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.

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.
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.

CleanSpark generates revenue from two primary sources: energy management software and systems for microgrids and bitcoin mining.

EXECUTIVE DISCUSSION

Shawn Severson: Today, will be addressing the recent quarter and outlook for 2021. Let’s begin with a review of the recently reported quarter.

Zach Bradford: Absolutely, sounds great. We had a great quarter. In fact, it was another record-breaking quarter for CleanSpark. Revenues were up 130% year-over-year and we saw growth in all of our segments. I’ll speak to two of those in particular.

One was our energy segment, which is software based mostly. We saw a growth from about $900,000 last year to $1.2 million in that segment. It made up about 54% of our revenue.

And then, of course, a big growth area was the bitcoin mining. We saw over $700,000 in revenue from that segment. It’s important to note that we only had that segment active for 21 days from the acquisition. We were very happy to see the results in that period of time.

That segment was also very helpful in bringing our margins up. Our margin improvement ...

ABOUT THE EXECUTIVE
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Zachary Bradford

CEO & President

CleanSpark, Inc.

Zachary Bradford served as the company's Chief Financial Officer from 2014 through October 2019 at which time he was named Chief Executive Officer. Mr. Bradford holds a BS in Accounting and a Masters of Accountancy from Southern Utah University. He is a licensed CPA in Nevada, a Chartered Global Management Accountant, and a member of the American Institute of Certified Public Accountants. His experience includes serving as a partner in a public accounting and consulting firm. From March 2015 to July 2016, Mr. Bradford also served as a member of the Board of Directors and CFO of Epic Stores Corp.

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