Riot Platforms Inc

Previous wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (this “MD&A”) should be read in conjunction with our Condensed Consolidated Financial Statements and the related Notes and other financial information included elsewhere in this Quarterly Report and with our audited consolidated financial statements for the year ended December 31, 2023, as included in our 2023 Annual Report.

Current wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (this “MD&A”) should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes (the “Notes”) and other financial information included elsewhere in this Quarterly Report and with our audited consolidated financial statements for the year ended December 31, 2023, as included in our 2023 Annual Report.

Previous wording

Unless otherwise indicated, amounts are stated in thousands of U.S. Dollars except for share, per share, and miner amounts, and Bitcoin quantities, prices, and hash rate.

Current wording

Unless otherwise indicated, amounts are stated in thousands of U.S. Dollars except for: share, per share, and miner amounts; Bitcoin quantities, prices, and hash rate; cost to mine one Bitcoin; and production value of one Bitcoin mined.

Previous wording

The price of Bitcoin increased during the first quarter of 2024 due to a new source of demand, the eleven Bitcoin spot Exchange Traded Funds (“ETFs”) approved to begin trading by the Securities Exchange Commission (“SEC”) on January 11, 2024. Significant interest in the Bitcoin ETFs followed their introduction. One such ETF earned recognition as the fastest ETF ever to surpass $10 billion in assets under management since its launch. The ETFs, as an investment vehicle, provided a new access point for investors to gain exposure to Bitcoin through more traditional methods resulting in Bitcoin ETFs seeing a combined net inflow of approximately $12.1 billion during the first quarter of trading.

Current wording

The price of Bitcoin increased during the first quarter of 2024 due to a new source of demand, the eleven Bitcoin spot Exchange Traded Funds (“ETFs”) approved to begin trading by the SEC on January 11, 2024. Significant interest in the Bitcoin ETFs followed their introduction. One such ETF earned recognition as the fastest ETF ever to surpass $10 billion in assets under management since its launch. The ETFs, as an investment vehicle, provided a new access point for investors to gain exposure to Bitcoin through more traditional methods resulting in Bitcoin ETFs seeing a combined net inflow of approximately $33.1 billion through June 30, 2024.

Previous wording

During 2023 and the first quarter of 2024, the Bitcoin mining industry saw record amounts of growth as the price of Bitcoin increased from the lows experienced in early 2023. A renewed opportunity to access capital markets to fund growth partly from a growing Bitcoin price led to an unprecedent expansion in mining operations as the size of computing power on the network, as measured by total hashrate, more than doubled. Many Bitcoin mining companies heavily invested in infrastructure, as well as upgrading and expanding mining fleets in advance of the Bitcoin network halving. We expect competition within the mining industry to continue as long as Bitcoin prices remain elevated or increase further.

Current wording

During 2023 and the first half of 2024, the Bitcoin mining industry saw record growth as the price of Bitcoin increased from the lows experienced in early 2023. A renewed opportunity to access capital markets to fund growth partly from a growing Bitcoin price led to an unprecedent expansion in mining operations as the size of provisioned hash calculation services on the network, as measured by total hash rate, more than doubled. Many Bitcoin mining companies heavily invested in infrastructure, as well as upgrading and expanding mining fleets in advance of the Bitcoin network halving. We expect competition within the mining industry to continue as long as Bitcoin prices remain elevated or increase further.

Previous wording

The Bitcoin mining industry has recently experienced an increase in transaction fees on the Bitcoin network, as well as an increase in overall demand in Bitcoin. Various protocols on the Bitcoin network gained popularity during 2023, and at various times temporarily resulted in a significant increase in the transaction fee paid to add a certain Bitcoin transaction to the blockchain. These transaction fees are volatile in nature, but are paid directly to miners and are representative of interest in transacting in Bitcoin. Transaction fees are packaged with the block subsidy issued by the Bitcoin network to combine for the total reward paid to miners upon solving a block.

Current wording

The Bitcoin mining industry recently experienced an increase in transaction fees on the Bitcoin network, as well as an increase in overall demand in Bitcoin. Various protocols on the Bitcoin network gained popularity during 2023, and at various times temporarily resulted in a significant increase in the transaction fee paid to add a certain Bitcoin transaction to the blockchain. These transaction fees are volatile in nature, but are paid directly to miners and are representative of interest in transacting in Bitcoin. Transaction fees are packaged with the block subsidy issued by the Bitcoin network to combine for the total reward paid to miners upon solving a block.

