BIT Mining Limited Reports Q4 Results

BIT Mining Limited (BTCM) today reported its unaudited financial results for the fourth quarter and full year ended December 31, 2022.

Cryptocurrency Business Progress

BIT Mining has four primary business segments covering self-mining, mining pool, data center operation and mining machine manufacturing. The Company is pursuing its development strategy to focus on cryptocurrency mining operations globally.

Our subsidiary, Bee Computing, has designed a new generation of highly efficient Bitcoin ("BTC") and Dogecoin ("DOGE") / Litecoin ("LTC") mining machines utilizing the most advanced technology.

• Together with our partners, we have successfully produced more than 5,000 DOGE/LTC mining machines with a total hash rate capacity of approximately 22,373 GH/s. We have deployed all of these DOGE/LTC mining machines at our Ohio data center for use in our self-mining business. We expect to have produced approximately 8,000 DOGE/LTC mining machines in aggregate by early April 2023.
• Our BTC mining ASIC has been taped out and is in the process of being fine-tuned and optimized. The first silicon engineering sample of the chips will be available by the end of February 2023. We expect to have the first batch of system engineering samples in the first half of 2023.
• Bee Computing successfully produced 252 W1 ASIC Ethereum Classic ("ETC") mining machines in August 2022, achieving power efficiency of 0.5 W/MH. These ETC mining machines have been deployed and are online at the cryptocurrency mining data center we host in Akron, Ohio (the "Ohio Mining Site"). As of today, a substation with power capacity of 82.5 megawatts has completed construction and is operational at the Ohio Mining Site.

The Ethereum Merge, namely, of the Ethereum Mainnet and the Beacon Chain Proof-of-Stake system (the "Merge"), occurred on September 15, 2022. After the Merge, the Company changed its strategy to ETC cryptocurrency mining operations. As of today, the total hash rate capacity of our online ETC mining machines is approximately 3,525 GH/s. For the three months ended December 31, 2022, we produced 35,936 ETC from our ETC cryptocurrency mining operations, and recognized revenue of approximately US$0.8 million.

Due to recent declines in cryptocurrency markets, we suspended the operation of certain types of BTC mining machines. Despite the changes and uncertain environment, we are still determined to improve our quality and efficiency. As of today, the total hash rate capacity of our online BTC mining machines is approximately 66 PH/s. For the three months ended December 31, 2022, we produced 65 BTC from our BTC cryptocurrency mining operations, and recognized revenue of approximately US$1.1 million.

Due to continued declines in cryptocurrency prices in the fourth quarter of 2022, our mining pool business revenue decreased from US$88.5 million for the three months ended September 30, 2022 to US$53.9 million for the three months ended December 31, 2022.

"We are pleased to report our financial results for the fourth quarter and full year of 2022. Despite challenging market conditions, we have continued to optimize our operations and enhance our resilience to market volatility," said Xianfeng Yang, CEO of BIT Mining. "During the quarter, we strengthened our vertical integration across our mining center, mining machine R&D, and mining pool businesses. Despite the crypto market downturn and high energy prices in November and December, we were able to manage the energy volatility through our fixed power pricing strategy during the winter months. We remain focused on our long-term development strategy, and we are confident in our ability to create value for our shareholders in the future," Yang added. "The change in the ratio of our American Depositary Shares to our Class A ordinary shares, executed in late December, was carried out smoothly. We successfully launched a new DOGE/LTC mining machine, LD3, that has raised investor confidence and garnered significant interest from machine buyers. We also continue to enhance our technology development, not only in hardware but also in software."

Fourth Quarter 2022 Highlights

• Revenues were US$61.0 million in the fourth quarter of 2022, representing a sharp decrease of US$436.8 million from US$497.8 million for the fourth quarter of 2021, and a significant decrease of US$36.0 million from US$97.0 million for the third quarter of 2022. Revenues during the fourth quarter of 2022 primarily comprised US$53.9 million in revenue contribution from the mining pool business.
• Operating loss was US$121.7 million in the fourth quarter of 2022, representing an increase of US$104.6 million from US$17.1 million for the fourth quarter of 2021, and an increase of US$88.1 million from US$33.6 million for the third quarter of 2022.
• Non-GAAP operating loss1 was US$21.1 million in the fourth quarter of 2022, as compared with non-GAAP operating loss of US$15.1 million for the fourth quarter of 2021, and non-GAAP operating loss of US$14.3 million for the third quarter of 2022.
• Net loss attributable to BIT Mining was US$123.4 million in the fourth quarter of 2022, as compared with net loss attributable to BIT Mining of US$11.0 million for the fourth quarter of 2021, and net loss attributable to BIT Mining of US$22.2 million for the third quarter of 2022.
• Non-GAAP net loss1 attributable to BIT Mining was US$20.5 million in the fourth quarter of 2022, as compared with non-GAAP net loss attributable to BIT Mining of US$9.3 million for the fourth quarter of 2021, and non-GAAP net loss attributable to BIT Mining of US$2.9 million for the third quarter of 2022.
• Basic and diluted losses per American Depositary Share ("ADS")2 attributable to BIT Mining Limited for the fourth quarter of 2022 were US$11.60.
• Non-GAAP basic and diluted losses per ADS2 attributable to BIT Mining Limited for the fourth quarter of 2022 were US$1.93.

