Riot Platforms Stock

Riot Platforms, Inc. (Riot Platforms) operates as a vertically integrated Bitcoin mining company.

The company principally engages in enhancing its capabilities to mine Bitcoin in the support of the Bitcoin blockchain. The company also provides comprehensive and critical infrastructure for institutional-scale Bitcoin mining at the company's large-scale Bitcoin mining facilities in Rockdale, Texas (the 'Rockdale Facility') and Navarro County, Texas (the 'Corsicana Facility').

The company's Rockdale Facility is the largest single Bitcoin mining facility in North America, as measured by developed capacity, and the company is evaluating further growing its capacity. Additionally, the company is developing the Corsicana Facility, its second large-scale Bitcoin mining facility, which, upon completion, is expected to have approximately one gigawatt of Bitcoin mining capacity.

Segments

The company operates in three reportable business segments: Bitcoin Mining, Data Center Hosting, and Engineering.

Bitcoin Mining segment

As of December 31, 2023, the company's Bitcoin Mining business segment operated 112,944 miners with a total hash rate capacity of 12.4 exahash per second ('EH/s'). In 2023, the company mined 6,626 Bitcoin. Based on the company's existing operations and expected deliveries and deployment of miners the company has purchased, it anticipates having approximately 28 EH/s of total hash rate in operation by the end of 2024.

The company's Bitcoin Mining operations are focused on maximizing its ability to successfully mine Bitcoin by growing the company's hash rate (the amount of computer power the company devotes to supporting the Bitcoin blockchain), to increase the company's chances of successfully creating new blocks on the Bitcoin blockchain (a process known as 'solving a block').

A key component of the Bitcoin Mining business segment is to acquire highly specialized computer servers (known in the industry as 'miners'), which operate application-specific integrated circuit ('ASIC') chips designed specifically to mine Bitcoin, and deploy such miners at-scale in the company's Rockdale Facility and Corsicana Facility, that utilize immersion-cooled environments. The Rockdale Facility and the Corsicana Facility, which are supported by the company's dedicated team, enable the company's large-scale Bitcoin Mining operations and provide the necessary infrastructure and available power capacity for the company to continue scaling its Bitcoin Mining business.

During the year ended December 31, 2023, the company entered into a long-term master purchase and sales agreement, dated as of June 23, 2023, as amended (the 'Master Agreement') with MicroBT Electronics Technology Co., LTD, through its manufacturing affiliate, SuperAcme Technology (Hong Kong) Limited (collectively, 'MicroBT') to secure the long-term supply of immersion miners from MicroBT, all of which are being manufactured in the United States. In 2023, the company executed two purchase orders under the Master Agreement to acquire a total of 99,840 new MicroBT miners (consisting of 8,320 M56S+ model miners, 22,684 M56S++ model miners, 20,778 M66 model miners, and 48,058 M66S model miners), primarily for use at the company's Corsicana Facility. Delivery of these miners began in the fourth quarter of 2023 and will be completed in monthly batches according to the delivery schedules specified under the applicable purchase order. All 99,840 miners are expected to be received and deployed by mid-2025. Upon full deployment of these new, state-of-the-art MicroBT immersion miners, the company anticipates a total self-mining hash rate capacity of 38 EH/s. The Master Agreement also provides the company with options to purchase up to 66,560 additional miners per year through December 31, 2027, on the same terms as the initial order, for an aggregate of 265,000 additional miners.

Mining Pools

The company has utilized two types of mining pools:

The first type of mining pool uses software that coordinates the pool members' hash rate, identifies new block rewards, records how much work all the participants are doing, and assigns Bitcoin rewards to its participants in proportion to the hash rate each participant contributed to the successful mining transaction. The company utilized this type of mining pool until mid-December 2022.

The second type of mining pool pays Bitcoin rewards utilizing a 'Full-Pay-Per-Share' payout of Bitcoin based on a contractual formula, which calculates payout primarily based on the hash rate provided by the company to the mining pool as a percentage of total network hash rate, along with other inputs. The company is entitled to consideration even if a block is not successfully placed by the mining pool operator. The company transitioned completely to this type of mining pool in December 2022, and utilized it for the year ended December 31, 2023.

Immersion-cooling

The initial phase of the development of the Corsicana Facility involves the construction of 400 megawatts ('MW') of immersion-cooled Bitcoin Mining and Data Center Hosting infrastructure. The company anticipates that immersion-cooling technology will present many unique opportunities to increase efficiencies in Bitcoin mining and are constantly evaluating new and emerging technologies in the Bitcoin ecosystem to make the company's mining operations more efficient.

The company is continuing to test its immersion-cooling mining operations, and if the company's desired performance metrics are achieved, the company plans to leverage its infrastructure development capabilities to expand the implementation of the company's immersion-cooled Bitcoin mining hardware to increase its Bitcoin mining hash rate without relying solely on purchasing additional new miners and mining equipment.

Data Center Hosting segment

The company's Data Center Hosting business segment is operated at its Rockdale Facility and focuses on providing co-location services for institutional-scale Bitcoin mining companies. The Rockdale Facility provides the critical infrastructure and workforce necessary for institutional-scale miners to deploy and operate their miners in buildings specifically designed to operate Bitcoin miners at scale.

In pursuit of achieving the most efficient power strategy, the company combines fixed low-cost power agreements, real-time spot power procurement, and credit from the company's participation in ancillary power services programs established by the Electric Reliability Council of Texas ('ERCOT'). The company benefits from this low-cost energy by maximizing production margins.

During the year ended December 31, 2023, the company completed its expansion of the Rockdale Facility, more than doubling its developed capacity from the time of its acquisition in May 2021.

The expansion of the company's Rockdale Facility has provided the company with the capacity to deploy its fleet of miners and bring the company's Bitcoin Mining business segment entirely in-house, while still allowing the company to continue offering Data Center Hosting services.

Engineering segment

The company's Engineering business segment designs and manufacturers power distribution equipment and custom engineered electrical products that provide the company with the ability to vertically integrate many of the critical electrical components and engineering services necessary for the company's Corsicana Facility development and Rockdale Facility expansion and to reduce the company's execution and counter-party risk in ongoing and future expansion projects. Engineering and other specialized talent employed in the company's Engineering business segment also allows the company to continue to explore new methods to optimize and develop a best-in-class Bitcoin mining operation and has been instrumental in the development of the company's industrial-scale immersion-cooled Bitcoin mining hardware.

The company's Engineering business segment also provides electricity distribution product design, manufacturing, and installation services primarily focused on large-scale commercial and governmental customers and serves a broad scope of clients across a wide range of markets, including data center, power generation, utility, water, industrial, and alternative energy. Products are custom built to client and industry specifications.

Global Logistics

Global supply logistics have caused delays across all channels of distribution. Similarly, the company has also experienced delays in certain of its miner delivery schedules and in the company's infrastructure development schedules due to constraints on the globalized supply chains for miners, electricity distribution equipment and construction materials. Additionally, the development of the Corsicana Facility requires large quantities of construction materials, specialized electricity distribution equipment and other component parts that can be difficult to source. The company continues to monitor developments in the global supply chain and assess their potential impact on the company's expansion plans.

History

The company was incorporated in 1998. It was formerly known as AspenBio Pharma, Inc. and changed its name to Venaxis, Inc. in 2012. Further, the company changed its name to Bioptix, Inc. in 2016 and then to Riot Blockchain, Inc. in 2017 and then to Riot Platforms, Inc. in 2023.