Fri. Jan 24th, 2020

Bitfarms Ltd. (TSXV:BITF)

31 min read

Bitfarms Ltd. (“Bitfarms”, or the “Company”) (TSXV: BITF) released its consolidated results for the 3.0 and 9.0 months finished September 30, 2k19.

September 30, 2k19 Fiscal Summary and Corporate Highlights

  • Consolidated revenue of US$9.70M; gross profit of US$4.50M (46.00 percent gross profit margin), operating income of US$2.10M (22.00 percent operating margin), and net income of US$4.30M;
  • Mining operations segment gross mining profitof US$6.00M (67.00 percent gross mining margin);
  • EBITDA of US$7.20M (74 percent EBITDA margin) and Adjusted EBITDA of US$4.70M (48.00 percent Adjusted EBITDA margin);
  • Mined 834 Bitcoin and 1,219 Litecoin in Q3 2k19;
  • Q3 2k19 average break-evenBitcoin price of US$3,482.00 and average break-even Litecoin Price of US$100.00;
  • Completed the drawdown of the 4th and final US$5.00M tranche of US$20.00M loan to fund planned expansion;
  • Completed the acquisition of 7,795 new generations ASICs of which 4,750 of the acquired ASICS have been installed as at September 30, 2k19. The 4,750 installed ASICs produce approximately 240 PH/s of hashrate and represent an incline of approximately 79.00 percent since the end of Q2 2k19;
  • Bitfarms acquired the remaining 39.30 percent of outstanding shares of Backbone through a 1:1 share exchange in which 26,295,655 Backbone shares were exchanged for 26,295,655 newly issued shares in the Company;

 

Revenue

Bitfarms’ total revenue for Q3 2k19 was US$9,739,000.00 compared to US$6,866,000.00 for the comparable three-month duration in 2k18 (“Q3 2k18”). Revenue in Q3 2k19 inclined US$2,873,000.00 or 42.00 percent compared to the revenue in Q3 2k18. The most significant factors influencing the net incline to Bitfarms’ revenue for the 3.0months finished September 30, 2k19 compared to the 3.0-months finished September 30, 2k18 are the 40.00 percent higher average realized price for each Bitcoin of US$10,281.00 in Q3 2k19 compared to US$7,321.00 in Q3 2k18, as well as 91 more Bitcoin mined resulting from Bitfarms’ average inclined hashrate in excess of the average Network Difficulty throughout Q3 2k19 compared to Q3 2k18.

Cost of Sales

Bitfarms’ cost of sales for Q3 2k19 was US$5,276,000.00 compared to US$6,149,000.00 in Q3 2k18. Costs of sales include energy and infrastructure costs, rental cost, depreciation and amortization, electrician salaries, and, purchases and net change in inventory.

Energy and infrastructure costs inclined by US$753,000.00 or 34.00 percent in Q3 2k19 compared to Q3 2k18 as the Company added new Mining computers which had the effect of increasing electrical consumption from 22.00 MW at the end of Q3 2k18 to 41.0 MW at the end of Q3 2k19.

Depreciation and amortization cost declined by US$1,864,000.00 in Q3 2k19 compared to Q3 2k18 due to the impairment loss of US$18,500,000.00 on property, plant and equipment and intangible assets recorded by the Company in Q4 2k18. The decline in depreciation and amortization cost was partially offset by an incline in depreciation and amortization cost of US$215,000.00 in Q3 2k19 compared to Q3 2k18 resulting from the adoption of IFRS 16.0 by the Company in January 2k19 as the Company amortizes right of use assets over the term of the relevant leases.

Gross Profit

For the 3.0 and 9.0 month durations finished September 30, 2k19 the Company had consolidated gross profit of US$4.50M (46.00 percent gross margin) and US$8.60M (39.00 percent gross margin) on consolidated revenues of US$9.70M and US$21.90M, respectively, compared to gross profit of US$0.70M (10.00 percent gross margin) and US$13.10M (45.00 percent gross margin) on revenues of US$6.90M and US$29.20M, respectively, for 3.0 and 9.0-month durations finished September 30, 2k18. Bitfarms’ net income for Q3 2k19 was US$4,309,000.00 compared to a net loss of US$1,712,000.00 for Q3 2k18.

General & Administrative Costs

Bitfarms’ general and administrative costs declined US$34,000.00 or 1.0 percent in Q3 2k19 compared to Q3 2k18. There were higher salary costs of US$504,000.00 in Q3 2k19 compared to Q3 2k18 for non-cash share-based compensation costs related to employee stock options approved and granted in Q2 2k19 that did not exist in Q3 2k18. The incline in salaries costs in Q3 2k19 compared to Q3 2k18 was primarily offset by US$394,000.00 lower professional fees in Q3 2k19 compared to Q3 2k18 that primarily related to costs of preparation of the Company’s preliminary prospectus to list its common shares in Canada.

Financial Income and Costs

Bitfarms’ financial income for Q3 2k19 was US$3,425,000.00 compared to a financial income of US$0.00 in Q3 2k18 resulting primarily from a revaluation of the warrants and embedded derivative creating non-cash gains of US$2,588,000.00 and US$831,000.00, in connection with the Dominion Capital loan described below.

Financial costs for Q3 2k19 was US$1,240,000.00 compared to US$39,000.00 in Q3 2k18, the incline is primarily related to interest cost of US$1,019,000.00 incurred on the Dominion Capital loan which did not exist in Q3 2k18.

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