Bitfarms Ltd. (“Bitfarms”, or the “Company”)
(TSXV: BITF ), today announced its consolidated results for the
three and six months ended June 30, 2019 (all amounts in US
dollars, unless otherwise indicated).
June 30, 2019 Financial Summary and Corporate
Highlights
- Consolidated revenue of $8.5 million; gross profit of $3.9
million (46% gross profit margin), operating income of $571,000 (7%
operating margin), and net loss of $1.3 million;
- Mining operations segment gross mining profit1 of $5.1 million
(67% gross mining margin);
- EBITDA of $668,000 (8% EBITDA margin) and Adjusted EBITDA of
$3.3 million (39% Adjusted EBITDA margin),
- Mined 974 Bitcoin and 4,857 Litecoin in Q2 2019;
- Q2 2019 average break-even2 Bitcoin price of $2,259 and average
break-even Litecoin Price of $40;
- Drew 2nd and 3rd $5.0 million tranches of aggregate $20.0
million loan for planned operational expansion;
- Completed the purchase and installation of 3,267 new generation
ASICs producing approximately 90 PH/s of hashrate. This increased
the Company’s current hash power by approximately 41% since the end
of Q1 2019; and
- Closed the court approved Israel arrangement to de-list from
Tel Aviv Stock Exchange and redomicile to Canada on June 12th and
received a receipt from the Ontario Securities Commission for the
final non-offering long form prospectus on June 13th.
“Q2 2019 was an extremely positive period for the cryptocurrency
industry and crypto miners that saw the price of Bitcoin grow
significantly from the end of the first quarter and greatly outpace
network difficulty. With the acquisition of 3,267 next generation
ASICs that resulted in a 41% increase to our computing power in the
second quarter, and the drawing of our debt facility to continue to
invest in our operations going forward both coinciding with the
turnaround in crypto mining conditions, we are well positioned to
continue to execute on our growth plans” commented John Rim, Chief
Financial Officer.
Wes Fulford, Chief Executive Officer of Bitfarms added,
“Bitfarms has had a very successful second quarter, with the
Company achieving several meaningful and significant corporate
milestones. Our growth strategy has been focused on leveraging our
contracted pipeline of hydroelectricity in Quebec, utilizing
financing and operational cashflow to diligently build out the
first 30MW of our fifth computing centre in Sherbrooke. Here we
will optimize energy consumption through the deployment of new
generation mining hardware which is anticipated to be fully online
in Q4 2019. With Shareholder and OSC approval, we also successfully
transitioned our listing to the TSX Venture Exchange, and post
quarter end we announced a 100% consolidation of our operating
entity. We are excited about our growth plans at Bitfarms, as an
essential services infrastructure provider in an evolving and
increasingly important cryptocurrency industry.”
Financial Review
Consolidated Company Results (000’s)
(U.S.$ in thousands except where indicated)
Three months ended
Six months ended
For the periods ended as
indicated
Jun. 30 2019
Jun. 30 2018
$ Change
% Change
Jun. 30 2019
Jun. 30 2018
$ Change
% Change
Revenues
8,517
6,592
1,925
29
%
12,146
22,285
(10,139
)
(45
%)
Cost of Sales
4,587
4,804
(217
)
(5
%)
8,003
9,907
(1,904
)
(19
%)
Gross profit
3,930
1,788
2,142
120
%
4,143
12,378
(8,235
)
(67
%)
Gross margin
46
%
27
%
-
-
34
%
56
%
-
-
G&A and other expenses
3,359
3,506
(147
)
(4
%)
5,282
5,713
(431
)
(8
%)
Operating income (loss)
571
(1,718
)
2,289
(133
%)
(1,139
)
6,665
(7,804
)
(117
%)
Operating margin
7
%
-26
%
-
-
-9
%
30
%
-
-
Interest expense
689
36
653
1814
%
821
110
711
646
%
Other financial expenses
1,202
6
1,196
19933
%
1,366
26
1,340
5154
%
Pre-tax income (loss)
(1,320
)
(1,760
)
440
(25
%)
(3,326
)
6,529
(9,855
)
(151
%)
Income tax expense
0
(423
)
423
(100
%)
0
1,791
(1,791
)
(100
%)
Net income (loss) per share - basic
(0.01
)
(0.02
)
-
-
(0.04
)
0.08
-
-
Gross mining profit (1)
5,122
3,567
1,555
44
%
6,205
16,953
(10,748
)
(63
%)
Gross mining margin (1)
67
%
60
%
-
-
58
%
80
%
-
-
EBITDA (1)
668
1,483
(815
)
(55
%)
142
12,572
(12,430
)
(99
%)
EBITDA margin (1)
8
%
22
%
-
-
1
%
56
%
-
-
Adjusted EBITDA (1)
3,329
2,683
646
24
%
2,908
13,919
(11,011
)
(79
%)
Adjusted EBITDA margin (1)
39
%
41
%
-
-
24
%
62
%
-
-
Notes
(1)
EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin,
Gross mining profit and Gross mining margin are non-IFRS
performance measures; please refer to the end of this press release
regarding the use of Non-IFRS Measures.
