Riot Platforms(RIOT)2024-10-31 00:40Financial Data and Key Metrics - Total revenue for Q3 2024 was $84.8 million, a 65% increase year-over-year compared to $51.9 million in Q3 2023, driven primarily by higher Bitcoin prices [17] - Gross profit for Q3 2024 was $24.3 million, down from $37.7 million in Q3 2023 [17] - Non-GAAP adjusted EBITDA for Q3 2024 was a loss of $3.6 million, compared to a loss of $3.1 million in Q3 2023 [17] - Net loss for Q3 2024 was $154.4 million or $0.54 per share, compared to a net loss of $80 million or $0.44 per share in Q3 2023 [19] - Bitcoin mining revenue for Q3 2024 was $67.5 million, a 116% increase compared to $31.2 million in Q3 2023 [20] - Bitcoin mining gross profit for Q3 2024 was $28.4 million, representing a margin of 42%, compared to $56.4 million or a margin of 181% in Q3 2023 [20] - The company generated $12.4 million in power credits during Q3 2024, lowering the all-in cost of power to $3.1 cents per kilowatt hour [9] Business Line Data and Key Metrics - Bitcoin mining cost per Bitcoin in Q3 2024 was $35,376, with power costs accounting for $26,673 per Bitcoin (75% of total cost) [22] - Direct non-power costs per Bitcoin mined were $8,703, down from 41% of total costs in Q2 2024 to 25% in Q3 2024, reflecting economies of scale [23] - The engineering business (ESSMetron) reported revenue of $12.6 million in Q3 2024, a decrease of $2.9 million compared to Q3 2023, primarily due to delays in a large government contract [24] - ESSMetron reported a gross loss of $0.9 million in Q3 2024, compared to a gross profit of $2.3 million in Q3 2023 [24] Market Data and Key Metrics - The company mined 1,104 Bitcoin in Q3 2024, in line with the 1,106 Bitcoin mined in Q3 2023, despite the Bitcoin block subsidy halving event in April 2024 [16] - The company ended Q3 2024 with 10,427 Bitcoin, a 42% increase compared to 7,327 Bitcoin held at the end of Q3 2023 [16] - The global network hash rate increased by 4% quarter-over-quarter, from 604 exahash in Q2 2024 to 625 exahash in Q3 2024 [21] - The company's total deployed hash rate increased by 27% quarter-over-quarter, from 22 exahash to 28 exahash, meeting the quarter-end target [8] Company Strategy and Industry Competition - The company's primary strategic focus is on developing a leading vertically integrated Bitcoin mining company, built on three key pillars: significant scale, low-cost production, and a strong balance sheet [7] - The company is on track to reach 35 exahash by the end of 2024, with plans to achieve 100 exahash of self-mining hash rate in the future [29] - The company is expanding its Corsicana Facility, which will add 600 megawatts of capacity when complete, taking the site to 1 gigawatt of capacity [30] - The company is revising its hash rate growth forecast for 2024 and 2025, with a year-end installed hash rate of 35 exahash for 2024, down slightly from prior guidance of 36 exahash [33] - The company is taking a more cautious approach to its 2025 hash rate growth forecast, lowering the year-end exit hash rate forecast from 56 exahash to 46.7 exahash [35] Management Commentary on Operating Environment and Future Outlook - The company is focused on achieving operational excellence, with a goal of greater than 95% average utilization of deployed hash rate, excluding periods of curtailment related to power strategy [45] - The company is leveraging its low-cost power strategy to maintain one of the industry's lowest costs to mine Bitcoin, at $35,376 per Bitcoin in Q3 2024 [41] - The company is actively exploring opportunities to allocate power capacity for AI HPC (High-Performance Computing) if it offers better economics than Bitcoin mining [54] - The company is monitoring industry trends and making decisions that provide the greatest benefit to shareholders while staying focused on the long-term goal of reaching 100 exahash in total self-mining hash rate [43] Other Important Information - The company adopted FASB's final standard on crypto assets in December 2023, recognizing Bitcoin held at fair value, resulting in a mark-to-market upward adjustment of $8.6 million in Q3 2024 [18] - The company expects run rate cash SG&A for Q4 2024 to be in the range of $27 million to $30 million, with elevated litigation expenses anticipated [28] - The company has initiated the full second phase development of the Corsicana Facility, with orders placed for substation equipment and expected completion in 2026 [30] Q&A Session Summary Question: Utilization Rate and Operational Excellence - The company is focused on achieving greater than 95% average utilization of deployed hash rate, excluding periods of curtailment related to power strategy [45] - The company has seen rapid improvements in utilization, from 60%-70% in previous months to over 80% in the most recent month [45] Question: M&A Appetite and Market Opportunities - The company is actively exploring M&A opportunities, particularly in the private mining sector, driven by challenging hash price conditions and the need for fleet upgrades [48] - The company is disciplined in its approach to M&A, focusing on opportunities that align with its strategic goals [49] Question: AI HPC Optionality and Power Allocation - The company is open to allocating power capacity for AI HPC if it offers better economics than Bitcoin mining, with preliminary discussions ongoing [54] - The company has received interest from multiple parties for significant amounts of power capacity, particularly for 2025 [89] Question: ESSMetron and Third-Party Deals - ESSMetron is a small customer of Riot, with most of its capacity utilized for third-party contracts, particularly in data center construction and power generation [58] - The company expects ESSMetron to return to higher-margin contracts in Q1 2025, following the completion of a large government contract [59] Question: Kentucky Expansion Timeline - The company has pushed out some of the expected Kentucky expansion into 2026 and 2027 to maximize power capacity and improve economics [61] Question: SG&A and Litigation Expenses - The company expects elevated litigation expenses in Q4 2024, but these are temporary and not reflective of the run rate of operating the business [66] Question: AI HPC and Counterparty Quality - The company is focused on working with strong, well-capitalized counterparties for any potential AI HPC deals, with a preference for improving capital efficiency [96] Question: M&A Focus and Opportunities - The company is open to both large and small M&A opportunities, with a focus on valuation, operational excellence, and jurisdiction [105] - The company is actively exploring opportunities to supplement its organic growth pipeline [106] Question: Bitcoin Mining vs. Direct Bitcoin Purchase - The company believes that Bitcoin mining allows for averaging in over time, leveraging its low-cost power strategy to mine Bitcoin at a discount to market prices [119]