Personally, I can’t wait to dive deeper into CleanSpark’s latest quarterly report. Undoubtedly, CleanSpark has been a rising star among Bitcoin mining peers, attracting investment interest from both institutional and retail investors. The evidence for this includes increased Wall Street analyst coverage, rating upgrades, and overall share performance. Additionally, CleanSpark’s 204.48% YoY growth in hash rate (as of June 2024) is the largest growth we’ve seen from publicly traded Bitcoin miners.
Based on my interpretation, here is the major takeaway from their latest financial statement (the original report has 130 pages) :
- CleanSpark is aggressively expanding its Bitcoin mining operations (204.48% YoY hash rate growth), as evidenced by the substantial growth in Bitcoin mining revenue (+129% YoY) and the large-scale investments ($284.5m deposits) in new mining equipment, which indicates a forward-looking approach, aiming to solidify its position in the market.
- Despite revenue growth, significant impairments (accounting for 53.57% of total costs and expenses for the quarter) and operational expenses (+92% YoY increase) have resulted in substantial losses ($236.242m net loss), indicating potential risks in its aggressive expansion strategy. If Bitcoin prices were to fall significantly or operational costs were to rise, CleanSpark could face financial strain, especially given its high cash burn rate.
- The company's strategy to accumulate Bitcoin and raise capital through equity offerings has strengthened its balance sheet, positioning it for future growth in the volatile Bitcoin market.
The following is breakdown for CleanSpark's Q3 2024 financial performance.
Income Statement Highlights:
- Bitcoin Mining Revenue: $104.1m (+129% YoY growth), highlighting the company's expanding mining capacity.
- Impairment Expense: $189.2m related to its fixed assets during the 9 months ended June 30, 2024.
- Operating Loss: $249m for Q3 2024, up from a $15.6 million loss in Q3 2023. This dramatic increase is largely driven by the impairment charge.
Note: the company’s operational loss would be substantially lower without these non-cash expenses.
- Cost of Revenues: $45.18m (+118% YoY increase), while slightly lower than the revenue growth rate, suggests that CleanSpark's operations are scaling but also incurring higher operational costs, potentially due to halving impacts, energy costs, maintenance, or expansion-related expenses.
- General and Administrative Expenses: $8.23m (+60% YoY increase). This increase might indicate higher administrative burdens associated with the company's rapid expansion.
Balance Sheet Highlights:
- Bitcoin Holdings: valued $413m as of June 30, 2024, up from $56.2m on September 30, 2023. This significant increase underscores the company's strategy to accumulate Bitcoin, potentially taking advantage of rising Bitcoin prices.
- Cash Position: $126.1m (cash and cash equivalents) as of June 30, 2024, compared to $29.2 million in September 2023. However, restricted cash ($3.02m) and equity offerings receivable ($31.15 million), indicates a reliance on equity markets for liquidity.
- Total Assets: $1.475b by June 2024, which is more than doubled from $761.6m in September 2023. This growth is primarily due to increased Bitcoin holdings and investments in property and equipment, indicating a significant ramp-up in operational capacity and strategic positioning for future mining growth.
- Leverage and Debt: total liabilities is $73.4m, decreasing slightly from $84.3m as of Sep 30, 2023. This decrease in liabilities, alongside increased equity, suggests CleanSpark is managing its debt conservatively, relying more on equity financing to fund its growth.
- Equity and Share Dilution: The company’s common stock outstanding increased from 160.2 million shares in September 2023 to 235.5 million shares in June 2024. This significant dilution reflects the company’s aggressive use of equity financing to raise capital.
Cash Flow Statement Highlights:
- Capital Expenditure Focus: outflow of $503.7m used in investing activities ($428.7m on miners and mining equipment) for the 9 months ended June 30, 2024, primarily for the purchase of miners and mining equipment. This shows CleanSpark's continued investment in expanding its Bitcoin mining infrastructure, which will enhance their competitive position in the Bitcoin mining industry.
- Cash Flow from Financing Activities: raised $780m net from equity offerings. This heavy reliance on equity financing rather than debt suggests the company prefers not to increase its leverage in a volatile market.
- Cash Burn Rate: The net cash used in operating activities was $150.5m for the 9 months ended June 30, 2024, compared to $16.6m provided by operating activities in the same period in 2023.
- Bitcoin Sales Strategy: Bitcoin sales ($42.8m) from the company were classified as cash flows from investing activities. This classification suggests that CleanSpark holds onto its Bitcoin for longer periods before selling, treating Bitcoin not just as operational revenue but also as an investment asset.
CleanSpark’s strategic use of resources, cash position, Bitcoin accumulation, and capital raising through equity offerings have strengthened its balance sheet, positioning the company for further aggressive expansion. However, managing the balance between growth and financial sustainability will be critical as they navigate the volatile Bitcoin market.
Other Useful Links:
Disclaimer:
The views expressed in this article are my own and are based on publicly available information. This content is intended for informational purposes only and should not be construed as investment advice. Readers are encouraged to conduct their own research before making any investment decisions. Past performance is not indicative of future results. No recommendation or advice is being provided as to the suitability of any investment for any particular investor.
