CIFR, Cipher Digital Inc.

Will it survive?

• Can it pay its interest? -11.5×
  Does not cover its interest
  Operating income ($422M) ÷ interest expense $37M
  What this means

  A full year of operating profit didn't cover the interest bill. This is the zombie zone: the business depends on refinancing, asset sales, or forbearance to service its debt.

• How heavy is the debt, net of cash? $2.0B
  Net debt against an operating loss
  Cash $628M + ST investments $170M − debt $2.7B
  What this means

  Netting $798M of cash and short-term investments against $2.7B of debt leaves $2.0B owed, with no operating profit this year to measure it against — understand that combination before anything else about the company. Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? -180d
  Negative, funded by others
  DSO 0 + DIO 0 − DPO 180 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. A negative cycle is a quiet moat: suppliers and customers fund the operation (Buffett's “float”), the company grows on other people's money. (Little or no inventory, a services / asset-light model, so the inventory leg is ~0.)

Is it a good business?

• Return on invested capital -9%
  Below average through the cycle
  4-yr median, range -11%–-4%; -11% latest = NOPAT ($333M) ÷ invested capital $2.9B
  Industry peers: median -6%
  What this means

  The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 4 years (it ran -11% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.

• Owner-earnings margin -182%
  Consumes cash through the cycle
  4-yr median margin, range -833%–-90%; latest ($407M) = operating cash ($208M) − maintenance capex $199M
  Industry peers: median -42%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's -182% of revenue this year, a -182% median across 4 years. It chose to put $289M more into growth, so free cash flow this year was ($696M) — the gap is investment, not weakness. Treating stock comp as the real expense it is (less $53M of SBC) leaves ($460M).

• Are earnings backed by cash? ($208M)
  Loss, and burning cash
  Net income ($822M) · cash from operations ($208M)
  What this means

  The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did not.

How is the cash used?

• Where do the earnings go? —
  No surplus to allocate
  What this means

  The business didn't generate positive Owner Earnings this year, so any distributions came from the balance sheet or borrowing, not from operations.

• Investing or harvesting? 2.45×
  Expanding
  Capex $488M ÷ depreciation $199M
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 1 of 3 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

• Adequate size Miss
  Revenue ≥ $2B · $224M
  What this means

  Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.

• Strong liquidity Pass
  Current ratio ≥ 2× · 3.79×
  What this means

  Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.

• Conservative debt Near
  Debt ≤ working capital · $2.7B vs $2.0B WC
  What this means

  Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.

• Moderate price —
  P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
  What this means

  Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $-0.73/share (latest year $-2.01), the averaged base the calculator's gate runs on, and book value is $1.97/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2022–2025

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 0 of 4
  What this means

  Lost money in 4 year(s), look at what happened there before trusting the average.

• Operating margin −624% → −109% (2-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about −624% early to −109% lately, median −188% — pricing power intact or improving.

• Reinvestment, incremental ROIC returns capital
  What this means

  The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.

• Worst year 2022 · −1232.2% op. margin
  What this means

  Operations went underwater in 2022, understand why before trusting the good years.

• Share count +15.4%/yr
  What this means

  The share count is rising, dilution works against you on a per-share basis.