Full Year 2023 CleanSpark Inc Earnings Call
Good afternoon, My name is Christa and I will be your conference operator today.
This time I would like to welcome everyone to clean Sparks fiscal full year 2023 financial results conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would.
Like to ask a question during that time simply press star followed by the number one on your telephone keypad and if you would like to withdraw your question again press Star one.
Yeah.
And at this time I would like to turn the floor over to Isaac wholly own Chief Communications Officer, you may begin.
Thank you, Chris and thank you for joining us today for our fiscal full year financial results call covering the period October one 2022 through September 32023, our press release was issued about 30 minutes ago and is available on our website at <unk>.
Ww dot clean spark dot com so.
We expect to file our Form 10-K tomorrow.
Today's call is also being webcast and a replay and transcript will be available on our website.
Herewith, Zach Bradford, our Chief Executive Officer, and Gary <unk>, Our Chief Financial Officer keep in mind that some of the statements. We make today are forward looking and based on our best view of the world and our businesses as we see them today the statements and information provided remains subject to the risk factors disclosed in our most recently filed.
The annual report, we will also discuss certain non-GAAP financial measures concerning our performance during todays call you can find the reconciliation of non-GAAP financial measures in our press release, which is available on our website and with that it is my pleasure to turn the call over to Zack.
Thank you Isaac it's a pleasure to be here with you. All today. This past fiscal year has been one of substantial growth and success for clean spark, we've not only met but exceeded many of our strategic games and I'm proud to share these accomplishments with you.
It was a record breaking year for us financially and operationally, we posted revenue of over $168 million or 28% increase over the last fiscal year.
We expect to continue to follow this trajectory and we are optimistic about revenue growth next year, even as we prepare for the happening for example, during the last month, we posted our first single day revenue of almost $1 million.
Like analysts across the traditional financial industry. We are bullish on bitcoin, we believe that its utility as a payment system investment opportunity opportunity and savings tool for the middle class will continue to grow as more and more people take part in this next stage in the evolution of money.
Operationally, our hatch rate growth year over year has been exceptional high.
Highlighting our commitment to not just growing but also scaling efficiently in fact, we've achieved a remarkable milestone this year by surpassing a total hash rate of 10 <unk> per second a level reached only by a select few in our industry.
<unk> has more than doubled since I spoke with you one year ago during our last fiscal year earnings call.
More our hatch rate is among the most efficient among publicly traded miners.
Thanks to one of the most advanced fleets in the industry. Our fleet wide efficiency is now 26.4 tools per <unk> and we.
<unk> to continue to see sustained improvement in our efficiency with standards that are coming online in the next few months.
I'll talk more about this in a bit but for now let me emphasize that this growth is a testament to our team's hard work and the strategic investments we've made in our technology and infrastructure.
We've kept pace with the bitcoins network soaring hash rate pass rate and the results of our efforts were a record 6902 Bitcoin mine for the first fiscal year almost doubling what we mined last year, we mind that bitcoin with an average gross margin of 42.
2%.
Im also pleased to report that we are entering the new year with the strongest balance sheet in our history.
As of this call we have almost a 170 million in liquidity in cash and Bitcoin holdings.
I'd like to talk about our strategy around holding more bitcoin on our balance sheet.
We see bitcoin as a smart treasury tool and we expect <unk> to continue to increase in value over the near term we plan to be opportunistic about how we use that bitcoin for future growth opportunities you'll notice that we grew our balanced swiftly over the last few months.
We did this to strategically boost the balance as we price improvement was on the horizon.
We expect to continue to grow our bitcoin treasury, but we have shifted back to a strategy of using our bitcoin for expenses and holding the difference we plan to maintain strategic flexibility and how we make capital decisions with our bitcoin.
As we head into <unk> I expect us to lean into a balanced strategy of maximizing our holdings will also using bitcoin to fund our operations and therefore avoid using equity to fund operating expenses.
It seems like a long time ago now, but it was at the beginning of our 2023 fiscal year that we acquired our Sanders fill location more recently, we acquired our Dalton campus, we now have sites dotted across Georgia proud.
