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Riot Blockchain Inc. (NASDAQ: RIOT)

Riot Blockchain Inc. (NASDAQ: RIOT) is focused on building, supporting, and operating blockchain technologies through proof-of-work mining and, through subsidiary Whinstone U.S., hosting Bitcoin mining equipment for institutional clients.

Distributed blockchain technology is a decentralized and encrypted ledger that is designed to offer a secure, efficient, verifiable, and permanent way of storing records and other information without the need for intermediaries. It serves as a medium of exchange, store of value, or unit of account.

Riot operates in a single segment of cryptocurrency mining. The company’s portfolio consists of Verady, Tesspay, Coinsquare, and others. Riot is expanding and upgrading its mining operations through industrial-scale infrastructure development and latest-generation miner procurement.

Riot’s headquarters is located in Castle Rock, Colorado, and the Whinstone facility operates out of Rockdale, Texas. The company also has mining equipment operating in upstate New York under a co-location hosting agreement with Coinmint, LLC. Riot is a believer in Bitcoin, and efforts aimed at growing its mining operation demonstrates its commitment to the Bitcoin network. The company is an industry leader in Bitcoin mining and hosting and one of the largest U.S.-based publicly traded Bitcoin miners in North America. Riot is constantly working to improve mining efficiency and production as it seeks to become one of the most relevant and significant companies supporting the Bitcoin network and greater Bitcoin ecosystem.

Riot Blockchain supports the Bitcoin blockchain through rapidly expanding large-scale mining in the United States. The company is focused on expanding operations by increasing its Bitcoin mining hash rate and infrastructure capacity. Riot believes the future of Bitcoin mining will benefit from American operations and endeavors to be the driver of that future.

Whinstone U.S. is a wholly owned subsidiary of Riot Blockchain and consists of the single largest Bitcoin mining and hosting facility in North America, as measured by its 300 megawatts (MW) in developed capacity. Riot currently has a deployed hash rate capacity of 3.0 EH/s utilizing approximately 91 MW of energy.

Whinstone Operations

In May 2021, Riot announced its acquisition of Whinstone U.S. Whinstone is located on a 100-acre site, hosting Bitcoin mining customers in three buildings totaling 190,000 square feet. The site is subject to a long-term lease agreement, with electricity provided via a long-term power supply contract. Since early 2020, the Whinstone team has worked on creating the largest hosting company in North America. Pairing low cost of energy and a market-leading development and operations team, Whinstone has been able to build the largest Bitcoin mining hosting campus as measured by machines operational and megawatts developed at a single site.

Whinstone’s comprehensive energy management strategy delivers best-in-class energy costs of 2.5 cents per kWh. Whinstone’s team of professionals use cutting edge technology and comprehensive analytics to deliver industry-leading reliability and responsiveness. Whinstone’s site has a total power capacity of 750 MW, with 300 MW currently developed. Whinstone currently hosts Bitcoin mining operations for three institutional clients who are expected to utilize up to 200 MW of aggregate power capacity. In addition to hosting revenue, Whinstone generates engineering and construction services revenue from hosting clients on site, including revenue derived from the fabrication and deployment of immersion cooling technology for Bitcoin mining.

Market Overview

According to a market analysis report from Grand View Research, the global blockchain technology market size was valued at $3.67 billion in 2020. Grand View forecasts the market could expand at a CAGR of 82.4% from 2021 to 2028. That CAGR projects a market worth a whopping $450 billion by 2028.

Grand View points out that blockchain has emerged as a highly promising technology. Blockchain provides an open, immutable, distributed public ledger that can be accessed by several parties involved in a transaction and acts as a universal depository of all transactions between the involved parties.

The increasing worldwide acceptance of cryptocurrencies is one of the major drivers of market growth, Grand View reports. Commercial and central banks across the world are now using blockchain technology for payment processing and issuing of their own digital currencies. The technology enables cross-border payments that are less expensive and faster as compared to traditional systems.

Management Team

Jason Les is CEO at Riot Blockchain. He has significant experience in cryptocurrency mining, as an engineer studying protocol development and as a contributor to open-source projects. He was also a founding partner of Binary Digital, a software-development company where he led the engineering team. His background includes more than a decade as a professional poker player competing in the most prestigious, high-stakes tournaments in the world. He holds a bachelor’s degree in computer science from UC Irvine.

Jeffrey G. McGonegal is CFO at Riot Blockchain. He is the longest-standing member of Riot’s executive team, resuming his position as CFO in February 2021. During 2019 and 2020, he served as Riot’s CEO. His career has spanned over 40 years in senior leadership roles working as an audit partner with a national accounting firm and as an executive within multiple public entities. From 1974 to 1997, he was an accountant with BDO US. He holds a bachelor’s degree in accounting from Florida State.

Megan Brooks is COO at Riot Blockchain. She has more than 20 years of experience in operations, risk management, and finance, with seven years of executive management. During her time in the risk management and insurance industry, she was named to the Power 50 “One to Watch” list. She has a bachelor’s degree in finance, along with a Master’s Certificate of Accountancy from the University of Houston C.T. Bauer College of Business and a certification in risk management. She is also a licensed Risk Manager.

Investment Considerations
  • During the fiscal quarter ended September 30, 2021, Riot mined 1,292 Bitcoin, for a daily average of 14 Bitcoin mined.
  • The company posted adjusted EBITDA of $37.6 million on revenue of $64.8 million for the three-month period.
  • As of December 2021, Riot held 4,464 Bitcoin on its balance sheet.
  • In the six-month period from the beginning of Q2 2021 to the end of Q3, the company’s revenue grew by 179.3%.
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