For the three and six month periods ended June 30, 2019 the
Company had consolidated gross profit of $3.9 million (46% gross
margin) and $4.1 million (34% gross margin) on consolidated
revenues of $8.5 million and $12.1 million, respectively, compared
to gross profit of $1.8 million (27% gross margin) and $12.4
million (56% gross margin) on revenues of $6.6 million and $22.3
million, respectively, for three and six month periods ended June
30, 2018.
The most significant factors influencing Bitfarms’ revenues are
the difference in Bitcoin inventory held by the Company at period
end and the difference in market price of cryptocurrency during the
three and six months ended June 30, 2018 compared to June 30, 2019.
Although costs of goods remained relatively stable, depreciation
expense decreased significantly due to the impairment loss of $18.5
million recorded by the Company in 2018.
Electricity expense increased by $437,000 in Q2 2019 compared to
Q2 2018 resulting from the addition of new mining computers.
General and administrative expenses remained relatively constant
and include non-cash compensation expense of approximately $1.4M
compared to $383,000 in Q2 2018 related an employee stock
compensation plan adopted by the company in Q2 2019. Financial
expenses increased significantly in Q2 2019 as a result of interest
expense related to the Dominion Capital loan financing of $549,000,
as well as warrant liability and embedded derivatives related to
the financing facility, measured at fair value through profit or
loss, resulting in non-cash expenses of $782,000 and $409,000,
respectively.
Webcast
The Company will be hosting a webcast presentation at 10:00 AM
Eastern Standard Time on August 29, 2019. To view the webcast
presentation, please register using this direct link. The financial
results and presentation will also be available on our website.
About Bitfarms Ltd.
The Company owns and operates computing centres that power the
global decentralized financial economy. Bitfarms provides computing
power to cryptocurrency networks such as Bitcoin, earning fees from
each network for securing and processing transactions. Powered by
clean and competitively priced hydroelectricity, Bitfarms operates
5 computing centres in Québec, Canada with 36MW of built-out
infrastructure and approximately 220 Ph/s of installed hash power.
Bitfarms’ strong and experienced management team is comprised of
veteran industrial-scale data centre operators and capital markets
professionals, focused on building infrastructure for the future by
developing and hosting the ecosystem growing around
blockchain-based technologies.
Keep up-to-date on Bitfarms’ events, developments and online
communities:
https://www.facebook.com/bitfarms/
https://twitter.com/Bitfarms_io
https://www.instagram.com/bitfarms/
https://www.linkedin.com/company/bitfarms/
Cautionary Statement
Trading in the securities of the Company should be considered
highly speculative. No stock exchange, securities commission or
other regulatory authority has approved or disapproved the
information contained herein. The Tel Aviv Stock Exchange has
neither approved nor disapproved the contents of this press
release.
Forward-Looking Statements
This news release contains certain “forward-looking information”
within the meaning of applicable Canadian securities laws that are
based on expectations, estimates and projections as at the date of
this news release. The information in this release about future
plans and objectives of the Company, are forward-looking
information. Other forward-looking information includes but is not
limited to information concerning: the intentions, plans and future
actions of the Company, , as well as Bitfarms’ ability to
successfully mine digital currency, revenue increasing as currently
anticipated, the ability to profitably liquidate current and future
digital currency inventory, volatility in digital currency prices
and the resulting significant negative impact on the Company’s
operations, the construction and operation of expanded blockchain
infrastructure as currently planned, and the regulatory environment
of cryptocurrency in the Provinces of Canada.
Any statements that involve discussions with respect to
predictions, expectations, beliefs, plans, projections, objectives,
assumptions, future events or performance (often but not always
using phrases such as “expects”, or “does not expect”, “is
expected”, “anticipates” or “does not anticipate”, “plans”,
“budget”, “scheduled”, “forecasts”, “estimates”, “believes” or
“intends” or variations of such words and phrases or stating that
certain actions, events or results “may” or “could”, “would”,
“might” or “will” be taken to occur or be achieved) are not
statements of historical fact and may be forward-looking
information and are intended to identify forward-looking
information.