Previous wording

The Bitcoin subsidy issued by the Bitcoin network for solving a block is subject to periodic incremental halving. The network halving is a preprogrammed, fixed process of the Bitcoin network where the Bitcoin subsidy for solving a block received by miners is reduced by half approximately every four years. The network halving is a process designed to implement a periodic decreasing schedule of the issuance of new Bitcoin into the market which results in a predictable and controlled inflationary rate. The network halving will continue to occur on this schedule until the amount of Bitcoin in existence reaches the cap of 21.0 million. Historically, many Bitcoin miners have been a source of selling pressure on Bitcoin as miners have sold their production to fund operations. After each halving, the decrease in the subsidy provided to miners from the Bitcoin network may lead to fewer rewards for miners and thus may result in a decrease in the supply of bitcoin sold by miners into the market. The network halving occurred in April 2024, cutting the subsidy from 6.25 to 3.125 Bitcoin per block.

Current wording

by half approximately every four years. The network halving is a process designed to implement a periodic decreasing schedule of the issuance of new Bitcoin into the market which results in a predictable and controlled inflationary rate. The network halving will continue to occur on this schedule until the amount of Bitcoin in existence reaches the cap of 21.0 million. Historically, many Bitcoin miners have been a source of selling pressure on Bitcoin as miners have sold their production to fund operations. After each halving, the decrease in the subsidy provided to miners from the Bitcoin network may lead to fewer rewards for miners and thus may result in a decrease in the supply of bitcoin sold by miners into the market. The network halving occurred in April 2024, cutting the subsidy from 6.25 to 3.125 Bitcoin per block.

Previous wording

Prior to the halving event, shifts in strategy by prominent Bitcoin miners focused on implementing vertically integrated business models whereby Bitcoin miners own and operate their own facilities rather than renting out space from a third-party’s data center. Vertical integration provides additional control over operational outcomes as well as better management of any input costs such as power and overhead fees. Flexibility, and the ability to manage expenses becomes increasingly important as the amount of competition on the Bitcoin network expands and the subsidy in Bitcoin provided by the network contracts.

Current wording

Prior to the halving event, shifts in strategy by prominent Bitcoin miners focused on implementing vertically-integrated business models whereby Bitcoin miners own and operate their own facilities rather than renting out space from a third-party’s data center. Vertical integration provides additional control over operational outcomes as well as better management of any input costs such as power and overhead fees. Flexibility, and the ability to manage expenses, becomes increasingly important as the amount of competition on the Bitcoin network expands and the subsidy in Bitcoin provided by the network contracts decreases.

Previous wording

Network difficulty, which is a measure of how hard it is for miners to solve a block on the Bitcoin blockchain (and, thus, earn a mining reward), is determined by the network’s total hash rate (i.e., the total computational power devoted to solving a block), which is adjusted every 2,016 blocks (with a new block being added approximately every ten minutes). Therefore, as more miners join the network and the network’s global hash rate increases, its difficulty will increase. Conversely, if miners leave the network and its hash rate decreases, its difficulty will decrease. We have observed that, when the market price for Bitcoin experiences a sustained increase (as it did across 2023), new miners are introduced onto the Bitcoin network, increasing its network hash rate, and network difficulty has increased as a result. Thus, despite increasing our hash rate by approximately 18% from March 31, 2023, to 2024, the increased network difficulty following increased network hash rate across the periods resulted in a decrease in the number of Bitcoin we mined of approximately 35.5%, when comparing the three months ended March 31, 2024, to the same period in 2023.

Current wording

Network difficulty, which is a measure of how hard it is for miners to solve a block on the Bitcoin blockchain (and, thus, earn a mining reward), is determined by the network’s total hash rate (i.e., the total computational power devoted to solving a block), which is adjusted every 2,016 blocks (with a new block being added approximately every ten minutes). Therefore, as more miners join the network and the network’s global hash rate increases, its difficulty will increase. Conversely, if miners leave the network and its hash rate decreases, its difficulty will decrease. We have observed that when the market price for Bitcoin experiences a sustained increase (as it did across 2023), new miners are introduced onto the Bitcoin network, increasing its network hash rate, and network difficulty has increased as a result. Thus, despite increasing our hash rate by approximately 105.6% from June 30, 2023, to 2024, the halving in April 2024, and increased network difficulty following increased network hash rate across the periods result in a decrease in the number of Bitcoin we mined of approximately 43.2%, when comparing the six months ended June 30, 2024, to the same period in 2023.

