Riot Platforms Inc
For the period ended Dec 31, 2024. Filed Feb 28, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 28, 2025
RIOT$16.71+13.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-23.
0001558370-24-001550
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-28.
0001558370-25-001888
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 155 previous paragraphs and 175 current paragraphs.
34 unchanged; 33 reworded; 100 added; 86 removed; 2 previous and 8 current paragraphs rearranged.
Tables are not compared: 9 previous and 25 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (100)
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Our MD&A is organized as follows:
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For a discussion of our business, see Part I, Item 1. “Business” of this Annual Report.
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BUSINESS OVERVIEW AND TRENDS
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General
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We are a leading Bitcoin mining company focused on utilizing our vertical integration strategy to mine Bitcoin in support of the Bitcoin blockchain. We own and operate multiple Bitcoin mining sites in the United States with two locations in Texas, consisting of the Rockdale Facility and the Corsicana Facility, and the Kentucky Facility. The Rockdale Facility is believed to be the largest Bitcoin mining facility in North America, as measured by developed capacity, and currently provides 700 MW in total developed capacity. Additionally, we are developing our second large-scale Bitcoin mining facility, the Corsicana Facility, which currently provides 400 MW in developed capacity. Upon completion, the Corsicana Facility is expected to have approximately one GW of capacity available. During 2024, we capitalized on our positioning within the market and acquired Block Mining, a Kentucky-based vertically-integrated Bitcoin miner and E4A Solutions, a leading provider of electrical engineering services to a diverse customer base of energy developers and data center operators. The Block Mining Acquisition added 60 MW of operational capacity for self-mining operations, which we are working to expand to 110 MW in 2025, and provided us with access to a secondary electrical grid. The acquisition of E4A Solutions adds engineering expertise to service our own existing and future electrical infrastructure, as well as provides solutions and services to the rapidly growing market for electrical infrastructure.
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Our market environment is highly competitive globally and regionally. We compete against other large-scale Bitcoin miners and individuals to receive the Bitcoin reward that is the heart of our operations. Our industry frequently evolves based on the proliferation of Bitcoin and cryptocurrencies in general, and we believe we are well positioned in the digital commodities industry in which we operate.
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We are organized in two business segments: Bitcoin Mining and Engineering.
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During the year ended December 31, 2024, we mined 4,828 Bitcoin, as compared to 6,626 Bitcoin mined during the year ended December 31, 2023. The decrease of 1,798 Bitcoin was primarily due to the April 2024 halving event, which was partially offset by our increase in deployed hash rate.
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Custodians
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As Bitcoin is a decentralized cryptocurrency, it is not required that Bitcoin be held by a custodian, and we may elect to self-custody. However, we believe our private keys relating to our Bitcoin are better safeguarded by the secure environment provided by custodians. Self-custody poses an increased risk to our private keys and we may not have the same level of protection as custody providers who are well versed in industry best practices to protect digital assets from potential theft, loss, or destruction.
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Pursuant to the Digital Asset Custodial Agreement, dated as of November 1, 2023, between us and NYDIG (as may be amended, modified or supplemented from time to time, the “NYDIG Custodial Agreement”), NYDIG, a well-known U.S.-based third-party digital asset-focused custodian, holds our Bitcoin in cold storage wallets in a digital asset account in our name. In exchange for its custodial services, NYDIG charges an annual fee equal to a percentage of our custodied Bitcoin based on the daily average value in U.S. dollars of the Bitcoin we custody with NYDIG. Our Bitcoin held in such digital asset accounts does not constitute “deposits” within the meaning of U.S. federal or state banking law and the digital asset accounts are not subject to Federal Deposit Insurance Corporation or Securities Investor Protection Corporation protections. The cold storage wallets in which our Bitcoin is held with NYDIG are all located in the United States. The NYDIG Custodial Agreement is for a term of one-year, and automatically renews for successive one-year periods, unless either the Company or NYDIG provides thirty days’ notice of termination, in writing, except that either the Company or NYDIG may terminate the NYDIG Custodial Agreement in writing, effective immediately, in the event that either NYDIG or the Company are adjudged bankrupt or insolvent or files an application for an arrangement with its creditors, or there is a material misstatement or failure of a party to perform its obligations under the NYDIG Custodial Agreement, a change in applicable law that has a material adverse effect on the services provided for in the NYDIG Custodial Agreement, or a substantial change in ownership or control or material adverse change in the financial condition of NYDIG or the Company.
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The NYDIG Custodial Agreement contains certain mutual indemnification provisions, including that NYDIG will indemnify us against direct claims for loss of custodied assets that arise directly from NYDIG’s or NYDIG’s nominees’ grossly negligent action, grossly negligent failure to act, bad faith or willful misconduct. Additionally, the Company shall indemnify NYDIG against all claims and liabilities incurred or assessed against NYDIG in connection with the NYDIG Custodial Agreement, except as may arise from certain of NYDIG or its nominees’ own actions or conduct.
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For more information on the NYDIG Custodial Agreement, see the full text of the NYDIG Custodial Agreement filed herewith as Exhibit 10.22, which qualifies the forgoing descriptions of the NYDIG Custodial Agreement in its entirety.
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We are also a party to a Digital Asset Execution Agreement with NYDIG Execution LLC (“NYDIG Execution”), pursuant to which NYDIG Execution executes or arranges transactions of our Bitcoin (“Orders”) as our agent. NYDIG Execution earns a commission on each trade determined by the net trade proceeds in U.S. dollars. NYDIG Execution does not charge us additional fees for principal trades. We deliver our Orders to NYDIG Execution via a designated security procedure, and each Order is affirmatively accepted by NYDIG Execution. While our Bitcoin may temporarily be processed through a NYDIG Execution customer account, NYDIG has covenanted that our assets will not be commingled with the assets of NYDIG Execution. NYDIG Execution is required to deposit any cash from the sale of our Bitcoin into our bank account at a U.S. depositary institution, less any applicable commissions. NYDIG Execution does not guarantee the value of our Bitcoin and is not responsible for any delay or failure to complete any Order caused by a digital asset network. If NYDIG Execution fails to (1) execute a properly executable Order and (2) give us notice of such failure, NYDIG Execution will only be liable for our actual damages.