Proudly many of them are in rural communities, where we where we can have an outsized impact on the economic engine of the community and the power purchasing strategies of the respected utilities.
We continue to maintain good relationships with our hosting provider in upstate New York and see that partnership as part of our approach to a diverse operating framework through happening.
The acquisitions of Sanders film, Dalton, where pivotal and our growth strategy.
These acquisitions have allowed us to expand our reach and capacity.
In the case of Dalton It has allowed us to further diversify our utility providers as the city has its own independent power Department.
We are making significant progress on the expansion of sand yourself.
And I will share more about standards filled later in my remarks, it's exciting to see these plans materialize contributing to our goal of keeping our status as one of America's leading the coin miners.
Earlier this year during summer our expansion in Washington went live marking a critical step in our strategic efforts to diversify and strengthen our operational footprint.
This facility not only enhances our production capabilities, but also exemplifies our commitment to sustainable and responsible mining practices. The expansion added 50 megawatts of operational infrastructure for a total of 86 megawatts, which is currently capable of around six five bitcoin a day.
In line with our growth strategy.
<unk> expanded our machine inventory, specifically targeting the most efficient miners.
This year, we continued our proven track record of buying state of the art machine.
Equipment at market setting prices.
The result is that we have increased our operational efficiency and output.
These machines are not just an investment in hardware, but in the future of clean spark.
We've been particularly strategic in our acquisition purchasing over 80000 machines, including 57500 S 19 xps.
Those xp's have since all been delivered and many of them are waiting to be racked and energized at our standards of facility.
We also have an additional 22020 ones with delivery expected to begin in January 2024.
As we look beyond this quarter post Sanders fill expansion and into happening we plan to aggressively focus on incremental gains in performance.
And outperform our peers with these gains.
We also plan to continue to strategically upgrade our machines and optimize our software ensuring that we stay ahead and at the forefront of the bitcoin mining industry.
These enhancements improve our efficiency and profitability.
I want to take a moment to define what we mean when we discuss efficiency of our operations, we measure efficiency at multiple levels. The most important though our energy efficiency and uptime efficiency.
Energy efficiency is the amount of energy it takes to produce a bitcoin staying.
Staying at the forefront of energy efficiency gives us a meaningful advantage. Even now we are producing up to 37% more bitcoin with the same amount of energy as some of our less efficient peers.
Uptime efficiency refers to our ability to maximize the available shelf.
<unk> and power at our site.
We limit the time in which a minor is offline or Iraq is unused.
We have increased uptime by pursuing the following initiatives.
Building out our internal repair capabilities.
Matt optimizing our software stack and training our teams to rapidly address down miners.
We also maintain a small safety stock of extra miners at each site to allow for rapid swaps of miners.
If a minor needs to be taken off the shelf for repairs, we put a new minor in its place instead of leaving an empty slot.
Earlier this week, we achieved 90, 987% uptime across all of our wholly owned sites, meaning that 88710 of 88825 available slots we're hashing.
Efficiency is crucial as we head towards having we use software to make our machines more efficient for.
<unk> for example.
We can under Clarke, our machines, whereby we can choose to reduce their computing power by an average of 27%, while reducing their energy consumption by almost half.
This is the equivalent of mining three quarters of a bitcoin at a little more than half the energy consumption and cost as it would take under normal conditions.
To put another way this is like mining 126, bitcoins with the same amount of energy that it would normally cost of mine just one bitcoin.
We also use software to optimize or overclock our machine.
Generally speaking over clocking means the machine consumes more energy to increased tax rate.
We can actually increase the machines hash rate by about 12% with no increase in energy consumption at all.
To build on my earlier math, it's like mining one once you bitcoin at the energy consumption levels of what you would normally see when your mind just one bitcoin.
And in emerging cooling environment, we can push those efficiency gains even further.
We expect to see our efficiency continue to improve into happening due to these initiatives and the deployment of the new F. 'twenty, one bitcoin mining machine.
The most efficient minor currently available in the market.
Once installed we expect our hatch rate to exceed 20 <unk> per second.