This forward-looking information is based on reasonable
assumptions and estimates of management of the Company at the time
it was made, and involves known and unknown risks, uncertainties
and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by
such forward-looking information. Such factors include, among
others, risks relating to the global economic climate; dilution;
the Company’s limited operating history; future capital needs and
uncertainty of additional financing; the competitive nature of the
industry; currency exchange risks; the need for the Company to
manage its planned growth and expansion; the effects of product
development and need for continued technology change; protection of
proprietary rights; the effect of government regulation and
compliance on the Company and the industry; network security risks;
the ability of the Company to maintain properly working systems;
reliance on key personnel; global economic and financial market
deterioration impeding access to capital or increasing the cost of
capital; and volatile securities markets impacting security pricing
unrelated to operating performance. In addition, particular factors
which could impact future results of the business of Bitfarms
include but are not limited to: the construction and operation of
blockchain infrastructure may not occur as currently planned, or at
all; expansion may not materialize as currently anticipated, or at
all; the digital currency market; the ability to successfully mine
digital currency; revenue may not increase as currently
anticipated, or at all; it may not be possible to profitably
liquidate the current digital currency inventory, or at all; a
decline in digital currency prices may have a significant negative
impact on operations; the volatility of digital currency prices;
the anticipated growth and sustainability of hydroelectricity for
the purposes of cryptocurrency mining in the Province of Québec,
the ability to complete current and future financings, any
regulations or laws that will prevent Bitfarms from operating its
business; historical prices of digital currencies and the ability
to mine digital currencies that will be consistent with historical
prices; and there will be no regulation or law that will prevent
Bitfarms from operating its business. The Company has also assumed
that no significant events occur outside of the Bitfarms’ normal
course of business. Although the Company has attempted to identify
important factors that could cause actual results to differ
materially, there may be other factors that cause results not to be
as anticipated, estimated or intended. There can be no assurance
that such statements will prove to be accurate as actual results
and future events could differ materially from those anticipated in
such statements. Accordingly, readers should not place undue
reliance on forward-looking information. The Company undertakes no
obligation to revise or update any forward-looking information
other than as required by law.
Non-IFRS Performance Measures
This press release makes reference to certain measures that are
not recognized under IFRS and do not have a standardized meaning
prescribed by IFRS. They are therefore unlikely to be comparable to
similar measures presented by other companies. The Company uses
non-IFRS measures including "EBITDA," “EBITDA margin,” "Adjusted
EBITDA," “Adjusted EBITDA margin,” “Gross mining profit,” and
"Gross mining margin” as additional information to complement IFRS
measures by providing further understanding of the Company’s
results of operations from management’s perspective.
EBITDA and EBITDA margin are common measures used to assess
profitability before the impact of different financing methods,
income taxes, depreciation of capital assets and amortization of
intangible assets. Adjusted EBITDA and Adjusted EBITDA margin are
measures used to assess profitability before the impact of all of
the items in calculating EBITDA in addition to certain other
non-cash expenses. Gross mining profit and Gross mining margin are
measures used to assess profitability after power costs in
cryptocurrency production, the largest variable expense in mining.
Management uses non-IFRS measures in order to facilitate operating
performance comparisons from period to period and to prepare annual
operating budgets.
“EBITDA” is defined as net income (loss) before: (i) interest
expense; (ii) income tax expense; and (iii) depreciation and
amortization. “EBITDA margin” is defined as the percentage obtained
when dividing EBITDA by Revenue. “Adjusted EBITDA” is defined as
EBITDA adjusted to exclude: (i) share-based compensation; (ii)
non-cash finance expenses; (iii) asset impairment charges; and (iv)
other non-cash expenses. “Adjusted EBITDA margin” is defined as the
percentage obtained when dividing Adjusted EBITDA by Revenue.
“Gross mining profit” is defined as Revenue minus energy expenses
for the Bitfarms segment of the Company. "Gross mining margin” is
defined as the percentage obtained when dividing Gross mining
margin by Revenue for the Bitfarms segment of the Company.
These measures are provided as additional information to
complement IFRS measures by providing further understanding of the
Company's results of operations from management's perspective.
Accordingly, they should not be considered in isolation nor as a
substitute for analysis of the Company's financial information
reported under IFRS.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
1 EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA
margin, Gross mining profit and Gross mining margin are non-IFRS
performance measures; please refer to the end of this press release
regarding the use of Non-IFRS Measures.
2 Represents the break-even cost of Bitcoin and Litecoin based
on variable cost of electricity and is calculated by taking the
total electricity costs related to the Mining of each of Bitcoin
and Litecoin divided by the total number of Bitcoin and Litecoin
mined, respectively, in the relevant period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190829005212/en/
For investor inquiries: Sonia Tercas Director, Investor
Relations +1.647.348.9207 stercas@bitfarms.io
For media inquiries: Bahador Zabihiyan Director of Public
Relations +1.514.536.0145 bahador@bitfarms.io
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