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The Company also engaged Coinbase, a well-known U.S.-based third-party digital asset-focused custodian through the Coinbase Prime Broker Agreement, which includes the Coinbase Custody Services Agreement, and the Coinbase Master Trading Agreement (together, the “Coinbase Prime Broker Agreement”) for custodial and prime broker services, including, but not limited to, the storing of digital assets, trade execution, lending, post-trade credit, and other services. In exchange for its custodial services, Coinbase charges an initial storage fee and an annualized custodial service fee based on the total value of the digital assets the Company custodies with Coinbase. Our Bitcoin held in such digital asset accounts does not constitute “deposits” within the meaning of U.S. federal or state banking law and the digital asset accounts are not subject to Federal Deposit Insurance Corporation or Securities Investor Protection Corporation protections. The cold storage wallets in which our Bitcoin is held with Coinbase are located in the United States.
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The Coinbase Prime Broker Agreement shall remain in effect until terminated by Coinbase or the Company for any reason upon providing thirty days written notice to the other party. However, Coinbase may, in its sole discretion, suspend, restrict or terminate the Coinbase Prime Broker Agreement, including by suspending, restricting or closing the Company’s accounts or any provision of credit (as applicable), immediately upon the occurrence of an Event of Default (as defined in the Coinbase Prime Broker Agreement), without prior notice to the Company.
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The Coinbase Prime Broker Agreement contains certain mutual indemnification provisions, including that Coinbase will indemnify the Company from and against direct claims and losses arising out of or relating to any (i) violation, misappropriation, or infringement upon any United States patent, copyright, trademark, trade secret or other intellectual property right of a third party or (ii) violation of applicable law, unless such claims or losses arise out of or relate to the Company’s gross negligence, fraud, willful misconduct, or breach of the Coinbase Prime Broker Agreement. The Company will indemnify Coinbase from and against any and all third-party claims and losses arising out of or relating to the Company’s breach of the Coinbase Prime Broker Agreement, the Company’s violation of any law, rule, or regulation, or rights of any third party, or the Company’s gross negligence, fraud, or willful misconduct, except to the extent such third-party claims and losses resulted from the gross negligence, fraud or willful misconduct of Coinbase.
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Additionally, under the Coinbase Prime Broker Agreement, Coinbase may execute or arrange transactions of our Bitcoin as our agent. The Company will pay a fixed rate as commission and transaction fees associated with the Order executed. The Company delivers Orders to Coinbase, and Coinbase executes Orders by using automated trade routing services or by filling Orders on Coinbase’s over-the-counter trading service. Coinbase may accept or reject any Order, at its sole discretion. Coinbase does not guarantee the value of our Bitcoin and is not responsible for any delay or failure to complete any Order caused by a digital asset network.
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For more information on the Coinbase Prime Broker Agreement, see the full text of the Coinbase Prime Broker Agreement included herein as Exhibit 10.23, which qualifies the forgoing descriptions of the Coinbase Prime Broker Agreement in its entirety.
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Our custodian and brokerage services relationships are non-exclusive, and we may change our Bitcoin custodian and brokerage relationships at any time. We continually monitor our Bitcoin assets held by our Custodians, and in the case of NYDIG we have unlimited audit rights with respect to such custodial accounts. The Company performs monthly reconciliations of our Bitcoin assets held by our custodian(s) and the records of our mining pool, and our independent auditors verify the location and quantity of our Bitcoin assets annually, as part of the year-end audit process of our financial statements and internal controls over financial reporting. The Company’s insurance providers do not have inspection rights associated with our Bitcoin assets held in cold storage.
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Bitcoin Mining Metrics
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The following table presents our key Bitcoin Mining metrics:
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The following table presents our cost to mine one Bitcoin (amounts in thousands, except value of one Bitcoin amounts):
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operate our miners since depreciation is a non-cash expense and is not a variable operating cost that can be avoided even if we curtail operations temporarily. Depreciation expense incurred is disclosed for each respective period in the table above.
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During the year ended December 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 additional purchase options remaining under the Master Agreement. Delivery of these miners occurred in the third quarter of 2024, and deployment commenced upon delivery.
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For the year ended December 31, 2024, Bitcoin Mining revenue was approximately $321.0 million.
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Summary of Bitcoin Activity
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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 year ended December 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 no longer report Data Center Hosting as a separate reportable segment.
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In December 2024, we acquired E4A Solutions, a leading provider of electrical engineering services to a diverse customer base of energy developers and data center operators (the “E4A Solutions Acquisition”). This acquisition adds to our vertically integrated strategy by adding engineering expertise to service its own existing and future electrical infrastructure as well as provide solutions and services to the rapidly growing market for electrical infrastructure.
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For the year ended December 31, 2024, Engineering revenue was approximately $38.5 million.
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Strategic Goals and Initiatives
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Bitcoin Treasury Strategy
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Our Bitcoin acquisition strategy involves mining Bitcoin utilizing vertical integration, and from time to time, subject to market conditions, purchasing Bitcoin with our liquid assets derived from issuing debt or equity securities. Our vertical integration strategy has supported our stability during market fluctuations and allows us to capitalize on industry consolidation while building on our liquidity position.
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We view our Bitcoin holdings as long-term holdings, and during the year ended December 31, 2024, made the strategic decision to halt the sale of Bitcoin, and instead increase our Bitcoin holdings.
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Power Strategy
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Long-term power contracts form the basis of our power strategy. We utilize our Power Purchase Agreements (“PPA”) in place at the Rockdale Facility (the “Rockdale PPA”) and Kentucky Facility (the “Kentucky PPA”) in the following ways:
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Manual Curtailment
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We power down operations and return power to the utility when market prices for electricity provide the potential for us to receive more power curtailment credits than the Bitcoin Mining revenues we would have generated had we not curtailed our mining operations. We receive power credits for the difference in the market power price and our fixed power price, which provides us the ability to maximize our overall profitability between Bitcoin Mining and supporting the grid by not drawing power from the grid when electricity is most scarce.
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Ancillary Services
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We competitively bid to sell ERCOT and MISO the option to control our electrical load during certain hours. ERCOT and MISO compensate us in the form of Demand Response Credits, which are received whether or not we are called on to power down.
