10-Q: Riot Platforms Reports Q3 2024 Results, Expands Mining Capacity

Riot Platforms reports a net loss for Q3 2024, but highlights significant growth in hash rate and strategic acquisitions.

Summary

• Riot Platforms reported a net loss of $154.4 million for the third quarter of 2024, compared to a net loss of $80.0 million in the same period of 2023.
• The company's Bitcoin mining revenue increased to $67.5 million in Q3 2024 from $31.2 million in Q3 2023, driven by higher Bitcoin prices.
• Riot's total deployed hash rate capacity reached 28.2 EH/s as of September 30, 2024, a 158.7% increase from the same period last year.
• The company mined 3,312 Bitcoin in the first nine months of 2024, a decrease from 4,996 Bitcoin in the same period of 2023, due to increased network difficulty and the halving event.
• Riot acquired Block Mining in July 2024 for approximately $113.6 million, adding 60 MW of operational capacity with potential for expansion.
• The company is developing the Corsicana Facility, which is expected to have 1.0 GW of capacity for Bitcoin mining upon completion.
• Riot's all-in power cost for its Rockdale facility was 2.8 cents per kilowatt-hour in Q3 2024, compared to a negative 1.6 cents in Q3 2023 due to power curtailment credits.
• The company has made deposits and advance payments of $448.5 million to MicroBT for the purchase of miners, with a remaining commitment of $112.5 million due through December 2024.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While there is significant growth in hash rate and strategic acquisitions, the company also reports a substantial net loss and decreased Bitcoin production. The increased expenses and reliance on future capital raises temper the positive aspects.

Positives

• Bitcoin mining revenue increased significantly due to higher Bitcoin prices.
• The company's hash rate capacity has increased substantially, indicating growth in mining operations.
• The acquisition of Block Mining expands Riot's geographical footprint and access to additional energy markets.
• The development of the Corsicana Facility will significantly increase Riot's mining capacity.
• Riot has a strong cash position with $355.7 million in cash and cash equivalents and $190.1 million in marketable securities.

Negatives

• The company reported a net loss of $154.4 million for Q3 2024.
• Bitcoin production decreased due to increased network difficulty and the halving event.
• Selling, general, and administrative expenses increased significantly due to stock compensation and legal fees.
• Engineering revenue decreased due to supply chain constraints.
• The company's all-in power cost increased at the Rockdale facility due to lower power curtailment credits.

Risks

• The price of Bitcoin is volatile and can significantly impact revenue and profitability.
• The Bitcoin network difficulty is increasing, which can reduce mining rewards.
• The company is subject to risks related to its mining pool, including potential downtime or loss of access.
• Riot relies on third-party intellectual property and is subject to potential infringement claims.
• The company is subject to counterparty risks, including risks related to its custodians.
• Riot's access to power is dependent on its electrical distribution provider, grid operator and regulator.
• Global supply chain issues may cause delays in equipment delivery and infrastructure development.

Future Outlook

Riot anticipates achieving a total self-mining hash rate capacity of approximately 34.9 EH/s by the end of 2024 and expects the Bitcoin mining industry to see increased competition and consolidation in 2024.

Management Comments

• Management believes a focus on vertical integration will positively affect each of our business segments.
• Management believes we are well positioned to benefit from consolidation in the Bitcoin mining industry.
• Management believes our private keys relating to our Bitcoin are better safeguarded by the secure environment provided by custodians.

Industry Context

The Bitcoin mining industry has seen record growth due to increasing Bitcoin prices, leading to significant investments in infrastructure and expansion of mining operations. The industry is also experiencing increased competition and a shift towards vertically-integrated business models.

Comparison to Industry Standards

• Riot's hash rate growth of 158.7% year-over-year is significant, outpacing many competitors in the Bitcoin mining space.
• The company's focus on vertical integration, including owning and operating its own facilities, aligns with a growing trend in the industry, similar to companies like Marathon Digital and Core Scientific.
• Riot's all-in power cost of 2.8 cents per kilowatt-hour at the Rockdale facility is competitive, but the negative cost in the previous year highlights the impact of power curtailment credits, which are a key differentiator for Riot.
• The acquisition of Block Mining is a strategic move to diversify energy sources and expand geographically, similar to strategies employed by other large miners.
• Riot's investment in immersion cooling technology at the Corsicana Facility is a forward-looking approach to improve mining efficiency and extend the lifespan of miners, which is a key area of focus for leading miners.

Legal Proceedings

• Green Revolution Cooling, Inc. (GRC) filed a complaint against the Company for patent infringement.
• Northern Data AG filed a complaint against the Company challenging the independent accountants written final determination.
• Whinstone US, Inc. filed a petition against Rhodium 30MW, LLC for breach of contract.
• SBI Crypto Co., Ltd. filed a complaint against Whinstone alleging breach of contract, fraud, and negligent bailment claims.
• GMO Gamecenter USA, Inc. and its parent, GMO Internet Group, Inc. filed a complaint against Whinstone alleging breach of a colocation services agreement.

Stakeholder Impact

• Shareholders may be concerned about the net loss and decreased Bitcoin production, but encouraged by the growth in hash rate and strategic acquisitions.
• Employees may see increased job security due to the company's expansion, but also face increased workloads.
• Customers of the Engineering segment may experience delays due to supply chain constraints.
• Suppliers may benefit from increased orders due to the company's expansion.
• Creditors may be concerned about the company's net loss, but reassured by its strong cash position.

Next Steps

• Riot intends to expand Block Mining's two sites, targeting 110 MW for self-mining operations by the end of 2024.
• The company expects to complete the development of Building B2 at the Corsicana Facility during the fourth quarter of 2024.
• Riot anticipates achieving a total self-mining hash rate capacity of approximately 34.9 EH/s by the end of 2024.

Key Dates

Keywords

Bitcoin mining, hash rate, cryptocurrency, mining facility, power curtailment, digital assets, Block Mining, Corsicana Facility, immersion cooling, MicroBT