IREN Ltd. (Iris Energy Limited) — FY2023 Form 20-F
Period note: This is an annual report for the fiscal year ended June 30, 2023, not a quarterly filing for calendar Q4 2022. Financial statements are prepared under IFRS and presented in U.S. dollars.
Business context and reporting period
Iris Energy operates renewable-powered data centers and mines Bitcoin, generally selling mined Bitcoin daily. At June 30, 2023, it reported no Bitcoin holdings. The company was also exploring diversification into high-performance computing (HPC), including AI-related services.
Financial and operating metrics
| Metric | FY2023 | FY2022 |
|---|---|---|
| Bitcoin mining revenue | $75.5 million | $59.0 million |
| Loss after income tax | $171.9 million | $419.8 million |
| Operating cash flow | $6.0 million inflow | $21.6 million inflow |
| Investing cash flow | $71.5 million outflow | $318.1 million outflow |
| Financing cash flow | $28.2 million inflow | $372.0 million inflow |
| Cash and cash equivalents at year-end | $68.9 million | $110.0 million |
| Net current assets | $65.2 million | $75.1 million |
| Total assets / total liabilities | $332.1 million / $26.7 million | $570.5 million / $133.1 million |
| Net assets | $305.4 million | $437.4 million |
- Bitcoin mining revenue increased 28% year over year. The company mined and sold 3,259 Bitcoin, versus 1,399; the increase in mined Bitcoin was partly offset by a lower average realized price, approximately $23,200 versus $42,200.
- Reported loss narrowed substantially, chiefly because FY2022 included $390.7 million of losses on embedded derivatives and $26.7 million of interest expense on hybrid instruments. FY2023 included a $105.2 million asset impairment and a $6.6 million loss on disposal of property, plant and equipment.
- EBITDA was negative $123.2 million versus positive $16.1 million; Adjusted EBITDA was positive $1.4 million versus $26.2 million. The filing reports FY2023 EBITDA and Adjusted EBITDA margins of negative 163% and 2%, respectively. These are non-IFRS measures and should be read alongside IFRS results.
- Electricity charges were $35.8 million, about 47% of mining revenue. Depreciation and amortization rose to $30.9 million from $7.7 million as operating assets expanded.
- Cash declined by $41.1 million over the year. Capital expenditures, including mining-hardware prepayments, were $119.5 million versus $332.2 million. FY2023 financing inflows primarily included proceeds from the committed equity facility.
- Year-end borrowings and lease liabilities totaled $1.4 million, almost entirely lease liabilities, compared with $108.3 million a year earlier. This reduction reflects deconsolidation of two defaulting financing subsidiaries; it should not be interpreted as the underlying debt being repaid by the parent.
Material changes versus the prior comparable period
- Operating scale grew: average operating hashrate was 2.7 EH/s versus 0.7 EH/s, and data-center capacity was 180 MW at June 30, 2023 versus 39 MW a year earlier. The report separately gives 5.6 EH/s as capacity across sites as of August 31, 2023.
- Two special-purpose subsidiaries defaulted on equipment financing. Approximately 3.6 EH/s of their miners stopped operating after hosting arrangements ended, reducing hashrate during the year. The company gradually reused available capacity and purchased additional miners.
- FY2023 assets and equity fell materially, including the $105.2 million impairment and deconsolidation of the defaulting subsidiaries. The company recorded a $3.3 million gain on disposal of subsidiaries.
- Funding commitments due within a year fell to $7.5 million from $346.6 million, largely because prior miner purchase commitments were reduced or fulfilled.
- The company raised equity through its B. Riley committed equity facility: it reported approximately $43.4 million gross proceeds through June 30, 2023, with up to approximately $56.6 million remaining under the $100 million facility at that date.
Outlook, risks, contingencies, and unusual items
- Going concern: Management and the auditor disclosed material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern. Management nevertheless prepared the statements on a going-concern basis and said it expects to meet obligations for at least one year from approval, relying on operating plans, expenditure flexibility, and potential additional financing. The forecast is sensitive to Bitcoin prices, network hashrate, the 2024 reward halving, regulation, and execution.
- Financing defaults and litigation: The two subsidiaries’ facilities had about $103.4 million aggregate principal outstanding at December 31, 2022. A receiver was appointed in February 2023 and the subsidiaries entered bankruptcy proceedings in June. In an August 2023 ruling, the court found, among other things, no parent guarantee and that company-mined Bitcoin was not collateral, but declared certain hashpower-service transactions void; it cited a value discrepancy of $3.0 million to $11.9 million. The company appealed. Final exposure and any further claims remain uncertain.
- Expansion and HPC: Construction of another 80 MW at Childress was underway, with potential aggregate capacity of about 9.1 EH/s assuming miner purchases and full utilization. Those miners had not yet been purchased, and expansion remained subject to funding and market conditions. After year-end, the company agreed to buy 248 NVIDIA H100 GPUs for approximately $10 million; delivery was expected in coming months. HPC revenue and customer demand were not established in this filing.
- Bitcoin and energy exposure: Bitcoin price, global hashrate and electricity costs directly affect revenue and mining economics. A 10% Bitcoin price change would have changed FY2023 revenue by approximately $7.6 million; a 10% power-cost change would have changed loss before tax by approximately $3.6 million. The company also described power-market volatility, grid constraints, and regulatory limits on mining or electricity access.
- Other contingencies: A putative U.S. securities class action alleges misleading statements and seeks unspecified damages; the company said it would defend the claims and filed a motion to dismiss. Canadian sales-tax audits and an appeal are ongoing; the company recorded a $6.2 million provision for non-refundable sales tax.
- Shareholder considerations: No dividends were declared or paid, and the company said it does not anticipate cash dividends in the foreseeable future. The founders’ dual-class shares give them substantial voting control; the filing reports 73.7% of voting power for the founders and affiliates as of August 31, 2023.
Important facts for investors to verify
- Review the going-concern disclosures and monitor cash burn, financing access, and the company’s ability to fund operations and planned construction.
- Track the appeal, bankruptcy process, and any claims or liabilities arising from the NYDIG equipment-financing dispute, including the cited $3.0–$11.9 million discrepancy.
- Reconcile the reported year-end debt reduction with the deconsolidation of defaulting subsidiaries and identify any potential parent or other subsidiary exposure.
- Confirm actual Childress construction progress, miner purchases, funding, operating capacity, and any realized HPC customers or revenue.
- Assess whether Bitcoin price, network difficulty, reward-halving effects, and power costs support positive operating cash flow; distinguish reported IFRS losses from non-IFRS EBITDA measures.
- Monitor dilution from the committed equity facility and other share-based awards, as well as the effects of founder voting control.