Riot Platforms, Inc. — Q1 2024 Form 10-Q Summary
Business Context and Reporting Period
Riot Platforms is a vertically integrated Bitcoin mining company with operations at its Rockdale, Texas facility and a developing Corsicana, Texas facility. The filing covers the three months ended March 31, 2024, compared with the three months ended March 31, 2023. The company now reports two segments: Bitcoin Mining and Engineering. Legacy Data Center Hosting contracts were terminated and the business is no longer separately reported.
Key Financial Metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $79.3 million | $73.2 million | Up 8.3% |
| Bitcoin Mining revenue | $74.6 million | $48.0 million | Up $26.6 million |
| Engineering revenue | $4.7 million | $16.1 million | Down $11.4 million |
| Operating income | $203.9 million | $17.4 million | Improved materially |
| Net income | $211.8 million | $18.5 million | Improved materially |
| Diluted EPS | $0.81 | $0.11 | Up $0.70 |
| Adjusted EBITDA | $245.7 million | $81.7 million | Up $164.0 million |
| Net cash from operating activities | $(57.9) million | $32.4 million | Declined |
| Capital expenditures and equipment deposits | $196.6 million | $51.0 million | Increased substantially |
Bitcoin Mining cost of revenue was $41.1 million, or 55.1% of Bitcoin Mining revenue, compared with 45.6% in the prior period. The resulting Bitcoin Mining revenue less reported cost of revenue was approximately $33.5 million, or 44.9% of Bitcoin Mining revenue, before depreciation, corporate expenses, power credits and other items.
Reported net income and operating income were heavily affected by non-cash fair-value gains, including a $234.1 million Bitcoin fair-value gain and a $20.2 million derivative-asset gain. Net income also benefited from a $27.1 million reduction in depreciation expense associated with extending the estimated useful life of miners from two years to three years.
Cash and cash equivalents were $688.5 million at March 31, 2024, compared with $597.2 million at December 31, 2023. Net working capital was approximately $692.5 million. Total liabilities were $135.8 million and stockholders’ equity was $2.475 billion. Reported debt was approximately $0.8 million, consisting of equipment-related borrowings; the company had no outstanding balance on its revolving credit line. ESS Metron was not in compliance with an EBITDA covenant, but the lender granted a waiver.
Material Changes Versus the Prior Comparable Period
- Bitcoin Mining revenue increased because the average Bitcoin price was approximately $52,343 versus $22,704, partially offset by lower production.
- Bitcoin production declined to 1,364 coins from 2,115 coins, a decrease of approximately 35.5%, primarily because of higher network difficulty despite an approximately 18% increase in Riot’s hash rate.
- Engineering revenue declined because supply-chain constraints delayed receipt of materials and completion of customer products.
- Data Center Hosting revenue fell to zero as legacy customer agreements were terminated.
- SG&A increased to $57.7 million from $12.7 million, primarily due to $32.0 million of stock-based compensation, higher hiring costs, legal and professional fees, and other growth-related costs.
- Net cash from operations turned negative, while financing cash flow increased to $343.7 million, primarily from ATM equity offerings.
- Riot issued approximately 26.2 million shares through ATM offerings during the quarter and received approximately $345.7 million of net proceeds. Shares outstanding increased to approximately 268.0 million at March 31, 2024, from 230.8 million at December 31, 2023.
- Bitcoin holdings increased to 8,490 coins valued at $605.6 million, compared with 7,362 coins valued at $311.2 million at December 31, 2023. Riot stated that it temporarily ceased selling its Bitcoin production and intended to increase its Bitcoin holdings.
Guidance, Outlook, Risks and Unusual Items
- Management expected total self-mining hash-rate capacity of approximately 31 EH/s by the end of 2024, compared with 12.4 EH/s deployed at March 31, 2024.
- The Corsicana facility’s initial 400 MW phase commenced operations in April 2024. The full facility is expected to provide approximately 1.0 GW of Bitcoin mining capacity, with an additional 200 MW available for development at Riot’s discretion.
- Riot estimated the first 400 MW Corsicana phase would cost approximately $362.0 million. Approximately $270.8 million had been incurred through March 31, 2024, with approximately $91.2 million expected to be incurred through 2024.
- Remaining commitments included approximately $252.8 million for MicroBT miners, approximately $6.7 million for previously ordered immersion-cooling systems, and approximately $16.2 million for additional immersion-cooling systems.
- The April 2024 Bitcoin network halving reduced the block subsidy from 6.25 to 3.125 Bitcoin, increasing pressure on mining economics. Network competition and difficulty also remain significant risks.
- Bitcoin price and power price volatility are material. Management estimated that a 10% change in Bitcoin prices would affect net income by approximately $61.5 million, while a 10% change in future power prices would affect the derivative asset and net income by approximately $44.5 million.
- Riot faces pending litigation involving Green Revolution Cooling, Northern Data, former hosting customers Rhodium, SBI Crypto and GMO. The filing states that outcomes and potential losses cannot currently be estimated for these matters.
- Cash generation was negative despite reported profitability because earnings included substantial non-cash Bitcoin and derivative fair-value gains and Bitcoin mined revenue. Continued expansion may require additional equity, debt financing or Bitcoin sales.
- Subsequent to quarter-end through April 30, 2024, Riot received approximately $154.1 million of additional net proceeds from its 2024 ATM offering through the issuance of approximately 14.8 million shares.
Important Facts for Investors to Verify
- Whether the Corsicana facility reaches planned capacity and deployment milestones, including the stated 31 EH/s year-end 2024 target.
- The effect of the April 2024 halving, rising network difficulty, Bitcoin prices and power prices on production costs, cash flow and profitability.
- The sustainability of reported earnings after excluding Bitcoin and derivative fair-value gains, miner-life accounting benefits and other unusual items.
- Future dilution from the remaining ATM capacity, equity compensation and other potential share issuances.
- Cash requirements for miner purchases, Corsicana construction and immersion-cooling commitments relative to operating cash flow.
- The status and potential financial exposure of the GRC patent dispute and legacy hosting-related litigation.
- Compliance with debt covenants and the continued availability of lender waivers.