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Removed paragraphs (86)
Previous report
Business Overview and 2023 Highlights
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We are a vertically integrated Bitcoin mining company principally engaged in enhancing our capabilities to mine Bitcoin in support of the Bitcoin blockchain. We also provide comprehensive and critical mining infrastructure for institutional-scale hosted clients to mine Bitcoin at our Rockdale Facility. The Rockdale Facility currently provides 700 MW in total developed capacity for our Bitcoin mining and data center hosting services for institutional-scale hosted clients. Our Rockdale Facility is believed to be the largest Bitcoin mining facility in North America, as measured by developed capacity. Additionally, we are developing the Corsicana Facility, a second large-scale Bitcoin mining data center facility, which, upon completion, is expected to have approximately one gigawatt of capacity available for our own Bitcoin mining and data center hosting services for institutional-scale hosted clients. During 2023, Riot continued to expand on our growth-focused corporate strategy by capitalizing on our positioning within the market, and appropriately allocating resources to continue to expand and develop in a volatile market.
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We operate in an environment which frequently evolves based on the proliferation of Bitcoin and cryptocurrencies in general. A significant component of our strategy is to effectively and efficiently allocate capital between opportunities that generate the highest return on our investment.
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As of December 31, 2023, our Bitcoin Mining business segment operated 112,944 miners, with a hash rate capacity of 12.4 EH/s.
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For the year ended December 31, 2023, Bitcoin Mining revenue was approximately $189.0 million.
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Following our acquisition of Whinstone, we commenced an expansion of our Rockdale Facility to more than double its developed capacity at the time of acquisition and, as of December 31, 2023, this expansion had been completed.
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The expansion of our Rockdale Facility has provided capacity to enable us to deploy our current fleet of miners in a self-hosted facility, while allowing us to continue offering our Data Center Hosting services. We believe deploying our miners at the expanded Rockdale Facility offers many advantages for our Bitcoin Mining operations, including allowing us to operate our miners without incurring third-party colocation services fees and to do so at the low fixed energy costs available to the Rockdale Facility under its long-term PPA.
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Data Center Hosting revenue includes upfront payments, which we record as deferred revenue and generally recognize as services are provided. We provide energized space and operating and maintenance services to third-party mining companies who locate their mining hardware at our Rockdale Facility under long-term contracts. We account for these agreements as a single performance obligation for services being delivered in a series with delivery being measured by daily successful operation of the mining hardware. As such, we recognize revenue over the life of the contract as its series of performance obligations are met. The contracts are recognized in the amount for which we have the right to invoice because we elected the “right to invoice” practical expedient.
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For the year ended December 31, 2023, Data Center Hosting revenue was approximately $27.3 million.
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For the year ended December 31, 2023, Engineering revenue was approximately $64.3 million.
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Industry Trends
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During 2022 and 2023, we observed several companies in the Bitcoin ecosystem experience significant challenges and initiate bankruptcy proceedings due to the significant volatility in the price of Bitcoin, the increase in interest rates, the volatility in the spot price of power, and other national and global macroeconomic factors. We anticipate this trend will likely continue as companies attempt to shift their business models to operate on significantly compressed margins. Further affecting the margins of the companies within the Bitcoin ecosystem, the Bitcoin reward for solving a block is subject to periodic incremental halving, which is next anticipated to occur in April 2024. The network halving is a preprogrammed, fixed process of the Bitcoin network where the Bitcoin reward for solving a block received by miners is reduced by half approximately every four years. The network halving will continue to occur on this schedule until the amount of Bitcoin in existence reaches the cap of 21.0 million. 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.
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The dramatic increase in the price of Bitcoin observed in the market during prior years caused many companies to over-leverage themselves, thus operating in potentially unsustainable ways given the recent variability in the price of Bitcoin. Riot chose to refrain from engaging in any significant debt-financing activities during this period and, as a result, has not been subject to the significant debt-service shortfalls some of our competitors are experiencing. Despite such challenges in the ecosystem, Riot continues to focus on building long-term stockholder value by taking strategic action to vertically integrate our business, utilizing the Rockdale Facility and developing the Corsicana Facility. Management believes this focus will positively affect each of Riot’s three business segments by providing more capacity for our Bitcoin Mining and Data Center Hosting operations, and by capitalizing on supply chain efficiencies garnered through our Engineering segment. As we grow our business, we continue to focus on deploying our efficient Bitcoin mining fleet, at scale, while realizing the benefits of being an owner and operator of our Bitcoin Mining and Data Center Hosting facilities.
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We anticipate companies in our industry will continue to experience challenges, and that 2024 will be a period of consolidation in the Bitcoin mining industry. Further, given our relative position, liquidity, and absence of any significant long-term debt, we believe we are well positioned to benefit from such consolidation. We are continuously evaluating strategic opportunities which we may decide to undertake as part of our strategic growth initiatives; however, we can offer no assurances that any strategic opportunities which we decide to undertake will be achieved on the schedule or within the budget we anticipate, if at all, in our competitive and evolving industry, and our business and financial results may change significantly as a result of such strategic growth.
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The recent shutdowns of certain digital asset exchanges and trading platforms due to fraud or business failure has negatively impacted confidence in the digital asset industry as a whole and led to increased oversight and scrutiny of the industry. We did not have any exposure to any digital asset lenders or exchanges who have declared bankruptcy or have suspended operations. We only hold and sell Bitcoin that we have mined and do not sell, hold, or redeem any Bitcoin for any other parties. Our Bitcoin is held in cold storage wallets by a well-known U.S.-based third-party digital asset-focused custodian. We also sell our Bitcoin using our custodian’s U.S. brokerage services.
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In 2023, the banking industry and financial services sector experienced disruptions and instability. In March 2023, Silvergate Capital Corporation, the holding company for Silvergate Bank, which was primarily focused on the digital asset industry, announced its intent to wind down operations and voluntarily liquidate its holdings. Also in March 2023, Silicon Valley Bank and Signature Bank both closed and the FDIC was appointed receiver following their closures and transferred substantially all assets of the former banks to newly created, FDIC-operated bridge banks in an action to protect all depositors of the banks. In May 2023, First Republic Bank was closed, and the FDIC sold substantially all of First Republic Bank’s assets to JP Morgan Chase & Co.
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Although we maintained certain operating accounts with Signature Bank prior to its closure, we have since transferred all our deposits previously held with the bank to other banking institutions. We did not lose access to our accounts or experience interruptions in banking services, and we suffered no losses with respect to our deposits at Signature Bank as a result of the bank’s closure. We did not have any banking relationships with Silicon Valley Bank, Silvergate Bank, or First Republic Bank, and currently hold our cash and cash equivalents at multiple banking institutions. Although we did not suffer any losses, we continue to monitor for updates to mitigate any future impacts we may be subject to as a result of instability of the banking industry and financial services sector.
