Q1 2023 CleanSpark Inc Earnings Call
Today, we will discuss the results of our first fiscal quarter, which as Isaac mentioned covers the period of October through December 2022.
During that time, our industry in particular and the economy more broadly faced significant macro headwinds.
Even in the face of these headwinds we persisted and we grew our average cash rate rapidly increased outpacing global hash rate, resulting in significantly increased <unk> production for the quarter and the subsequent month the number of machines hashing grew by over 20000, we added a new mining campus to our portfolio.
The growth in work from those dark winter days has since resulted in our highest bitcoin production ever last month, which was nearly 700 bitcoin.
We also grew our board welcoming Amanda capillary who is an expert in bitcoin policy.
No matter the measure no matter how difficult the quarter. We grew and we are just seeing the majority of the benefits of this growth today and beyond.
In fact, we outpaced all of our peers every single one of them.
Data recently published by the minor Mag our research in depth data portal focused on institutional bitcoin miners placed us first amongst public miners in terms of percentage cash rate growth as you can see from the visual the network cash rate average grew by 46% since January 2022, while we grew.
Over 200% not only did we outpaced global hash rate, we did so at a tremendous clip.
We started the quarter with Ashford of $4 two <unk> per second and by the end of the year. It had grown to $6 <unk> per second for a 48% increase for the quarter.
Since then we've continued to grow and our hash rate now stands at six six <unk> per second.
We had 63700 machines hashing as of December 31.
Our fleet was running at an average efficiency of about 31 watts per Terra ash for perspective, we understand some of our peers come in at over 40 watts per tear house.
Our fleet is tremendously efficient.
Most of our machines come from Fitments S 19th series and we've started to acquire more xps the quality of the machine tells only part of the story.
Our emerging cooled facility has allowed us to test the limits of over and under clocking as we leverage software and firmware to optimum optimize performance.
We are also testing additional software optimization techniques for our air cooled fleet.
Which we expect to allow us to bring under and over clocking capabilities to all of our campuses.
This optimization will prepare us to stay ahead of the curve when having occurred in 2024.
We mined a record number of bitcoin for the quarter a total of 1531 bitcoins for comparison in the first quarter of our last fiscal year, we mined 660 bitcoins.
This represents an increase of 131% well outpacing global hash rate.
We also increased production quarter over quarter by 25%, we have reliably grown as we execute on our operational strategy that we believe makes us one of the fastest growing most reliable and most efficient publicly traded bitcoin miners in North America.
The secret to our growth has been our proprietary mining model. There are many different mining models out there from asset light on one side two proprietary mining on the other.
And the asset light model machines are owned by the company that cared for and run by hosting companies that also take a cut of the profits.
This model introduces less control over our company's destiny visa companies exposed to the risks and uncertainties of third parties their ability to build facilities procure power operate the machinery and importantly stay solvent we.
We believe higher returns are consistently generated by actively participating in the mining process.
Contrast that with proprietary mining.
Miners like clean spark that operate almost exclusively as proprietary miners can exercise significant greater control over their own destiny.
We believe this gives us a significant edge.
First it provides investors with predictability.
Out of the various business models for bitcoin miners are proprietary mining model minimizes the impacts of unforeseen events, we can plan and react to the unexpected and real time <unk>.
Giving us greater optionality.
Even during difficult market conditions.
We also have multiple sites in different jurisdictions that we own and operate with complete control.
Second it makes us more reliable.
Last month, we had our highest uptime ever over 98%.
We believe we have one of the highest uptime among publicly traded mining companies, we own our infrastructure development teams and culture necessary to staff and run our campuses and execute and very remarkable ways on our operational strategy.
We exercise maximum control over timelines.
To underscore the 98% uptime only happens when you have a team of dedicated people who believe in the work and what we are doing and who share and the rewards of our successes.
Third our proprietary mining model introduces lower production cost many factors go into production costs, including staffing costs power cost and the cost of assets, but.
