A Bitcoin mining company that operates farms with clean and renewable energy just announced operational results from Q1 2020. Despite general market conditions being hurt by COVID-19, the company was able to produce 47% gross mining margins due to a very low BTC breakeven cost.
Canada based Bitfarms recently reported their financial results for Q1 2020. The blockchain company focuses on mining, and provides computing power to some of the largest cryptocurrencies like Bitcoin and Litecoin. With the firm's core focus on clean and renewable energy, their computing power is fueled by green hydroelectricity. Their cost effective infrastructure has allowed Bitfarms to see significant return on capital, even during the global uncertainties that have surfaced from COVID-19. The firm continues to scale throughout Quebec Canada, now operating 5 computing centers ( Cowansville, Farnham, Magog, Saint-Hyacinthe, and Sherbrooke).
Financial Metrics - Low Bitcoin Mining Production Costs
According to financial results for Q1 2020, Bitfarms saw positive growth in mining operations, capturing 47% gross margins and taking in $4.1 million in gross profits. This was significantly better than Q1 2019, in which the company took in $1.1 million in gross mining profits, yielding 36% margins. Bitfarms also saw positive EBITDA of $1.8 million ( $2.8 million adjusted ) in Q1 2020 compared to a loss of $ -0.5 million ( $ -0.4 million adjusted ) in Q1 2019.
Chief Financial Officer, John Rim mentioned that:
“We are pleased that, despite the difficulties in general market conditions presented by the COVID-19 pandemic in Q1 2020 for most companies, Bitfarms’ operations were able to continue in normal course and yielded positive EBITDA and Adjusted EBITDA. We are pleased that the Company was able to achieve a 47% gross mining margin in the first quarter amidst challenging and uncertain market conditions.”
The company saw significant margins due to operational efficiency. Bitfarms was able to mine 1,087 Bitcoin in Q1 2020. In doing so, the company achieved a break even cost of $3,988 / BTC. The low break even cost is what’s separating Bitfarms from its competitors. With Bitcoins price having an average market price of $8,261 in Q1 2020, it allowed Bitfarms to leverage its infrastructure to capture significant return.
Differences In Mining Efficiency
In a recent report by Visionary Financial, it was outlined that around 70% of miners were using older devices. With this being said, reports by TradeBlock showed that the average break even cost prior to Bitcoins halving was around $6,851. This goes to show how efficient Bitfarms is carrying out operations. With the firm recently reporting a $3,988 break even cost, that’s about -41% lower than many miners are witnessing. This further explains how Bitfarms is able to capture its 47% gross mining margins. The comments by Chief Financial Officer, John Rim also explains that the company is able to operate efficiently through difficult times like COVID-19. During these unprecedented times, we’ve seen a different narrative at other mining companies. For example, it was reported by Riot Blockchain that the company saw COVID-19 disrupting cryptocurrency mining. In the company's 10k reports, they disclosed that COVID-19 would cause major disruptions to its core operations.
Vertical Integration Business Model
The Vertical integrations implemented by Bitfarms has allowed the company to maximize efficiencies. The core objective is fueled through its mining infrastructure. While leveraging hydroelectricity, the eco-friendly energy source provides increased performance, cost savings, and enhanced reliability. This is all facilitated by Bitfarms “industrial scale and professionally engineered design.” In addition, the vertical business model is structured around:
- On staff electricians that provide cost efficiency and “timely build-outs.”
- Performance and monitoring platforms that also includes in house repair centers
The Bitfarms business model has allowed the company to scale into new horizons. To date, Bitfarms remains one of the strongest publicly traded companies in the cryptocurrency mining sector.
Image Source: Bitfarms