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Global Logistics
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We continue to monitor developments in the global supply chain and assess their potential impact on our expansion plans.
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Summary of Bitcoin Mining Results
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For the years ended December 31, 2023 and 2022, Data Center Hosting revenue was $27.3 million and $36.9 million, respectively. The decrease of $9.6 million was primarily due to hosting fewer customers during the 2023 period as we continue to address legacy contracts. For information regarding measures we have taken to address legacy contracts, see the discussion under “Legacy Hosting Customer Disputes” in Note 17.Commitments and Contingenciesto our Consolidated Financial Statements*.*
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Cost of revenue for Bitcoin Mining for the years ended December 31, 2023 and 2022 was $96.6 million and $74.3 million, respectively, representing an increase of approximately $22.3 million. As a percentage of Bitcoin Mining revenue, cost of revenue totaled 51.1% and 47.4% for each of the years ended December 31, 2023 and 2022, respectively. Bitcoin Mining cost of revenue
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consists primarily of direct production costs of mining operations, including electricity, labor, insurance and, for a portion of 2022, the variable Coinmint hosting fee, but excluding depreciation and amortization, which are separately stated. The increase wasprimarily due to the increase in mining capacity at the Rockdale Facility, which requires more headcount and direct costs necessary to maintain and support the mining operations. During the years ended December 31, 2023 and 2022, we earned $71.2 million and $27.3 million, respectively, in power credits, to be credited against our power invoices, as a result of temporarily pausing our operations. These credits are recognized in power curtailment credits in the statements of operations, outside of cost of revenue, but significantly reduce our overall cost to mine Bitcoin. When reducing the cost of revenue for Bitcoin Mining by the power curtailment credits allocated to Bitcoin Mining, the non-GAAP Bitcoin Mining revenue in excess of cost of revenue, net of power curtailment credits, as a percentage of revenue was 73.6% and 60.3% for the years ended December 31, 2023 and 2022, respectively, compared with Bitcoin Mining revenue in excess of cost of revenue, as a percentage of revenue of 48.9% and 52.6% (without reducing the cost of revenue for Bitcoin Mining by the power curtailment credits allocated to Bitcoin Mining) for the years ended December 31, 2023 and 2022, respectively. For a reconciliation of Bitcoin Mining revenue in excess of cost of revenue to Bitcoin Mining revenue in excess of cost of revenue, net of power curtailment credits, see the subheading below titled “Non-GAAP Measures”.
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Cost of revenue for Data Center Hosting for the years ended December 31, 2023 and 2022 was $97.1 million and $61.9 million, respectively, an increase of approximately $35.2 million. The costs consisted primarily of direct power costs, with the balance primarily incurred for rent and compensation costs. The increase was primarily attributable to the significant increase in size of our Rockdale Facility over the period, which has more than doubled since 2021.
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In addition to Adjusted EBITDA, we believe “Bitcoin Mining revenue in excess of cost of revenue, net of power curtailment credits”, “Data Center Hosting revenue in excess of cost of revenue, net of power curtailment credits”, “Cost of revenue – Bitcoin Mining, net of power curtailment credits” and “Cost of revenue – Data Center Hosting, net of power curtailment credits” are additional non-GAAP performance metrics that represent a key indicator of our core business operations of both Bitcoin Mining and Data Center Hosting.
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We believe our ability to offer power back to the grid at market-driven spot prices, thereby reducing our operating costs, is integral to our overall strategy, specifically our power management strategy and our commitment to supporting the ERCOT power grid. While participation in various grid demand response programs may impact our Bitcoin production, we view this as an important part of our partnership-driven approach with ERCOT and our commitment to being a good corporate citizen in our communities.
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We also believe netting the power sales against our costs can be an important financial measure because it allows management, investors, and our board of directors to evaluate and compare our operating results, including our operating efficiencies, from period-to-period by making such adjustments. We have allocated the benefit of the power sales to our Bitcoin Mining and Data Center Hosting segments based on their proportional power consumption during the periods presented.
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Bitcoin Mining revenue in excess of cost of revenue, net of power curtailment credits, Data Center Hosting revenue in excess of cost of revenue, net of power curtailment credits, Cost of revenue – Bitcoin Mining, net of power curtailment credits and Cost of revenue – Data Center Hosting, net of power curtailment credits are provided in addition to and should not be considered to be a substitute for, or superior to Revenue – Bitcoin Mining, Revenue – Data Center Hosting, Cost of revenue – Bitcoin Mining or Cost of revenue – Data Center Hosting as presented in our Consolidated Statements of Operations.
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The following table presents reconciliations of these non-GAAP performance metrics to the most comparable GAAP financial measures:
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Contractual Commitments (Miners and Mining Equipment)
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During the year ended December 31, 2023, the Company paid $191.1 million in deposits and payments to MicroBT for the purchase of miners described herein. The remaining commitment of approximately $270.4 million is due in installments through approximately April 2025 based on the estimated miner delivery schedule. Total payments of $220.0 million and $50.4 million are expected to be made in 2024 and 2025, respectively.
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During the year ended December 31, 2023, the Company paid $31.2 million in deposits and payments to Midas Green Technologies, LLC (d/b/a Midas Immersion Cooling) (“Midas”) for the purchase of immersion cooling systems described herein. The remaining commitment of approximately $21.1 million is due in installments in early 2024, based on the estimated delivery schedule.
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Development of the Corsicana Facility Data Center
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During the year ended December 31, 2022, we announced the initiation of a large-scale development to expand our Bitcoin mining and data center hosting capabilities in Navarro County, Texas with the acquisition of a 265-acre site where the anticipated one-gigawatt Corsicana Facility is being constructed. We received approval from ERCOT for the entire one-gigawatt capacity. The initial phase of the development of the Corsicana Facility involves the construction on the 265-acre site of 400 MW of immersion-cooled Bitcoin mining and data center hosting infrastructure spread across multiple buildings, as well as a high-voltage power substation and transmission facilities to supply power to the facility. Construction of the substation and the data centers is expected to be carried out concurrently, with self-mining operations expected to commence by the end of the first quarter of 2024, following the commissioning of the substation.