But directly owning the infrastructure and other assets involved in producing bitcoin means lower operating costs in the long run we make long term investments for long term benefits and those long term benefits accrue to our shareholders directly rather than being dispersed amongst a variety of service providers or third parties.
We're very proud of these facilities and take every opportunity to open them up to the communities we operate in.
Seeing our mining campuses has a transformational effect on bitcoin enthusiasts and skeptics alike.
We see our owned and operated facilities not only a competitive advantage in the bitcoin mining industry, but its the key to winning the hearts and minds of the people and communities we work with.
One of the newest communities to be brought into the clean spark team is the city of standards fill Georgia home to our most recent acquisition and 80 megawatt facility that we closed in mid October .
And we've quickly ramped up our hatch rate there.
Allowing us to exceed our 2022 calendar year end guidance.
Not just once but twice.
We are well into planning the expansion of the standards rail facility and expect to add an additional 150 megawatts to the site by the end of 2023 for.
For a total of 230 megawatts supporting over seven <unk> in total.
Subsequent to the quarter. We also broke ground on our 50 megawatt expansion in Washington.
I am, particularly proud of our teams and partners that are working tirelessly day in and day out to complete this buildup.
As an example, our teams were working long before the Sun came up last Saturday to start pouring the concrete pads for the buildings construction is proceeding according to timelines. We expect all four buildings each of which will house 12, five megawatts of miners to be completed with all miners racked and <unk>.
<unk> by the end of May.
<unk> is then expected to take a few weeks more being completed sometime in late June .
We receive regular updates from our construction partners and the utility provider and we will share relevant information in a timely way.
I can also tell you that the city of Washington is glad to have is building in the community to construction provides jobs and keeps resources in the community. We are very proud to have found great partners and the city of Washington.
Allow me to transition to the future.
Share with you how we plan to continue the rapid growth we have witnessed over the past year that has allowed us to triple our hatch rate from January 2021 to January 2023.
Our past performance should be viewed as the best indicator of our future performance.
During our last earnings call, we shared with you our guidance of <unk> <unk> per second by the end of calendar year 2023.
I'll now like to take a few moments to talk about how we plan to meet the expectations by talking in greater detail about our growth strategy.
The financial strategy that backs it essentially how we plan to build it and pay for it.
First I'd like to talk about how we plan to build it.
We have six six <unk> per second operating now and we expect to squeeze out a bit more efficiency in the coming months, which will allow us to incrementally increase this hash rate.
As I mentioned the Washington during this expansion is underway, which will result in rack space for over 15000 miners.
We are finalizing the plan on the minor mix and based on the latest plants. We expect this site to ultimately increase our hash rate by one nine SaaS per second.
This expansion brings us to eight five <unk> in June .
Leaving seven five <unk> per second can meet our year end target.
The standards expansion will commence in the coming months with a target completion date of November 2023.
This timeline is dependent on the completion of a substation that is being constructed by our utility partners.
We intend to align our construction schedules to have our site complete in advance of the power handoff date with the expectation that we have our facility built and the miners react to that.
When we go live so that we can go live as soon as the powers handed over.
We expect the standards for expansion to add approximately five five <unk> per second, bringing our total portfolio to 14 <unk> per second.
Now this leaves us with a <unk> per second gap to fill over the next 11 months.
We are confident in our ability to do so we.
We are currently evaluating several greenfield and acquisition targets to fill the two <unk> per second gap and expect to source or acquire an additional 50 to 75 megawatts of new opportunities. We have multiple candidates in the pipeline and we will provide additional details as appropriate.
Lastly at.
I have recently been asked about land cm at this time, we do not have any further updates other than we still hold the contractual rights to the power when completed.
We are currently not expecting any of it to come online in 2023 and as soon as we have more information about the 2020 for outlook and beyond we'll let you know.
Now how do we plan to secure all the miners to fill the shelves over.
Over the last few months, we've sourced brand new inbox latest generation miners at bottom dollar prices, we've gone to the spot market for the majority of these purchases.
The spot market continues to be full of opportunities and we expect to rely on the spot market for at least a portion of our miners.
We also expect to shift our strategy when the time is right and look towards future contracts once again for opportunities we.
