CleanSpark, Inc. — Form 10-Q Summary
Period clarification: The request metadata says 2022 Q3, but the filing is for the quarter ended June 30, 2023, covering the three and nine months ended June 30, 2023. Unless noted, figures below are in U.S. dollars; financial statement amounts are converted from thousands to millions.
Business context and reporting period
CleanSpark is a bitcoin mining company. At June 30, 2023, it reported 230 MW of developed capacity at its Georgia data centers, was developing another 150 MW in Sandersville, Georgia, and had 50 MW hosted in New York. It reported 6.7 EH/s of operating hashrate at quarter-end and 9.0 EH/s as of August 9, 2023. The former energy business is reported as discontinued operations.
Financial and operating performance
| Metric | Three months ended June 30, 2023 | Nine months ended June 30, 2023 |
|---|---|---|
| Total revenue | $45.5 million | $115.9 million |
| Bitcoin mining revenue | $45.4 million | $115.7 million |
| Operating loss | $15.6 million | $62.0 million |
| Net loss | $14.2 million | $61.7 million |
| Adjusted EBITDA, non-GAAP | $13.3 million | $24.1 million |
Quarterly revenue increased 47% year over year; nine-month revenue increased 10%. Mining volume rose to 1,623 bitcoin for the quarter and 5,025 for the nine months, while average realized bitcoin prices fell to $27,982 and $23,016, respectively. For the quarter, the cost of mining one bitcoin averaged $12,710 versus average mining revenue of $27,982; for the nine months, those figures were $12,501 and $23,016.
Operating costs rose substantially with fleet expansion. Nine-month cost of revenues, excluding depreciation and amortization, was $63.2 million, up 157%; depreciation and amortization was $62.5 million, up 91%. The company reported $1.0 million of bitcoin impairment for the nine months. Adjusted EBITDA is a company-defined non-GAAP measure; the filing notes that it excludes items including stock compensation and certain legal expenses.
Cash flow, balance sheet and funding
- At June 30, 2023, cash and cash equivalents were $21.8 million and bitcoin holdings were $13.9 million (529 bitcoin). Current assets were $52.7 million, current liabilities $37.4 million, and working capital $15.3 million.
- Total assets were $652.8 million and stockholders’ equity was $603.6 million. Total liabilities were $49.2 million. Loans had a net carrying value of $17.8 million, including $7.1 million current; stated loan rates include 10% to 13.8% on major facilities.
- For the nine months, operating cash flow from continuing operations was $12.4 million; investing cash outflow was $241.5 million; and financing cash inflow was $226.8 million. Net cash increased $1.4 million to $21.8 million.
- Investing outflows included $165.5 million for miners and deposits, $42.6 million for fixed assets, and acquisitions. Financing inflows were principally $237.5 million of net equity-offering proceeds; common shares outstanding rose from 55.7 million at September 30, 2022 to 131.8 million at June 30, 2023.
- Management stated that cash, expected operating cash flows, and access to the ATM equity facility should support operations for at least 12 months. It also noted that further capital may be needed for growth or other requirements.
Material changes versus prior comparable periods
- Quarterly mining revenue rose 47%, but cost of revenues excluding depreciation doubled, and operating loss was broadly similar to the prior-year quarter. Net loss improved from $29.3 million to $14.2 million, largely as discontinued-operation losses and bitcoin impairment were lower.
- For the nine-month period, continuing operations shifted from $1.1 million income to a $62.8 million loss. Higher power costs, operating costs, and depreciation associated with expansion contributed; mining revenue increased more slowly than costs.
- Average owned-facility power cost for the nine months increased to $0.048/kWh from $0.036/kWh. Mining cost as a share of average mining revenue rose to 54.3% from 23.1%.
- Common shares issued and outstanding increased materially, primarily from ATM sales. The company issued a further 20.2 million shares under the ATM from July 1 through August 8, 2023, receiving $119.1 million net proceeds.
Outlook, risks, contingencies and unusual items
The company expects to expand hashrate and facilities, but this filing provides no formal financial guidance. Management said the timing of the planned Lancium Texas hosting facilities was uncertain because of provider delays; no miners had been deployed there and no deposits had been paid. The company had $81.3 million of open miner and equipment purchase commitments and $23.6 million of construction-in-progress commitments disclosed in its contractual obligations table.
Key risks include bitcoin-price and mining-difficulty volatility, variable power prices, dependence on a single mining-pool operator (over 99% of revenue), reliance on third-party bitcoin custody, uninsured cash balances, financing needs, and execution and integration risks. Bitcoin held with Coinbase was not insured; the company noted uncertainty about recovery if a custodian entered bankruptcy. Management also described active, real-time curtailment decisions when power costs make mining uneconomic.
Unusual and contingent matters include a $2.0 million gain from reducing the Mawson power-related contingent consideration liability to zero; Mawson disputed the company’s view that the earn-out conditions were unmet. The company settled the Darfon battery-contract litigation for $3.8 million and recorded $2.7 million of additional settlement expense in the March 2023 quarter. Securities class and shareholder derivative actions remained pending; management considered the claims without merit but cautioned that outcomes could adversely affect the company. The filing also reports a $4.6 million sale agreement for remaining energy-segment inventory, with payment tied to the buyer’s use or sale of inventory and no gain or loss yet recognized.
Important facts for investors to verify
- Confirm the reporting-period discrepancy: this is a June 30, 2023 10-Q, not a 2022 Q3 filing.
- Track delivered hashrate, miner deployment, facility expansion, and whether the planned Sandersville capacity and delayed Lancium hosting become operational.
- Assess mining economics against bitcoin prices, network difficulty, realized power costs, curtailment, and hosting fees.
- Monitor continued ATM issuance and share-count dilution, including the post-quarter $119.1 million proceeds and shares issued.
- Review liquidity and cash burn against equipment commitments, debt maturities and rates, and the company’s stated twelve-month liquidity outlook.
- Follow the Mawson earn-out disagreement, pending litigation, and collection and recognition of proceeds from the discontinued-operation inventory sale.