Full Year 2022 Highlights for Continuing Operations

• Revenues were US$650.2 million for the full year 2022, compared with revenues of US$1,328.9 million for the full year 2021.
• Operating loss was US$182.9 million for the full year 2022, compared with operating loss of US$68.4 million for the full year 2021.
• Non-GAAP operating loss1 was US$58.9 million for the full year 2022, compared with non-GAAP operating loss of US$57.1 million for the full year 2021.
• Net loss attributable to BIT Mining was US$169.6 million for the full year 2022, compared with net loss attributable to BIT Mining of US$51.8 million for the full year 2021.
• Non-GAAP net loss1 attributable to BIT Mining was US$43.4 million for the full year 2022, compared with non-GAAP net loss attributable to BIT Mining of US$46.4 million for the full year 2021.
• Basic and diluted losses per ADS2 attributable to BIT Mining Limited for the full year 2022 were US$19.47.
• Non-GAAP basic and diluted losses per ADS2 attributable to BIT Mining Limited for the full year 2022 were US$4.98.

Full Year 2022 Highlights for Discontinued Operations

• Net loss from discontinued operations, net of taxes was nil for the full year 2022, compared with net loss from discontinued operations, net of taxes of US$8.9 million for the full year 2021. The year over year decrease of US$8.9 million was due to the disposal of the Company's Chinese lottery-related business and termination of its lottery business-related VIE contracts in July 2021.

Fourth Quarter 2022 Financial Results

Revenues

Revenues were US$61.0 million for the fourth quarter of 2022, representing a sharp decrease of US$436.8 million or 87.7% from US$497.8 million for the fourth quarter of 2021 and a significant decrease of US$36.0 million or 37.1% from US$97.0 million for the third quarter of 2022. The year-over-year and sequential decreases were mainly attributable to continuous declines in cryptocurrency prices of since the second quarter of 2022. Revenues mainly comprised US$53.9 million from the mining pool business and US$5.2 million from data center services.

Operating Costs and Expenses

Operating costs and expenses were US$78.9 million for the fourth quarter of 2022, representing a sharp decrease of US$422.7 million or 84.3% from US$501.6 million for the fourth quarter of 2021, and a significant decrease of US$34.7 million or 30.5% from US$113.6 million for the third quarter of 2022. The year-over-year decrease was mainly due to a significant decrease of US$425.9 million in cost for the allocation to pool participants associated with the mining pool business. The sequential decrease was mainly due to a decrease of US$37.3 million in cost for the allocation to pool participants associated with the mining pool business.

Cost of revenue was US$72.2 million for the fourth quarter of 2022, representing a sharp decrease of US$419.1 million or 85.3% from US$491.3 million for the fourth quarter of 2021, and a significant decrease of US$35.9 million or 33.2% from US$108.1 million for the third quarter of 2022. The year-over-year decrease was mainly attributable to a significant decrease of US$425.9 million in cost for the allocation to pool participants associated with the mining pool business. The sequential decrease was mainly due to a significant decrease of US$37.3 million in cost for the allocation to pool participants associated with the mining pool business. Cost of revenue was comprised of the direct cost of revenue of US$63.3 million and depreciation and amortization of US$8.9 million. The direct cost of revenue mainly included direct costs relating to (i) the mining pool business of US$53.4 million, (ii) the cryptocurrency mining business of US$5.1 million and (iii) the data center business of US$4.8 million.

Sales and marketing expenses were US$0.1 million for the fourth quarter of 2022, representing a decrease of US$0.2 million or 66.7% from US$0.3 million for the fourth quarter of 2021, and a decrease of US$0.1 million or 50.0% from US$0.2 million for the third quarter of 2022.

General and administrative expenses were US$5.8 million for the fourth quarter of 2022, representing a decrease of US$3.0 million or 34.1% from US$8.8 million for the fourth quarter of 2021, and an increase of US$1.2 million or 26.1% from US$4.6 million for the third quarter of 2022. The year-over-year decrease was mainly due to (i) a decrease of US$2.4 million in share-based compensation expenses associated with fewer share options granted to the Company's directors and employees and (ii) a decrease of US$1.4 million in consulting expenses. The sequential increase was mainly due to an increase of US$1.1 million in consulting expenses related to DOGE/LTC mining machine production.

Service development expenses were US$0.7 million for the fourth quarter of 2022, representing a decrease of US$0.5 million or 41.7% from US$1.2 million for the fourth quarter of 2021, and a decrease of US$0.1 million or 12.5% from US$0.8 million for the third quarter of 2022. The year-over-year decrease was mainly due to a decrease of US$0.3 million in compensation expenses for employees as well as a decrease of US$0.2 million in share-based compensation expenses associated with share options granted to the Company's directors and employees as a result of a decrease in headcount.