We believe the tides are starting to shift and locking in prices for large orders will begin to be part of our strategy in the coming months.
Lastly, let me share a few thoughts about how we plan to pay for it.
Entrail to achieving our guidance is it past premised on accretive growth.
That means we issue shares for growth for assets that quickly generate free cash flow. This.
This is why in our upcoming annual meeting we have proposed to increase the number of shares authorized for issuance from 100 million shares to 300 million shares.
It is important to note that these shares are simply authorized and it is not required that we ever issue them. Rather this proposal gives us the flexibility to use equity for targeted growth. We believe these shares will provide us the flexibility to not only maintain market share.
But to substantially grow market share just as we have in the past to continue to scale, we need full access to capital markets, increasing our authorized shares provides that.
I want to thank our shareholders for trusting us and taking this journey with us I want to thank our teams for all their hard work this quarter, which has allowed us to move forward even in these challenging times.
As I said in our last call bitcoin as a technological and financial advancement that growth year after year.
The market's rise and fall, but bitcoin adoption just keeps rising.
<unk> keeps growing and price well, we strongly believe will recover we're seeing indications that some of that is starting to happen and as I remind my colleagues all the time I would like to remind you as our shareholders.
We are just at the beginning.
Thank you for choosing to invest in clean spark I do not take lightly the trust you as shareholders place in us. Thank.
Thank you for your support.
I'd now like to give the floor to Gary our Chief financial officer to discuss our financial results.
Thank you Zack diving into the numbers for the first quarter of our 2023 fiscal year I want to draw your attention to the Orange Bar chart. On this page you will note that are big corn production increased 130% over the same quarter of the prior year as we mined over 1500 bitcoin.
This was due to the rapid growth we experienced over the past 12 months deploying an additional 45000 miners.
In that period.
However, you will see that we recognized about $10 million less in revenue compared to the same period. This is strictly due to the steep decline in bitcoin price for reference the price of Bitcoin was over $46000 at December 31, 2021, and Bitcoin was just over 16000 at the end of our most recent quarter.
Looking at the immediate prior fourth quarter Youll see a similar stories, we mined approximately 25% more bitcoin between the quarters.
Only saw 6% greater revenue. This is also due to the decline in <unk> prices as the price of Bitcoin was approximately $19000 at September 32022.
This bar chart puts into context, how far we have come as a company despite headwinds of bitcoin prices.
Turning to gross profit on the right hand side of the slide our gross profit was $7 4 million, which declined from over $31 million in the same quarter of last year.
Decline was directly attributable to the decline in corn prices when compared to the immediate prior fourth quarter. We saw a decline in gross profit despite seeing incremental revenue growth between the periods.
This shows how profitable our business model can be when bitcoin prices are just slightly elevated which they were in the fourth quarter.
Moving onto the next slide we recognized a GAAP net loss of $29 million compared to net income of $14 5 million in Q1 of last year again, the high margins due to record bitcoin prices than the prior year, mostly dropped to the bottom line in the current quarter, we recognized a large net loss primarily due to two <unk>.
Noncash items depreciation and amortization was approximately $19 million and stock based compensation was $5 9 million.
Two items comprise almost $25 million of the $29 million net loss in the current period.
I want to point out that with respect to depreciation we have recognized depreciation of miners with acquisition cost as high as $107 of terahertz.
Additionally, as I've mentioned in previous quarters, our stock based compensation was expected to come down as this number was relatively flat compared to the stock based compensation expense in Q1 of last year and decreased from $14 million in the immediately preceding fourth quarter.
During the fourth quarter, you will see our net loss decreased from over $42 million, which was partly attributed to the significant reduction in stock based compensation and noncash charge related to goodwill, which is recognized in the fourth quarter.
Looking at adjusted EBITDA Youll see we recognized a slightly negative adjusted EBITDA of $1 $4 million.
This was indicative of how challenging of a quarter. It was as lower corn prices resulted in compressed margins.
