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Once I last covered BIT Mining Restricted (NYSE:BTCM) in early September, it was simply days earlier than the lengthy awaited transition of Ethereum (ETH-USD) from a Proof of Work to Proof of Stake consensus mechanism. In my article, I cautioned that 76% BIT Mining’s self-mined crypto income got here from Ethereum mining – income that might go away following the consensus mechanism change. After “The Merge” final September, BIT Mining Restricted has needed to regulate its self-mining strategy. On this replace, we’ll have a look at the present standing of BIT Mining’s income segments and steadiness sheet following Q1 earnings.
Full Income Image
Whole Q1 income for BIT Mining Restricted got here in at $72.9 million. Whereas that is up 19% over This autumn, the corporate’s Q1 efficiency represents a dramatic 75% decline in income yr over yr. This is not essentially distinctive to BIT Mining Restricted as many crypto-related corporations have seen drastic income declines over the past yr or so.
BIT Mining goals to have a diversified income technology mannequin that features mining swimming pools, datacenter providers, and miner manufacturing along with the corporate’s self-mining phase. As anticipated final yr, the self-mining portion of the income fell aside following The Merge falling from $7.1 million in Q3-22 to simply $1.9 million the next quarter. On the finish of Q1, crypto self-mining income got here in at $6.2 million. This was up 226.3% sequentially however down almost 73% from the year-over-year comp.
| Income from: | Q1-22 | Q2-22 | Q3-22 | This autumn-22 | Q1-23 | QoQ | YoY |
|---|---|---|---|---|---|---|---|
| Self-mining | $22.9 | $14.8 | $7.1 | $1.9 | $6.2 | 226.3% | -72.9% |
| Mining Pool | $272.3 | $178.5 | $88.5 | $53.9 | $60.0 | 11.3% | -78.0% |
| Datacenter Providers | $1.5 | $2.2 | $1.4 | $5.2 | $5.9 | 13.5% | 293.3% |
Supply: BIT Mining Restricted, tens of millions
Manufacturing income is a distant 4th place when it comes to income phase rank and seems to have solely accounted for $0.8 million thus far. As of final quarter, datacenter providers are the one significant space of development for the corporate and it is a small proportion of income for the general enterprise. BIT Restricted continues to be extremely reliant on mining pool income because it makes up over 82% of the corporate’s whole determine. Although it ought to be famous that the corporate has lowered its reliance on mining pool income from 92% in Q1-22.
Along with dropping the ETH mining income final yr, the corporate additionally cited declines in crypto market costs as a trigger for the discount in crypto mining income as nicely. Because of the failing economics of the enterprise, BIT Mining made the choice to droop sure forms of BTC mining rigs. For the quarter ended March thirty first, BTCM was solely in a position to mine 99 BTC with acknowledged income of $2.1 million. The vast majority of the corporate’s mining income now comes from mining Dogecoin (DOGE-USD) and Litecoin (LTC-USD).
Stability Sheet
On the finish of March, BIT Mining Restricted had $40.2 million in present belongings. This was up from $35.3 million on the finish of 2022; nonetheless, the vast majority of that $4.9 million improve is from a $3.4 million revaluation within the firm’s cryptocurrency holdings. Money declined from $5.4 million on the finish of 2022 to $4.6 million on the finish of March:
BIT Mining Restricted
There was a little bit of a rotation within the make-up of the crypto holdings as nicely. The corporate’s crypto treasury is comprised of Bitcoin (BTC-USD), ETH, and DOGE:
| Holdings | This autumn-22 | Q1-23 | QoQ |
|---|---|---|---|
| BTC | 289 | 289 | 0.0% |
| ETH | 4,845 | 3,243 | -33.1% |
| DOGE | 42,800,000 | 69,500,000 | 62.4% |
Supply: BIT Mining Restricted
Quarter over quarter, the corporate did not see any change within the BTC on the steadiness sheet. Nonetheless, it did promote 1,602 ETH and grew DOGE holdings by almost 27 million DOGE. This implies roughly $5 million of BIT Mining Restricted’s $18 million in crypto holdings are allotted to a meme coin. The larger head-scratcher although will be the determination to promote ETH when it’s the solely coin the corporate holds that may generate returns by staking.
BIT Mining Restricted
From a legal responsibility standpoint, BIT Mining Restricted cites $36 million in present liabilities and $39 million in whole liabilities when including lease obligations. Quarter over quarter shares excellent grew a bit of over 4%.
Dangers
There is not rather more data within the firm’s filings pertaining to legal responsibility particulars. We all know BIT Mining Restricted beforehand operated a lottery enterprise earlier than getting into crypto mining in 2021. We additionally know the corporate has precisely one quarter of optimistic internet revenue between 2016 and 2022:
This isn’t an organization that has a historical past of producing optimistic earnings even when crypto was at all-time highs. Share dilution stays an ongoing concern.
Abstract
BIT Mining Restricted’s mining pool and self-mining companies are telling the story. The broader pattern for these segments is in decline. The chance in datacenters is fascinating, however there can be fairly a little bit of competition in that house. Earlier in Could, BIT Mining Restricted announced a partnership with an organization known as Chain Response to producing BTC mining techniques with a brand new ASIC chip that the businesses describe as “groundbreaking.” Although there have been no specifics about manufacturing items and gross sales offered.
Moreover, the corporate’s crypto treasury administration selections are odd from the place I sit. Whereas I’ve made it no secret that I feel belongings like Dogecoin do not have a lot a future, in my opinion the extra egregious determination is promoting the ETH on the steadiness sheet when the corporate might be producing rewards by staking it natively on-chain. It is obscure why administration would decide as a substitute for holding meme cash slightly than promoting all DOGE manufacturing and staking Ethereum at nearly no price. BTCM continues to be an keep away from for me.
Editor’s Notice: This text covers a number of microcap shares. Please concentrate on the dangers related to these shares.
