CleanSpark, Inc. (Nasdaq: CLSK), a software and services company
which offers proprietary software and controls for microgrid and
distributed energy resource management systems and innovative
software marketing and design services, is pleased to announce and
provide a statement on the Company’s financial results presented in
its Form 10-Q. The Company recommends that readers also
review the Company’s 10-Q in its entirety, a free copy of which is
available to all interested parties on the Company’s website or on
www.sec.gov.
Dear Fellow Shareholders,
We move into 2020 having achieved one of
CleanSpark’s primary stated goals of up-listing to the Nasdaq stock
exchange. This up-listing to Nasdaq is a major corporate
achievement reflecting growing momentum and financial performance
throughout 2019. We believe our Nasdaq listing will help to
increase long-term shareholder value by improving awareness,
liquidity, and expanding our investor base to include more
institutional investors.
We are well capitalized and positioned to
continue to leverage our mPulse and mVSO software platform.
We have committed to focus our fiscal year 2020 on revenue growth
as we continue our path to profitability through both sales and
acquisitions. CleanSpark has now delivered its sixth
consecutive record-setting quarter, creating a significant increase
in year-over-year revenues. As we have expanded our product
offerings and customer base, we are optimistic that we will
continue to see increased adoption of our solutions. As a result,
we expect our year-over-year quarterly revenues continue to
increase through our 2020 fiscal and calendar year.
We are focusing on marketing our Software as a
Service (SaaS) platform mVSO which generates revenues recurring in
nature and carry high margins. Our expectation is that our SaaS
revenues will continue to increase rapidly over the fiscal year
ending 2020 as we further increase our marketing efforts to take
advantage of the opportunities we see in front of us. More
specifically, our plan is to focus on a highly targeted online
campaign paired with traditional marketing. We are targeting $1.0
million in annualized SaaS revenue under contract before the end of
calendar 2020. Based upon historical trends, we expect this
revenue to carry profit margins of 70-85%.
In addition to our online marketing efforts we
have continued to increase our sales team who are focused on mPulse
controls sales and expect these efforts to continue to increase
revenue outputs. We currently have $1.0 million in mPulse and
energy storage orders under contract, which we expect to deliver
over the next two quarters. We are targeting $3.5 million in
mPulse and energy storage sales over the next calendar year.
We are limited to some degree by the long sales cycles
associated with system integration, but as our adoption rate
increases and our contracted pipeline continue to build we expect
our mPulse and energy storage sales to increase significantly into
2021 and beyond. Based upon historical trends, we expect
these revenues to carry profit margins between 20-70% depending on
total system size.
Our sales in fiscal 2020 have largely been led
by sales of our equipment division with over $2.6 Million in new
orders received this fiscal year to date, with most orders being
placed by repeat customers. We expect this trend of increased
sales to continue throughout 2020. Currently, we have a total of
$5.1 million in equipment purchase orders under contract which we
expect to deliver over the next two quarters. We are
targeting $7.0 million in delivered equipment sales prior to the
end of fiscal 2020. We expect this revenue to carry
profit margins of 9-12%, based on historical trends.
We have also begun to further diversify our
revenue streams with a strong focus on increasing profit
margins. As part of this strategic initiative, on January 31,
2020, CleanSpark completed the acquisition of p2klabs, Inc., a
design and innovation consulting firm that specializes in applying
transformational design, technology, and business methodologies to
transform and grow businesses. This acquisition enables
CleanSpark to accelerate the development and deployment of its
software platforms and expand overall sales and marketing
capabilities. The addition of p2klabs adds significant depth
in software sales experience and a top-tier sales and marketing
team. As a result of the acquisition, Mr. Amer Tadayon has
joined the CleanSpark executive team as the Company’s Chief Revenue
Officer to oversee our sales and marketing strategy. Mr.
Tadayon has more than 25 years of experience working with
world-class companies including IBM, Cognizant and frog Design.
We expect the acquisition to not only enhance
and increase our existing software platform sales, but we also
expect it to add up to $2.0 million in new services-based revenue
directly related to the acquired business over the next twelve
months. Based upon historical trends, we expect this revenue
to carry profit margins of 55-65%.
Quarter ending December 31, 2019 US GAAP
Financial and Operating Highlights:
All amounts below are presented in accordance
with accounting principles generally accepted in the United States
of America (“US GAAP”) unless otherwise indicated.
- Quarter ending December 31, 2019 Revenue of $976,824, up 372%
from $262,907 in 2018.
- Quarter ending December 31, 2019 Gross profit increased 238% to
$94,103, up from $39,581 in 2018.
- Quarter ending December 31, 2019 Net loss per share improved by
$0.23 per share to $(0.40) from $(0.63) in 2018.
- CleanSpark announced a 10-year exclusive agreement with
International Land Alliance (ILAL). The agreement calls for
CleanSpark to provide its microgrid Value Stream
Optimizer (mVSO) software services to support system design
and engineering as well as integrating CleanSpark’s mPULSE software
into the final systems on all future energy projects across the
ILAL portfolio of properties. We are currently working with ILAL on
two initial feasibilities studies and we anticipate that in 2020 we
will recognize at least $200,000 in related revenue with a large
increase expected in 2021 as ILAL’s development efforts begin to
accelerate.
- CleanSpark announced the signing of a Memorandum of
Understanding (“MOU”) with the Shoreline Unified School District to
form a Strategic Alliance for Microgrid Assessment and
Deployment. In accordance with the MOU, CleanSpark will
evaluate two stages of grid resiliency for the District. The
intended Resiliency Zones would utilize Solar Energy, Storage and
Back-up Generation controlled by our mPulse controls platform to
meet the School District’s energy needs and provide back-up energy
to the surrounding communities during emergencies.