And while our operations team did a fantastic job operating on a profitable basis and forecasting in advance high energy prices. During December we still recognize negative adjusted EBITDA due to corporate overheads, while we're printing negative adjusted EBITDA. This quarter I feel very comfortable in saying that this is not a trend we expect.
To continue into the second quarter as Youre aware bitcoin prices increased almost 30% since the end of our first quarter and that increase in price has expanded our margins significantly while we can't predict where big corn prices will go into future I will say that we are operating comfortably at a profit in the second quarter as energy prices are some.
The lowest prices we've seen in a long time.
So we expect the second quarter numbers can be much better so as long as bitcoin prices cooperate and our operations teams maintain extremely high uptime.
Looking at the balance sheet with over 2 million of cash on hand at December 31, and 228 bitcoin.
<unk> total liquidity to $6 million, we also have over $6 million in assets held for sale I want to point out that this week, we closed a deal with a third party that's almost $5 million of our legacy energy assets. This is further described in the subsequent event footnote for Form 10-Q, which will be filed today.
On a final note our total debt is less than $20 million during.
During the first quarter, we paid down $1 $6 million of our debt, which is approximately 8% of the total balance.
Many of our peers have higher debt balances, however, I'm happy to report to a rather clean and healthy balance sheet, one that could take on additional leverage in the future, which I will speak to in a few minutes.
So right now I wanted to discuss Capex as Youre aware, we are in an industry, which requires significant investment in capital expenditures.
At December 31, we had almost 64000 machines deployed representing six two <unk>, while the company incurred significant capex to get to this point I'm going to share with Capex looks like for the remainder of this calendar year.
We discussed on the last earnings call. We stated that we will be at 16 exit hashed by December 31 of this year that require additional nine four <unk> machines just to remind you. We went from $1 nine ex ash at December 31, 2021 to $6 two ex ash all in 12 months.
As Jack said, we have confidence we will get there primarily through the 200 megawatts of additional capacity coming online.
We expect the total capex for minors for the additional nine for Axa hash will be in the range of $140 million to 200 million at current prices before coupons and discounts through.
With respect to our expansion efforts in Washington, and San Diego are construction costs are expected to be approximately $70 million, which represents approximately $350000 a megawatt to build out those sites.
Of that amount, we've already paid $10 million and we expect to make announcements in the coming weeks regarding purchases of miners as well are minor purchases throughout 2023 could be comprised of several different models to help us to get towards <unk> goal and could range between 75000 to 95000 miners in total.
Depending on the speed and modeled the miners. However, we remain very focused on purchasing and deploying miners, which have the greatest ROI. As we previously mentioned there is still a value disconnect between the current cost of new <unk> and minor xps and other models. So we keep a careful eye on our capex as we get the <unk>.
<unk> more bang for our Buck and thus greater hash rate by optimizing the mix of non XP NXP models.
Before I wrap up I want to take a minute to follow up on <unk> comments.
Clean spark Cassini explosive growth in the last 12 months, we feel very comfortable with our plans.
Zach discussed we're laser focused on executing the clear path to a current goal of 16 ex ash by December 31 of this year. We are in this for the long term and we maintain a long term vision and strategy. One that has us all rowing in the same direction towards our calendar year end guidance.
With respect to our strategy regarding M&A, we have been one of the most active miners to date and acquiring infrastructure and machines and we will continue to be active while deal flow decrease going into the holiday season, we have seen activity pick up since the new year. We are still buyers in this market and our strategy has not changed that strategy is to find accretive.
<unk> acquisitions, which meet our ROI metrics and start producing free cash flow. Shortly after the deployment of capital to finance. These acquisitions, we will continue to use the levers available to us which right now include the sale of <unk> equity.
And as Zach mentioned, we are a shareholder proposal to increase the outstanding share count to 300 million shares.
That note I want to emphasize that we will continue to be methodical and calculated when raising capital and deploying that capital because we're conscious of responsible equity management and want to be as efficient as possible when pulling any of our three levers <unk>.
Additionally, the recent increase in bitcoin prices have allowed us to build bakra huddle balance.