Timing has always been a key part of our strategy.
And I believe we have done it better than anyone.
We will continue to time, our strategic purchasing and growth to seek out the best returns for our shareholders subsequent to the fiscal year and we've continued our expansion.
Wiring new machines that align with our long term strategies and growth goals.
This ongoing investment in our infrastructure is key to keeping our competitive edge and driving sustainable growth.
Our recent acquisitions and machine purchases made strategically during the bear market have positioned us exceptionally well for the upcoming bitcoin happening.
We are scaling up our operations in anticipation of the next bitcoin happening ensuring that our infrastructure is robust and efficient our team is working tirelessly to enhance our operational capacity and we are excited about the potential this expansion brings.
Principally we are excited.
About achieving scale, we expect our corporate overhead to remain flat going forward, while substantially growing our operations.
Internal analysis suggests that the financial effects of this are large it's on par with lowering our all in cost by almost a full penny per kilowatt hour.
For example, we can increase machine inventory power under management and hash rate without having to make proportional increases in overhead both in terms of office space and head count are principal cost driver is the cost of our energy we expect to continue to expertly manage this.
Cost, while keeping overhead down thus driving more value to our shareholders.
In terms of our energy acquisition strategy, we've been meticulous and strategic.
Our goal has always been to strike the right balance.
Cost effectiveness and sustainability.
We've adopted innovative approaches to energy consumption.
Focusing on investing in communities that have access to low cost energy sources.
Are these energy sources are renewable or low carbon like nuclear energy.
Access to nuclear energy is one of the principal reasons, we've made Georgia our home.
There is abundant energy in Georgia.
And as a net exporter of energy.
We are thrilled to be able to work with rural communities throughout Georgia.
To keep that of energy in the community.
This approach not only aligns with our commitment to environmental stewardship, but it also ensures long term operational efficiency and resilience.
We consume a lot of energy as a bitcoin miner, and we're committed to being wide stewards of that energy.
We view, our consumption as essential to securing and maintaining a robust decentralized money.
Despite substantial growth over the last year, we continue to see most of our energy mix being derived from clean energy sources, showing our dedication to responsible mining practices.
As we look to the future.
The expansion of our standards. So facility is a key focus.
Once completed standards Bill will be the largest bitcoin mining data center in Georgia, and we believe in the entire southeast.
The site itself will be capable of producing over six <unk> per second and will hold about 45000 machines.
For those of you who have followed along with our monthly updates on Youtube Youll notice that the site has seen sustained progress.
Most of the subsurface infrastructure like conduit trenching and concrete is in place.
While the teams are making substantial progress on our <unk> and.
And installing racking.
We expect this site to be complete in the coming weeks ready for full <unk> shortly after that.
Sanders will hold a special place in our Hearts and in the community and we look forward to introducing this site to you when its completed and energized early next year.
I was recently in centers field, where we have four different trades working side by side in this rural community working full time jobs that they would not otherwise have access to.
The economic impact of growth is sometimes an appreciated in our current macro environment.
Prefer a town like Sanders Bill growth like this is crucial for the town's ongoing success.
After the expansion is complete many of those trades will go on to other opportunities, but our robust workforce of clean spark employees will remain will the city.
Benefits from millions of dollars a year in tax revenue and margins on the electricity, we buy from the community.
After standards, though.
We expect to need up to 72 megawatts of additional capacity to support our growth to over 20 <unk> per second with the F. 'twenty one.
We expect nearly half of this capacity to come through facility expansions at our existing sites.
With that I'm.
I am pleased to announce that we are making efforts to address the first 15 megawatts of this need by adding 15 megawatts of capacity at our Dalton campus.
Once fully expanded that campus will host an additional 4320 latest generation F. 'twenty one machines.
Capable of 850 50 <unk> per second.
We also plan to pursue adding up to 27 megawatts of additional capacity at other existing site.
All of these plans, including adult and expansion are subject to further approval.
By expanding at our owned properties, we expect to gain of 42 megawatts or approximately 60% of the power we need to exceed 20 <unk> per second without having to acquire or build new site.