Previous wording

Accordingly, as market prices for Bitcoin increase and more miners and hash rate are drawn onto the Bitcoin network, network difficulty will continue to increase, meaning existing miners like the Company will need to increase their hash rate to maintain and improve their chances of earning a Bitcoin mining reward. To do this, we continually seek out new Bitcoin mining capacity, including through our acquisition and development of new Bitcoin mining facilities (such as the Corsicana Facility) and the electricity supply and distribution facilities to service them, as well as other strategic growth opportunities. Further, we have adopted new and improved technology to increase both our mining power and efficiency, including our industrial-scale adoption of immersion cooling and our strategic acquisitions of large quantities of the newest, most powerful and most efficient miners available.

Current wording

Accordingly, as market prices for Bitcoin increase and more miners and hash rate are drawn onto the Bitcoin network, network difficulty will continue to increase, meaning existing miners like us will need to increase their hash rate to maintain and improve their chances of earning a Bitcoin mining reward. To do this, we continually seek out new Bitcoin mining capacity, including through our acquisition and development of new Bitcoin mining facilities (such as the Corsicana Facility) and the electricity supply and distribution facilities to service them, as well as other strategic growth opportunities. Further, we have adopted new and improved technology to increase both our mining power and efficiency, including our industrial-scale adoption of immersion cooling and our strategic acquisitions of large quantities of the newest, most powerful and most efficient miners available.

Previous wording

We own and operate one of the largest Bitcoin Mining operations in North America. During the three months ended March 31, 2024, we continued to deploy miners at our Rockdale Facility and continued development activities at the Corsicana Facility, with the objective of increasing our operational efficiency and performance in the future.

Current wording

We own and operate one of the largest Bitcoin Mining operations in North America. During the six months ended June 30, 2024, we continued to deploy miners at our Rockdale Facility, and continued development activities and commencement of deployment of miners at the Corsicana Facility, with the objective of increasing our operational efficiency and performance in the future.

Previous wording

As of March 31, 2024, our Bitcoin Mining business segment had a total deployed hash rate capacity of approximately 12.4 EH/s. We anticipate achieving a total self-mining hash rate capacity of approximately 31 EH/s by the end of 2024.

Current wording

As of June 30, 2024, our Bitcoin Mining business segment had a total deployed hash rate capacity of approximately 22.0 EH/s, as compared to 12.4 EH/s as of December 31, 2023, and 10.7 EH/s as of June 30, 2023, resulting in increases of 77.4% and 105.6%, respectively. We anticipate achieving a total self-mining hash rate capacity of approximately 36.3 EH/s by the end of 2024.

Previous wording

During the three months ended March 31, 2024, we mined 1,364 Bitcoin, which represented a decrease of 751 Bitcoin from the 2,115 Bitcoin we mined during the three months ended March 31, 2023 due primarily to the significant increase in the Bitcoin network difficulty, which has more than doubled since January 2023.

Current wording

During the six months ended June 30, 2024, we mined 2,208 Bitcoin, which represented a decrease of 1,682 Bitcoin from the 3,890 Bitcoin we mined during the six months ended June 30, 2023. The decrease was primarily due to the increase in the Bitcoin network difficulty, which has more than doubled since January 2023, and the halving that occurred in April 2024, partially offset by higher Bitcoin prices and our increase in deployed hash rate.

Previous wording

During 2023, we entered into two purchase orders under the Master Agreement to acquire new immersion miners from MicroBT with a total hash rate of 25.6 EH/s, for a total purchase price of approximately $453.4 million, subject to downward price adjustment as provided by the Master Agreement. These new miners are primarily for use at our new Corsicana Facility, which commenced operations in April 2024. Delivery of these miners began in 2023, with all miners expected to be received and deployed by mid-2025. The Master Agreement also provides us with four annual options to purchase additional miners, on the same or better terms as the second purchase order executed under the Master Agreement, for a total hash rate of approximately 75.0 EH/s, assuming exercise of all four annual purchase options.

Current wording

as provided by the Master Agreement. These new miners are primarily for use at our new Corsicana Facility, which commenced operations in April 2024. Delivery of these miners began in 2023, with all miners expected to be received and deployed by mid-2025. The Master Agreement also provides us with four annual options to purchase additional miners, on the same or better terms as the second purchase order executed under the Master Agreement, for a total hash rate of approximately 75.0 EH/s, assuming exercise of all four annual purchase options.