Balance we will use to be opportunistic in the marketplace. Therefore, our hurdle balance may fluctuate from month to month, depending on the opportunities we take advantage of.
So while we expect our huddle balance to increase over time, there may be fluctuations in our month to month reports were decreases in our hurdle are strictly for capex purchases that drive hatch rate and cash flow.
On a final note, we haven't talked much about the debt lever, but we continue to have conversations with lenders in this market. When the time is right. We do expect to apply a small amount of leverage for our balance sheet and when we do so we believe we will be at reasonable cost of capital on that note I want to take a few minutes to also discuss what we believe differentiates clean spark from other mining company.
Yes.
Exactly one year ago, Zach and I shared our vision and strategy with the goal of being a top five miner.
Not only did we achieve that goal rather quickly, but we have also set the tone for other miners about what a proper and prudent business model looks like in this industry.
You May remember, we stated that 100% Hoddle strategy was not sustainable.
And that our plan was to strategically sell bitcoin and it was the prudent business decision as we know as we now know miners who were previous 100% <unk> have sold much of the big Horn balanced in 2022, and even recently at 2023 oftentimes at a loss compared to what they reminded at or even purchased bitcoin.
We believe that our selling of bitcoin is strategic not idealistic and is that strategy, which has helped us experienced a high growth. We've reported over the last year, we are thoughtful and calculated buyers in this market seeking out accretive acquisitions and as you can tell from the deals we have completed in the past 12 months, we have been successful in <unk>.
<unk> and closing transactions, which not only grow our percentage of the total global has rates, but also produce meaningful bitcoin and cash flow.
In closing, we can't underscore enough the value of human capital.
And that of our team members through the secret sauce that make this work while there have been macro headwinds over the last quarter I am personally very excited to see what 2023 brings as we believe this will be year of continued execution and growth.
Thank you for your time as it back to you.
Thank you Gary address this concludes our prepared remarks, we would now like to open the line for questions from analysts.
Lee.
Ladies and gentlemen at this plant will begin the question and answer session to ask a question you May Press Star and then one to withdraw your question you May Press Star one again.
We are using a speaker phone, we do ask that you. Please pickup your handset prior to pressing the numbers to ensure the best quality once again that is star one.
Go to our first question from Mike colonies of H C. Wainwright.
Hi, guys. Thank you for taking my questions. Today. My first question is on your capital management and allocation strategy and our view bitcoin prices still look subdued at these levels. So at what point do you think you might start holding onto a larger portion of the bitcoin youre mining and what factors would you need to see before.
Before making that call.
Hey, Mike it's a good tuck in and thanks for joining the call.
Just like we said we always approach this very strategic rather than with an ideological approach. We will look to measure this really by the market indicators. We agree with you I think that bitcoin is as I said, the tides are turning and I expect to see.
A change of direction, which is why we do intend to see that hoddle balance grow but again strategy over ideology is how we want to approach. This on a real time basis with that said I'm going to let Garry add a little bit to that yeah. Thanks for the question. Mike I think you can look at the huddle balance, particularly these big when price levels to be directly.
Reflective.
Of what our margins are so as the margins expand I'd expect the huddle balance too.
To accelerate but right now we're really managing on a day to day basis because.
Zach sees a lot of deal inflow, whether it's infrastructure or bitcoin miners that are available on the market and by having that that balance of bitcoin. We can quickly strike and close the deal with the matter of a couple of days if need be so we will continue to use it opportunistically, but really that huddle balances can be reflective of.
<unk> prices directly and.
And the margins thereof.
That's great I appreciate the color and any additional color you can provide on the greenfield sites Youre evaluating.
Towards the growth plans for the year, specifically, if you could talk to any relocations that youre, considering and if these sites offer an opportunity to lock in any ppas.
Yes, so everything we look at I of course cant speak to the specifics because.
It just wouldn't be appropriate to do so the one thing I can say is we do have a criteria that they have to meet and that is of course that is going to have a PPA that will give us access to low cost power on a long term basis it needs to be in a community that we want to put in.
In investment into but ultimately.
