CleanSpark, Inc. — FY2022 Form 10-K Summary
Period clarification: The supplied filing is the annual report for the fiscal year ended September 30, 2022, with comparison to FY2021; it is not a report for 2021 Q4. Filed December 14, 2022.
Business context
CleanSpark shifted its focus to bitcoin mining and classified its energy business as discontinued operations as of June 30, 2022, while pursuing divestitures. Bitcoin mining is now its principal revenue-generating business. The company operates owned Georgia facilities and hosts miners at Coinmint in New York. It reported approximately 42,000 miners in operation at September 30, 2022, producing about 4.1 EH/s; by the filing date, it reported 5.75 EH/s.
Financial and operating metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total continuing-operations revenue | $131.5 million | $39.3 million |
| Bitcoin mining revenue | $131.0 million | $38.8 million |
| Loss from continuing operations | $40.1 million | $8.2 million |
| Net loss, including discontinued operations | $57.3 million | $21.8 million |
| Operating cash flow from continuing operations | $77.8 million provided | $12.2 million used |
| Cash and cash equivalents, including restricted cash | $20.5 million | $18.0 million |
| Working capital | $16.7 million | $47.7 million |
| Total loans payable | $21.2 million | No loans payable reported |
- Mining revenue rose 237%, primarily as miners in operation and bitcoin mined increased. The company mined 3,752 bitcoin versus 899; average bitcoin price on mining dates was $34,916 versus $43,232.
- Cost of revenue, excluding depreciation and amortization, increased to $41.2 million from $5.3 million, including $13.6 million of energy costs and $22.7 million of hosting fees. Depreciation and amortization rose to $49.0 million from $9.0 million.
- FY2022 included $12.2 million of bitcoin impairment, $12.0 million of goodwill impairment, and $31.5 million of stock-based compensation. Adjusted EBITDA was reported at $65.7 million versus $11.2 million; this non-GAAP measure excludes substantial expenses and should not be read as GAAP profitability.
- At year-end, the company held 595 bitcoin with a carrying value of $11.1 million and stated fair market value of $11.5 million. It recognized $12.2 million of bitcoin impairment during the year.
- Energy discontinued operations generated $9.7 million of revenue and a $17.2 million net loss, compared with $10.2 million of revenue and a $13.6 million loss in FY2021.
Material changes, outlook, and risks
- The company invested heavily in expansion: investing cash outflow was $211.0 million, mainly for miners, equipment, and facilities. Financing cash inflow was $142.0 million, including $125.0 million net proceeds from equity offerings and $19.6 million from equipment-backed borrowing.
- Common shares outstanding increased from 37.4 million at September 30, 2021 to 55.7 million at September 30, 2022. Subsequent to year-end, the company issued 14.5 million additional ATM shares for approximately $41.3 million net proceeds; 71.7 million shares were outstanding on December 14, 2022.
- Management said it expected cash, bitcoin, and operating cash generation to meet anticipated requirements until profitability, while noting that further capital may be needed. The filing provides no specific profitability guidance.
- The company exceeded its August 2022 target of 5.0 EH/s by December 31, 2022, reporting 5.75 EH/s as of the filing date, and expected further growth in 2023 and beyond. It had prepaid for additional miners and expected further deliveries.
- The Lancium hosting arrangement for 200 MW had no miners deployed as of the filing date. Lancium delays pushed expected facility readiness to late calendar 2023 or potentially later; CleanSpark said it had paid no deposits or consideration.
- Major risks include bitcoin-price and mining-difficulty volatility, power costs, financing and dilution, equipment supply and construction delays, evolving regulation, cybersecurity and custody exposure, and reliance on mining pools. One pool operator accounted for 99.98% of FY2022 mining revenue; equipment suppliers were also concentrated.
- Post-year-end events included the October 2022 Mawson acquisition in Georgia, funded with cash, shares, and seller financing, and the November 2022 sale of certain energy assets for approximately $2.75 million.
- Material legal matters include a securities class action and related derivative litigation, both contested by the company, plus a battery-contract suit seeking $5.4 million and an energy-business dispute seeking more than $500,000. Management stated it did not anticipate a loss in the battery case; outcomes remain uncertain.
Most important facts for investors to verify
- Whether reported hashrate, miner deliveries, facility expansion, and the delayed Lancium capacity translate into sustained production and cash generation.
- How much reported operating cash flow depended on bitcoin sales, working-capital movements, and other nonrecurring or noncash adjustments.
- Bitcoin holdings, impairment accounting, realized sale prices, and the company’s exposure to bitcoin-price declines; the company does not hedge its bitcoin holdings.
- Current debt balances, repayment terms, collateral and covenants, as well as the funding and dilution effects of subsequent ATM share issuance and the Mawson transaction.
- Progress and proceeds from energy-asset divestitures, and the status, potential exposure, and insurance coverage of pending litigation.