8-K: Riot Platforms Reports Q2 2024 Results: Revenue at $70 Million, Hash Rate Reaches 22 EH/s

Riot Platforms reported $70 million in total revenue and a deployed hash rate of 22 EH/s for the second quarter of 2024, despite the Bitcoin halving event.

Summary

• Riot Platforms reported a total revenue of $70 million for the second quarter of 2024.
• This revenue includes $55.8 million from Bitcoin mining and $9.6 million from engineering.
• The company produced 844 Bitcoin during the quarter, a 52% decrease compared to the same period last year due to the Bitcoin halving event and increased network difficulty.
• The average direct cost to mine one Bitcoin was $25,327, significantly higher than the $5,734 in the same quarter of 2023, primarily due to the halving and increased network hash rate.
• Riot generated $13.9 million in power credits, including $4.4 million from demand response programs.
• The company's deployed hash rate reached 22 EH/s by the end of the quarter, nearly doubling from the previous quarter.
• Riot acquired Block Mining Inc. in July, adding 60 MW of power capacity with potential to expand to over 300 MW by the end of 2025.
• The company has a pipeline to achieve over 2 GW of capacity.
• Riot's working capital stands at $646.5 million, including $481.2 million in cash.
• The company holds 9,334 unencumbered Bitcoin, valued at approximately $585 million as of June 30, 2024.
• The net loss for the quarter was $(84.4) million, or $(0.32) per share, compared to a net loss of $(27.4) million, or $(0.16) per share, for the same period in 2023.
• Non-GAAP Adjusted EBITDA for the quarter was $(75.2) million, compared to $24.3 million for the same period in 2023.
• Riot anticipates achieving a total self-mining hash rate capacity of 36 EH/s by the end of 2024 and 56 EH/s by the end of 2025.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the significant net loss, increased mining costs, and negative Adjusted EBITDA, despite positive developments in hash rate growth and strategic acquisitions. The impact of the halving is a major headwind.

Positives

• Riot's deployed hash rate nearly doubled during the quarter, reaching 22 EH/s.
• The company generated $13.9 million in power credits, demonstrating effective energy management.
• Riot maintained a strong financial position with $646.5 million in working capital and $481.2 million in cash.
• The acquisition of Block Mining Inc. expands Riot's growth pipeline and operational expertise.
• Riot has a clear path to achieving 100 EH/s in self-mining through infrastructure development, miner purchases, and acquisitions.
• The company's fleet efficiency is improving with new miner purchases.

Negatives

• Bitcoin production decreased by 52% compared to the same quarter last year, primarily due to the Bitcoin halving event.
• The average direct cost to mine one Bitcoin increased significantly to $25,327, driven by the halving and increased network difficulty.
• The company reported a net loss of $(84.4) million for the quarter.
• Non-GAAP Adjusted EBITDA was $(75.2) million for the quarter, a significant decrease compared to the same period in 2023.
• Selling, general, and administrative expenses increased significantly due to stock compensation and advisory expenses.

Risks

• The Bitcoin halving event significantly impacted production and increased mining costs.
• Increased global network hash rate has made mining more competitive and costly.
• The company's net loss and negative Adjusted EBITDA raise concerns about profitability.
• The integration of acquired businesses may not be successful or may take longer than anticipated.
• The company's future performance is subject to risks related to Bitcoin production, hash rate growth, and the success of expansion plans.
• The company is exposed to risks related to weather events, miner deployment, and potential negative impacts on mining pool rewards.

Future Outlook

Riot anticipates achieving a total self-mining hash rate capacity of 36 EH/s by the end of 2024 and 56 EH/s by the end of 2025. The company also plans to expand its operations in Kentucky following the acquisition of Block Mining.

Management Comments

• Jason Les, CEO of Riot, stated that the company accomplished significant operational growth and execution of its long-term strategy during the second quarter.
• He also noted that Riot maintained strong gross margins in its core Bitcoin mining business despite the Bitcoin halving event.

Industry Context

The Bitcoin halving event in April 2024 significantly impacted all Bitcoin miners, reducing block subsidies and increasing mining costs. Riot's results reflect these industry-wide challenges, as well as the company's efforts to expand capacity and improve efficiency. The acquisition of Block Mining is a strategic move to diversify operations and access new energy markets.

Comparison to Industry Standards

• Riot's cost to mine a Bitcoin at $25,327 is significantly higher than the previous year, reflecting the impact of the halving and increased network difficulty, which is a common challenge across the industry.
• Companies like Marathon Digital Holdings and CleanSpark have also reported increased costs due to the halving, but Riot's cost per Bitcoin is higher than some of its peers.
• Riot's hash rate growth to 22 EH/s is a positive sign, but it needs to continue to expand to compete with larger players in the industry.
• The acquisition of Block Mining is similar to other miners' strategies of expanding geographically to diversify risk and access new power sources.
• Riot's focus on vertically integrated operations is a common strategy among leading Bitcoin miners, aiming to control costs and improve efficiency.

Stakeholder Impact

• Shareholders are negatively impacted by the net loss and decreased profitability.
• Employees may be impacted by the integration of Block Mining and the expansion of operations.
• Customers of the engineering segment may benefit from the company's increased capacity and improved supply chain.
• Suppliers may see increased demand as Riot expands its operations.
• Creditors may be concerned about the company's increased losses and negative Adjusted EBITDA.

Next Steps

• Riot plans to integrate Block Mining's operations and team.
• The company will focus on near-term expansion opportunities in Kentucky.
• Riot aims to achieve a total self-mining hash rate capacity of 36 EH/s by the end of 2024 and 56 EH/s by the end of 2025.
• The company will continue to develop the Corsicana Facility and expand operations at the Rockdale Facility.

Key Dates

Keywords

Bitcoin mining, hash rate, cryptocurrency, Riot Platforms, financial results, power credits, Block Mining, mining capacity, EBITDA, revenue