We're looking at a lot of opportunities and a lot of regions and we're going to pick the very best but they have to meet a very strict criteria. We have I can tell you that we say no to a lot and.
All kinds of factors that go into that not least of which of course important to us as the energy mix. In addition to the cost.
Great I appreciate you guys, taking my questions.
We'll go next to Josh Stiegler at Cantor Fitzgerald.
Yes, hi, guys. Thanks for taking my question today, Congrats on the continued execution and really great results in January it's always great to see.
For my first question I'd love to dive into the energy cost can you speak to how they trended during the quarter and what youre seeing so far into 2023.
Hey, Josh Great question I'll jump into that so.
<unk> 22 was a challenging year everybody knows it on the energy side.
Our third fiscal quarter, we had prices right around the four range on average and all of these price them in a name or across our entire portfolio owned and operated and the hosting.
Q4 fiscal ending September we saw those rise and they were right around the <unk> and last quarter. We did see prices start to average around <unk> is where they rose two with that said, we were able to navigate those really well because of our active energy management strategy, but also most.
Fortunately, we have been put in a position and we've recently seen power prices as low as $1 eight at our facilities, we're consistently seeing prices in that <unk> range and right now if you do a look back at for example at the last seven day average we are seeing across all into our entire port.
Folio and average price at three <unk>.
So we really saw December be a tough month and then January was was look it looks great and it was kind of a godsend that we needed to.
Chip tides and bring the margins back where we wanted them to be.
Understood. That's very helpful color I appreciate that and then looking forward to the rest of 2023 can you provide an update in terms of your relationship with me right now and how you are thinking about power costs for the rest of the year. Thank you.
Yes, absolutely, we're having really constructive conversations one of the things. We're finding is the active energy management strategy, we're deploying we're actually outperforming the fixed.
<unk> opportunities that we have in front of us and so based on that we feel like is patience is going to be part of our strategy in dealing with them.
And the reason that is is because when you buy.
<unk> locked in power strip for example, you the.
On the other side of that the hedge is really making a bet on the upside or downside and our ability to manage and avoid a few hours here a few hours. There again, our average power price is outperforming this so I think that there will be the right time and that right time is going to come as the energy markets.
Continue to drop in energy prices, we follow the energy markets very closely and we think that wholesale prices, especially where we operate but probably the country as a whole are on a really positive trajectory and its winter being a mild winter and what we're seeing happen with natural gas price.
As we.
We think it's a little early to strike and we're going to wait and cool our heels until we pick it because it's going to lock in something for a long term.
And we want to make sure it's as low as possible and thats going to happen as the energy providers really do see this impact their long term forecast of what theyre going to generate on their side as energy providers in revenue.
Understood. That's very helpful. Thanks for taking my question.
We'll move next to Greg Lewis with <unk>.
Hey, Thanks, Thank you and good afternoon.
Everybody and thanks for taking my questions.
Jack I was.
Thanks for all your detail around.
The path towards that 16 ex ash.
I did kind of want to talk about our kind of get your thoughts around.
Clearly theres a lot of opportunities on the M&A side, it sounds like of physical assets, but just given the fact that clean spark you mentioned, the low leverage you're kind of.
Differentiated or started differentiate yourself as an operator.
What is potential appetite from clean spark and what type of opportunities are you seeing the kind of.
Continue to go down the co hosting round and is that something that you have any interest in doing just as you think about whether getting the 16 or even potentially higher later this year.
No that's a great question.
And I think it's an important question to ask and as we spoke to win there. We really think that the proprietary mining model provides us with the reliability and efficiency that we really want to see.
We have a great hosting partner, but I can tell you that our team is dedicated to things that are going to directly benefit us in a way that produces better results and I think that thats just a natural human thing that that happens in the human component of what we do we think as Gary said is to.
Secret sauce, so our growth, we really plan to push directly towards being proprietary mining.
We do see.
Being hosted.
And to have a time and a place but that should really be when we seek out flexibility or when we have opportunities for miners without a place to give them a home, but even then I would say we would look to rotate that into a proprietary mining model on a long term basis, because we truly believe.
