Bitfarms' Q2 2024 results reflect the impact of the Bitcoin halving event, with revenue declining to $41.55M (-16% Q/Q) and a reduced gross mining margin of 51% (-20.31% Q/Q).
However, Bitfarms (NASDAQ: BITF) maintains a relatively strong balance sheet, underpinned by robust liquidity and reduced liabilities. This financial stability, along with the company's strategic focus on expanding its hash rate in the U.S. and South America, positions Bitfarms well for future growth. With the target of reaching 35 EH/s mining capacity by 2025, the company's emphasis on cost control and operational efficiency will be critical in an increasingly lean-margin environment.
The following contains a summary of key metrics from their Q2 financial statement (original report has 40 pages):
Earning Release Summary
- Revenue: $41.55m (-16% Q/Q； +17% Y/Y). The Q/Q decline is mainly due to the Bitcoin halving event in April 2024, which significantly reduced block rewards.
- Net Loss: $26.60m, compared to a net loss of $26.08 million in Q2 2023, showing consistent challenges in profitability despite revenue growth.
- Gross Mining Margin: 51%, a decline from 64% in Q1 2024 but an improvement from 48% in Q2 2023.
Income Statement
- Cost of Revenues: $52.82m, grew by 27.2% Y/Y, up from $41.52 million in Q2 2023. The higher costs likely reflect the increased difficulty in mining post-halving and the operational expenses related to the fleet upgrade.
- Operating Expenses: $12.40m increase (Q2 2023 = $9.16m), driven by general and administrative expenses.
- Operating Loss: $23.5m, a slight improvement from the $25.17 million in Q2 2023. This figure includes $46 million in accelerated depreciation of older miners.
- EBITDA: The adjusted EBITDA was $12 million, representing 28% of revenue, down from 46% in Q1 2024.
Balance Sheet
- Total Assets: $535.93m, up from $378.73 million as of December 31, 2023. This growth is mainly due to expansions in property, plant, and equipment (PPE).
- Total Liabilities: $62.06m, decreased from $83.96 million at the end of 2023, driven by reductions in warrant liabilities and the repayment of long-term debt.
- Shareholders’ Equity: $473.88m, up from $294.76 million, largely due to the issuance of common shares and accumulated digital assets.
Cash Flow Statement
- Operating Cash Flow: Net cash generated from operating activities was $27.9 million, up from $2.5 million in Q2 2023. The increase is primarily due to the sale of digital assets and better working capital management.
- Investing Activities: The company invested $123.12 million in property, plant, and equipment, reflecting its aggressive expansion strategy, which is a substantial increase compared to $19.03 million in the same period last year.
- Financing Activities: The company raised $173.56 million through the issuance of common shares in the first half of 2024, (compared to $37.59 million in 2023), supporting its expansion and liquidity.
Management Discussion and Analysis (MD&A)
- Strategic Expansion: Bitfarms continues to focus on expanding its capacity in the U.S. and South America, with significant investments in new sites in Paraguay and Pennsylvania.
- Efficiency Improvements: Bitfarms reported a significant improvement in its mining efficiency, with a current efficiency of 25 watts per terahash (w/TH), a 26% improvement from Q1 2024.
- Future Guidance: Bitfarms is on track to achieve its target of 21 EH/s and 21 w/TH by the end of 2024, and it projects over 35 EH/s in 2025, indicating strong growth potential.
Key Metrics and Ratios
- Gross Mining Margin: The gross mining margin was 51%, down from 64% in Q1 2024, indicating a decline in profitability due to increased operational costs post-halving.
- Liquidity: As of June 30, 2024, the company had $195 million ( including $139 million in cash and 905 BTC) in liquidity, up from $129.98 million at the end of 2023, providing a strong financial cushion for short-term obligations and future investments.
Industry and Economic Context
- Bitcoin Halving Impact: The report notes that the recent Bitcoin halving event in April 2024 led to a reduction in mining rewards, which affected the company's revenue and production costs. The company’s strategic focus on improving efficiency and expanding capacity is crucial in mitigating these impacts.
- Market Positioning: Bitfarms continues to strengthen its position in the Bitcoin mining industry by expanding its hash rate in South America and the U.S. and improving operational efficiency.
Non-GAAP Measures
- Adjusted EBITDA: The company reported an adjusted EBITDA (excluding non-cash items like depreciation and one-time expenses) of $12 million, representing 28% of revenue, down from $23 million or 46% of revenue in Q1 2024. This decline reflects the increased costs and reduced mining rewards post-halving.
Guidance and Analyst Expectations
- Forward Guidance: Bitfarms is on track to achieve its guidance of 21 EH/s and 21 w/TH by the end of 2024, and reach over 35 EH/s by 2025. which is an ambitious target and critical for maintaining investor confidence. This guidance aligns with the company’s growth strategy and ongoing investments in capacity and efficiency.
Notes to Financial Statements
- Depreciation and Impairments: The company recorded significant accelerated depreciation of $46.2 million in Q2 2024, reflecting the company's strategy to upgrade its fleet and improve (reflecting the planned replacement of older mining equipment with newer, more efficient models)
- BTC Holdings: The company held 905 BTC as of June 30, 2024, valued at $56.75 million, with an average production cost per BTC of $30,600.