We are currently reviewing additional opportunities that would more than cover the remaining 30 megawatt need we expect to achieve 20 <unk> per second in 2024. After the full delivery of that F. 'twenty one we've recently ordered.
We may also push beyond 24 extra hash.
In 2024, but such growth will be done in a measured way as we approach having we plan to continue pursuing our M&A strategy on a post <unk> basis at the right time and at the right value.
In a way these incremental additions now seem small after just talking about adding 150 megawatts all at once in standards Phil.
But this move is strategic to how we see ourselves growing.
Large mega sites can only be one part of a bitcoin and miners portfolio.
Instead, we see the future of our campus growth.
To be more distributed minimizing the risks of geographic concentration, while maximizing the strength of local knowledge with that in mind, we expect to continue to expand throughout Georgia.
Where we are local power experts.
We also expect to expand into new cities and diversify across multiple utilities.
The nature of these expansions are likely to be more measured as we near the happening in April.
I wanted to take a moment to thank our incredible team of clean spark the dedication innovation and hard work have been instrumental in achieving the milestones we have discussed today.
It's your efforts that drive our successes and I'm proud to lead such an outstanding group of professionals.
I'd like to end with a shout out to three groups of people.
First thank you to the teams who are working to build our largest site in sand yourself.
Cant get that level of cooperation without clear leadership and commitment to the project.
Second I want to thank our burgeoning repair team at our Norcross campus the ability to make repairs in house down to the chip level is a game changer.
Means.
Machine spend less time unplugged and more time hashing.
Directly contributing to the bitcoin network and to shareholder value.
Lastly.
I want to thank the finance team at our corporate headquarters preparing fiscal year end financial results over the holiday season is not any one short list not even a CPA shortlist.
For your efforts with that over to Gary.
Thank you Zack.
It's my pleasure to share some insights in order to financial performance for the fiscal year ended September 32023 <unk>.
Zach mentioned, it's been a year of significant achievements or financial results reflect this.
Diving right into the numbers our revenues for the year were $168 4 million, an increase of approximately $37 million or 28%. This increase was primarily driven by the increase in bitcoin production.
We produced over 6900 bitcoin for the fiscal year compared to 3750 <unk> produced for fiscal year, 2022, which represents an increase of 84%.
However, big corn price so much volatility during the year with a low of approximately 15500 and our fiscal first quarter late last calendar year and a high of almost 32000 and our fourth quarter. Additionally, global house rate has increased significantly.
While our hatch rate has more than doubled and the recent fiscal year. The combination of bitcoin prices and increased difficulty has resulted in a muted overall increase in revenues our gross profit for the year. So a decrease in 2023, approximately $15 5 million or 17% the largest contributor to this decline was the average.
One price, which was significantly higher last fiscal year.
Looking at our GAAP net loss, we saw loss of approximately $137 million for the fiscal year 2023.
It is important to note that our net loss includes noncash GAAP items, the largest of which is a charge. We took in the fourth quarter of $32 $7 million related to the acceleration of depreciation around our older minors Zack as discussed today and on prior calls we are preparing our fleet for the having.
Next year this acceleration of depreciation related to older less efficient machines that we have either taken out of service as we replace them with more efficient and powerful XP machines or units. We currently have in use but we do not anticipate using post having.
This led us to taking the conservative approach to write down these machines because their estimated useful life to us with significantly reduced to either zero or in some limited cases seven months, which is the estimated time from our yearend two happening.
Also included in our net loss number is approximately $4 $4 million related to discontinued operations. The majority of which includes a full reserve related to assets held for sale, we expect that in future periods. There will be no further costs associated with our legacy energy business as we have now fully.
Exhibited that business. We've included in our 2023 numbers any future costs related to the wind down of the entities on total cost, which is estimated to be less than $1 million.
Finally, with respect to adjusted EBITDA, We did see a decrease year over year for reasons very similar to those which affected our gross margins.
However, I want to point out that we did have some fourth quarter costs, which were excluded as favorable adjustments to EBITDA, the largest of which is related to noncash impairment of bitcoin.