Previous report
In general, we provide power for our data center customers on a variable (sub-metered) basis. A customer pays us variable monthly fees for the specific amount of power utilized at rates specified in each contract, subject to certain minimums. We recognize variable power revenue each month as the uncertainty related to the consideration is resolved, power is provided to our customers, and our customers utilize the power (the customer simultaneously receives and consumes the benefits of our performance).
Previous report
We generate engineering and construction services revenue from the fabrication and deployment of immersion cooling technology for Bitcoin mining customers, for which we bill the customer at a fixed monthly fee or at an hourly rate. For the construction of customer-owned equipment, revenue is recognized upon completion of each phase of the construction project, as defined in each contract. For the construction of assets owned by us but paid for and used by the customer during the term of their data center hosting contract, revenue is recognized on a straight-line basis over the remaining life of the contract.
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Maintenance services include cleaning, cabling, and other services to maintain the customers’ equipment. We bill the customer at a fixed monthly fee or at an hourly rate. Revenue is recognized as these services are provided.
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2023 ATM Offering
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In August 2023, we entered into the 2023 ATM sales agreement under which we could offer and sell up to $750.0 million in shares of our common stock.
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During the year ended December 31, 2023, we received net proceeds of approximately $571.6 million ($583.3 million of gross proceeds, net of $11.7 million in commissions and expenses) from the sale of 45,758,400 shares of our common stock at a weighted average fair value of $13.07 per share under the 2023 ATM Offering.
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Previous wording
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information that will assist the reader in understanding our results of operations and financial condition. This MD&A should be read in conjunction with our Consolidated Financial Statements and the related notes that are included in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report.
Current wording
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information that will assist the reader in understanding our results of operations and financial condition. This MD&A should be read in conjunction with our Consolidated Financial Statements and the related notes (the “Notes”) that are included in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report.
Previous wording
This MD&A generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Current wording
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 not impacted by the elimination of the Data Center Hosting reportable segment are not included in this MD&A, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Previous wording
We own and operate one of the largest Bitcoin Mining operations in North America. During the year ended December 31, 2023, 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
During the year ended December 31, 2024, we continued development activities at the Corsicana Facility, acquired the Kentucky Facility and deployed miners at all our Facilities, with the objective of increasing our operational efficiency and performance in the future. As of December 31, 2024, we had a total deployed hash rate capacity of 31.5 EH/s, as compared to 12.4 EH/s as of December 31, 2023, an increase of 154.0%.
Previous wording
During the year ended December 31, 2023, we mined 6,626 Bitcoin, which represented an increase of 19.3% over the 5,554 Bitcoin we mined in the year ended December 31, 2022. We anticipate achieving a total self-mining hash rate capacity of 28 EH/s by the end of 2024.
Current wording
We are targeting a total self-mining hash rate capacity of 38.4 EH/s by the end of 2025.
Previous wording
During the year ended December 31, 2023, we entered into the Master Agreement to acquire 99,840 miners from MicroBT (consisting of 8,320 M56S+ model miners, 22,684 M56S++ model miners, 20,778 M66 model miners, and 48,058 M66S model miners), primarily for use at the Corsicana Facility, for a total purchase price of approximately $453.4 million. Delivery of the miners began in the fourth quarter of 2023, with all miners expected to be received and deployed by mid-2025. Upon full deployment of the 99,840 miners, we anticipate a total self-mining hash rate capacity of 38 EH/s. The Master Agreement also provides us with an option to purchase up to an additional 265,000 additional miners, on the same terms as the initial order.
Current wording
During 2023, we entered into purchase orders under the Master Agreement to acquire new immersion miners from MicroBT. These purchase orders represented 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 miners are primarily for use at the Corsicana Facility, which commenced operations in April 2024. Delivery of these miners began in 2023 and all miners are expected to be received and deployed by mid-2025. The Master Agreement provides us with four additional annual options to purchase miners, on the same or more favorable terms as the second purchase order executed under the Master Agreement. These additional miners represent a total hash rate of approximately 75.0 EH/s, assuming exercise of all four annual purchase options.
Previous wording
The following table presents additional information about our Bitcoin Mining activities, including Bitcoin production and sales of the Bitcoin mined:
Current wording
The following tables present additional information about our own Bitcoin Mining activities, including Bitcoin production, purchases, and sales:
Previous wording
Our Engineering business segment designs and manufacturers power distribution equipment and custom engineered electrical products that provide us with the ability to vertically integrate many of the critical electrical components and engineering services necessary for our Corsicana Facility development and Rockdale Facility expansions and to reduce our execution and counter-party risk in ongoing and future expansion projects. Engineering and other specialized talent employed in our Engineering business segment also allows us to continue to explore new methods to optimize and develop a best-in-class Bitcoin Mining operation and has been instrumental in the development of our industrial-scale immersion-cooled Bitcoin mining hardware.
Current wording
Our Engineering business designs and manufactures power distribution equipment and custom engineered electrical products. The products allow us to vertically-integrate many critical electrical components and engineering services necessary for our site developments and to reduce our execution and counter-party risk in ongoing and future expansion projects. The specialized talent employed in our Engineering business allows us the opportunity to explore new methods to optimize and develop best-in-class Bitcoin Mining operations and have been instrumental in the development of our industrial-scale immersion-cooled Bitcoin mining hardware.
Previous wording
Our Engineering business segment also provides electricity distribution product design, manufacturing, and installation services primarily focused on large-scale commercial and governmental customers and serves a broad scope of clients across a wide range of markets including data center, power generation, utility, water, industrial, and alternative energy. Products are custom built to client and industry specifications.
Current wording
Our Engineering business also provides electricity distribution product design, manufacturing, and installation services primarily focused on large-scale commercial and governmental customers and serves a broad scope of clients across a wide range of markets including data center, power generation, utility, water, industrial, and alternative energy.
Previous wording
Global supply logistics have caused delays across all channels of distribution. Similarly, we have also experienced delays in certain of our miner delivery schedules and in our infrastructure development schedules due to constraints on the globalized supply chains for miners, electricity distribution equipment and construction materials. Through the date of this Annual 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.
Current wording
For the year ended December 31, 2024, we continued to experience an inflationary environment and global supply chain logistics issues across all channels of distribution. We have experienced delays in certain of our miner delivery schedules and in our infrastructure development schedules due to constraints on globalized supply chains for miners, electricity distribution equipment, and construction materials. We have also experienced delays in our Engineering business 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.