- Release of new features and improvements to our SaaS Microgrid
Value Stream Optimizer (mVSO) platform, which includes the enhanced
equipment library, the ability to run scenario comparisons and
upload site plans. We believe these features further distinguish
CleanSpark as a market leader in the space.
- Release of new features and improvements to our mPulse Controls
platform, which includes enhanced reporting and the release of a
low costs ‘light-version’ for smaller systems. We expect this
enhancement to further allow us to not only compete on price but
also on functionality.
Certain Non-U.S. GAAP Financial
measures:
The Company assesses its results of operations
using certain non-U.S. GAAP financial measures, in addition to U.S.
GAAP financial measures. The Company believes these non-U.S. GAAP
financial measures provide useful information to investors and
others in understanding and evaluating its operating performance in
the same manner as management does.
The non-U.S. GAAP financial measures should be
considered in addition to, and not as a substitute for or superior
to, any financial measures prepared in accordance with U.S. GAAP.
The Company’s non-U.S. GAAP financial measures may be defined
differently from time to time and may be defined differently than
similar terms used by other companies, and accordingly, care should
be exercised in understanding how the Company defines its non-U.S.
GAAP financial measures.
Reconciliation of non-GAAP Adjusted
EBITDA (after elimination of stock based and other
non-cash expenses)
|
|
For the Quarter Ended |
|
|
December 31, 2019 |
|
December 31, 2018 |
Net loss (US GAAP) |
$ |
(1,916,254 |
) |
$ |
(2,283,551 |
) |
Less: Depreciation,
Amortization and other non-cash items: |
|
|
|
|
Depreciation and
amortization |
|
626,777 |
|
|
157,483 |
|
Software amortization |
|
39,287 |
|
|
348,660 |
|
Stock based compensation |
|
636,269 |
|
|
554,206 |
|
Non-cash interest charges,
amortization of debt discounts and other |
|
1,504,073 |
|
|
517,417 |
|
Unrealized gains on
investments |
|
(2,635,522 |
) |
|
- |
|
Loss on settlement of
debts |
|
- |
|
|
26,225 |
|
Total Depreciation,
Amortization and other non-cash items: |
|
170,884 |
|
|
1,761,474 |
|
|
|
|
|
|
Non-GAAP Adjusted EBITDA
(after elimination of stock based and other non-cash expenses) |
$ |
(1,745,370 |
) |
$ |
(679,560 |
) |
Update on Fiscal 2020 Strategic
Objectives
We have executed on our first acquisition as
stated in our prior shareholder letter and we plan to continue to
seek out accretive acquisition opportunities for software and
software-design companies. We believe that growth through
acquisition will accelerate profitability. We are evaluating
acquisition targets based on a few key criteria which include, a)
the target company should be cashflow positive; b) the target
company’s core-revenues must be derived from software or related
services, and c) our team’s impact and expertise must be able to
create an immediately accretive result and create increased
efficiency and/or decreased costs. We are currently
evaluating additional target companies at this time and although
there can be no assurance that we will come to agreements on terms
with these targets, we are optimistic as to the progress. If
these targets do not result in an acquisition or similar
transaction we intend to seek out and continue to evaluate
additional opportunities.
We are resolved to put all our efforts towards
achieving profitability in the coming year by endeavoring to
significantly improve our margin profile by focusing on increasing
software sales specifically our mVSO Software and a Services (SaaS)
platform. We are properly capitalized and believe we have the
tools available to us to achieve our 2020 revenue targets.
Through our planned initiatives we expect to begin approaching
break-even in late 2020 and expect to achieve profitability in
2021.
We greatly appreciate the continued support from
all our shareholders.
Sincerely,
Zachary Bradford, CEO and S. Matthew Schultz,
Chairman
Parties interested in using CleanSpark’s
platform are encouraged to inquire by contacting the Company
directly at info@cleanspark.com or visiting the Company’s
website at www.Cleanspark.com
About CleanSpark:
CleanSpark a software and services company which
offers software and intelligent controls for microgrid and
distributed energy resource management systems and innovative
software marketing and design services. The Company provides
advanced energy software and control technology that allows energy
users to obtain resiliency and economic optimization. Our software
is uniquely capable of enabling a microgrid to be scaled to the
user's specific needs and can be widely implemented across
commercial, industrial, military, agricultural and municipal
deployment. Our product and services consist of intelligent energy
controls, microgrid modeling software, and innovation consulting
services in design, technology, and business process methodologies
to help transform and grow businesses.
Forward-Looking Statements:
CleanSpark cautions you that statements in this
press release that are not a description of historical facts are
forward-looking statements. These statements are based on
CleanSpark's current beliefs and expectations. The inclusion of
forward-looking statements should not be regarded as a
representation by CleanSpark that any of our plans will be
achieved. Actual results may differ from those set forth in this
press release due to the risk and uncertainties inherent in our
business, including, without limitation: the expectations of future
growth may not be realized, timing of deliveries, demand for our
software products; and other risks described in our prior press
releases and in our filings with the Securities and Exchange
Commission (SEC), including under the heading "Risk Factors" in our
Annual Report on Form 10-K and any subsequent filings with the SEC.
You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof,
and we undertake no obligation to revise or update this press
release to reflect events or circumstances after the date hereof.
All forward-looking statements are qualified in their entirety by
this cautionary statement, which is made under the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995.
Contact - Investor
Relations:Shawn SeversonIntegra Investor Relations(415)
233-7094info@integra-ir.com
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