As we have discussed in prior calls this impairment expense as required under current GAAP accounting.
Entire year, we recognized a total of $7 1 million impairment expense of which $6 million is directly attributable to the fact that we increased our bitcoin balanced significantly during the fourth quarter to help put this in perspective, we held 529 bitcoin as of June 30 and finished.
Our year end with 2240 bitcoin as of September 30.
Which is over 300% increase in Bitcoin holdings, just in the fourth quarter alone.
While we remain subject to the accounting rules around impairment of our bitcoin, we look forward to the FASB adopting the proposed mark to market rules, which.
Which will better reflect the true economics of our operations.
I want to take a moment to discuss our power cost for the entire year, our power costs for fiscal year 'twenty three were $4 eight per kilowatt hour as you'll see here our wholesale electricity costs alone were $3 six per kilowatt hour and we had an additional $1 two per kilowatt hour of costs related to transmit.
The distribution profit margins to the cities, we operate in and taxes.
Management considers its all in power cost, which include these fees and costs on top of the wholesale electricity numbers when analyzing its operations. We believe that we are one of the lowest all in power costs amongst miners in the industry and when combined with our uptime clean spark is one of the top miners in the industry.
With respect to the fourth quarter, we did see higher costs of $5 one.
Per kilowatt hour compared to the third quarter, which we saw cost of $4. One per kilowatt hour. This was in line with our expectations as we have seasonally higher temperatures in July and August which leads to higher power costs.
Additionally, our team did run miners during periods with higher than normal power costs. However, this was done intentionally as the increase in <unk> prices allowed us to still mine profitably. During those periods. We continue to have an active power management strategy, which takes into consideration the three variables of current.
The coin price difficulty and power costs.
This strategy allows us to remain responsive to the needs of the grid, while remaining flexible and profitable.
I also want to point out our cost to mine, a bitcoin or average cost for fiscal year 2003 was $12473 four a wholly owned facilities and 15797 at hosted facilities.
This is important to note because given our world class operations, the economics of running our own infrastructure continues to be significantly better than hosting relationships.
We will continue to have an infrastructure infrastructure first strategy, while using hosting relationships when it makes sense.
Additionally, I want to point out that hosting costs will typically be higher does that include a profit sharing component, which reduces margins compared to our wholly owned locations, especially as bitcoin price increases.
On a final note I want to talk about our balance sheet and our liquidity position.
When I look back on fiscal year, 2023, and see that our company took advantage of the bear market to grow our <unk> by more than doubled and we also shored up our balance sheet during that time. So I previously mentioned, we have increased our bitcoin holdings over 300% in the fourth quarter alone and that number as of today.
Is just shy of 2600, <unk>, representing almost $100 million in value. We also had approximately $29 million in cash as of September 30.
As of today, we have over $70 million of cash in the bank combined this represents approximately $170 million in liquidity between our <unk> holdings and cash as of today.
From my perspective, we have set the stage for a successful 2024, and a very healthy going into the havoc with multiple tail winds at our back.
Not only do we have significant liquidity, but we have one of the industry's most efficient fleets have an average of $26 four joules per tier house, we have a low cost of mine bitcoin and we have 150 megawatts producing at least six exit cash coming online prior to having.
That <unk> <unk> represents an additional 60% processing power above and beyond what we currently have plugged in and it will drive our fleet efficiency to 25 to <unk>.
And of course, we're also excited about the potential.
Bitcoin spot ETF approval will bring as we view it as a positive catalyst for the industry and big corn price.
Again, our size scale and strong balance sheet have set the stage for the having events and event. We will we know will not only create some challenges for miners, but also create opportunities for miners such as clean spark.
As we have the ability desire and liquidity to once again take advantage of opportunities in the marketplace.
Until the having we remain laser focused on execution and look forward to bringing over six <unk> per second online and standards.
As we move towards exceeding 20 exit hatches per second.
With that I'll turn the call back over to Isaac to open the floor for questions.
