Greenidge Generation(GREE) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2022, highlighting significant asset and revenue growth from cryptocurrency mining expansion, despite a net loss Condensed Consolidated Balance Sheets As of March 31, 2022, total assets increased to $431.4 million from $341.3 million, driven by property and equipment, while total liabilities grew to $215.3 million due to increased long-term debt Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $113,726 | $100,602 | | Cash and cash equivalents | $96,453 | $82,599 | | Property and equipment, net | $292,051 | $217,091 | | Total Assets | $431,354 | $341,267 | | Total Current Liabilities | $100,244 | $41,726 | | Long-term debt, current portion | $66,729 | $19,577 | | Total Liabilities | $215,302 | $128,844 | | Total Stockholders' Equity | $216,052 | $212,423 | Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income Total revenue for Q1 2022 surged to $37.7 million from $11.1 million in Q1 2021, driven by cryptocurrency datacenter expansion and the Support.com acquisition, yet resulted in a net loss of $0.4 million due to higher operating costs Q1 2022 vs Q1 2021 Statement of Operations (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total Revenue | $37,655 | $11,063 | | Cryptocurrency datacenter Revenue | $23,232 | $8,997 | | Power and capacity Revenue | $5,923 | $2,066 | | Services and other Revenue | $8,500 | $- | | Income from operations | $2,522 | $1,885 | | Net (Loss) Income | ($429) | $1,279 | | Basic (Loss) Earnings Per Share | ($0.01) | $0.02 | | Diluted (Loss) Earnings Per Share | ($0.01) | $0.02 | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased from $212.4 million to $216.1 million in Q1 2022, primarily due to common stock issuance proceeds and stock-based compensation, partially offset by a net loss - During Q1 2022, the company issued 415,000 shares of common stock, resulting in net proceeds of $3.8 million[14] - The net loss for the quarter was $429,000, which reduced the accumulated deficit[14] Condensed Consolidated Statements of Cash Flows In Q1 2022, net cash from operating activities was $6.3 million, while investing activities used $70.6 million for property and equipment, and financing activities provided $78.2 million, leading to a $13.9 million increase in cash Q1 2022 vs Q1 2021 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,330 | $2,487 | | Net cash used in investing activities | ($70,639) | ($5,667) | | Purchases of property and equipment | ($71,135) | ($5,667) | | Net cash provided by financing activities | $78,163 | $37,294 | | Proceeds from debt, net | $80,371 | $- | | Change in Cash and Cash Equivalents | $13,854 | $34,114 | | Cash and Cash Equivalents - End of Period | $96,453 | $39,166 | Notes to Condensed Consolidated Financial Statements These notes detail the company's business structure, accounting policies, and financial activities, highlighting the Support.com merger, increased debt for miner purchases, and significant future commitments - The company operates a vertically integrated cryptocurrency datacenter and a 106 MW power generation facility in New York, and another datacenter in South Carolina[16] - The acquired Support.com business contributed $8.5 million in revenue and $1.5 million of operating income for Q1 2022[26] - As of March 31, 2022, the company had entered into agreements to purchase miners totaling $197.0 million, with $135.3 million already paid as deposits[65] - In March 2022, the company entered into new financing agreements totaling approximately $107.5 million ($81 million from NYDIG and $26.5 million from B. Riley) to fund miner acquisitions and other purposes[39][41] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022's significant revenue growth, driven by increased hash rate and the Support.com acquisition, which was offset by rising operating costs and natural gas prices, leading to a net loss despite bolstered liquidity from new debt financing Overview and Miner Fleet Growth The company operates vertically integrated cryptocurrency datacenters, with 1.6 EH/s capacity from 19,400 miners as of March 31, 2022, and an additional 3.1 EH/s from 29,600 miners on order, while facing volatile natural gas prices - As of March 31, 2022, the company had approximately 19,400 miners with a capacity of 1.6 EH/s[87] - The company has ordered an additional 29,600 miners from Bitmain, which are expected to add approximately 3.1 EH/s in capacity[87] - The company is exposed to volatility in natural gas prices, which have been on an upward trajectory and are expected to remain elevated in 2022[84] Results of Operations Total revenue for Q1 2022 increased by 240.4% to $37.7 million, driven by cryptocurrency datacenter growth and the new Services segment, but a 261.1% rise in cost of revenue and 345.7% increase in SG&A led to a net loss of $0.4 million Q1 2022 vs Q1 2021 Key Operational Results (in thousands) | Metric | Q1 2022 | Q1 2021 | Variance | | :--- | :--- | :--- | :--- | | Total revenue | $37,655 | $11,063 | 240.4% | | Cost of revenue (ex-D&A) | $16,550 | $4,583 | 261.1% | | Selling, general and administrative | $14,392 | $3,229 | 345.7% | | Income from operations | $2,522 | $1,885 | 33.8% | | Net (loss) income | ($429) | $1,279 | -133.5% | - The increase in cost of revenue was primarily due to an approximately 