Rising Costs and Shrinking Margins Leave Bitfarms with a Deepening Net Loss In Q3 2024
Bitfarms (TSX: BITF) released its third-quarter financials for 2024 this morning, reporting total revenue of $45 million for the quarter ending September 30, an 8% increase from $41.6 million in Q2 2024 and up 30% from $34.6 million in Q3 2023.
However, the company’s gross mining margin slid to 38% in Q3, a sharp decline from 51% in Q2 and down from the 44% reported in Q3 2023. This steep reduction reflects rising operational costs and intensifying network competition within the Bitcoin mining industry. The company’s gross mining profit of $17 million, although up 15% year-over-year, dropped from $21 million in the previous quarter. These declines highlight the dual pressures of escalating energy expenses and Bitcoin network difficulty, which have compounded operational challenges for the firm and strained its ability to capitalize on revenue growth.
Total operating expenses for Bitfarms surged to $27.6 million, up 123% from Q2’s $12.4 million and a staggering 230% year-over-year increase from $8.4 million in Q3 2023. This surge was driven primarily by increased general and administrative expenses, which have grown significantly as the company expands its operations and upgrades its fleet.
This expense structure drove the company to an operating loss of $44 million, more than doubling its Q2 operating loss of $24 million and increasing significantly from $18.6 million in Q3 2023. A notable portion of this loss was tied to a $10 million accelerated depreciation on older mining rigs, an expenditure that reflects Bitfarms’ aggressive fleet upgrade strategy.
Net losses widened sharply in Q3 to $37 million, or $(0.08) per diluted share, compared to $27 million, or $(0.07) per share, in Q2 2024 and $16.5 million, or $(0.06) per share, in Q3 2023. The net loss increase was influenced by a $6 million non-cash gain from warrant revaluation, a slight positive that partially offset broader losses.
The average direct cost per Bitcoin produced rose to $36,000, up from $30,600 in Q2 and more than double the $15,100 cost per Bitcoin in Q3 2023. Total cash cost of production per Bitcoin followed a similar trajectory, increasing to $52,400 from $47,300 in Q2 and a significant jump from $20,800 in the same period last year.
The company’s adjusted EBITDA fell to $6 million in Q3, reflecting a 28% decrease from $8.9 million in Q2 2024. This drop brought the adjusted EBITDA margin down to 14% from 26% in the previous quarter, suggesting that rising costs are not being adequately offset by the company’s expanded operations.
Liquidity at the end of Q3 was $146 million, comprised of $73 million in cash and 1,147 Bitcoin, which was valued at $63,300 per BTC as of September 30. The company has actively managed its liquidity by selling 461 BTC during Q3 for $28 million and another 194 BTC in October, generating $13 million in additional proceeds.
On the operational front, Bitfarms reported a current hashrate of 11.9 EH/s, up from 10.4 EH/s in Q2 2024, an increase driven by the deployment of 5,400 new miners. This improvement in hashrate demonstrates Bitfarms’ ongoing fleet upgrade efforts, which have increased its capacity to mine more Bitcoin.
However, the company’s daily production averaged only 7.6 BTC per day in Q3, which is lower than the production levels seen in previous quarters, indicating that the network’s increased difficulty has partially offset gains from new miners. Additionally, despite hitting its energy efficiency goal of 21 watts per terahash three months ahead of schedule, the improvement has not yet translated into commensurate reductions in production costs.
In its expansion strategy, Bitfarms made a move with its acquisition of Stronghold Digital Mining, Inc. (Nasdaq: SDIG), aimed at bolstering its U.S. presence and energy capacity. This acquisition is expected to increase Bitfarms’ power portfolio to over 950 MW by year-end 2025 and potentially up to 1.6 GW in the future. With this acquisition, Bitfarms’ U.S.-based operations are anticipated to account for roughly 66% of its total power portfolio, a substantial increase from the current 6%.
But this expansion comes with notable capital expenditures, including two miner-hosting agreements that will transition to self-mining operations upon completion. While this acquisition could position Bitfarms for future growth, it also increases the company’s exposure to U.S. energy costs, which have been volatile and may impact overall profitability.
Bitfarms last traded at $3.77 on the TSX.
Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
Why on earth are we doing any of this anyways? What is the actual need for bitcoin and bitcoin farms? Energy consumption is the scourge of our planet and now we have created this abstract “currency” that is supposed to be transparent and skip the banks (not a good idea), which is not transparent. It is “virtually” all speculative and used by oligarchs, terrorists, fraudsters and the naive. Some normal people are making boatloads of money on exactly (no product). What is it good for? And we need mining farms and AI farms and more and more energy. Good luck getting rid of coal and oil anytime soon. Then the forever feared nuclear will be a necessity – because we have to keep this unnecessary abstract “money” system going. Seriously pointless. It is not safe and stop saying that it is. Invented by geeks for geeks who lost their sense of the world and community ie: real life.