Previous wording

During the three months ended March 31, 2024, we executed an additional purchase order with MicroBT under the Master Agreement to acquire new air-cooled miners with a total hash rate of 5.9 EH/s, for a total purchase price of approximately $96.7 million. This purchase order is in addition to the four purchase options remaining under the Master Agreement. We plan to deploy these miners primarily at the Rockdale Facility, both to replace existing underperforming miners and to fill excess capacity available in the facility. Delivery of these miners is expected to occur in the second quarter of 2024, with deployment commencing upon delivery.

Current wording

During the six months ended June 30, 2024, we executed an additional purchase order with MicroBT under the Master Agreement to acquire new air-cooled miners with a total hash rate of 5.9 EH/s, for a total purchase price of approximately $96.7 million. This purchase order is in addition to the four purchase options remaining under the Master Agreement. We plan to deploy these miners primarily at the Rockdale Facility, both to replace existing underperforming miners and to fill excess capacity available in the facility. Delivery of these miners is expected to occur in the third quarter of 2024, with deployment commencing upon delivery.

Previous wording

For the three months ended March 31, 2024, Bitcoin Mining revenue was approximately $74.6 million.

Current wording

For the six months ended June 30, 2024, Bitcoin Mining revenue was approximately $127.2 million.

Previous wording

In 2023, we made the decision to stop pursuing new hosting contracts and end our legacy contracts, to focus on our self-mining efforts. During the three months ended March 31, 2024, all agreements with Data Center Hosting customers were terminated, and we have no plans to offer data center hosting services to new customers. We determined that such agreements, by themselves, were no longer material (based on revenue or profit) and, therefore, commencing for the three months ended March 31, 2024, we will no longer report Data Center Hosting as a separate reportable segment.

Current wording

In 2023, we made the decision to stop pursuing new hosting contracts and end our legacy contracts, to focus on our self-mining efforts. During the six months ended June 30, 2024, all agreements with Data Center Hosting customers were terminated, and we have no plans to offer data center hosting services to new customers. For the three and six months ended June 30, 2024, we will no longer report Data Center Hosting as a separate reportable segment.

Previous wording

For the three months ended March 31, 2024, Engineering revenue was approximately $4.7 million.

Current wording

For the six months ended June 30, 2024, Engineering revenue was approximately $14.3 million.

Previous wording

Global supply logistics have caused delays across all channels of distribution. We have also experienced delays in certain of our miner delivery schedules, our Engineering segment’s manufacturing and delivery schedule, and in our infrastructure development schedules, resulting from constraints on the globalized supply chains for miners, electricity distribution equipment and construction materials. Through the date of this Quarterly Report, we have been able to effectively and efficiently mitigate delivery delays to

Current wording

Global supply logistics have caused delays across all channels of distribution. We have also experienced delays in our Engineering segment’s manufacturing and delivery schedule, and in our infrastructure development schedules, resulting from constraints on the globalized supply chains for miners, electricity distribution equipment and construction materials. Through the date of this Quarterly Report, we have been able to effectively and efficiently mitigate delivery delays to avoid materially impacting our miner deployment schedule; however, we cannot guarantee that we will be able to continue to mitigate any such delivery delays in the future.

Previous wording

Additionally, the development of our new Corsicana Facility requires large quantities of construction materials, specialized electricity distribution equipment, and other component parts that are in high demand and can be difficult to source. To help mitigate the impacts of global supply chain constraints and increasing demand for these goods, including any inflationary pricing concerns that may result, we procured all the required components and materiel for development of the first 400 MW phase of the Corsicana Facility, and we have procured and already hold many of the components and materiel required for development of the next 600 MW phase of our development of the Corsicana Facility, as well as replacement components and parts for our existing systems, to help shorten the impact of potential damage to installed equipment.

Current wording

Additionally, the development of our new Corsicana Facility requires large quantities of construction materials, specialized electricity distribution equipment, and other component parts that are in high demand and can be difficult to source. To help mitigate the impacts of global supply chain constraints and increasing demand for these goods, including any inflationary pricing concerns that may result, we procured all the required components and materials for development of the first 400 MW phase of the Corsicana Facility, and we have procured and already hold many of the components and materials required for development of the next 600 MW phase of our development of the Corsicana Facility, as well as replacement components and parts for our existing systems, to help shorten the impact of potential damage to installed equipment.