83% year-over-year rise in natural gas cost per dekatherm[93] - SG&A expenses increased by $11.2 million, driven by public company operating costs, corporate infrastructure growth, and $2.1 million in expansion assessment costs[95] Segment Discussion The Cryptocurrency Datacenter and Power Generation segment saw revenue grow 164% to $29.2 million and Adjusted EBITDA increase 74% to $7.3 million, while the new Support Services segment contributed $8.5 million in revenue and $1.9 million in Adjusted EBITDA Segment Performance Q1 2022 vs Q1 2021 (in thousands) | Segment | Revenue Q1 2022 | Revenue Q1 2021 | Adjusted EBITDA Q1 2022 | Adjusted EBITDA Q1 2021 | | :--- | :--- | :--- | :--- | :--- | | Cryptocurrency Datacenter & Power Generation | $29,155 | $11,063 | $7,344 | $4,221 | | Support Services | $8,500 | $- | $1,869 | $- | | Total | $37,655 | $11,063 | $9,213 | $4,221 | - The Cryptocurrency segment produced 561 bitcoins in Q1 2022, up from 213 in Q1 2021, due to a 267.3% increase in average hash rate[109][110] - Power and capacity revenue increased 186.7% due to higher wholesale electricity prices and increased sales volume to the NYISO grid, particularly during a cold January[111] Non-GAAP Measures and Reconciliations This section reconciles non-GAAP financial measures, showing Q1 2022 Adjusted EBITDA at $9.2 million (up from $4.2 million in Q1 2021) and Adjusted Net Income at $1.3 million, with adjustments primarily for merger, expansion, and stock-based compensation costs Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA (in thousands) | Line Item | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net (loss) income | ($429) | $1,279 | | (Benefit) provision for income taxes | (368) | 732 | | Interest expense, net | 3,353 | 188 | | Depreciation and amortization | 3,978 | 1,261 | | EBITDA | $6,534 | $3,460 | | Stock-based compensation | 362 | 656 | | Merger and other costs | 213 | 105 | | Expansion costs | 2,104 | - | | Adjusted EBITDA | $9,213 | $4,221 | Liquidity and Capital Resources As of March 31, 2022, the company held $96.5 million in cash, with liquidity bolstered by $81 million in new debt, facing $310.1 million in contractual commitments, including $220.6 million in debt and $61.3 million for miner purchases - In Q1 2022, the company obtained approximately $108 million of additional committed financings, with $81 million funded in March[123] Contractual Obligations and Commitments as of March 31, 2022 (in thousands) | Commitment | Total | Remainder of 2022 | 2023-2024 | 2025-2026 | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | | Debt payments | $220,627 | $66,036 | $70,117 | $84,474 | $- | | Miner and other purchase commitments | $61,342 | $61,342 | $- | $- | $- | | Total | $310,108 | $130,204 | $78,448 | $90,408 | $11,048 | - The company's current business strategy is to sell digital assets (bitcoin) within a short period after earning them, with over 95% liquidated the same day it is mined[125] Quantitative and Qualitative Disclosures About Market Risk This section has been omitted as it is not required for smaller reporting companies - Disclosure is not required for smaller reporting companies[140] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during Q1 2022 - Management, including the CEO and CFO, concluded that as of March 31, 2022, the company's disclosure controls and procedures are effective[141] - No material changes in internal control over financial reporting occurred during Q1 2022[142] PART II. OTHER INFORMATION Legal Proceedings The company is not aware of any material adverse legal proceedings, and a challenge to its datacenter expansion site plan in Torrey, NY, was denied by the court in April 2022 - A legal challenge (Article 78 petition) to the company's datacenter expansion in Torrey, NY was denied by the court in April 2022[145] - The company states it is not currently aware of any legal proceedings or claims that it believes will have a material adverse effect on its business[144] Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021, have occurred - No material changes to the risk factors disclosed in the 2021 Form 10-K have occurred during the quarter[146] Unregistered Sales of Equity Securities and Use of Proceeds The company details its stock purchase agreements with B. Riley Principal Capital, including the termination of the 2021 agreement and the establishment of a new $500 million purchase agreement on April 7, 2022, for general corporate purposes - From January 1, 2022, to April 6, 2022, the company issued 415,000 shares of Class A common stock to BRPC under the 2021 Purchase Agreement[147] - On April 7, 2022, the company entered into a new common stock purchase agreement with BRPC, with the right to sell up to $500 million in shares[148] Defaults Upon Senior Securities No defaults upon senior securities have been reported - None[150] Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[151] Other Information This section is not applicable to the company's operations - Not applicable[152] Exhibits This section lists the exhibits filed as part of the Quarterly Report, including key financing and purchase agreements, and officer certifications - Exhibits filed include the Secured Promissory Note with B. Riley, the Master Equipment Finance Agreement with NYDIG, and the new 2022 Purchase Agreement with B. Riley[155]