Bit Digital leverages ETH treasury to fund WhiteFiber expansion

Bit Digital reported second-quarter revenue of $32.1 million, a 15% increase from the previous quarter, while reducing its net loss to $107.2 million from $146.7 million. To finance the construction of its WhiteFiber data center, the company borrowed $50 million against a portion of its Ethereum holdings, avoiding the sale of digital assets or the issuance of new equity.

The financing structure used the borrowed funds to establish a credit facility of up to $150 million for WhiteFiber, Bit Digital's subsidiary for AI infrastructure and high-performance computing. Guaranteed by the parent company and reviewed by independent committees at both entities, this arrangement allowed Bit Digital to preserve its Ethereum holdings and ownership stake while securing capital for the NC-1 data center campus, which is expected to begin generating revenue in the third quarter.

Infrastructure divisions drove the quarterly performance. Cloud services revenue grew 42% from the first quarter to $23.8 million, and colocation revenue for the first half of the year rose 182% compared to the prior year. Contract liabilities, representing committed customer cash not yet recognized as revenue, more than doubled to $143.1 million from $79.6 million at the end of the previous year, supporting a backlog of approximately $1.0 billion. Since the last earnings call, WhiteFiber signed new multi-year cloud services agreements with an aggregate value exceeding $540 million, a pipeline management says could yield over $200 million in annualized revenue once fully deployed. Operating cash flow increased 33% to $46.8 million over the first six months.

Legacy operations continue to contract. Digital asset mining revenue dropped 58% year over year in the first half, with bitcoin mined per quarter falling from 48.1 to 32.3. Management stated that no meaningful capital will be directed to the mining segment going forward. Ethereum staking revenue declined from $2.3 million to $0.9 million in a single quarter, a decrease attributed to repositioning coins into liquid staking and lower average ETH prices.

Accounting for the Ethereum treasury remains complex. The company recorded a $46.0 million non-cash impairment on liquid staked ETH holdings during the quarter, part of roughly $86 million in non-cash items contributing to the net loss. Debt levels are increasing, with convertible notes rising to $336.2 million and the new WhiteFiber facility adding up to $150 million, partially collateralized by $105.6 million of ETH holdings.

CEO Sam Tabar acknowledged a disconnect between improved operating results and stock valuation, noting the board is evaluating options to close that gap. Hedge fund ownership increased from 19 to 25 funds in the most recent quarter, while short interest remains at 18.49% of the float. The stock trades at a forward price-to-earnings ratio of 23.87 as of September 9.