Thank you Gerry for the detailed financial overview, we will now open the floor to questions from the analyst community. Operator, please provide instructions and manage the queue for the Q&A session. Thank you.
Thank you ladies and gentlemen at this point, we will begin the question and answer session.
Good question, you May press Star and then the number one.
Try your question Chris.
Star and the number one if you are using.
Okay.
Pick up your handset.
The numbers to ensure the best sound quality once again that is star and then the number one.
<unk> question comes from the line of Mark colonies from H C. Wainwright.
Please go ahead with your question.
Thank you operator, I guess high end marks now guys. Thank you for taking my questions and good afternoon first one for me is on your whole balance I. Appreciate all the colors that you provided on your go forward strategy I was curious if you can walk through a little.
Bit more about how you've been able to grow the balance so rapidly in recent months.
Hey, Mike good.
Good to hear from you.
When we approached it we really.
We were expecting to go up and we were proven correct on that and we also looked at our cost to mine bitcoin and as Gary just talked about it's a little over $12000 a bitcoin for us to mine.
And so we made a choice just like micro strategy bought bitcoin.
We exercised the value of leverage so instead of being like micro strategies and buying spot. They just disclosed today buying a lot of bitcoin at over 36000.
We effectively funded some of our operations on a temporary basis from equity and as a result, it has essentially allowed us to acquire bitcoin at that cost of 12, a little over $12000 of bitcoin. So it was a short term strategic way to boost the balance and then we shifted back.
Two again looking to maximize really the output from our operations by using bitcoin for what we do know what we really expect is to continue to maintain very healthy margins and on the go forward what that looks like.
I am very bullish on what Etfs somewhat having ultimately.
Means for bitcoin price appreciation and I really seeing us hotaling, the delta between what we need to.
Keep the lights on and payer power Bill and that difference I see going into the huddle balance for future appreciation.
That's really helpful. I appreciate the additional color there and second one for me you also mentioned in your prepared remarks that construction to support the expansion of standards Ville is tracking to plan and expected to be completed in the coming weeks can you provide some more specifics as to when you expect to have the site fully energized and hashing out.
Full capacity.
Yes, we're really excited about the progress we're making as I mentioned in the prepared remarks, we expect the construction side of that to be done in the next few weeks and really we expect it to be done before the end of the year.
That really leaves.
The power coming online and getting the machines.
Plugged in and hashing, what we expect as of right now.
Is for us to begin <unk> in February.
And we think it will take a few weeks to basically bring all the miners online just like it did in Washington, Obviously this is not like flipping a light switch it's instead like turning on several hundred Wal marts and with all of that power that goes into it we turn it on transformer by transformer solar come on by two megawatts at a tie.
<unk> and we expect to be able to turn on multiple transformers, each and every day starting February.
Great. Thanks.
Your next question comes from the line of Josh <unk> from Cantor Fitzgerald.
Please go ahead with your question.
Yes, hi, good afternoon. Thanks for taking my question. Congrats on all that you've achieved this year I think is a testament to our strong execution.
First of all I'd love, if we could dive a little bit more into the 15 megawatt expansion that Dalton.
Do you have any parameter.
Parameters around the Capex requirement for that first slug of infrastructure growth.
Yes, I've got a little bit around that we expect it to actually be pretty low cost and so I would anticipate that our all in capex needed to do that expansion is under $5 million. Obviously, we've already taken care of the miners, we've disclosed what that looks like but from a facilities infrastructure.
Syed we do expect it to be under that $5 million mark to finish to $15 million or 15 megawatt expansion.
Perfect. That's very helpful. Thanks, and then on the energy side I was wondering if you can give us any update on how energy prices have been trending throughout this winter in Georgia in any major.
Trends or anything you'd like to highlight as we progressed through 'twenty four.
Yes.
How its trending right now as it's trending meaningfully better than it did one year ago. So one year ago. If you recall, we were everybody was experiencing still quite a bit of pain. When it came to natural gas prices. So if you look at our first fiscal quarter last year.
Prices were trending from a wholesale basis around <unk>. So our all in cost was floating right around that 6% range.