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 can be difficult to source. We have procured and already hold many of the required materials to help navigate challenges related to global supply logistics and mitigate any inflationary pricing concerns that may come from global supply delays.
Current wording
Through the date of this Annual 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. Additionally, the development and potential expansions of our Facilities require 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 have procured and already hold many of the electrical infrastructure 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 years ended December 31, 2023 and 2022, was $280.7 million and $259.2 million, respectively, and consisted of our Bitcoin Mining revenue, Data Center Hosting revenue, Engineering revenue, and other revenue.
Current wording
Total revenue for the years ended December 31, 2023 and 2022 was $280.7 million and $259.2 million, respectively, and consisted of 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 years ended December 31, 2023 and 2022, Bitcoin Mining revenue was $189.0 million and $156.9 million, respectively. The increase of $32.1 million was primarily due to a 19.3% increase in the number of Bitcoin mined in the 2023 period as compared to the 2022 period as a result of an increase in miners deployed, partially offset by an increase in the Bitcoin network difficulty. Additionally, we continued employing our power strategy to significantly reduce overall power costs. As described below, during the years ended December 31, 2023 and 2022, we earned $71.2 million and $27.3 million, respectively, in power credits, which were recognized as offsets to our operating expenses, but equated to approximately 2,497 Bitcoin and 968 Bitcoin, respectively, as computed using the average daily Bitcoin prices for the applicable period.
Current wording
For the years ended December 31, 2023 and 2022, Bitcoin Mining revenue was $189.0 million and $156.9 million, respectively. The increase of $32.1 million was primarily due to a 19.3% increase in the number of Bitcoin mined in the 2023 period as compared to the 2022 period, which was primarily the result of an increase in miners deployed, partially offset by an increase in the Bitcoin network difficulty.
Previous wording
For the years ended December 31, 2023 and 2022, Engineering revenue was $64.3 million and $65.3 million, respectively. The decrease of $1.0 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.
Current wording
For the years ended December 31, 2023 and 2022, Engineering revenue was $64.3 million and $65.3 million, respectively. The decrease of $1.0 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 are used as important components in data center development and in power generation and distribution facilities. There has been increased demand for these products due to the escalated interest in data center construction, as well as the growing worldwide demand for power.
Previous wording
Cost of revenue for Engineering for the years ended December 31, 2023 and 2022 was $60.6 million and $57.5 million, respectively. The costs consisted primarily of direct materials and labor, as well as indirect manufacturing costs. The increase was primarily due to increased cost of labor and materials, partially offset by 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 years ended December 31, 2023 and 2022 was $60.6 million and $57.5 million, respectively, an increase of approximately $3.1 million. The costs consisted primarily of direct materials and labor, as well as indirect manufacturing costs. The increase was primarily due to increased cost of labor and materials, partially offset by decreased receipts of materials resulting from increased competition for direct materials due to supply chain constraints.
Previous wording
Selling, general and administrative expenses during the years ended December 31, 2023 and 2022 totaled $100.3 million and $67.5 million, respectively. Selling, general and administrative expenses consist of stock-based compensation, legal and professional fees, and other personnel and related costs. The increase of $32.9 million was primarily attributable to an increase in compensation expense, which increased by $12.2 millionas a result of hiring additional employees to support our ongoing growth, increased stock-based compensation of $7.6 million due to the adoption of the long-term incentive plan and additional headcount, increased legal and professional fees of $8.1 million primarily related to ongoing litigation and public company compliance, and an increase of $5.0 million in other general operating costs such as insurance and information technology projects to support our growth.
Current wording
Selling, general and administrative expenses for the years ended December 31, 2023 and 2022, totaled $100.3 million and $67.5 million, respectively, an increase of approximately $32.8 million. Selling, general and administrative expenses consist of stock-based compensation, legal and professional fees, and other personnel and related costs. The increase wasprimarily attributable to an increase in compensation expense, which increased by $12.2 million as a result of hiring additional employees to support our ongoing growth, increased stock-based compensation of $7.6 million due to the adoption of the long-term incentive plan and additional headcount, increased legal and professional fees of $8.1 million primarily related to ongoing litigation and public company compliance, and an increase of $5.0 million in other general operating costs such as insurance and information technology projects to support our growth.
Previous wording
Depreciation and amortization expense during the years ended December 31, 2023 and 2022 totaled $252.4 million and $108.0 million, respectively. The increase of $144.4 millionwas primarily due to higher depreciation expense recognized for the Rockdale Facility and the significant increase in the number of recently acquired and deployed miners.
Current wording
Depreciation and amortization expense during the years ended December 31, 2023 and 2022 totaled $252.4 million and $108.0 million, respectively, an increase of $144.4 million. The increase wasprimarily due to higher depreciation expense recognized for the Rockdale Facility and the significant increase in the number of recently acquired and deployed miners.
Previous wording
Change in fair value of Bitcoin for the year ended December 31, 2023, was a gain of $184.7 million, and was recognized as a result of adopting Accounting Standards Update (“ASU”) No. 2023-08,Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”), effective January 1, 2023, under which Bitcoin is recognized at fair value with changes in fair value recognized in net income. The gain recognized was attributable to increases in the price of Bitcoin and the increased quantity of Bitcoin held as of December 31, 2023, as compared to December 31, 2022.
Current wording
The change in fair value of Bitcoin for the year ended December 31, 2023 was a gain of $184.7 million, and was recognized as a result of adopting Accounting Standards Update (“ASU”) No. 2023-08,Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”), effective January 1, 2023, under which Bitcoin is recognized at fair value with changes in fair value recognized in net income. The gain recognized was attributable to increases in the price of Bitcoin and the increased quantity of Bitcoin held as of December 31, 2023, as compared to December 31, 2022.
Previous wording
Changes in fair value of our derivative asset for the years ended December 31, 2023 and 2022 were gains of $6.7 million and $71.4 million, respectively, and were 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 changes in fair value of our derivative asset for the years ended December 31, 2023 and 2022 were gains of $6.7 million and $71.4 million, respectively, and were recorded to adjust the fair value of the Rockdale PPA, which is classified as a derivative asset and measured at fair value. The changes in fair value were primarily due to changes in future power prices over the applicable period. The gain incurred during the year ended December 31, 2023, was primarily attributable to the average of the forward prices utilized in the discounted cash flow estimation models increasing from $43.59 per mWh as of December 31, 2022 to $45.15 per mWh as of December 31, 2023.
