Bitmain, the world’s largest crypto miner producer, makes $2.8 billion in revenue in H1 2018
The recent release of its initial public offering (IPO) prospectus of its books to the public earlier this week, Bitmain Cryptocurrency Company, Bitmain has shown its might as the largest crypto mining firm in the world. The document gives complete details on the financial nature of Bitmain that aims to be listed on the Hong Kong Stock Exchange. The huge prospectus includes sales, profits, costs and investment projects since 2015 to the first half of 2018.
With the company rumored to be making revenues of $2 billion in Q1 2018, the recent document shows the figures to be considerably higher than first predicted. Below we focus on the main points on Bitmain’s IPO prospectus including revenues, profitability and the costs involved with Bitmain’s production of mining equipment.
Revenues and profits
Having kept its numbers hidden to the public over the course of its existence, Bitmain has finally opened its books. The recent prospectus release shows the power and dominance of Bitmain in the world of cryptocurrency mining with the financial statements showing how profitable the world’s leading mining hardware company is.
Bitmain pretax profits from 2015-2018 (Image: Coindesk)
As seen in the chart above, Bitmain’s profits have rapidly increased since 2015, when they made a pre-tax profit of $57.8 million USD to $907 million USD as at June 2018. The blistering 1400% nominal return on the pre-tax profits show a continued increase in Bitmain’s sales pace since 2015. The pretax profits have crossed the total mark of $897.4 million USD reached last year.
The total revenue collected in 2015 stood at $137.3 million USD and has since increased rapidly to $2.8 billion USD as of June this year as reported by the prospectus. The revenue collected this year has already surpassed the total revenues collected in 2017 revenue by $100 million USD.
The document further reported the soar in profits in the profits registered by Bitmain from $48.6 million USD in 2015 to $952.2 million USD in half year of 2018, less than a million dollars short of last year’s total profits haul.
So How Exactly did Bitmain get the Huge Amount of Revenue in The Years Past?
Bitmain is a digital asset based firm that specializes in the mining end of the cryptocurrency world: mainly selling crypto mining hardware and mining cryptocurrencies themselves. According to the prospectus released by the company, it accounts for 75% of the total mining hardware produced around the world and is owns of the largest Bitcoin mining pools currently.
The revenue statement showed that most of Bitmain’s sales were from the hardware sales, specifically the application-specific integrated circuits (ASICs), that have gained popularity amongst miners due to its efficiency compared to the graphical processing units chips (GPUs). The sale of the ASIC miners saw the revenue share of mining hardware shoot up from 79 percent in 2015 to 94 percent in 2018.
Bitmain however has seen massive growth in all individual sectors of the company from 2015 till the half year announcements in 2018. Propriety mining in particular has seen a massive drop in the share of the revenue as it dropped from 20.3 percent in 2015 to 3.3 percent of the total revenue collected by Bitmain. However, on nominal terms, the revenue generated by propriety mining has increased from $27.9 million USD in 2015 to $94.3 million USD as of first half year 2018.
Is Bitmain moving towards less diversification as the mining hardware sales are expected to grow even further by the end of 2018? It may be the case on the broad state of things currently, but looking at the sector inwardly, the company diversifying further towards mining hardware for a number of cryptocurrencies including Bitcoin Cash (BCH), Litecoin (LTC), Dash (DASH) and ZCash (ZEC). This recent expansion by Bitmain within mining hardware will place it as one of the few companies offering consumers with mining solutions of various cryptocurrencies.
Costs and investments
As revenues grow in exponential terms, Bitmain’s profit growth has not increased as much (it is pretty good, but comparatively slow to the revenue growth). The company has reinvested much of the revenues back to the business as the costs of production of the mining hardware also increasing significantly.
The costs of materials, manufacturing costs and other administrative costs have increased from $43.5 million USD in 2015 to over $1.5 billion USD in the first half of 2018. This is highly attributed by the extra cryptocurrency coins added to mining hardware catalogue which is increasing at an astonishing rate.
The increase in production costs “represent our payment to our production partners for the fabrication and the packaging and testing of our ASIC chips. It represents Bitmain’s business growth as the prospectus noted.
However, the company has faced a huge increase in expenses regarding “provisions for impairment of inventories and prepayment to suppliers” as the cryptocurrency market saw its volatility increase heavily. The company started with the provisions last year where they coughed out $240.4 million USD and the figure increased to $252.7 million USD in H1 2018.
“The fluctuation of certain cryptocurrencies caused the anticipated selling price of certain mining hardware below their cost.” – Bitmain
Propriety mining and crypto assets
Mining its own currencies was once a major arm of the company as the mining pool rewards accounted for over a fifth of the revenues. This share has significantly dropped in the first half of 2018 to barely a fraction as mining hardware became the cash cow of the company.
The total cryptocurrency assets held by Bitmain stand at $886.9 million in BTC, BCH, LTC, DASH and ETH digital asset. The number represents only 28% of the total assets of Bitmain, a slight drop from the share in 2017 (30%) which signals a huge increase in the number of tokens held by the company as the price of most tokens dropped in value during the year.
As clients offer to pay in crypto for the machines, Bitmain may be seeing an increase in crypto assets share in the total assets.