Previous wording

Total revenue for the three months ended March 31, 2024 and 2023, was $79.3 million and $73.2 million, respectively. For the three months ended March 31, 2024, total revenue consisted of our Bitcoin Mining revenue, Engineering revenue, and other revenue. For the three months ended March 31, 2023, total revenue consisted of our Bitcoin Mining revenue, Data Center Hosting revenue, Engineering revenue, and other revenue.

Current wording

Total revenue for the three months ended June 30, 2024 and 2023, was $70.0 million and $76.7 million, respectively. Total revenue consists of our Bitcoin Mining revenue, Engineering revenue, and Other revenue. Other revenue consists almost entirely of residual activity related to our ceased Data Center Hosting segment.

Previous wording

For the three months ended March 31, 2024 and 2023, Bitcoin Mining revenue was $74.6 million, and $48.0 million, respectively. The increase of $26.6 million was primarily due higher Bitcoin prices in the 2024 period, which averaged $52,343 per coin, as compared to $22,704 per coin for the 2023 period, which was partially offset by a decrease of 751 Bitcoin mined in the 2024 period as compared to the 2023 period, due primarily to the substantial increase in the Bitcoin network difficulty. Additionally, we continued employing our power strategy to significantly reduce overall power costs. As noted below, during the three months ended March 31, 2024 and 2023, we earned $5.1 million and $3.1 million, respectively, in power credits, which were received in cash or credited against our power invoices, as a result of temporarily pausing our operations. The power credits equate to approximately 98 Bitcoin and 135 Bitcoin, respectively, as computed using the average daily Bitcoin prices for the applicable period.

Current wording

For the three months ended June 30, 2024 and 2023, Bitcoin Mining revenue was $55.8 million and $49.7 million, respectively. The increase of $6.1 million was primarily due to higher Bitcoin prices in the 2024 period, which averaged $66,071 per coin, as compared to $28,022 per coin for the 2023 period, partially offset by a decrease of 931 Bitcoin mined in the 2024 period as compared to the 2023 period, primarily due to the substantial increase in the Bitcoin network difficulty and the April 2024 halving. Additionally, we continued employing our power strategy to significantly reduce overall power costs. As noted below, during the three months ended June 30, 2024 and 2023, we earned $13.9 million and $13.5 million, respectively, in power credits, which were received in cash or credited against our power invoices, as a result of temporarily pausing our Bitcoin Mining operations.

Previous wording

the completion of certain custom products, and, therefore, the recognition of revenue. Our custom electrical products such as switchgear and power distribution centers are used as important components in data center development and in power generation and distribution facilities, and there has been increased demand for these products due to the continued increase in data center construction by developers, as well as the continually increasing worldwide demand for power.

Current wording

For the three months ended June 30, 2024 and 2023, Engineering revenue was $9.6 million and $19.3 million, respectively. The decrease of $9.7 million was primarily attributable to supply chain constraints resulting in decreased receipts of materials, delaying the completion of certain custom products, and, therefore, the recognition of revenue. Our custom electrical products such as switchgear and power distribution centers are used as important components in data center development and in power generation and distribution facilities, and there has been increased demand for these products due to the continued increase in data center construction by developers, as well as the continually increasing worldwide demand for power.

Previous wording

Selling, general and administrative expenses for the three months ended March 31, 2024 and 2023, were $57.7 million and $12.7 million, respectively, an increase of approximately $45.0 million. Selling, general and administrative expenses consist of stock-based compensation, legal and professional fees, and other personnel and related costs. The increase was primarily due to increases in stock compensation expenses of $34.3 million related to new grants under our long-term incentive program, compensation expenses of $4.4 million as a result of hiring additional employees to support our ongoing growth, increased legal and professional fees of $2.5 million primarily related to ongoing litigation and public company compliance, and $3.6 million for other costs primarily attributable to ongoing growth.

Current wording

Selling, general and administrative expenses for the three months ended June 30, 2024 and 2023, were $61.2 million and $19.8 million, respectively, an increase of approximately $41.4 million. Selling, general and administrative expenses consist of stock-based compensation, legal and professional fees, and other personnel and related costs. The increase was primarily due to increases in stock compensation expenses of $28.7 million, which was primarily due to new grants under our long-term incentive program that was implemented in July 2023, compensation expenses of $3.7 million as a result of hiring additional employees to support our ongoing growth, increased legal and professional fees of $3.1 million primarily related to ongoing litigation and public company compliance, and $5.7 million for other costs primarily attributable to ongoing growth.