Previous wording
Power curtailment credits during the years ended December 31, 2023 and 2022 were $71.2 million and $27.3 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 power grid, such as weather and global fuel costs.
Current wording
Power curtailment credits during the years ended December 31, 2023 and 2022 were $71.2 million and $27.3 million, respectively, and represent sales of unused power under the Rockdale 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 power grid, such as weather and global fuel costs.
Previous wording
Casualty-related (charges) recoveries, net during the years ended December 31, 2023 and 2022 were $6.0 million and ($9.7) million, respectively. In December 2022, the Rockdale Facility was damaged during severe winter storms in Texas, resulting in casualty-
Current wording
Casualty-related (charges) recoveries, net during the years ended December 31, 2023 and 2022 were $6.0 million and ($9.7) million, respectively. In December 2022, the Rockdale Facility was damaged during severe winter storms in Texas, resulting in casualty-related charges being recognized in 2023 and 2022. The income recognized during the year ended December 31, 2023, was the result of cash recoveries from insurance claims related to the December 2022 winter storms.
Previous wording
We believe Adjusted EBITDA can be an important financial measure because it allows management, investors, and our board of directors to evaluate and compare our operating results, including our return on capital and operating efficiencies, from period-to-period by making such adjustments. Additionally, Adjusted EBITDA is used as a performance metric for share-based compensation.
Current wording
We believe Adjusted EBITDA can be an important financial measure because it allows management, investors, and our Board to evaluate and compare our operating results, including our return on capital and operating efficiencies, from period-to-period by making such adjustments. Additionally, Adjusted EBITDA is used as a performance metric in our share-based compensation plan.
Previous wording
As of December 31, 2023, we had net working capital of approximately $887.6 million, including cash and cash equivalents of $597.2 million. We reported a net loss of $49.5 million during the year ended December 31, 2023. The net loss included $91.7 million in non-cash income items, primarily consisting of $189.0 million of Bitcoin revenue and $184.7 million in Change in fair value of Bitcoin, partially offset by depreciation and amortization of $252.4 million.
Current wording
As of December 31, 2024, our net working capital totaled approximately $439.1 million, including cash and cash equivalents of $277.9 million, and marketable securities of $134.3 million. During the year ended December 31, 2024, we reported net income of $109.4 million, which included $395.7 million in non-cash net gains, primarily consisting of revenue recognized from Bitcoin mined of $321.0 million, $457.4 million in change in fair value of Bitcoin, and the change in fair value of the derivative asset of $45.3 million, partially offset by depreciation and amortization of $212.1 million, stock-based compensation of $125.2 million, and the unrealized loss on marketable securities of $69.5 million.
Previous wording
During the year ended December 31, 2023, we sold 6,185 Bitcoin for proceeds of approximately $176.2 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 year ended December 31, 2024, we sold 212 Bitcoin for proceeds of approximately $9.5 million. Subsequent to those sales, we made the strategic decision to temporarily halt the sale of all our Bitcoin production and instead, increase our Bitcoin holdings. 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
This first phase of the development of the Corsicana Facility includes land acquisition, site preparation, substation development, and transmission construction, along with construction of ancillary buildings and four buildings utilizing our immersion-cooling infrastructure and technology. We estimate that the total cost of the first phase of the development will be approximately $333.0 million, which is scheduled to be invested through mid-2024. Through December 31, 2023, we had incurred costs of approximately $217.8 million related to the development of the Corsicana Facility, which consisted of $10.1 million for land, $203.0 million of initial developments costs and equipment and a $4.7 million deposit for future power usage. We expect to incur costs of approximately $115.2 million during the first half of 2024.
Current wording
Through December 31, 2024, we incurred costs of approximately $415.9 million related to the development of the first phase of the Corsicana Facility, which consisted of $10.1 million for land and $405.8 million of initial developments costs and equipment.
Previous wording
Funding our operations on a go-forward basis will rely significantly on our ability to mine Bitcoin at a price above our Bitcoin Mining costs and revenue generated from our Engineering customers. We expect to generate ongoing revenue from Bitcoin rewards in connection with our Bitcoin Mining operations and our ability to liquidate Bitcoin rewards at future values will be regularly evaluated to generate cash for operations.
Current wording
We expect to generate ongoing revenue from Bitcoin rewards in connection with our Bitcoin Mining operations and our ability to liquidate Bitcoin rewards at future values will be regularly evaluated to generate cash for operations.
Previous wording
Generating Bitcoin rewards, for example, which exceed our production and overhead costs will determine our ability to report profit margins related to such mining operations, although accounting for our reported profitability is significantly complex. Furthermore, regardless of our ability to generate proceeds from the sale of our Bitcoin produced from our Bitcoin Mining business, we may need to raise additional capital in the form of equity or debt to fund our operations and pursue our business strategy.
Current wording
Generating Bitcoin rewards which exceed our production and overhead costs will determine our ability to report profit margins related to such Bitcoin Mining operations, although accounting for our reported profitability is significantly complex. Furthermore, regardless of our ability to generate proceeds from the sale of our Bitcoin produced from our Bitcoin Mining business, we may need to raise additional capital in the form of equity or debt to fund our operations and pursue our business strategy.
Previous wording
The ability to raise funds through the sale of equity, debt financings, or the sale of Bitcoin to maintain our operations is subject to many risks and uncertainties and, even if we were successful, future equity issuances or convertible debt offerings could result in dilution to our existing stockholders and any future debt or debt securities may contain covenants that limit our operations or ability to enter into certain transactions. Our ability to realize revenue through Bitcoin production and successfully convert Bitcoin into cash or fund overhead with Bitcoin is subject to a number of risks, including regulatory, financial and business risks, many of which are beyond our control. Additionally, we have observed significant historical volatility in the market price of Bitcoin and, as such, future prices cannot be predicted. See the discussion of risks affecting our business under Part I, Item 1A. “Risk Factors” of this Annual Report.
Current wording
The ability to raise funds through the sale of equity, debt financings, or the sale of Bitcoin to maintain our operations is subject to many risks and uncertainties and any future equity issuances or convertible debt offerings could result in dilution to our existing stockholders and any future debt or debt securities may contain covenants that limit our operations or ability to enter into certain transactions. Our ability to realize revenue through Bitcoin production and successfully convert Bitcoin into cash or fund overhead with Bitcoin is subject to a number of risks, including regulatory, financial and business risks, many of which are beyond our control. Additionally, we have observed significant historical volatility in the market price of Bitcoin and, as such, future prices cannot be predicted. See the discussion of risks affecting our business under Part I, Item 1A. “Risk Factors” of this Annual Report.