<unk>, we can produce better results.
Okay and to that point on the there was a slide where you kind of had your progression.
And maybe it was just the optics of the slide but it looked like.
The amount of host Dean or co hosting I guess.
It looked like in 2425 that comes down is that related to existing contracts you have that potentially roll off.
We don't have plan on right now we have 50 megawatts of capacity hosted and we don't plan on that increasing in the near terms or anything that we put up on the slide so really maybe it's just scale showing our increase in proprietary mining, but we really plan on holding status quo.
Yes.
It's really the game plan now we don't really plan on changing anything in our current relationship because we're going to keep keep those miners running in hashing, we'll probably keep them there until their end of life.
Or unless until we make a different decision.
And then just realizing it's still a developing technology, but it seems like its gaining traction.
As you think about opportunities to continue to build out your infrastructure.
He kind of leanings or thoughts around immersion in the potential how you think about maybe deploying that future sites.
Yes.
<unk> had a great experience with our immersion <unk>.
<unk> facility right now in Norcross, and we're absolutely evaluating that at the standards El site may be incorporating that into part of it in our expansion in Washington, We're not and I'll tell you why it really comes down to capital.
It takes more capital to build the infrastructure that supports emerging cooling now in the current market that hasnt been supported in the next bull market I think that that changes a little bit what we really like though about immersion mining is that it does give you flexibility over clocking under clocking.
There's a lot we can do with it.
But we're also seeing advances in what we can do over clocking in under clocking in an air cooled environment. So what this ultimately comes down to and we there are opportunities. We're evaluating it's closing that gap for the capital it takes to build air cooled versus build immersion and <unk> technologies and <unk>.
Prove and get better and that gap begins to close that's when we will likely make bigger moves towards immersion cooling.
Perfect. Thank you very much for the time.
And we will go next to Brian Dobson at <unk> capital markets.
Alright, thanks, very much for taking my question.
So.
It's taking a little bit of a longer term view how are you positioning the company ahead of the 2020.
And how do you see that impacting the competitive landscape.
Yes, our positioning is to always increase the efficiency of our miners. So.
You'll see in the 10-Q, we identify that a year ago. Our average fleet efficiency was about 35 watts or tools per care hash and we've improved that to close to 31, and we plan to continue to improve that so <unk>.
Always staying in a place where you're upgrading and improving the efficiency is really step one step.
Step two this is where we think investing in building our own infrastructure matters.
One time long term investment that puts us in a position where those long term cost of operating or lower that will give us a better advantage into happening.
And then lastly, it making sure we're pulling every single string we can on the technology side to be in the right position because I think from a competitive landscape theres going to be a lot of hash rate that drops off when it occurs for the low performing or the least efficient miners and it's important that.
We.
<unk> are not only just the most efficient at the time as we can be but we are deploying technologies as I mentioned to both under clock and overclock and when you under clock you can actually take a machine bring down attach rate a little bit to add significantly more efficiency than it did remove cash right and so <unk>.
Sure. We're on the cutting edge of all three of those factors is what's going to be really really important.
Yes, Brian I, just wanted to add a few things to that too.
We talked about our base cases here is executing at 16 exit cash, but we don't feel compelled to go out and have to do M&A, but obviously, if we see a good deal we'll take advantage of that but really looking and having it bitcoins not at call. It you know.
Close to $40000, we think that theres going be a lot of smaller miners and potentially private miners. They can't access the capital markets are going to have trouble. So we really want to position the company to be able to pick off.
Infrastructure and assets at good deals similar to what we've done in the last six months or so so really from a positioning standpoint, we really are looking forward to some opportunities right around a halving of some other companies that want to get out of the game.
Excellent that's very helpful and look forward to have you at the conference next month.
Thank you.
Alright.
So I'd like to thank you for your questions and for joining US today, we wish everyone listening a good afternoon and good evening.
Back to you Roger.
Thank you, ladies and gentlemen, with that we'll conclude today's conference. We thank you for attending you may now disconnect your lines.
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