Bitcoin Miner Riot Blockchain Racks Up $221 Million Deficit

U.S. mining firm Riot Blockchain has published its financial report for Q1 2020 — painting a picture of a company heavily reliant on equity and debt financing to fund its operations.

The firm reported recurring losses and negative cash flows from its operations, with Riot anticipating continued losses over the near term.

But the mining outfit is pinning its hopes on the arrival of 2000 next generation mining machines it believes will enable it to double its operational hash rate. 

Riot improves year-over-year performance

As of March 31, 2020, Riot Blockchain reported holding cash and cash equivalents worth $14 million; $5.3 million in crypto assets — predominantly Bitcoin (BTC) — along with working capital of $17 million.

In a press release, Riot emphasizes its improved performance when compared with the first quarter of 2019 —  with its margin on mining operations up to $955,000 from a loss of $65,000. Revenue increased 68%, from $1.4 million to $2.4 million, when compared to Q1 2019.

The firm also emphasizes a sharp increase in corporate liquidity since the start of the year, with liquidity up to $19.2 compared to $11.3 million as of December 31, 2019.

Yeah, but about that $221 million ...

However, Riot’s accumulated deficit exceeded $221 million, with the company relying on equity and debt financing to fund most of its operations.

Further, the company “expects to continue to incur losses from operations for the near-term,” noting that the losses may be significant as legal and administrative costs, and expenditures associated with acquisitions, continue to mount. “The company is closely monitoring its balances, cash needs, and expense levels,” the report stated.

Riot bets big on next-generation antminers

The firm notes that its Q1 gains in revenue and gross profit can be primarily attributed to changes in cryptocurrency prices and its recent deployment of next-generation cryptocurrency miners.

In December, Riot purchased 4,000 Antminer S17 Pro ASICs from Bitmain for roughly $6.3 million. While all of the units were deployed by the end of February, disruptions stemming from COVID-19 saw the firm relocate a significant portion of its S17s to a facility in New York operated by Coinmint in April.

Riot has recently purchased 1,000 Antminer S19s and 1,040 S19 Pros Bitmain, expressing expectations that their deployment will double its operational hash rate.

However, with debts exceeding $220 million, it remains to be seen whether the S19s will be able to significantly improve the company’s performance, especially after this week’s halving saw the block reward reduced to just 6.25 BTC.