Previous wording

Depreciation and amortization for the three months ended March 31, 2024 and 2023, was $32.3 million and $59.3 million, respectively, a decrease of approximately $27.0 million. The decrease was primarily due to the change in the estimated lives of our Bitcoin miners from 2 years to 3 years.

Current wording

Depreciation and amortization for the three months ended June 30, 2024 and 2023, was $37.3 million and $66.2 million, respectively, a decrease of approximately $28.8 million. The decrease was primarily due to the change in the estimated lives of our Bitcoin miners from 2 years to 3 years.

Previous wording

The change in fair value of Bitcoin for the three months ended March 31, 2024 and 2023, were gains of $234.1 million and $83.5 million, respectively, and were recognized to adjust the fair value of our Bitcoin held.

Current wording

The change in fair value of Bitcoin for the three months ended June 30, 2024 and 2023, were losses of $76.4 million and gains of $14.5 million, respectively, and were recognized to adjust the fair value of our Bitcoin held at the end of each period.

Previous wording

The change in fair value of our derivative asset for the three months ended March 31, 2024 and 2023, was a gain of $20.2 million and a loss of $5.8 million, respectively, and was recorded to adjust the fair value of our PPA, which was classified as a derivative asset and measured at fair value. The changes in fair value were due to changes in future power prices over the applicable period.

Current wording

The change in fair value of our derivative asset for the three months ended June 30, 2024 and 2023, were gains of $27.5 million and $13.1 million, respectively, and was recorded to adjust the fair value of our PPA, which was classified as a derivative asset and measured at fair value. The changes in fair value were due to changes in future power prices over the applicable period.

Previous wording

Power curtailment credits for the three months ended March 31, 2024 and 2023, were $5.1 million and $3.1 million, respectively, and represent sales of unused power under our PPA and participation in ancillary services under ERCOT Demand Response Services Programs. The amount of these credits varies from period to period depending on various factors impacting the supply of power to, and the demand for power on, the ERCOT grid, such as weather and global fuel costs.

Current wording

Power curtailment credits for the three months ended June 30, 2024 and 2023, were $13.9 million and $13.5 million, respectively, and represent sales of unused power under our PPA and participation in ancillary services under ERCOT Demand Response Services Programs. The amount of these credits varies from period to period depending on various factors impacting the supply of power to, and the demand for power on, the ERCOT grid, such as weather and global fuel costs.

Previous wording

For the three months ended March 31, 2024 and 2023, total other income (expense) was $7.8 million and ($3.8) million, respectively. The income recognized during the three months ended March 31, 2024, was primarily attributable to interest income earned as a result of higher cash balances and increased interest rates. The loss incurred in the same period in 2023 was attributable to interest expense.

Current wording

For the three months ended June 30, 2024 and 2023, total other income (expense) was $32.6 million and $4.9 million, respectively. The increase in other income recognized during the three months ended June 30, 2024, was primarily attributable to unrealized gains on marketable securities of $24.5 million, and higher interest income earned as a result of higher cash balances and increased interest rates.

Previous wording

Cost of revenue for Bitcoin Mining for the three months ended March 31, 2024 and 2023, was $41.1 million and $21.9 million, respectively, an increase of approximately $19.2 million. As a percentage of Bitcoin Mining revenue, Bitcoin Mining cost of revenue was 55.1% and 45.6% for the three months ended March 31, 2024 and 2023, respectively. Cost of revenue for Bitcoin Mining consists primarily of direct production costs of Bitcoin mining operations, including electricity, labor, and insurance, but excluding depreciation and amortization, which are separately stated. The increase was primarily due to the increase in Bitcoin mining capacity at the Rockdale Facility, which requires more headcount and direct costs necessary to maintain and support our expanded Bitcoin mining operations, as well as the absorption of other costs previously included in our Data Center Hosting segment. As noted below, during the three months ended March 31, 2024 and 2023, we earned $5.1 million and $3.1 million, respectively, in power credits to be credited against our power invoices, as a result of temporarily pausing our operations to participate in ERCOT’s Demand Response Service Programs. Our fixed-price power purchase contracts enable us to strategically curtail our mining operations and participate in these programs, which significantly lower our cost to mine Bitcoin. These credits are recognized inPower curtailment credits on our Condensed Consolidated Statements of Operations, outside of cost of revenue, but significantly reduce our overall cost to mine Bitcoin.

