Breaking into a butterfly amidst market volatility--analysis of Bitdeer's financial results

Bitdeer (Bitdeer) was founded in 2018, through the SPAC method in April 14, 2023 on the NASDAQ listing, stock code [BTDR]. Bitdeer is the world's leading digital asset mining service provider, headquartered in Singapore, co-founded by Wu Jihan, co-founder of Bitmain and Matrixport, together with Sequoia Capital, IDG and other well-known investment institutions, and has two service platform under its banner, “Bitdeer” and “Mining++”. Mining ++”, to provide customers with mining cloud services and mining capacity management, including the whole ecological mining services. According to public information, Bitdeer currently operates five proprietary mining data centers in the United States and Norway, providing services to users in 200 countries and regions.

In this article, we will deeply analyze Bitdeer's financial performance and the driving factors behind it over the past 2-3 years, and explore its growth trajectory amidst industry competition. In terms of changes in operating capacity, fluctuations in profitability, and adjustments to the asset and liability structure, this paper will provide a comprehensive overview of how Bitdeer has survived and developed in a continuously volatile market, with a view to providing valuable reference for investors and peer companies.

1. Per Share Indicators

Reporting period | 2024Q1 | 2023FY | 2022FY | 2021FY

Basic earnings per share | $ 0.01 | - $0.51 | -$0.56 | $0.76

Net assets per share | $3.30 | $2.97 | $9.07 | $7.55

In terms of basic earnings per share, Bitdeer performs best in 2021. The cryptocurrency market warmed up that year, the price of bitcoin showed an upward trend, and in January of the same year, Bitmain co-founder Jihan Wu announced his resignation from Bitmain and assumed the role of chairman of Bitdeer, and other former executives from Bitmain joined Bitdeer's executive team. The strong entry of outstanding people will help boost market confidence and improve earnings per share.2022 to 2023 has been in the red, on the one hand, due to the cryptocurrency market continues to be in turmoil after a series of blow-ups such as Terra/USD, LUNA, Three Arrows Capital, FTX, Genesis, and so on, the price of bitcoin fell by more than 70% at one time; On the other hand bitcoin computing power continues to increase, and the difficulty of mining is at an all-time high. As a result, profitability was further squeezed under the general environment of continuous decline in coin price and continuous growth in arithmetic power. achieved earnings per share of $0.01 in the first quarter of 2024, which was the first time since 2021 that positive earnings were achieved.

In terms of net assets per share, they rose slightly to $7.55 per share in 2021 and $9.07 in 2022. However, it plunges to $2.97 in 2023, mainly due to the formal listing of the company in 2023 involving a share swap and absorption merger. Back in November 2021, Bitdeer planned to merge with Blue Safari Group Acquisition Corp, a blank check company, via SPAC, valuing the company at $4 billion. After a year and a half, Bitdeer has finally completed its curve to go public, while the company's valuation has been severely reduced, directly from $4 billion to $1.18 billion, a whopping 70.5% drop. The number of common shares issued on the day of the IPO was 111 million, and the dilution of equity and decrease in market capitalization led to a decrease in net assets per share. net assets per share for the first quarter of 2024 was $3.30, a slight increase that correlates with the company's positive earnings, as well as an increase in market capitalization.

Overall, Bitdeer's financial performance is closely related to the cryptocurrency market volatility, management changes and the company's IPO. The company's operating performance has gradually rebounded after the bear market, and its asset size is also on an upward trend after the share swap adjustment, which reflects the adaptability and flexibility of Bitdeer's development strategy to the market.

2. Operating capacity analysis

Reporting period | 2024Q1 | 2023FY | 2023Q3 | 2023Q2 | 2023Q1 | 2022FY

Business cycle | 15.43 days | 17.38 days | 17.04 days | 18.25 days | 20.80 days | 14.33 days

Accounts receivable turnover ratio | 5.83 times | 20.72times | 15.85 times | 9.86 times | 4.33 times | 25.12 times

Current asset turnover ratio | 0.34 times | 1.09 times | 0.77 times | 0.49 times | 0.21 times | 0.82 times

Fixed asset turnover ratio | 0.74 times | 2.51 times | 1.74 times | 1.20 times | 0.54 times | 2.76 times

Total Asset Turnover | 0.18 times | 0.57 times | 0.40 times | 0.26 times | 0.11 times | 0.51 times

In terms of operating capacity, Bitdeer has seen a slight overall increase in total asset turnover from 2022 to 2023, while having a pattern of increasing quarterly. With the global crypto market experiencing a bear market, Bitdeer has resisted the pressure to further reduce costs and increase efficiency by continuously improving the efficiency of asset utilization, advancing its strategy of vertical integration of technology, and successfully testing its self-developed chips, while making progress in diversifying and scaling its global mining operations. By expanding its mining and high-performance computing capabilities, Bitdeer has improved its revenue streams while also being able to better utilize its assets.

