Written by: Chris, Techub News
BitFuFu Inc. (NASDAQ: FUFU), a provider of digital asset mining services and cloud mining services, reported an unaudited second quarter 2024 financial report showing the company’s revenue growth achieved significant growth. However, despite strong revenue growth, declines in net income and adjusted EBITDA reflect the challenges the company continues to face in cost management and profitability.
Abstract:
BitFuFu achieved total revenue of $129.4 million in the second quarter of 2024, an increase of 69.7% from $76.3 million in the same period in 2023. Among them, cloud mining solutions contributed US$77 million, an increase of 66.8% from US$46.2 million in the previous quarter; Bitcoin self-mining business revenue was US$51.1 million, an increase of 81.0% from US$28.2 million in the previous quarter. %. This shows that the company has achieved certain results in expanding its business scale and attracting new customers.
Despite the significant increase in revenue, BitFuFu's net income fell to $1.3 million from $5.1 million in the same period in 2023, a decrease of 74.5%. Additionally, adjusted EBITDA was $8.3 million, a decrease of 39.6% from $13.8 million in the same period in 2023. The decline was primarily attributable to Bitcoin's unrealized fair value losses, which reached $16.4 million in the second quarter of 2024, demonstrating the negative impact of market volatility on the company's financial condition.
In terms of costs, the average cost per BTC of self-mining operations in the second quarter of 2024 rose sharply from US$19,344 in the same period of 2023 to US$51,887, an increase of 168.3%.
In addition, as of June 30, 2024, BitFuFu held a total of $155 million in cash, cash equivalents, and digital assets, an increase of 103.9% from $76 million on December 31, 2023. Despite the increase in cash reserves, the significant decline in net income shows that the company still faces challenges in capital management and will need to pay more attention to cost control and operational efficiency improvements in the future to cope with market fluctuations and maintain financial health.
Main financial data
2024 Q2 Adjusted EBITDA (non-GAAP measure) was $8.3 million, a decrease of 39.6% from $13.8 million in the same period in 2023. Results for the second quarter of 2024 included a non-cash unrealized fair value loss on BTC (4) of $16.4 million, compared with no fair value loss in 2023. Adjusted EBITDA for the second quarter of 2023 included a $2.2 million non-cash impairment loss on digital assets.
As of June 30, 2024, the combined balance of cash, cash equivalents and digital assets held by BitFuFu was US$155 million, compared with the cash, cash equivalents held by BitFuFu as of the end of last year The combined balance of digital assets and digital assets was US$76 million, an increase of 104%.
BitFuFu Chairman and CEO Leo Lu said: BitFuFu had another strong quarter with total revenue up 70% year-over-year. And the registered user base of BitFuFu cloud mining has increased significantly. As of June 30, the number of users exceeded 395,000. This is an increase of 87% from the same period last year and a 23% increase from the first quarter of 2024. Cloud mining revenue accounted for approximately 60% of BitFuFu’s second-quarter revenue. BitFuFu’s cloud mining operations allow us to effectively lock in the price of Bitcoin as a hedge against Bitcoin price fluctuations, a strategy that has proven particularly valuable during the recent significant decline in Bitcoin prices.
BitFuFu Chief Financial Officer Calla Zhao said: As of the end of the second quarter, BitFuFu continued to maintain a healthy balance sheet, with a net cash position including digital assets of US$52.5 million, laying a solid foundation for the implementation of BitFuFu’s growth strategy. Base.
The author believes that although BitFuFu's revenue showed significant growth in the second quarter of 2024, the company still needs to further optimize its profitability and cost management. In the second quarter of 2024, the company achieved total revenue of US$129.4 million, an increase of 69.7% from US$76.3 million in the same period of 2023, of which cloud mining solution revenue was US$77 million and Bitcoin self-mining business revenue was US$51.1 million. US dollars, up 66.8% and 81.0% respectively compared with the same period last year. However, despite the significant increase in revenue, the company's net profit fell to $1.3 million from $5.1 million in the same period in 2023, a drop of 74.5%. The decrease in net profit indicates that despite increased market demand and driving revenue growth, BitFuFu still faces pressure on cost control and operating efficiency, especially as adjusted EBITDA fell 39.6% from the same period a year ago. In addition, the company's non-cash unrealized fair value losses further depressed earnings performance. Although the combined balance of cash and digital assets has doubled to $155 million, how to further optimize the cost structure and improve profitability will be the key to the company's ability to achieve sustainable growth in the future.
Revenue and cost analysis
Income
In the second quarter of 2024, BitFuFu's total revenue was $129.4 million, compared to $76.3 million in the second quarter of 2023, an increase of 69.7%. Total revenue included $77 million from cloud mining solutions, $51.1 million from its self-mining Bitcoin business, and $1.1 million from managed services.
Among them, BitFuFu cloud mining solution revenue in the second quarter of 2024 was US$77 million, an increase of 66.8% from US$46.2 million in the same period of 2023. This growth was primarily driven by repeat purchases from existing customers and the addition of new customers. Specifically, revenue from active customers during the same period in 2023 was US$47.4 million, accounting for 61.5% of cloud mining revenue; while revenue from new customers acquired after June 30, 2023 totaled US$29.6 million, accounting for 61.5% of cloud mining revenue. 38.5%. Additionally, BitFuFu's net dollar retention rate in Q2 2024 was 103%, indicating that the company is performing well in maintaining its customer base and generating recurring revenue.
In the second quarter of 2024, revenue from BitFuFu’s Bitcoin self-mining business was US$51.1 million, an increase of 81.0% from US$28.2 million in the same period of 2023. This increase was primarily driven by a 135.0% year-over-year increase in the average Bitcoin price, resulting in $38.2 million in revenue growth. However, gains from higher prices were partially offset by a $15.3 million drop in revenue from lower Bitcoin production. Specifically, BitFuFu’s Bitcoin production dropped to 780 BTC from 1,014 BTC during the same period in 2023, a decrease of 23.1%, mainly due to the increase in blockchain difficulty and the block reward halving in April 2024.