Net Gain on Disposal of Cryptocurrency Assets

Net gain on disposal of cryptocurrency assets was US$2.1 million for the fourth quarter of 2022, representing a decrease of US$2.0 million from US$4.1 million for the fourth quarter of 2021, and a decrease of US$2.5 million from US$4.6 million for the third quarter of 2022, by using first-in-first-out ("FIFO") to calculate the cost of disposition during the fourth quarter of 2022.

Impairment of Cryptocurrency Assets

Impairment of cryptocurrency assets was US$1.5 million for the fourth quarter of 2022, representing a decrease of US$7.8 million from US$9.3 million for the fourth quarter of 2021 and a decrease of US$1.0 million from US$2.5 million for the third quarter of 2022, mainly due to provisions for impairment of cryptocurrency assets held as a result of fluctuations in cryptocurrency prices and lower amounts of cryptocurrencies held as of December 31, 2022.

Impairment of Property and Equipment

Impairment of property and equipment was US$25.5 million for the fourth quarter of 2022, representing a significant increase of US$13.8 million from US$11.7 million for the third quarter of 2022, which was mainly due to additional provision for impairment of mining machines in Kazakhstan and the U.S. Impairment of property and equipment for the fourth quarter of 2021 was US$12.6 million, mainly due to the closure and demolition of big data centers in Sichuan, China.

Impairment of Intangible Assets

Impairment of intangible assets was US$48.6 million for the fourth quarter of 2022, representing a significant increase of US$41.1 million from US$7.5 million for the third quarter of 2022, which was mainly due to impairment of the brand name and domain that the Company acquired through its acquisition of BTC.com in April 2021. Impairment of intangible assets for the third quarter of 2022 was US$7.5 million, which was mainly due to the impairment of the strategy contract that the Company acquired through its acquisition of Asgard Data Centers in October 2021.

Impairment of Goodwill

Impairment of goodwill was US$26.6 million for the fourth quarter of 2022, which was mainly due to the impairment of equity value that the Company acquired through its acquisition of BTC.com in April 2021.

Operating Loss

Operating loss was US$121.7 million for the fourth quarter of 2022, compared with operating loss of US$17.1 million for the fourth quarter of 2021, and operating loss of US$33.6 million for the third quarter of 2022.

Non-GAAP operating loss was US$21.1 million for the fourth quarter of 2022, compared with non-GAAP operating loss of US$15.1 million for the fourth quarter of 2021, and non-GAAP operating loss of US$14.3 million for the third quarter of 2022. The year-over-year increase in non-GAAP operating loss was mainly due to increases in gross losses of the cryptocurrency business and impairment of cryptocurrency assets, which were mainly attributable to the continuous declines in cryptocurrency prices. The sequential increase in non-GAAP operating loss was mainly due to (i) an increase of US$3.1 million in losses on cryptocurrency assets which was mainly due to a cyberattack on December 3, 2022, (ii) a decrease of US$2.4 million in net gain on disposal of cryptocurrencies, and (iii) an increase of US$1.1 million in consulting expenses related to DOGE/LTC mining machine production.

Net Loss Attributable to BIT Mining

Net loss attributable to BIT Mining was US$123.4 million for the fourth quarter of 2022, compared with net loss attributable to BIT Mining of US$11.0 million for the fourth quarter of 2021, and net loss attributable to BIT Mining of US$22.2 million for the third quarter of 2022. Both the year-over-year and sequential increases in net loss attributable to BIT Mining were mainly due to increases of impairment of intangible assets and goodwill related to BTC.com, as well as additional provision for impairment of mining machines as mentioned above.

Non-GAAP net loss attributable to BIT Mining was US$20.5 million for the fourth quarter of 2022, compared with non-GAAP net loss attributable to BIT Mining of US$9.3 million for the fourth quarter of 2021, and non-GAAP net loss attributable to BIT Mining of US$2.9 million for the third quarter of 2022. Both the year-over-year and sequential increase in non-GAAP net loss attributable to BIT Mining were mainly due to increased gross losses of the cryptocurrency business as mentioned above.

Cash and Cash Equivalents, Restricted Cash and Short-term Investment

As of December 31, 2022, the Company had cash and cash equivalents of US$5.4 million, restricted cash3 of US$0.1 million and short-term investment4 of US$2.4 million, compared with cash and cash equivalents of US$19.9 million and restricted cash of US$0.1 million as of September 30, 2022.

Cryptocurrency Assets

As of December 31, 2022, the Company had cryptocurrency assets of US$15.0 million in aggregate, which is the U.S. dollar equivalent of 289 BTC, 4,845 ETH, 42.8 million DOGE and various other cryptocurrency assets, including those generated from its mining pool and cryptocurrency mining businesses.