The decrease in the accounts receivable rate in 2023 compared to 2022 indicates progress in improving the company's accounts receivable management and collection processes. Bit deer may be able to reduce its accounts receivable backlog through internal management improvements, such as increased scrutiny of customer credit or optimized account collection strategies. Fixed asset turnover ratio also shows the same trend, which indicates that in Bitdeer is still investing in fixed assets on a certain scale in 2023, increasing the construction of mining equipment, technology research and development. The core of the bitcoin mining industry lies in the mining machine, as the main production tool for mining, the mining machine will directly affect the mining revenue and cost. With the rise in bitcoin prices and the approaching halving event, mining costs are about to double, which means that only high-performance mining machines can maintain benefits.

3. Analysis of Operations

Reporting period | 2024Q1 | 2023FY | 2023Q3 | 2023Q2 | 2023Q1 | 2022FY | 2022Q3 | 2022Q2

Total Hash Rate (EH/s) | 22.5 | 21.0 | 21.2 | 18.8 | 18.3 | 14.0 | 12.9 | 10.5

Total number of mining machines | 226000 | 215000 | 221000 | 199000 | 196000 | 152000 | 143000 | 119000

Total electric capacity | 895 | 895 | 895 | 795 | 795 | 775 | 755 | 522

Number of Bitcoin mined (self-mined) | 911 | 3694 | 1085 | 758 | 552 | 2113 | 490 | 521

Operationally specific, Bitdeer has been experiencing an increase in total hash rate and number of mining machines from the second quarter of 2022 through the first quarter of 2024. On a quarterly basis, the number of bitcoins mined rose sharply each quarter through 2023 until the first quarter of 2024 when the number declined from the previous quarter; on a yearly basis, the total number of miners also increased by 74.8% in 2023 compared to 2022, which indicates that Bitdeer has continued to improve its mining capacity to maintain its competitive strength.

Overall, Bitdeer has taken measures in recent years to improve its mining capacity and hash rate on the Bitcoin network by building data centers, upgrading the capacity of its equipment, optimizing its mining equipment, and expanding its partners, so as to enhance its competitiveness in the cryptocurrency mining industry.

4. Profitability Analysis

Reporting period | 2024Q1 | 2023FY | 2023Q3 | 2023Q2 | 2023Q1 | 2022FY

Return on equity | 0.17% | -17.41% | -16.21% | -15.90% | -2.96% | -19.91%

Net profit margin on sales | 0.51% | -15.37% | -20.35% | -29.94% | -13.04% | -18.11%

Gross margin on sales | 28.56% | 21.11% | 20.01% | 17.82% | 18.58% | 24.98%

Cost of sales ratio | 71.44% | 78.89% | 79.99% | 82.18% | 81.41% | 75.03%

Net Profit/Total Operating Income | 0.51% | -15.37% | -20.35% | -29.94% | -13.04% | -18.11%

Operating cash flow/operating income | / | -73.74% | / | / | / | -80.41%

In terms of profitability, Bitdeer shows an overall trend of turning around.

In terms of return on net assets: in 2022, the return on net assets of Bitdeer was -19.91%, the company's net profit to net assets ratio was negative, and the company had a large loss. in the first quarter of 2023, the company's return on net assets became -2.96%, although still negative, but it was a significant improvement compared to 2022. the return on net assets started to drop significantly in the second quarter of 2023, which was due to the high cost of preparing for the IPO, and the high cost of preparing for the IPO. reason is the high cost of preparing for the IPO, and the return for the whole year of 2023 is -17.41%. The losses in both years were also closely related to the cryptocurrency market downturn at the time, as the shrinking price of bitcoin and lower demand in the market led to the company's net sales margins and net income remaining negative. Increased global regulation, tightening monetary policy, uncertainty in the economic environment, and high leverage within the cryptocurrency industry have sent the industry into the winter. 2024's first-quarter NPAT of 0.17% is certainly a positive sign, as the company achieved positive net income for the first time despite modest earnings.

