CleanSpark Inc.

Company Overview

CleanSpark, Inc (CLSK) is a software and services company providing advanced energy software and control technology that enables a plug-and-play and end-to-end enterprise energy solution in microgrid and distributed energy resource (DER) settings as well as hardware systems, specifically switch gear and energy storage solutions. The SaaS and Controls business accounts for approximately 30% of the company’s revenue as of 3Q20 but carries an exceptional average margin of about 90%. The core of this business is an integrated software suite comprising mPulse and mVSO, with the core function of enabling a user to accurately model and intelligently manage a complex microgrid. Their software solutions can be widely implemented across commercial, industrial, military, and municipal establishments.

The hardware segment accounts for approximately 70% of revenue as of 3Q20 and carries an average margin of approximately 15%. Hardware sales primarily include switch gear equipment and energy storage solutions. All of CleanSpark’s switchgear models are custom designed and manufactured to customer’s specifications and requirements with the capability to support all major manufacturer’s components. CleanSpark is also a reseller of energy storage batteries, which is a critical component of most microgrid systems. The company is targeting a 50% attachment rate with mPulse sales, which would help to significantly drive revenue going forward. The company is also working on partnerships with multiple battery groups, which will be of a marketing nature with the goal of being the preferred controls provider to as many battery groups as possible.

Our Insight

The Opportunities

We believe the market for microgrids are in a long-term secular growth trend. One of the key strategies is to make microgrid’s smarter, which can optimize performance and drive a better ROI for customers. CleanSpark’s software and hardware are vendor agnostic and can connect and communicate with any components of a microgrid regardless of brand. This compares to other industry solutions that are component specific and do not easily allow for a bestin-class approach in building a microgrid. CleanSpark’s solution is based on intelligent energy software that can model, measure, monitor and adjust how a microgrid engages with the grid and the various assets. This is an ROI solution for customers.

The Obstacles

The company is a relatively small player in an industry dominated by much larger, very well capitalized competitors. CleanSpark has proven its ability to compete effectively but will need to continue to expand its sales network and ensure its software platform evolves with the industry. Management believes the company is well capitalized to achieve its near-term goals but reaching break-even is a critical milestone to reach in the next twelve months.