As of right now we're seeing those in the threes and we're really happy with the trajectory and the projections. So right now with some of the projections that we've been provided by the power providers. We expect the balance of the year to kind of continue on trend between that three and four range and then for 'twenty four.
And beyond we're actually really excited about what we see for 'twenty four.
A lot of the utility companies did quite a bit of purchasing to shore up.
What this year would look like with the natural gas issues that they encountered a year ago and so we're looking at are largely at least we're projecting out as are the utilities largely flat prices.
That are going to be in the three range and.
Oftentimes lower than that so 2024 is looking really really good in Georgia for power prices.
Okay.
Great.
Color, Thanks, again, and congratulations on what you've achieved this year. Thanks, guys. Thank you Josh I appreciate it.
Your next question comes from the line of Greg Lewis from <unk>.
Please go ahead with your question.
Thank you and good afternoon, and thanks for taking my questions.
Zack I was hoping you could talk a little bit more about.
So some of the cost savings may be were seen as kind of we've brought in.
Machines to internal repairs and the improvement in uptime is there any kind of way you guys are able to quantify that benefit that the company is getting.
Yes.
What we're seeing right now is.
With our internal repair team, we can actually turn between 601000 machines every single month without having to send to an outside source and if you think of it in context of two ways from savings on the repair side. One is when you send it out you are losing.
Meaningful time, sometimes weeks before that machine ever comes back to you from another party, but also what we found is when you send it to a third party UC Mark up not only on the parts and materials, sometimes 100% markup on that and these are often small dollars it could be a 20 dollar.
Instead of a $40 part that has to get switched out but then also we're seeing meaningful differences in labor. Obviously, when you send it to a third party they have their own labor costs that a market up to make a profit and so I don't necessarily have a specific percentage, but its very very meaningful.
Im going to take it to Gary to see if he has more context, let me give you a little bit more color.
We're still in the process of really ramping up our internal repair shop, and so so really those synergies have not been recognized fully in our financial results yet so.
Because we were previously previously outsourcing that.
But we expect in future quarters that will meaningfully help the margins.
Okay great.
Just to quantify though other piece from an uptime perspective, if you look at some of the independent reports that exist out there.
There is the average uptime across the industry is floating around in the 80% 85% range.
Obviously unless someone disclose is that we don't have all the details, but thats what it seems to be from an industry standard of uptime and us.
<unk> achieving in the high 90% up time part of that is what turns into our returns on that which is ultimately measured in topline revenue versus some specific cost savings metrics. So that's why I would look at it is we're probably 12% to 15% or more.
More.
Profitable due to our uptime metrics because of what we have developed internally.
100%.
I was looking for a little bit more clarity on the.
Kind of called out the 72 million I am sorry, the 72 megawatts of expansion.
Potential.
Just kind of in terms of the timing.
You highlighted.
<unk>.
Beyond that is that should we be thinking about that.
More of a first half event or is it with the having come in we're going to maybe look at doing that that's kind of may be part of our second half 'twenty for kind of growth build out just a little more color around that and then really I guess a two part question how are you thinking about.
Splitting up that.
Our.
Deploying that extra megawatts across the facilities beyond toll.
Yes, so we do expect it to be a first half event because our intention is to basically add megawatts. So that as we receive the F. 'twenty one we can plug them in and get them hashing right away. So for example, the adult and expansion should happen very rapidly and then some of the follow on.
<unk> I would still expect to happen in the first half of calendar half of 2024.
And then from.
Similar to all of it is going to be like minimal and similar to the Dol.
It seems like these are all going to be a couple million dollars here a couple million dollars. There yeah, yeah, we expected.
Our intention is to make a fairly low cost endeavor, we've gotten even better at building and so depending.
Depending on what we built whether it is air cooled or emerging and we are eyeing some additional immersion.
Going forward, but youre talking about anywhere from 350000 to around 500000 megawatts, which I should add is substantially better than the immersion that we built in the past the markets improve substantially for that and we're pretty excited about what immersion seems to bring in the coming year.
Great to hear thanks for the time.
