CleanSpark has software that helps companies become more energy efficient and mines bitcoin

CleanSpark has software that helps companies become more energy efficient and mines bitcoin

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Develops energy-control software and builds microgrids Launching mVoult residential microgrid product Successfully expanded into bitcoin mining with data centers acquisition What CleanSpark does:  CleanSpark Inc (NASDAQ:CLSK), based in Bountiful, Utah, has developed software to help companies and homes become more energy-efficient, and is also now big in bitcoin mining. The company designs and builds microgrids while providing engineering, consulting and turn-key implementation services. It also offers software for energy monitoring and system controls. CleanSpark's software - mPluse and mVSO (Microgrid Value Stream Optimizer) - enables a microgrid to be scaled to the user's specific needs and can be used by agricultural, commercial, industrial enterprises as well as the military and municipal governments, and residential users. Customers include not only energy consumers but independent power producers (renewable energy) and energy-storage vendors. The company, founded in 1987, runs on a software-as-a-service (SaaS) distribution model. CleanSpark’s mPulse software and control suite operates on-site in real-time, providing economic dispatch controls to maximize performance and resiliency operations to back-up critical energy loads in the event of a utility disruption. The company says its software is ideally suited for the rapidly expanding distributed energy resource (DER) market, which it has been targeting as a key revenue generator.  The global energy infrastructure is ageing and unreliable due to increases in loads and lack of new large-scale generation facilities (nuclear and coal). Meanwhile, renewable energy resources like solar, batteries, fuel cells and clean-energy generators are connecting to the grid, sometimes intermittently, stressing it and making it more complex to manage. But, at the same time, consumers such as defense installations, industrial complexes and campuses across the world are turning to virtual power plants and microgrids to decrease their reliance on the grid to tap directly into renewable energy providers and to strengthen their own energy security against blackouts. In a sense, these consumers become their very own utilities.  As a result, CleanSpark’s mPluse and mVSO software and control solutions are designed to provide consumers of all sizes with the mission-critical technologies that can help integrate and operate DERs as reliable energy generators on the grid. For those consumers who get energy off the main power grid, the company’s technology helps them modernize their own distribution microgrids while replacing fossil fuel generation with clean-energy suppliers. CleanSpark’s microgrids monitor energy rates continuously in 15-minute cycles, tapping the least expensive source. How is it doing: CleanSpark has made a very busy start to 2021, as it predicted in an annual letter to shareholders on December 31, 2020. It said then that it was aggressively seeking new acquisition opportunities for 2021 after realizing fiscal 2020 revenue of more than $10.0 million, the third-consecutive year of greater than 100% top-line growth. The company also noted that it planned to identify partnerships and product enhancements in 2021, which it expected would expedite its growth. In the company's most recent expansion, on July 14, CleanSpark said it had struck an agreement with new partner Coinmint to potentially deploy nearly 25 megawatts (MW) of its highly efficient Bitmain S19 Pro miners at a location operated by Coinmint. The company plans to deploy around 750 PH/s in hashrate capacity at Coinmint's facility in Massena, New York between July and September this year. To support this hash rate, Coinmint has agreed to provide 25 MW of power, provide operations support and commit to 98% uptime. CleanSpark expects the agreement to “rapidly increase” its overall hashrate across all bitcoin mining locations to 1.2 EH/s upon installation and believes that it will allow it to maximize its bitcoin production, while maintaining all aspects of its environmental, social, and corporate governance (ESG) mining philosophy. Coinmint operates the largest private digital currency data center in the world. The power is primarily derived from hydroelectric power, and, including all sources, achieves an energy mix that is 94% carbon-free. Coinmint is focused on all aspects of ESG in addition to operating a site powered primarily by renewable energy and focuses on providing jobs within its community. Additionally, CleanSpark and Coinmint intend to collaborate on further expansion of their green energy initiatives, with a goal of reaching 100% renewable power. Staying with bitcoin mining, on May 23 CleanSpark announced the completion of its purchase of the six-acre property which houses ATL Data Centers LLC and the 41,387 square foot data center building. As a part of the ATL transaction in December of 2020, CleanSpark acquired the existing Bitcoin mining ‘mobile data centers’ within the facilities. The company said it is in the process of expanding the number of mobile units deployed on-site in support of its focus on maximizing value and minimizing operating expense.  A purchase option for the building and site was included in the original lease agreement at closing, and the resulting purchase transaction was finalized May 20, 2021, at a price of $4.71 million. Obtaining ownership of the property will save the company over $50,000 per month in rent resulting in a reduction of overhead and expenses by more than 20% in our mining segment. And earlier in the same month, CleanSpark said it had purchased 2,400 Bitcoin mining S19-Pro rigs, which were expected to be delivered to its Atlanta mining operations in the first week of June. The new machines are designed to increase the overall hashrate efficiency, essentially the rate at which bitcoins are mined, of its existing fleet. The replacement of older-generation equipment is part of CleanSpark’s efforts to maximize energy efficiency when mining Bitcoin, in accordance with its ESG-focused approach, the company said, and is expected to increase production by about half a bitcoin per day. Bitcoin was valued at $49,642.15 Thursday morning. CleanSpark has also reached an agreement to sell a portion of the replaced, prior generation rigs, which consume more power and produce a much lower hashrate. The company anticipates that the swap will decrease overall energy consumption by about 1 megawatt (MW) while increasing production efficiency of the replaced equipment by