CleanSpark Inc. CLSK Fiscal Year 2025 Q2 Analysis Report

Executive Summary

For the fiscal second quarter ending March 31, 2025, CleanSpark Inc. demonstrated significant operational growth driven by strategic acquisitions and an aggressive expansion in its Bitcoin mining capacity. The company’s total assets reached approximately $2.66 billion, primarily fueled by property, equipment, and a substantial Bitcoin reserve valued at nearly $980 million. Despite reporting a net loss of approximately $138.8 million attributable to common shareholders, the company maintains a robust liquidity position with cash and cash equivalents at nearly $97 million and Bitcoin holdings in Cold Storage. The recent acquisition of GRIID Infrastructure has expanded its operational footprint within Tennessee, enhancing diversification and capacity. Overall, the company’s financial position reflects a growth-oriented model with notable asset accumulation and a focus on long-term Bitcoin reserve strategy, though profitability metrics remain challenged by market volatility and operational costs.

Key Metrics

Management Discussion and Analysis

During Q2 2025, CleanSpark expanded its Bitcoin mining operations through strategic acquisitions, notably GRIID Infrastructure, resulting in increased capacity and diversification. The company’s total assets increased by approximately 43%, driven by property, equipment, and an impressive Bitcoin reserve growth. The company’s Bitcoin holdings nearly doubled from September 2024, with fair value rising by over 126%. Despite the decline in net income and negative EPS, this reflects market volatility and high operational costs inherent to large-scale mining. The company maintained a strong liquidity profile with nearly $97 million in cash and a significant Bitcoin reserve, positioning it well for future growth. Operational expenses increased due to recent acquisitions and infrastructure expansion, with capital expenditures exceeding $510 million for miners and facilities. The company’s strategy remains focused on scaling Bitcoin production and expanding its data center footprint, with recent asset acquisitions in Georgia, Tennessee, and Mississippi supporting this growth. The market environment remains volatile, but the company’s diversified asset base and strategic positioning aim to mitigate risks and leverage long-term Bitcoin value appreciation.

Income Statement Analysis

Revenues and Gross Profit

Bitcoin mining revenue for the quarter was approximately $181.7 million, a substantial increase from the prior year. However, gross profit margins are impacted by high costs, including $85.4 million in costs of revenues, primarily driven by energy, equipment, and depreciation expenses. The gross margin stands at approximately 53% for the quarter, indicating a healthy revenue-to-cost ratio but still susceptible to Bitcoin price fluctuations.

Operating and Net Income

Operating loss amounted to approximately $138 million, due to elevated depreciation ($78.9 million) and fair value losses on Bitcoin ($127.7 million). The net loss attributable to common shareholders was approximately $138.8 million, reflecting market volatility and high operational costs. Earnings per share (EPS) was -$0.49 on a basic and diluted basis, indicating ongoing profitability challenges despite asset growth.

Year-over-Year and Quarter-over-Quarter Trends

Compared to the same period last year, revenue increased notably, but net losses widened significantly, mainly due to Bitcoin fair value adjustments and depreciation expenses. Sequentially, revenue remained stable, but losses persisted, highlighting the impact of market conditions and asset write-downs. The company’s strategy to hold Bitcoin long-term is expected to benefit future periods if Bitcoin prices stabilize or appreciate.

Balance Sheet Analysis

Assets

Property and equipment increased by approximately 89%, reaching $1.27 billion, driven by new miners and infrastructure. Bitcoin holdings rose sharply to 11,869 BTC, with fair value nearly doubling from September 2024. Cash and equivalents declined to $96.9 million, reflecting operational investments and acquisitions. Total assets now stand at approximately $2.66 billion.

Liabilities and Equity

Total liabilities surged from $201.8 million to $766.5 million, mainly due to the issuance of $650 million in 2030 convertible senior notes and increased borrowings. Shareholders’ equity increased slightly to $1.89 billion, supported by retained earnings and additional paid-in capital. Leverage ratios have increased, but liquidity remains strong with substantial Bitcoin reserves and cash.

Liquidity and Leverage

The company’s current ratio remains healthy at over 8.6, and debt levels are manageable given the asset base. The recent refinancing and borrowing facilities provide flexibility for ongoing expansion and operational needs.

Cash Flow Analysis

Operating Activities

Net cash used in operating activities was approximately $231.7 million, primarily due to net losses and changes in working capital. Adjustments for non-cash expenses included significant depreciation ($145.1 million) and fair value losses on Bitcoin ($127.7 million).

Investing Activities

Capital expenditures exceeded $510 million, mainly on miners and infrastructure. Asset acquisitions and deposits for mining equipment reflect aggressive expansion plans. Sale proceeds from miners and Bitcoin contributed positively but were overshadowed by large investments.

Financing Activities

The company raised approximately $523.8 million through debt issuance (including the 2030 Notes), equity offerings, and exercised warrants. It repurchased 11.76 million shares for $145 million, indicating a capital return strategy alongside growth investments.

Ratios & DuPont Analysis

Despite facing net losses, the company’s return on assets (ROA) and return on equity (ROE) are affected by high depreciation and market fluctuations. Asset turnover is high due to significant Bitcoin and property assets. The asset turnover ratio is approximately 0.068, indicating efficient use of assets in revenue generation, while the equity multiplier reflects increased leverage post-debt issuance. The net margin is negative, consistent with ongoing operational challenges, but long-term prospects depend on Bitcoin price stability and operational efficiencies.

Risk Factors

Market volatility in Bitcoin prices remains the primary risk, impacting revenue and asset valuation. Regulatory uncertainties concerning cryptocurrency and mining operations could introduce compliance costs or restrictions. Competitive pressures from larger miners and data centers pose operational risks. Operational risks include energy costs, equipment failures, and infrastructure development delays. Financial risks involve high leverage and debt servicing obligations amid volatile revenue streams. Macro risks include economic downturns, energy price spikes, and geopolitical factors affecting supply chains and market stability.

Notes & Additional Commentary

Unusual items include significant fair value adjustments on Bitcoin and derivative investments, as well as large capital expenditures for infrastructure expansion. The company’s strategy to hold Bitcoin long-term has resulted in marked asset appreciation, but also introduces valuation volatility. The impact of recent acquisitions and asset revaluations will continue to influence financial performance and asset base in upcoming periods.

Investment Implications

In the short term, the company offers opportunities for growth through its expanded mining capacity and diversified data center footprint. However, profitability remains challenged by market volatility and high operational costs. Long-term investors should monitor Bitcoin price trends, regulatory developments, and operational efficiencies. The company’s asset base and liquidity position provide a solid foundation for sustained expansion, but risks from market downturns and leverage levels necessitate cautious optimism. A balanced outlook suggests potential for value appreciation if Bitcoin stabilizes and operational costs are controlled.