Previous wording
If we are unable to generate sufficient revenue from our Bitcoin Mining, Data Center Hosting, or Engineering operations when needed or secure additional sources of funding, it may be necessary to significantly reduce our current rate of spending or explore other strategic alternatives.
Current wording
If we are unable to generate sufficient revenue from our Bitcoin Mining or Engineering operations when needed or secure additional sources of funding, it may be necessary to significantly reduce our current rate of spending or explore other strategic alternatives.
Previous wording
We have been named a defendant in several class action and other investor related lawsuits as more fully described in Note 17.Commitments and Contingencies to our Consolidated Financial Statements. While we maintain policies of insurance, such policies may not cover all of the costs or expenses associated with responding to such matters or any liability or settlement associated with any lawsuits and are subject to significant deductible or retention amounts.
Current wording
We have been named a defendant in several lawsuits as more fully described in Note 17.Commitments and Contingencies.
Previous wording
Our financial position, results of operations and cash flows are impacted by the accounting policies we have adopted. In order to get a full understanding of our financial statements, one must have a clear understanding of the accounting policies employed. A summary of our critical accounting policies follows:
Current wording
The following table presents a summary of our cash flows:
Previous wording
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Current wording
Long-lived assets are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Judgment is necessary in estimating our various assets’ useful lives. This includes evaluating our own usage experience with our currently owned assets, the quality of materials used in construction-related projects, and for its miners, the rate of technological advancement and market-related factors such as the price of Bitcoin and the Bitcoin network hash rate, which impact the value of the miners. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, which is determined based on a comparison of the carrying amount of an asset to undiscounted future cash flows expected to be generated by the asset. Significant judgment is used when estimating future cash flows, particularly the price of Bitcoin and the Bitcoin network hash rate. If such assets are considered impaired, an impairment is recognized based on the amount by which the carrying amount exceeds the estimated fair value of the assets.
Previous wording
We account for share-based payment awards exchanged for services at the estimated grant date fair value of the award, which is based on the fair market value of our common stock at the time of the grant. For performance-based share-based payment awards, we recognize compensation cost over the performance period when achievement of the milestones and targets is probable.
Current wording
Stock-based compensation expense related to share-based payment awards is recognized at the grant date of the award and is estimated based on the fair market value of our common stock on the date of the grant. Compensation cost for performance-based, share-based payment awards is recognized over the performance period when achievement of the milestones and targets becomes probable. We use significant judgment in determining the likelihood of meeting milestones and market conditions. Inputs into valuation models such as Monte Carlo simulations include both the Company’s and the Russell 3000’s historical and expected annual volatilities, and depending on the inputs selected, we could calculate significantly different estimated grant date fair values, materially impacting the valuation of our stock-based awards and the stock-based compensation expense we recognize in future periods.
Previous wording
See Note 2.Significant Accounting Policies and Recent Accounting Pronouncements to our Consolidated Financial Statements for a description of applicable recent accounting pronouncements and any material impact on our financial statements.
Current wording
See Note 2.Significant Accounting Policies and Recent Accounting Pronouncements for a description of applicable recent accounting pronouncements and any material impact on our financial statements.
Rearranged current paragraphs (8)
Current report — wording carried from elsewhere
This MD&A generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. As a result of the elimination of the Data Center Hosting reportable segment during 2024, year-to-year comparisons between 2023 and 2022 are also presented withinResults of Operations.
Current report — wording carried from elsewhere
For the years ended December 31, 2024 and 2023, Engineering revenue was $38.5 million and $64.3 million, respectively. The decrease of $25.8 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 are used as important components in data center development and in power generation and distribution facilities. There continues to be significant demand for these products due to the escalated interest in data center construction, as well as the growing worldwide demand for power.
Current report — wording carried from elsewhere
Cost of revenue for Engineering for the years ended December 31, 2024 and 2023 was $41.7 million and $60.6 million, respectively. 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 of approximately $18.9 million was primarily due to decreased receipts of materials resulting from increased competition for direct materials due to supply chain constraints.
Current report — wording carried from elsewhere
Power curtailment credits during the years ended December 31, 2024 and 2023 were $33.7 million and $71.2 million, respectively, and represent sales of unused power under the Rockdale PPA and the Kentucky PPA and participation in ancillary services under ERCOT and MISO 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 power grids, such as weather and global fuel costs.
Current report — wording carried from elsewhere
Loss on the sale/exchange of equipment during the years ended December 31, 2024 and 2023, were $17.4 million and $5.3 million, respectively. The loss on sale during the year ended December 31, 2024, was attributable to the sale of 19,817 Antminer model S19 XP miners for proceeds of $14.3 million. The loss on sale during the year ended December 31, 2023 was attributable to the sale of 2,700 Antminer model S19 XP miners for proceeds of $6.4 million.
Current report — wording carried from elsewhere
For the years ended December 31, 2024 and 2023, total other income (expense) was ($43.4) million and $8.5 million, respectively. The net expense recognized during the year ended December 31, 2024, was primarily attributable to unrealized losses on marketable securities of $69.5 million, partially offset by higher interest income earned as a result of higher cash balances and increased interest rates. The income recognized during the year ended December 31, 2023, was primarily attributable to interest income.
Current report — wording carried from elsewhere
For the years ended December 31, 2024 and 2023, total income tax benefit (expense) was ($0.7) million and $5.1 million, respectively. The decrease in income tax benefit of $5.8 million was primarily attributable to the change in the contingent consideration liability.
Current report — wording carried from elsewhere
Results of Operations Comparative Results for the Years Ended December 31, 2023 and 2022
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
related charges being recognized in 2023 and 2022. The income recognized during the year ended December 31, 2023, was the result of cash recoveries from insurance claims related to the December 2022 winter storms.
Previous report — wording carried elsewhere
Substantially all revenue is derived from the sale of custom products built to customers’ specifications under fixed-price contracts with one identified performance obligation. Revenue is recognized over time as performance creates or enhances an asset with no alternative use, and for which we have an enforceable right to receive compensation as defined under the contract.