more than 37%. Away from bitcoin mining, on the microgrid front, in its most recent announcement on July 7, CleanSpark announced the operating results of a microgrid project recently commissioned in San Diego, saying it resulted in a significant decrease in operational costs. The company said its wholly-owned subsidiary, Solar Watt Solutions, partnered with RSI Roofing on implementation of the solar-plus-storage microgrid system. In May CleanSpark also announced that Solar Watt Solutions had inked a new partnership initiative with FAFCO, the nation’s oldest and largest solar thermal manufacturer, to expand CoolPV Operations into Malibu, Santa Barbara and the San Fernando Valley in California. Solar Watt Solutions said it will increase solar and storage installations for its customers into the regions bringing cost-effective and sustainable backup energy solutions to Southern California homeowners. On the same day that that partnership was announced, CleanSpark had also revealed that it had been winning praise from International Land Alliance Inc, a land investment and development firm.  CleanSpark serves as the exclusive partner for the engineering, design, development, and controls of all renewable energy solutions across ILA’s property portfolio, including the company’s advanced solar-plus-storage power solutions at ILA’s Plaza Bajamar development in Mexico. CleanSpark CEO Zach Bradford noted that his company has already successfully deployed a microgid on ILA’s model home and is now moving to the next phase: The company will provide all of the units in ILA’s Plaza Bajamar community with solar microgrid installations supported by its software solutions.  In other corporate partnerships, on June 27 CleanSpark said it had entered into a collaborative memorandum of understanding (MOU) with Swiss wind turbine technology company FlowGen Ltd, in which the latter has agreed to use CleanSpark's mPulse controls solution in all of its microgrid projects globally. And on June 3, CleanSpark said it had extended and expanded a contract manufacturing agreement with Pioneer Power Solutions Inc through to the end of 2023. The company said Pioneer plans to bundle the solutions with PowerBloc, PPSI’s integrated charging and power solution for electric vehicle (EV) infrastructure. CleanSpark also said it has been granted expanded rights and opportunities to serve as a preferred distributor of the PowerBloc solution. In the same announcement, Cleanspark also said it had become a member of Think Microgrid, a group of leading Microgrid and energy companies organized to advance state and federal policies, adding that the body “fills the need for a coordinated voice supporting the fast-growing microgrid sector in critical policy, legislative and regulatory discussions currently underway”. Looking at its financials, on May 7 CleanSpark revealed that it generated $7.4 million in second-quarter net income on rising revenues as the company expanded sales and marketing initiatives for its energy business.  For the three months ended March 31, 2021m the company marked revenue of $8.1 million, an increase of $4.4 million or 122% from $3.6 million for the same prior-year period.  CleanSpark said net income was $0.28 basic earnings per share and $0.22 fully-diluted earnings per share, compared to a loss of $5.8 million or $1.13 loss in basic and diluted earnings per share for the same period in 2020.  In addition, the company said it ended the quarter with working capital of $171.1 million, compared to $2.9 million as of September 30, 2020. In the boardroom, on June 23 CleanSpark announced the appointment of blockchain veteran Bernardo Schucman as senior vice president of its Atlanta-based Bitcoin mining center.  Schucman, who has more than seven years of Bitcoin mining and cryptocurrency data center operations experience, served most recently as CEO of ATL Data Centers before ATL was acquired by CleanSpark. He will oversee CleanSpark’s Bitcoin mining and data center operations. Shareholders got a boost in the same announcement from news that the stock would be added to the Russell 2000 Index at the market open on June 28, 2021.  Inflection points: Continuing increase in Bitcoin mining activity News on residential microgrid progress Further corporate microgrid orders, partnerships What the broker says: Water Tower Research initiated coverage on CleanSpark in a note published on July 27, 2021. Its analysts pointed out that CleanSpark is a diversified software and services company aligned to the fast-growing market for microgrids and bitcoin mining. The company’s software intelligently controls and manages microgrids to save money and optimize performance, providing an attractive ROI for its energy customers. According to Guidehouse Insights, the global market for microgrids is expected to grow at a CAGR of 28% through 2029. They also ranked CleanSpark among the Top 15 microgrid controller companies in the world. Management is pushing to drive higher margins (targeting ~85%) by migrating the business model toward bitcoin mining and related energy solutions. CleanSpark reported a record 2Q21 with revenues doubling for the second consecutive quarter along with achieving profitability for the first time, largely driven by the company’s bitcoin mining operation, CleanBlok. Management expects the company to generate revenues of $47-67 million in FY21 with $16-20 million from the energy business, $1.0 million in digital agency, and $30-40 million in bitcoin mining. CleanSpark and Coinmint are collaborating on the ecofriendly mining of bitcoin. The partnership will enable CleanSpark to bring additional bitcoin mining capacity online and will help the company increase its overall hashrate capacity to its goals of 1.2 EH/s upon installation around mid-September. What the boss says: In the July 14 statement announcing the agreement with Coinmint, CleanSpark CEO Zach Bradford described the development as a “very exciting opportunity” for the company. “We are pleased to align ourselves with a company that has a similar ESG approach and a strong history of performance as a mining service provider. We anticipate that this agreement will enable us to expedite the time to reach 1.2 EH/s. All our recent shipments of mining rigs have arrived as agreed under our purchase agreements. “Over the course of the next three months, we plan to redirect our shipments to the Coinmint facilities to maximize the contracted 25 MW of clean power. Once we have reached full allocated capacity under the Coinmint agreement, we will then direct shipments of the new units to our Atlanta facilities," he said.  Contact the author at jon.hopkins@proactiveinvestors.com

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