Bitfarms Ltd. (“Bitfarms”, or the “Company”)
(TSXV:BITF) today announced its consolidated results for the three
and nine months ended September 30, 2019.
September 30, 2019 Financial Summary and Corporate
Highlights
- Consolidated revenue of US$9.7 million; gross profit of US$4.5
million (46% gross profit margin), operating income of US$2.1
million (22% operating margin), and net income of US$4.3
million;
- Mining operations segment gross mining profit1 of US$6.0
million (67% gross mining margin);
- EBITDA of US$7.2 million (74% EBITDA margin) and Adjusted
EBITDA of US$4.7 million (48% Adjusted EBITDA margin);
- Mined 834 Bitcoin and 1,219 Litecoin in Q3 2019;
- Q3 2019 average break-even2 Bitcoin price of US$3,482 and
average break-even Litecoin Price of US$100;
- Completed the drawdown of the 4th and final US$5.0 million
tranche of US$20.0 million loan to fund planned expansion;
- Completed the acquisition of 7,795 new generation ASICs of
which 4,750 of the acquired ASICS have been installed as at
September 30, 2019. The 4,750 installed ASICs produce approximately
240 PH/s of hashrate and represent an increase of approximately 79%
since the end of Q2 2019;
- Bitfarms acquired the remaining 39.3% 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; and
- Appointed Mathieu Vachon, a Founder of Bitfarms, to Executive
Vice President, Technology and Operations.
“Our Q3 financial results are beginning to reflect the steady
and disciplined execution of our growth plans during 2019. The Q3
results include the full quarterly financial impact of the
approximately 100 PH/s of computing power added in Q2 and a portion
of the additional ~250 PH/s added in Q3. As of the date of this
press release, Bitfarms has almost quadrupled its hashrate in the
past 8 months, and with the financial results achieved in Q3 which
begin to show the results of our growth, I am pleased to report
that the company is now already profitable on a net income basis
year-to-date in 2019 per IFRS” commented John Rim, Chief Financial
Officer.
Wes Fulford, Chief Executive Officer of Bitfarms added,
“Throughout 2019 Bitfarms has been positioning itself as an
industry leader in terms of corporate governance and operational
and financial performance. We have strengthened our team, added a
new computing centre and deployed capital into modern and
cutting-edge mining equipment. With these new generation miners
contributing to ~73% of our installed computing power, we have a
defensive business model and are well positioned to withstand
volatility in mining economics.”
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.
Financial Review
Consolidated Company Results
(000’s)
(U.S.$ in thousands except where indicated)
Three months
ended Nine months ended For the periods ended as
indicated
Sep. 30
2019
Sep. 30
2018
$ Change % Change
Sep. 30
2019
Sep. 30
2018
$ Change % Change Revenues
9,739
6,866
2,873
42%
21,886
29,151
(7,265)
(25%)
Cost of Sales
5,276
6,149
(873)
(14%)
13,280
16,056
(2,776)
(17%)
Gross profit
4,463
717
3,746
522%
8,606
13,095
(4,489)
(34%)
Gross margin
46%
10%
-
-
39%
45%
-
-
G&A and other expenses
2,356
2,390
(34)
(1%)
7,638
8,103
(465)
(6%)
Operating income (loss)
2,107
(1,673)
3,780
(226%)
968
4,992
(4,024)
(81%)
Operating margin
22%
(24%)
-
-
4%
17%
-
-
Financial income
3,425
-
-
-
2,197
-
-
-
Interest expense
1,332
11
1,321
12009%
2,146
121
2,025
1674%
Other financial expenses (income)
(92)
28
(120)
(429%)
53
54
(1)
(2%)
Pre-tax income (loss)
4,292
(1,712)
6,004
(351%)
966
4,817
(3,851)
(80%)
Income tax expense (recovery)
(17)
-
-
-
(17)
1,791
-
-
Net income (loss) per share - basic
0.06
(0.02)
0.08
(400%)
0.03
(0.02)
0.05
(250%)
Gross mining profit (1)
5,954
4,525
1,429
32%
12,192
21,478
(9,286)
(43%)
Gross mining margin (1)
67%
67%
-
-
62%
77%
-
-
EBITDA (1)
7,161
1,700
5,461
321%
7,329
14,272
(6,943)
(49%)
EBITDA margin (1)
74%
25%
-
-
33%
49%
-
-
Adjusted EBITDA (1)
4,668
1,903
2,765
145%
7,632
15,867
(8,235)
(52%)
Adjusted EBITDA margin (1)
48%
28%
-
-
35%
54%
-
-
Notes
- EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDAmargin,
Gross mining profit and Grossmining margin are non-IFRS performance
measures; please refer to Non-IFRS Performance Measures.
Revenue
Bitfarms’ total revenue for Q3 2019 was US$9,739,000 compared to
US$6,866,000 for the comparable three-month period in 2018 (“Q3
2018”). Revenue in Q3 2019 increased US$2,873,000 or 42% compared
to the revenue in Q3 2018. The most significant factors influencing
the net increase to Bitfarms’ revenue for the three months ended
September 30, 2019 compared to the three months ended September 30,
2018 are the 40% higher average realized price per Bitcoin of
US$10,281 in Q3 2019 compared to US$7,321 in Q3 2018, as well as 91
more Bitcoin mined resulting from Bitfarms’ average increased
hashrate in excess of the average Network Difficulty during Q3 2019
compared to Q3 2018.
Cost of Sales
Bitfarms’ cost of sales for Q3 2019 was US$5,276,000 compared to
US$6,149,000 in Q3 2018. Costs of sales include energy and
infrastructure expenses, rental expense, depreciation and
amortization, electrician salaries, and, purchases and net change
in inventory.