Current wording

Cost of revenue for Bitcoin Mining for the six months ended June 30, 2024 and 2023, was $71.8 million and $45.5 million, respectively, an increase of approximately $26.3 million. As a percentage of Bitcoin Mining revenue, Bitcoin Mining cost of revenue was 56.5% and 46.6% for the six months ended June 30, 2024 and 2023, respectively. Cost of revenue for Bitcoin Mining consists primarily of direct production costs of Bitcoin mining operations, including electricity, labor, and insurance, but excluding depreciation and amortization, which are separately stated. The increase was primarily due to the increase in Bitcoin mining capacity at the Rockdale Facility, and commencement of Bitcoin mining activities at the Corsicana Facility, both of which require more headcount and direct costs necessary to maintain and support our expanded Bitcoin mining operations, as well as the absorption of other costs previously included in our Data Center Hosting segment. As noted below, during the six months ended June 30, 2024 and 2023, we earned $19.0 million and $16.5 million, respectively, in power credits to be credited against our power invoices, as a result of temporarily pausing our operations to participate in ERCOT’s Demand Response Service Programs. Our fixed-price power purchase contracts enable us to strategically curtail our mining operations and participate in these programs, which significantly lower our cost to mine Bitcoin. These credits are recognized inPower curtailment credits on our Condensed Consolidated Statements of Operations, outside of cost of revenue, but significantly reduce our overall cost to mine Bitcoin.

Previous wording

Cost of revenue for Engineering for the three months ended March 31, 2024 and 2023, was $6.0 million and $15.6 million, respectively, a decrease of approximately $9.6 million. The costs consisted primarily of direct materials and labor, as well as indirect manufacturing costs. Consistent with the causes of decreased Engineering revenue noted above, the decrease was primarily due to decreased receipts of materials resulting from increased competition for direct materials due to supply chain constraints.

Current wording

Cost of revenue for Engineering for the six months ended June 30, 2024 and 2023, was $14.3 million and $33.7 million, respectively, a decrease of approximately $19.4 million. The costs consisted primarily of direct materials and labor, as well as indirect manufacturing costs. Consistent with the causes of decreased Engineering revenue noted above, the decrease was primarily due to decreased receipts of materials resulting from increased competition for direct materials due to supply chain constraints.

Previous wording

Casualty-related charges (recoveries), net, were $(2.3) million and $1.5 million for the three months ended March 31, 2024 and 2023, respectively. In December 2022, the Rockdale Facility was damaged during severe winter storms in Texas, resulting in casualty-related charges being recognized in 2023. The income recognized during the three months ended March 31, 2024, was the result of cash recoveries from insurance claims related to the December 2022 winter storms.

Current wording

Casualty-related charges (recoveries), net, were ($2.5) million and $1.5 million for the six months ended June 30, 2024 and 2023, respectively. In December 2022, the Rockdale Facility was damaged during severe winter storms in Texas, resulting in casualty-related charges being recognized in 2023. The income recognized during the six months ended June 30 2024, was the result of cash recoveries from insurance claims related to the December 2022 winter storms.

Previous wording

As of March 31, 2024, we had net working capital of approximately $692.5 million, which included cash and cash equivalents of $688.5 million. We reported net income of $211.8 million during the three months ended March 31, 2024, which included $260.6 million in non-cash gains, primarily consisting of the change in fair value of Bitcoin of $234.1 million, revenue recognized from Bitcoin mined revenue of $71.4 million, and the change in fair value of the derivative asset of $20.2 million, partially offset by depreciation and amortization of $32.3 million and stock-based compensation of $32.0 million.

Current wording

As of June 30, 2024, we had net working capital of approximately $646.5 million, which included cash and cash equivalents of $481.2 million. We reported net income of $127.3 million during the six months ended June 30, 2024, which included $221.5 million in non-cash gains, primarily consisting of the change in fair value of Bitcoin of $157.7 million, revenue recognized from Bitcoin mined of $127.2 million, the change in fair value of the derivative asset of $47.7 million, and the unrealized gain on marketable equity securities of $24.5 million, partially offset by depreciation and amortization of $69.7 million and stock-based compensation of $64.1 million.

Previous wording

During the three months ended March 31, 2024, we sold 212 Bitcoin for proceeds of approximately $9.5 million. We monitor our balance sheet on an ongoing basis and evaluate the level of Bitcoin retained from monthly production in consideration of our cash requirements for ongoing operations and expansion.

