Sphere 3D Reports Fiscal Year 2023 Financial Results and Operational Updates
- Significant increase in operating hashrate and Bitcoin mined year-over-year.
- Revenue increased by $15.8 million to $21.9 million in 2023.
- Streamlined operations by reducing SG&A, selling non-core businesses, and paying off debt.
- Achieved a net loss of $23.4 million in fiscal year 2023, compared to $192.8 million in 2022.
- Corporate developments include terminating agreements, selling assets, and entering settlement agreements.
- Received Core Scientific equity as part of a settlement agreement.
- Net loss available to common shareholders in fiscal year 2023.
- Operating costs and expenses totaled $51.9 million in 2023.
- Decrease in revenues from the service and product segment.
Insights
The financial results of Sphere 3D Corp. reflect a significant operational improvement in the fiscal year 2023, with an increase in revenue driven by enhanced digital mining operations. The strategic divestment of non-core businesses and the repayment of all debt indicate a focus on core competencies and balance sheet strength. The increased operating hashrate is a positive indicator for future revenue potential, especially in light of the recent uptick in Bitcoin prices.
However, the reported net loss and the increase in certain operational expenses, such as legal and insurance costs, suggest ongoing challenges in managing costs. The termination of the Master Services Agreement with Gryphon Digital Mining and the subsequent gain from the deconsolidation of MEOA are strategic moves that could improve gross margins and reduce complexity within the company's operational structure.
The settlement with Core Scientific and the acquisition of its equity as part of Core Scientific's emergence from bankruptcy is an opportunity for Sphere 3D to potentially benefit from the recovery of the digital mining sector. However, this also introduces a new risk profile associated with the performance of Core Scientific's stock.
The cryptocurrency mining industry is highly volatile and Sphere 3D's operational results must be contextualized within the broader market dynamics. The anticipated Bitcoin halving event in 2024 is expected to impact miners' profitability, as rewards for mining new blocks will decrease. Sphere 3D's proactive measures to increase operational efficiency and streamline its business model ahead of this event demonstrate strategic foresight.
The company's ability to increase its hashrate significantly while also improving its gross margin is indicative of competitive advancements in its mining capabilities. This positions Sphere 3D favorably within the industry, provided that Bitcoin's price remains stable or increases, which is a significant external factor affecting the company's performance.
Investors should monitor the market's reaction to these financial results, as well as the performance of Core Scientific's equity, which now constitutes a strategic asset for Sphere 3D. The company's future financial health will likely be influenced by the performance of this investment and the overall health of the cryptocurrency market.
The financial outcomes reported by Sphere 3D Corp. offer insights into the economic forces shaping the Bitcoin mining industry. The substantial reduction in net loss year-over-year indicates an improved cost structure, but the business continues to operate at a loss. This highlights the high fixed costs and capital-intensive nature of the cryptocurrency mining sector.
The divestiture of non-core segments and the focus on digital mining operations suggest a strategic pivot towards a more concentrated business model. This could yield economic efficiencies and allow for better allocation of capital towards high-growth areas. Nevertheless, the inherent risks associated with Bitcoin's price volatility and regulatory uncertainties remain pivotal economic factors that can affect Sphere 3D's performance.
From an economic standpoint, the upcoming Bitcoin halving could lead to a reduction in supply, potentially driving up the price if demand remains constant or increases. Sphere 3D's preparation for this event, coupled with its current operational scale, may position it to capitalize on potential market shifts. However, the long-term sustainability of the business model hinges on the company's ability to adapt to price fluctuations and maintain operational efficiency.
Stamford, Connecticut--(Newsfile Corp. - March 13, 2024) - Sphere 3D Corp. (NASDAQ: ANY) ("Sphere 3D" or the "Company"), a Bitcoin mining company operating at an industrial scale, is pleased to announce financial results for its fiscal year ended December 31, 2023.
COMMENTS FROM SPHERE 3D LEADERSHIP
"I'm pleased to report that once again we delivered very strong results and made significant progress in our operations during 2023. I am very proud of the Sphere 3D team!" said Patricia Trompeter, CEO of Sphere 3D. "We increased our operating hashrate to 1.3 EH/s from just under 0.1 EH/s last year, resulting in an approximately
2023 HIGHLIGHTS
Revenue increased by
$15.8 million , to$21.9 million during the year ended December 31, 2023, due to an increase in revenues from our digital mining operation;The Company mined 667 Bitcoin in 2023;
The Company ended the year with 1.3 EH/s;
The Company sold its service and product segment, including HVE Inc. and Unified ConneXions.