Energy and infrastructure expenses increased by US$753,000 or
34% in Q3 2019 compared to Q3 2018 as the Company added new Mining
computers which had the effect of increasing electrical consumption
from 22 MW at the end of Q3 2018 to 41 MW at the end of Q3
2019.
Depreciation and amortization expense decreased by US$1,864,000
in Q3 2019 compared to Q3 2018 due to the impairment loss of
US$18,500,000 on property, plant and equipment and intangible
assets recorded by the Company in Q4 2018. The decrease in
depreciation and amortization expense was partially offset by an
increase in depreciation and amortization expense of US$215,000 in
Q3 2019 compared to Q3 2018 resulting from the adoption of IFRS 16
by the Company in January 2019 as the Company amortizes right of
use assets over the term of the relevant leases.
Gross Profit
For the three and nine month periods ended September 30, 2019
the Company had consolidated gross profit of US$4.5 million (46%
gross margin) and US$8.6 million (39% gross margin) on consolidated
revenues of US$9.7 million and US$21.9 million, respectively,
compared to gross profit of US$0.7 million (10% gross margin) and
US$13.1 million (45% gross margin) on revenues of US$6.9 million
and US$29.2 million, respectively, for three and nine month periods
ended September 30, 2018. Bitfarms’ net income for Q3 2019 was
US$4,309,000 compared to a net loss of US$1,712,000 for Q3
2018.
General & Administrative
Expenses
Bitfarms’ general and administrative expenses decreased
US$34,000 or 1% in Q3 2019 compared to Q3 2018. There were higher
salary expenses of US$504,000 in Q3 2019 compared to Q3 2018 for
non-cash share-based compensation expense related to employee stock
options approved and granted in Q2 2019 that did not exist in Q3
2018. The increase in salaries expense in Q3 2019 compared to Q3
2018 was primarily offset by US$394,000 lower professional fees in
Q3 2019 compared to Q3 2018 that primarily related to costs of
preparation of the Company’s preliminary prospectus to list its
common shares in Canada.
Financial Income and Expenses
Bitfarms’ financial income for Q3 2019 was US$3,425,000 compared
to financial income of US$nil in Q3 2018 resulting primarily from
revaluation of the warrants and embedded derivative creating
non-cash gains of US$2,588,000 and US$831,000, in connection with
the Dominion Capital loan described below.
Financial expenses for Q3 2019 was US$1,240,000 compared to
US$39,000 in Q3 2018, the increase is primarily related to interest
expense of US$1,019,000 incurred on the Dominion Capital loan which
did not exist in Q3 2018. Financial income and expenses are
comprised of interest on the Dominion Capital loan financing,
warrant issuance costs, gain on embedded derivative, gain on fair
value revaluation of the warrants, interest payments in respect of
vendor financing, interest expense on the lease liabilities,
unrealized foreign exchange losses on translation of lease
liabilities in Canadian dollars to the functional currency in US
dollars, and interest on Volta’s long-term debt repayments and bank
charges.
Reconciliation of Net Income to EBITDA
and Adjusted EBITDA
(U.S.$ in thousands except where indicated)
Three months
ended Nine months ended For the periods ended as
indicated
Sep. 302019 Sep. 302018 $ Change
% Change Sep. 302019 Sep. 302018 $
Change % Change Net income (loss)
4,309
(1,712)
6,021
(352%)
983
3,026
(2,043)
(68%)
Interest Expense
1,332
11
1,321
12009%
2,146
121
2,025
1674%
Income Tax Expense
(17)
-
(17)
0%
(17)
1,791
(1,808)
(101%)
Depreciation/Amortization
1,537
3,401
(1,864)
(55%)
4,217
9,334
(5,117)
(55%)
EBITDA
7,161
1,700
5,461
321%
7,329
14,272
(6,943)
(49%)
Stock Compensation Expense
872
198
674
340%
2,443
581
1,862
320%
Financial income
(3,425)
-
(3,425)
0%
(2,197)
-
(2,197)
0%
Listing Cost
-
-
-
0%
-
1,000
(1,000)
(100%)
Impairment
56
-
56
0%
56
-
56
0%
Other Non-Cash Expenses
4
5
(1)
(20%)
1
14
(13)
(93%)
Adjusted EBITDA
4,668
1,903
2,765
145%
7,632
15,867
(8,235)
(52%)
Bitfarms’ net income for Q3 2019 was US$4,309,000 compared to a
net loss of US$1,712,000 for Q3 2018. Bitfarms’ income tax recovery
for the Q3 2019 was US$17,000 compared to US$nil for Q3 2018.
EBITDA and Adjusted EBITDA for Q3 2019 were US$7,161,000 and
US$4,668,000, respectively, compared to US$1,700,000 and
US$1,903,000, respectively, in Q3 2018. EBITDA and Adjusted EBITDA
are non-IFRS performance measures; please refer to the heading
“Non-IFRS Performance Measures” at the end of this press
release.
Webcast
The Company will be hosting a webcast presentation at 10:00 AM
Eastern Standard Time on November 27, 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. Bitfarms’ experienced
management team includes 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.
To learn more about 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/
Website: www.bitfarms.io
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. 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.
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 of network difficulty and
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; an increase in network difficulty 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.
See “Reconciliation of Net Income to EBITDA and Adjusted EBITDA”
for reconciliation of EBITDA and Adjusted EBITDA to net income.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191127005188/en/
For investor inquiries, please contact: Sonia Tercas
Director, Investor Relations +1.647.348.9207 stercas@bitfarms.io
For media inquiries, please contact: Marc Duchesne
+1.514.277.3508 marc@ryanap.com
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