Your next question comes from the line of Brian Dodson from Chardan Capital. Please go ahead with your question.
Okay.
Alright, thanks, very much for taking my question.
So so you've done a tremendous job decreasing joules per territory over the past six months and you mentioned that new machines could bring that metric down to about 25 drills procure ash.
Time frame are you thinking about for that further reduction.
Inside the first half of next year, So we're going to see a meaningful improvement into the 25 range when standards now it comes online next.
Next calendar quarter.
And then with the 'twenty ones plugging in which as I mentioned, we do expect to be shelving those in the first half of the year that we should we'll bring it down into the 2000 <unk> prepare ash.
Yes.
Yes.
That's impressive and I guess as Youre thinking of just adding those new more efficient machines.
What other kind of kind of efficiencies can you ring out if there is there more to be had on the software side of things.
Yeah. When you look at what those numbers, we are using that doesn't include that.
Sticker value of what this machine can do so while our focus is on that flexibility. So as I mentioned in the call. We can really make that 27% more efficient from an energy use.
On about two thirds of the fleet and also take everything up about 12%.
And so that's really the flexibility we think we can continue to ring out of it. In addition to there is still a small portion of the fleet that is included in that number that 24 number that we would consider to also upgrade which would likely.
I do expect we will execute upon that.
We're just going to be very cautious and try and time that from a capital side.
Would bring it under 24 watts.
<unk> per taro hash.
Yes.
Yeah very good thanks.
Thinking about the having next year, you mentioned that that should create some challenges for weaker players obviously opportunities for yourself.
How are you thinking about M&A as we as we head into 'twenty four.
Right now we have it really interesting opportunities already because there are.
Weak players that know their week and they're looking for things, but I think it's all about timing it correctly, so where were incredibly interested in M&A. We've been very focused on site by site and we continue currently asking me sitting here today, we're focusing on the site level a.
A few reasons you avoid any baggage that often comes with entities in mergers.
Im going to see that on a post tapping basis, though I really think that there's going to be opportunities to not only merge with weaker players, but I think there will present itself opportunities to merge with equally or near to a stronger players and I think that that's important and that's why our focus really is going to be on the coming.
Year is really on maximizing our market value because when it comes time when and if it comes time to have discussions like that in 'twenty, four and 'twenty five.
We of course want to be the bigger stronger more valuable player in that discussion.
There's a lot of ways, we're looking at it and so thats why for the next two years, it's going to be all about maximizing value.
Yes.
Excellent thanks very much.
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Hey, sorry about that thanks for taking the question guys. This is Charlie on for Rajeev.
Thinking about the remaining 72 megawatts needed to reach your <unk> target.
It sounds like 30 megawatts will come from new sites can you talk a bit about a little bit about what you are prioritizing in that search would that be the cheapest power would that be maximizing uptime would that be staying in Georgia.
That would be helpful. Thank you.
Yes, our first priority of course is low cost power that is reliable those two go together and making sure that we have high uptime at low cost.
Were of course interested in growing in Georgia, but if additional opportunities present themselves, we're certainly not going to.
Take the borders of the state and call that a hard and fast line certainly not so it really is that focus on.
Low cost power reliable and the other thing we're prioritizing is speed to deployment, we of course want to deploy.
Those as 20 ones at the time of receipt, we don't want to be sitting on those so it's always been our strategy to be able to plug things in as quick as we can after we get the miners in hand so.
That's going to be the other piece that we prioritize is is it going to be up and functional in the timelines that we want it to be.
Perfect. Thanks.
I appreciate it thank you.
We have no further questions at this time I will turn the call back over to Isaac.
For closing remarks.
Yeah.
Thank you and thank you to everyone for joining today's call and to our analysts. Thank you for your questions. We appreciate your interest and your support and clean spark as always we're committed to driving value for our shareholders and advancing our position as a leader in responsible bitcoin mining happy holidays from all of US here at clean spark.
Ladies and gentlemen, with that we'll conclude today's conference. We thank you for attending you may now disconnect your lines.
Yeah.
Yeah.
Yeah.