Review of the Recent Quarter and an Update on the 2021 Outlook

Key Points

  • CleanSpark generates revenue from two primary sources: energy management software and systems for microgrids and bitcoin mining.
  • CleanSpark recently reported a strong set of first quarter results with both top line and margins improving significantly, aided primarily by the ATL acquisition.
  • Revenues grew 130% y/y and 15% q/q to $2.3 million in 1Q21. All segments witnessed strong growth led by service and software revenues (+748% y/y) and hardware (+18%). The key highlight was the addition of $0.7 million (or 32% of total quarterly revenues) bitcoin mining revenues from the ATL acquisition.
  • Management noted that revenues from bitcoin mining will grow significantly in the second quarter and coming quarters on the back of expanded capacity (200 PH/s in December to more than 315 PH/s in February 2021).
  • For full year 2021, management expects to generate more than $30 million in revenues. Longer term, CleanSpark expects to generate over $100 million in revenues from bitcoin mining assuming the production of six to nine bitcoins per day and that they are valued at $47,000 per bitcoin.

Our Insights

The Opportunities

The company believes the market for microgrids and the newly entered bitcoin mining are in a long-term secular growth trend. While the company continues to make microgrids smarter, optimizing performance and driving a better ROI for customers, the acquisition of ATL and the associated bitcoin mining operation has transformed the company into a high-growth and high-margin business. The company believes that bitcoin mining will help management to achieve its full-year 2021 revenue target of $30 million. Longer term, the company’s annual revenues from bitcoin alone could exceed $100 million.

The Obstacles

The competition is the industry is likely to intensify as growth in microgrids is bringing in additional providers. Furthermore, the company is also now subject to and dependent on the price of bitcoin, adding a new dimension of volatility to revenue and profitability.

Catalyst Monitor

  • Additional facility acquisition in bitcoin mining would expand and grow the company’s existing foothold.
  • Reaching the breakeven point, which management expects to occur in FY21, would be an inflection point for the business.
  • Higher bitcoin prices would directly translate into a 100% contribution margin and improve cash flow.