In addition, BitFuFu's custody services revenue was $1.1 million in the second quarter of 2024, a decrease of 40.7% from $1.9 million in the same period in 2023. This decline is mainly due to some customers temporarily suspending or terminating custody services in order to reduce mining losses after the block reward halving in April 2024.
Taken together, in the revenue structure of BitFuFu in the second quarter of 2024, cloud mining solutions accounted for 59.5% of total revenue, Bitcoin self-mining business accounted for 39.5%, and custody services and others accounted for 1.0%. Despite strong revenue growth, the company faces challenges in terms of declining Bitcoin production and declining custody service revenue. It will need to further optimize mining efficiency and customer service in the future to ensure continued revenue growth and stable business development.
Costs and fees
Cost
BitFuFu's operating costs in the second quarter of 2024 were US$118.4 million, an increase of 74.2% from US$68 million in the same period of 2023, mainly due to the increase in costs related to the company's cloud mining solutions and self-mining business expansion, compared with the same period in 2023. The corresponding growth in revenue is consistent. However, BitFuFu’s unaudited financial report does not show detailed data of operating costs of US$118.4 million in the second quarter of 2024. It can only be temporarily believed that the operating costs in the second quarter of 2024 increased as written in the financial report. The main reason is due to the increase in costs related to the company's cloud mining solutions and self-mining business expansion.
Fees
Sales and marketing expenses for the second quarter of 2024 were $0.6 million, an increase of 50% from $0.4 million in the same period in 2023. The increase was primarily attributable to increased spending on advertising and promotional activities during the quarter. However, despite the significant year-over-year increase in cloud mining revenue, sales and marketing expenses as a percentage of total cloud mining revenue remained stable at 0.8%, the same as in the second quarter of 2023. This shows that the company has successfully controlled the proportion of marketing costs relative to revenue and maintained high operating efficiency while expanding market promotion.
General and administrative expenses increased to $1.4 million in the second quarter of 2024, an increase of 133.3% from $0.6 million in the same period in 2023. This increase was primarily due to an increase of $0.5 million in legal and other consulting fees related to the expansion of the Company's business development activities, an increase of $300,000 in employee costs, and additional expenses required as a public company upon BitFuFu's listing in March 2024 An increase of $300,000. The increase in these expenses reflects the company's investment in business expansion and capital markets activities, which not only increases operating costs, but also lays the foundation for future growth.
Research and development expenses for the quarter remained at $0.3 million, unchanged from the same period in 2023.
In the second quarter of 2024, BitFuFu experienced no impairment losses on digital assets, while in the same period in 2023, the company's digital assets experienced an impairment loss of US$2.2 million. This shows that companies will manage digital assets more prudently in 2024 to avoid losses caused by market price declines or asset devaluation.
In addition, as of January 1, 2024, BitFuFu has begun early adoption of a new accounting standard, the FASB Fair Value Accounting Standards (ASU No. 2023-08 "Accounting and Disclosure of Crypto-Assets"). Under this code, companies are required to regularly evaluate and report changes in the fair value of cryptoassets, such as Bitcoin. In the second quarter of 2024, BitFuFu recognized a $16.4 million non-cash fair value loss on Bitcoin under this standard, meaning the company recorded a paper loss from a decline in the market price of Bitcoin. This loss is non-cash, meaning it is only on the books and does not represent an actual cash outflow.
BitFuFu generated $9.9 million in revenue compared to $2.9 million in the same period in 2023 due to an increase in the volume of Bitcoin sold in the second quarter and the higher spot price at which Bitcoin was sold. This growth demonstrates the company's ability to strategically manage favorable market conditions and successfully exploit market opportunities to increase earnings. At the same time, the company chose to retain the remaining Bitcoins in anticipation of further capital appreciation.
Overall, BitFuFu has shown a certain degree of flexibility and strategy in expense management and digital asset processing in the second quarter of 2024. In terms of sales and marketing, general and administrative expenses, the company has maintained relative cost control capabilities while increasing expenditures; in digital asset management, the company has achieved revenue growth through the adoption of fair value accounting standards and favorable market operations. increased and reduced impairment losses. In the future, the company will still need to find a balance between expense growth and revenue improvement to ensure continued financial health and market competitiveness.
The author believes that although BitFuFu achieved significant revenue growth in the second quarter of 2024, showing the company's success in expanding its business scale and attracting new customers, there are still obvious challenges in profitability and cost control. . While total revenue grew 69.7%, net income fell sharply, 74.5%, reflecting the company's pressure to manage costs and respond to market volatility.
Especially in the context of increased volatility in the Bitcoin market and the rising difficulty of blockchain mining, the company's cost management in its self-mining business is particularly critical. The average cost of BitFuFu mining rose to $51,887 per Bitcoin, showing the company’s inadequacy in coping with increased mining difficulty and market fluctuations. Additionally, the company recorded non-cash fair value losses in the adoption of fair value accounting standards, further depressing earnings performance.
However, it is worthy of recognition that BitFuFu has shown a certain degree of flexibility and strategy in fee management and digital asset processing, especially in taking advantage of market opportunities to increase digital asset returns. In addition, despite the increase in operating costs, the company still successfully controlled the proportion of marketing costs relative to revenue, demonstrating high operating efficiency.
However, the author believes that if BitFuFu cannot increase its efforts in cost control and improving operational efficiency, especially in optimizing the cost structure in its self-mining business, the company will face the deterioration of its financial situation amid increased market volatility. risks and may make it difficult to achieve sustainable growth.
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