operating loss.
- Cash and cash equivalents were $29.2 million; bitcoin carrying value was $56.2 million for 2,243 bitcoin. Current assets were $102.2 million, current liabilities $74.1 million, and working capital $28.1 million.
- Total liabilities were $84.4 million. Loans had a $16.1 million principal balance ($15.9 million net carrying value), including $11.7 million principal under the equipment financing agreement. Total assets were $761.6 million.
Material changes versus FY2022
- Hashrate increased to 9.6 EH/s from 4.2 EH/s; fleet efficiency improved to 28.4 from 30.1 J/TH. The share of global hashrate rose to 2.45% from 1.70%.
- Despite higher production, lower average bitcoin prices and substantially higher energy costs weighed on results. Owned-facility cost per kWh increased to $0.048 from $0.041.
- Cash used in continuing operations swung from $77.8 million provided to $31.7 million used. The company said it sold fewer bitcoin than it mined, increasing its year-end bitcoin holdings.
- Investing outflows rose with miner purchases, facility expansion and acquisitions. The company raised $383.8 million net through its ATM equity program, issuing 98.8 million shares; common shares outstanding increased to 160.2 million from 55.7 million at year-end FY2022.
- Discontinued energy operations generated a $4.4 million loss, down from $17.2 million. The company said it did not expect substantial future activity in discontinued operations.
Outlook, risks and unusual items
- Management stated that cash, bitcoin and expected operating cash generation should support anticipated requirements for the next 12 months, while noting possible future needs for additional capital. It provided no specific earnings or revenue guidance.
- The company was developing an additional 150 MW at Sandersville, expected to energize in early 2024 and add over 6 EH/s. It reported approximately 45,000 machines received or expected for installation there. An October 2023 agreement provided for 4.4 EH/s of S21 miners, with deliveries scheduled to begin in January 2024.
- Management identified the April 2024 bitcoin reward halving, bitcoin-price volatility, rising network difficulty, variable power prices, expansion execution, equipment supply, financing access, regulation, and digital-asset custody and cybersecurity as material risks. The company does not hedge bitcoin holdings and relies on one mining-pool operator, Foundry Digital, for mining payouts.
- Energy-price spikes led the company to curtail 15% of its fleet during December 2022; management said curtailment was not significant during the remainder of FY2023. Its Lancium hosting agreement for up to 200 MW had not been deployed, and Lancium reported significant delays with no foreseeable readiness timeline.
- The company settled Darfon America Corp. litigation for $3.8 million; the case was dismissed with prejudice in July 2023. Securities class and shareholder derivative actions remained pending, with derivative cases stayed while a special litigation committee investigated.
- Management reported a material weakness in IT general controls over third-party systems and financial-reporting data, including spreadsheets. The auditor issued an adverse opinion on internal control effectiveness, but an unqualified opinion on the financial statements. Management expected remediation before FY2024 year-end; remediation was not yet established as complete.
- After year-end through December 1, 2023, the company issued 24.5 million additional ATM shares for $99.3 million net proceeds. This is a material subsequent financing and dilution item, not part of FY2023 year-end balances.
Key facts investors should verify
- Whether production growth, cost per bitcoin, power pricing and fleet curtailment support profitability after the scheduled bitcoin halving.
- Progress, cost and energization timing for the Sandersville expansion and delivery and deployment of the S21 miners.
- Cash needs and the extent of future ATM or debt financing; review share issuance and dilution after September 30, 2023.
- Current status of the material weakness remediation and any further SEC staff comments on bitcoin revenue, impairment, cash-flow classification and custody disclosures.
- Developments in the shareholder litigation, the Darfon settlement accounting, and the delayed Lancium hosting arrangement.