Initiation of Coverage Brief

Key Points

  • CleanSpark is a software and component company leveraged to the fast-growing market for microgrids
  • The company’s software intelligently models and manages microgrids to save money and optimize performance
  • The global market for microgrids is expected to grow at a CAGR of 28% from 2020-2029
  • CleanSpark sits among the top 10 microgrid controller companies in the world.
  • The company’s software is designed to drive a direct ROI for customers
  • Management is pushing to drive higher margins by migrating the business model towards SaaS
  • CleanSpark has posted seven consecutive quarters of year-over-year growth as of F3Q20
  • Management is targeting $10 Million in revenue for the 2020 fiscal year, an increase of 222% from $4.5mm in 2019 and a target of $40mm in FY2022
  • Completed two strategic acquisitions (p2klabs in Feb and GridFabric in Aug), expanding software and service offerings, while being additive to revenue and profit margin
  • Launched a strategic partnership platform in July 2020 to accelerate growth and gain market share. The platform provides a way for various participants (battery manufacturers, EPCs, and energy developers) to offer CLSK’s software and controls as part of ongoing project proposals or as a reseller
  • In October, CleanSpark announced an underwritten registered public offering of 4,444,445 shares of common stock at a price of $9.00 per share for gross proceeds of ~$40.0 million. These proceeds will be used for working capital requirements, sales and marketing, product development, and strategic acquisitions

Catalyst Monitor

  • Reach the breakeven point, which management expects to occur in FY20
  • Additional add-on acquisitions
  • Larger scale business wins
  • Accelerating growth of SaaS revenue

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.