BITCOIN ASSET AND VALUE
As of December 31, 2023, the Company had a self-mined Bitcoin balance of 23.8 with a carrying value of
FISCAL YEAR 2023 FINANCIAL RESULTS
- The Company generated revenues of
$21.9 million in fiscal year 2023 compared to$6.1 million in fiscal year 2022. The$15.8 million increase in revenue is due to the increase of$16.3 million in revenues from the Company's digital mining operation, offset by a decrease of$0.5 million in the Company service and product segment.
- Operating costs and expenses for fiscal year 2023 totaled
$51.9 million , compared to$163.7 million for fiscal year 2022. The$111.8 million decrease in operating costs and expenses is primarily attributable to decreases in impairments of mining equipment of$75.9 million and intangible assets and provisions for losses of$17.8 million , depreciation and amortization of$22.1 million , share-based compensation of$6.1 million , professional services associated with the Company's expansion into the digital asset mining industry of$4.5 million , merger expenses of$1.9 million offset by increases in cost of revenues of$12.5 million , legal expenses of$2.8 million , SPAC-related expenses of$0.9 million , increases in insurance of$0.5 million and other of$0.2 million .
- The net loss available to common shareholders in fiscal year 2023 was
$23.4 million , or a net loss of$1.93 per share, compared to a net loss available to common shareholders of$192.8 million , or a net loss of$20.36 per share, in fiscal year 2022.
FOURTH QUARTER AND RECENT CORPORATE DEVELOPMENTS
- On October 6, 2023, the Company terminated the Master Services Agreement with Gryphon Digital Mining, Inc., returning
22.5% to the Company's gross margin.
- On December 19, 2023, the Company's 3,162,500 shares of Minority Equality Opportunities Acquisition Inc. ("MEOA") Class B common stock were cancelled, eliminating the Company's ownership of MEOA, and the Company recognized a
$6.1 million gain related to the deconsolidation of MEOA.
- On December 28, 2023, the Company entered into a share purchase agreement with Joseph O'Daniel (the "Purchaser"), a related party, under which the Company sold its service and product segment, including HVE Inc. and Unified ConneXions, in consideration for
$1.00 and the transfer of HVE Inc.'s and Unified ConneXions's outstanding assets and liabilities. In connection with the share purchase agreement, the Purchaser, who served as the Company's President, resigned effective December 28, 2023. The Company recognized a noncash gain of$0.7 million related to the transfer of net liabilities to the Purchaser.
- During fiscal year 2023, the Company sold 3,336 bitcoin miners that were included in mining equipment, for cash proceeds of
$4.5 million .
- On January 16, 2024, the Company entered into a settlement agreement (the "Settlement Agreement") with Core Scientific, Inc. ("Core Scientific"), which was approved by a United States Bankruptcy Judge on January 16, 2024, as part of Core Scientific's emergence from bankruptcy, for
$10.0 million of Core Scientific's equity. The Settlement Agreement includes access to potential additional funds for interest as well as an additional equity pool if the value of Core Scientific equity initially received by the Company under the Settlement Agreement decreases below its value at the date of the Settlement Agreement in the 18 months after the date of the Settlement Agreement, commensurate with the other unsecured creditors. On January 23, 2024, the Company received 2,050,982 shares of Core Scientific common stock trading under the NASDAQ symbol "CORZ."
ABOUT SPHERE 3D
Sphere 3D Corp. (NASDAQ: ANY) is a cryptocurrency miner with decades of proven enterprise data-services expertise. The Company is growing its industrial-scale digital asset mining operation through the capital-efficient procurement of next-generation mining equipment and partnering with best-in-class data center operators. Sphere 3D is dedicated to increasing shareholder value while honoring its commitment to strict environmental, social, and governance standards. For more information about the Company, please visit Sphere3D.com.
