Bit Digital Inc (NASDAQ:BTBT) saw a surge in revenue for the first quarter driven by a rising Bitcoin price and its new high performance computing (HPC) services business.
Revenue jumped 266% from the year-ago quarter to $30.3 million, including a 166% increase in Bitcoin mining revenue to $21.9 million and $8.1 million in revenue from its HPC business.
In this interview with Proactive, Bit Digital CEO Sam Tabar discusses the company’s quarterly report, in addition to its growth plans for its high-margin HPC business.
Proactive: Tell me about Bit Digital.
Sam Tabar: We are originally a Bitcoin miner although we’ve created a new vertical in the HPC/AI space. With respect to our Bitcoin mining operations, we have tens of thousands of miners that span across three different countries: Canada, the United States and Iceland. We mine all our Bitcoin sustainably, so 85% of our mining operations are from clean, renewable sources of power such as hydro and volcanic power and geothermal in Iceland. We’ve been running a very profitable business on the Bitcoin mining side.
With respect to our other vertical, which is the HPC services business, we’ve been able to lock in a contract for hundreds of millions of dollars over the next three years. Basically a $50 million run rate annualized for the next three years locked in. The client has just asked us to double the size of the fleet. That is a very high-margin business as well. We just announced our Q1 earnings last week and finally can disclose the margins on that business. If you take out the one-time service credit the margins are about 72.5%, so great margins to work with. And the client is very happy with us and expanding that contract. We also have a very pregnant pipeline of other clients that are coming into that service, into that vertical. So two great verticals and that is Bit Digital in a nutshell.
In that new vertical, what is it that you do for these clients?
The clients are building large language models. They need specialized computational power but they aren’t going with the Magnificent 7 because they are building their own large language models. Our client and others don't want to be in bed necessarily with a competitor. We are not building a large language model so we have been able to capture this unique spot in the ecosystem in the supply chain with respect to renting computational power to those who are building their own language models.
Let’s talk about the Bitcoin part of the business. Your financials for that first quarter were really, really strong.
We had a banner quarter. The halving does compress the margins by 50% for all Bitcoin miners. It’s one of the reasons we were propelled to find a vertical that is very lucrative and that has no halving event and we’re making more in that business than we did in our original business of Bitcoin mining. That business is locked in for three years, in which we draw cash from the client every month. It’s an incredible business to be in when you can lock in your revenues for years and draw that every month. Whereas Bitcoin mining can be a lucrative business but it can also be a terrible business. I don’t have a crystal ball as to where the price of Bitcoin is going to be but I do have a crystal ball of where our HPC revenues are going to be over the next three years.
You reported a 266% increase in revenue for the first quarter over 2023. How does this continue for the rest of the year?
As I mentioned, our client has announced their intention to double the size of the fleet in Iceland. Any week now we will be disclosing that contract and the exact numbers of what that is. Our target is a $100 million run rate by the end of the year. I think we’re going to be ahead of schedule. We will need to be really smart with our capital allocation. If we think Bitcoin is going sideways, we may as well allocate that capital into HPC. Capital is one of our strengths. We have an incredible balance sheet of more than $160 million in terms of liquidity and absolutely no debt.
Quotes have been edited for clarity and style