Current wording

During the six months ended June 30, 2024, we sold 212 Bitcoin for proceeds of approximately $9.5 million. We monitor our balance sheet on an ongoing basis and evaluate the level of Bitcoin retained from monthly production in consideration of our cash requirements for ongoing operations and expansion.

Previous wording

Through March 31, 2024, we have paid approximately $305.9 million in total deposits and payments to MicroBT for the purchase of miners. The remaining commitment of approximately $252.8 million is due in installments through approximately April 2025 based on the estimated miner delivery schedule. Total payments of $202.3 million and $50.4 million are expected to be made in 2024 and 2025, respectively.

Current wording

Through June 30, 2024, we have paid approximately $412.9 million in total deposits and payments to MicroBT for the purchase of miners. The remaining commitment of approximately $148.0 million is due in installments through approximately April 2025 based on the estimated miner delivery schedule. Total payments of $97.5 million and $50.4 million are expected to be made in 2024 and 2025, respectively.

Previous wording

Through March 31, 2024, the Company paid $45.3 million in total deposits and payments to Midas for the purchase of immersion cooling systems. The remaining commitment of approximately $6.7 million is due in installments in early 2024, based on the estimated delivery schedule.

Current wording

Through June 30, 2024, we paid $64.3 million in total deposits and payments for the purchase of immersion cooling systems. The remaining commitment of approximately $15.4 million is due in installments in 2024, based on the estimated delivery schedule.

Previous wording

In 2022, we announced our planned development of the Corsicana Facility, our second large-scale Bitcoin mining facility located on a 265-acre site in Navarro County, Texas. The Corsicana Facility is expected, upon completion, to have 1.0 GW of developed capacity for Bitcoin mining, with an additional 200 MW of electrical capacity available for development, at our discretion, which is securely supplied with power by a substation being developed for us on the premises that will be interconnected with the nearby Navarro Switch. The strategic decision to locate the Corsicana Facility next to the Navarro Switch was made to limit electricity lost in transmission and maximize the efficiency of our substation’s power distribution facilities. The initial phase of the development of the Corsicana Facility involved the construction of a 400 MW substation and an equal amount of immersion-cooled Bitcoin mining infrastructure spread across multiple buildings, as well as construction of various utilities, offices, warehouses, and infrastructure to support the facility’s operations, with operations commencing in April 2024, following commissioning of the substation.

Current wording

In 2022, we announced our planned development of the Corsicana Facility, our second large-scale Bitcoin mining facility located on a 265-acre site in Navarro County, Texas. The Corsicana Facility is expected, upon completion, to have 1.0 GW of developed capacity for Bitcoin mining, with an additional 200 MW of electrical capacity available for development, at our discretion, which is securely supplied with power by a substation being developed for us on the premises that will be interconnected with the nearby Navarro Switch. The strategic decision to locate the Corsicana Facility next to the Navarro Switch was made to limit electricity lost in transmission and maximize the efficiency of our substation’s power distribution facilities. The initial phase of the development of the Corsicana Facility involved the construction of a 400 MW substation and an equal amount of immersion-cooled Bitcoin mining infrastructure spread across multiple buildings, as well as construction of various utilities, offices, warehouses, and infrastructure to support the facility’s operations. Our Bitcoin mining operations commenced in April 2024, following commissioning of the substation. As of June 30, 2024, the first 100 MW building, Building A1, was complete and the second 100 MW building, Building A2, was nearly complete with nearly all immersion tanks and miners in the building being operational. Development for the third building, Building B1, continued on schedule with the building structure being fully erect and concrete slab pouring in progress and installation of immersion tanks has begun and is continuing into the third quarter.

Previous wording

We estimate that the total cost of the first phase of the development will be approximately $362.0 million, which is scheduled to be invested through the second quarter of 2024. Through March 31, 2024, we had incurred costs of approximately $270.8 million related to the development of the Corsicana Facility, which consisted of $10.1 million for land, $256.0 million of initial developments costs and equipment, and a $4.7 million deposit for future power usage. We expect to incur costs associated with development of this first 400 MW phase of the Corsicana Facility of approximately $91.2 million through 2024.

Current wording

We estimate that the total cost of the first 400 MW phase of the development will be approximately $362.0 million. Through June 30, 2024, we had incurred costs of approximately $323.2 million related to the development of the Corsicana Facility, which consisted of $10.1 million for land, $308.4 million of initial developments costs and equipment, and a $4.7 million deposit for future power usage. We expect to incur the remaining $38.8 million during the remainder of 2024.