As far as net sales margin is concerned, its trend is basically in line with the return on net assets, which increased slightly but still not negative in the first quarter of 2023, dropped to the lowest value of -29.94% in the second quarter of 2023, and then gradually recovered, and for the first time in the first quarter of 2024, it had a positive value of 0.51%.

As far as gross margin on sales is concerned, it was 24.98% for the full year 2022, declined to 18.58% in the first quarter of 2023, and then rose slowly at first, with a significant improvement in the first quarter of 2024. Bitdeer faces the challenge of declining gross margins in 2023 due to a combination of changing market conditions, rising costs and business restructuring.

On a consolidated basis, Bitdeer's financial position experienced a shift from loss to profitability from 2022 to the first quarter of 2024. for the full year of 2022 to the second quarter of 2023, the company was under pressure to lose money, primarily due to lower revenues and higher costs as a result of the bear market and the spending of IPO expenses. the company's profit and EBITDA in both the third and fourth quarters of 2023 showed a positive financial performance, and the company's profit and EBITDA in both the third and fourth quarters were positive. both showed positive financial performance, with losses narrowing and a turnaround in the first quarter of 2024. Despite challenges such as volatility in the cryptocurrency market and increased difficulty in mining, Bitdeer has endeavored to improve its profitability through measures such as increasing the number of self-mined bitcoins and boosting the total hash rate under management.

5.Analysis of Financial Indicators

Reporting period | 2024Q1 | 2023FY | 2022FY | 2021FY

Debt-to-asset ratio | 43.36% | 47.99% | 51.13% | 5.32%

liquidity ratio | 1.83 | 1.59 | 1.53 | 0.52

Equity multiplier | 1.77 | 1.92 | 2.05 | /

Current Assets/Total Assets | 53.35% | 52.94% | 52.12% | 0.97%

Total current liabilities/liabilities | 67.18% | 69.22% | 66.42% | 35.45%

As far as the gearing ratio is concerned, the company's gearing ratio soars from 5.32% to 51.13% in 2022, which is mainly attributed to the company's increase in financing borrowings in order to counteract unstable cash flows due to the volatility of the price of Bitcoin, leading to an increase in the total liabilities and therefore a significant increase in the current assets ratio. The company's liabilities increased while shareholders' equity may not have increased by the same magnitude, which led to an increase in the gearing ratio. from 2022 to the first quarter of 2024, the company's gearing ratio has been on a slow downward trend overall from 51.13% to 43.36%, and the company's financial structure has become relatively more robust, but it is still at a higher level of indebtedness. As for the current ratio, it increased substantially from 2021 to 2022 and has been showing a slow rising trend since then, indicating that the company's short-term solvency has been increasing after listing. The current assets to total assets ratio also shows the same trend.

The company's current liabilities to total liabilities ratio has been maintained at a more stable and less fluctuating level after a significant rise in 2022. The company's debt is mainly short-term debt at present, which is due to the high volatility of the cryptocurrency market, the company prefers short-term debt to respond quickly to market changes, to take advantage of market opportunities or to alleviate the pressure on funds in the short term.

In summary, Bitdeer's financial structure has changed significantly from 2021 to the first quarter of 2024. The overall downward trend in gearing ratio indicates that the company's debt burden has been reduced; the improvement in current ratio indicates that the company's short-term debt-servicing ability has been enhanced; the decrease in equity multiplier also reflects the reduction in financial leverage; the improvement in the ratio of current assets to total assets indicates that the liquidity of assets has been strengthened; and the higher ratio of current liabilities to total liabilities implies that the company needs to pay attention to the management of short-term debt. These changes may be the measures taken by the company to optimize its capital structure and reduce financial risks. Meanwhile, Bitdeer is also working hard to develop AI cloud services, self-developed mining machines, etc., to enhance its strength and seize market opportunities through its expertise and balance of global resources.

In the future, Bitdeer needs to pay close attention to the fluctuation of financial indicators, consider the diversification of debt structure, strengthen the management of liquid assets, establish and improve the risk management system, continue to invest in technology and innovation, and suggest exploring the possibility of business diversification to reduce the dependence on a single market or asset, and to improve the company's overall risk-resistant ability.

References

[1] Bitbeer Bitbeer Quarterly Statements 2022-2024. https://ir.bitdeer.com/annual-report

[2]OrientalFortune https://emweb.eastmoney.com/PC_USF10/pages/index.html?code=BTDR&type=web&color=w#/cwfx