FORWARD-LOOKING STATEMENTS
This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events, including the timing of the proposed transaction and other information related to the proposed transaction. In some cases, you can identify forward-looking statements because they contain words such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these words or other similar terms or expressions. Expectations and beliefs regarding matters discussed herein may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. The forward-looking statements contained in this communication are also subject to other risks and uncertainties, including those more fully described in filings with the SEC, including Sphere 3D's reports filed on Form 10-K, Form 10-Q and Form 8-K and in other filings made by Sphere 3D with the SEC from time to time and available at www.sec.gov. These forward-looking statements are based on current expectations, which are subject to change.
SPHERE 3D CONTACTS
Kurt Kalbfleisch, CFO, Sphere 3D
Investor.relations@sphere3d.com
SPHERE 3D CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of U.S. dollars, except share and per share amounts)
| Year Ended | |||||||
| December 31, | |||||||
| 2023 | 2022 | ||||||
| Revenues: | (Unaudited) | ||||||
| Bitcoin mining revenue | $ | 19,730 | $ | 3,443 | |||
| Service and product revenue | 2,176 | 2,634 | |||||
| Total revenues | 21,906 | 6,077 | |||||
| Operating costs and expenses: | |||||||
| Cost of Bitcoin mining revenue | 15,031 | 2,044 | |||||
| Cost of service and product revenue | 913 | 1,373 | |||||
| Sales and marketing | 948 | 1,009 | |||||
| Research and development | 1,026 | 605 | |||||
| General and administrative | 15,825 | 24,134 | |||||
| Depreciation and amortization | 6,190 | 28,263 | |||||
| Provision for losses on deposits due to vendor bankruptcy filings | 8,509 | 16,069 | |||||
| Impairment of acquired intangible assets | 2,952 | 13,182 | |||||
| Realized gain on sale of Bitcoin | (1,131) | (19) | |||||
| Loss on disposal of property and equipment | 960 | - | |||||
| Impairment of Bitcoin | 682 | 1,148 | |||||
| Impairment of mining equipment | - | 75,922 | |||||
| Total operating expenses | 51,905 | 163,730 | |||||
| Loss from operations | (29,999) | (157,653) | |||||
| Other income (expense): | |||||||
| Gain on deconsolidation of SPAC | 6,140 | - | |||||
| Interest expense | (1,183) | - | |||||
| Interest income and other expense, net | 1,062 | 2,581 | |||||
| Gain on disposal of service and product segment - related party | 663 | - | |||||
| Impairment of investments | - | (14,529) | |||||
| Forgiveness of note receivable | - | (13,145) | |||||
| Provision for losses on deposit for mining equipment | - | (10,000) | |||||
| Loss before income taxes | (23,317) | (192,746) | |||||
| Provision for income taxes | 13 | 166 | |||||
| Net loss | (23,330) | (192,912) | |||||
| Less: Non-controlling interest - income (loss) | 76 | (111) | |||||
| Net loss attributable to common shareholders | $ | (23,406) | $ | (192,801) | |||
| Net loss per share: | |||||||
| Basic and diluted | $ | (1.93) | $ | (20.36) | |||
| Shares used in computing net loss per share: | |||||||
| Basic and diluted | 12,129,302 | 9,470,630 | |||||
SPHERE 3D CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
| December 31, | December 31, | ||||||
| 2023 | 2022 | ||||||
| (Unaudited) | (Unaudited) | ||||||
| ASSETS | |||||||
| Cash and cash equivalents | $ | 586 | $ | 1,337 | |||
| Digital assets, net | 986 | 1,695 | |||||
| Other current assets | 11,938 | 7,252 | |||||
| Total current assets | 13,510 | 10,284 | |||||
| Property and equipment, net | 24,166 | 34,259 | |||||
| Intangible assets, net | 4,581 | 9,477 | |||||
| Funds held in trust account | - | 10,297 | |||||
| Other non-current assets | 3,406 | 18,699 | |||||
| Total assets | $ | 45,663 | $ | 83,016 | |||
| LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS' EQUITY | |||||||
| Current liabilities | $ | 5,346 | $ | 6,200 | |||
| Other non-current liabilities | - | 5,784 | |||||
| Total temporary equity | 13,794 | 36,467 | |||||
| Total shareholders' equity | 26,523 | 34,565 | |||||
| Total liabilities, temporary equity, and shareholders' equity | $ | 45,663 | $ | 83,016 | |||
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/201443
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