CleanSpark(CLSK)2024-12-03 17:19Mining Operations - As of September 30, 2024, CleanSpark operated approximately 188,500 bitcoin mining machines with a hashrate capacity of approximately 27.6 EH/s, and mined 7,092 bitcoins in fiscal year 2024, a 3% increase from 6,903 bitcoins in fiscal year 2023[22] - The company has developed a total of 656 MW of operational capacity across its facilities, supporting a total operational hashrate of 27.6 EH/s, with significant contributions from Georgia (483 MW, 20.6 EH/s) and Tennessee (79 MW, 3.5 EH/s)[31] - CleanSpark plans to develop an additional 211.5 MW of capacity, expected to support approximately 50 EH/s of mining capacity, enhancing its operational efficiency[21] - CleanSpark's mining operations are primarily powered by renewable energy sources, although the energy mix has shifted due to expansion efforts, now including both non-carbon and carbon sources[36] - CleanSpark's mining operations are geographically distributed across Georgia, Tennessee, Mississippi, and Wyoming, with ongoing construction in Wyoming expected to be operational in fiscal year 2025[30] - The company has shifted its focus exclusively to bitcoin mining operations, having deemed its energy operations as discontinued as of June 30, 2022[48] - The company no longer provides traditional data center services, with all capacity now dedicated to bitcoin mining activities as of September 30, 2023[49] - The company has terminated its hosting arrangement with GRIID Infrastructure, Inc. following its acquisition on October 30, 2024, integrating the 54 MW into its owned facilities[176] Financial Performance - The company has sustained cumulative net losses of 145,777 for the fiscal year ended September 30, 2024[60] - The company has historically sold bitcoin to support operations and strategic growth, with management decisions influenced by market conditions and volatility[24] - Bitcoin mining revenue for the year ended September 30, 2024, was 210,847 or 125% compared to 145,777, an increase of 138,148 for the year ended September 30, 2023[212] - Total bitcoin mining revenue from owned facilities reached 127,827,000 in 2023, reflecting a 160.5% increase[1] - The cost of mining one bitcoin increased to 21,362 in 2023, representing an 81.8% increase year-over-year[1] - Average revenue per bitcoin mined rose to 24,601 in 2023, marking a 118.5% increase[1] Operational Challenges - The company is subject to various risks, including potential changes in laws and regulations applicable to bitcoin mining and the possibility of increased compliance costs[56] - The company operates in a highly competitive bitcoin mining market, facing challenges in acquiring new miners and securing low-cost electricity[62] - The reliance on a limited number of suppliers for mining equipment poses risks, as any disruption could delay expansion efforts[64] - The company has faced supply chain disruptions due to inflation and labor shortages, which could impact expansion and acquisition timelines[68] - The company may require additional financing for operations and expansion, which may not be available on favorable terms[71] - The company may experience reduced mining rewards if the mining pool fails to accurately distribute rewards, impacting overall business operations[79] Regulatory and Compliance Issues - The company has a non-renewal agreement with Coinmint for hosting services, set to expire on January 1, 2025, after which all operational capacity will be moved to wholly owned sites[25] - The company has terminated its agreement with a hosting facility in New York and will cease co-location activities in the state after January 1, 2025, due to regulatory concerns[40] - Regulatory changes could require the company to register as a money services business (MSB), incurring significant compliance costs[126] - Future regulatory developments regarding bitcoin could impose additional compliance costs, potentially impacting the company's financial condition[130] - Increased scrutiny regarding ESG practices may lead to additional costs and operational risks for the company[109] Risk Factors - The company may face significant risks from market disruptions, including price volatility and loss of confidence in digital assets, following the bankruptcies of major players like FTX[90] - The company relies on Coinbase for bitcoin custody, and any loss or destruction of bitcoins may not be recoverable, posing a risk to financial stability[93] - Security breaches could lead to loss of bitcoin holdings and damage to the company's reputation, adversely affecting investments[97] - The company does not maintain its own insurance coverage for its bitcoin holdings, which are held in custody by Coinbase, exposing it to potential losses[123] - The treatment of bitcoin held in custody during a custodian's bankruptcy is uncertain, posing risks to asset recovery[112] Staffing and Management - As of September 30, 2024, the company employed 270 staff members, with 256 being full-time[45] - The management team is critical to the company's success, and any loss of key personnel could adversely affect operations and growth prospects[65] - Significant costs are incurred due to compliance with public company laws and regulations, impacting management and accounting resources[153] Strategic Growth and Acquisitions - The company has a strategic focus on expanding its infrastructure through both organic growth and acquisitions, including the recent acquisition of GRIID, which added three Tennessee locations to its portfolio[29] - Recent strategic acquisitions in Georgia, Mississippi, Wyoming, and Tennessee are part of the company's growth strategy, but future acquisitions may dilute stockholder ownership[67] - The company aims to continue increasing its computing power through infrastructure expansion and strategic acquisitions[177] Energy and Cost Management - Energy expenses accounted for 39.7% of bitcoin mining revenues in 2024, down from 51.5% in 2023, indicating improved cost management[1] - Total energy expense for owned facilities was 65,824,000 in 2023, a 100% increase[1] - The average cost per KWH utilized in owned facilities was 0.048 in 2023[1] Cybersecurity and Data Management - The cybersecurity program is aligned with the National Institute of Standards and Technology Cybersecurity Framework 2.0, aimed at managing data confidentiality and integrity[159] - The Board of Directors oversees the management of cybersecurity risk through its audit committee and the IT Steering and Risk Committee[160]