Q1 2025 CleanSpark Inc Earnings Call
Good afternoon. My name is Krista and I will be your conference operator today at this time I would like to welcome everyone to the clean spark fiscal year first quarter 'twenty 25 earnings conference call.
Barbara: 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 this time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw that question again press Star one. Thank you and Barbara you May begin your conference.
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Barbara: Thanks, so much for that.
Speaker Change: Thank you for joining us today for the first quarter fiscal year financial results call for police for American Cui miner covering the period from October one through December 31, 2024. Our press release was issued about 30 minutes ago and is available on our website at www Dot com.
Speaker Change: Sorry, Www dot dot com. Additionally, the 10-Q will be filed shortly.
Speaker Change: Today's call is also being webcast and a replay and transcript will be available on our website.
Gary Guerrieri: On the call with me are Dr. Robert <unk>, our Chief Executive Officer, and Gary Guerrieri, Our Chief Financial Officer.
Speaker Change: Keep in mind the stomach.
Speaker Change: Fitments that we make today are forward looking and based on our best view of the world and our business as we see them today.
Speaker Change: Statements and information provided remains subject to the risk factors disclosed in our most recently filed annual report and 10-Q.
Speaker Change: We will also discuss certain non-GAAP financial measures concerning our performance during today's call.
Speaker Change: Can find a reconciliation of non-GAAP financial measures in our press release, which is available on our website and with that it's my pleasure to turn the call over to Sam.
Sam: Thank you Barbara.
Sam: To everyone for joining us as we review <unk> performance for the first quarter 2025, just before diving into this quarter's results I'd like to take a moment to discuss our strategic positioning in greater detail.
As a vertically integrated pure play Bitcoin mining company.
Sam: We operate at the crossroads.
Sam: Entergy operational excellence and capital stewardship.
Sam: The strategic positioning has enabled us to become the largest producer of bitcoin and the U S and the world's largest publicly traded pure play Bitcoin Meyer.
Sam: We firmly believe that bitcoin is the only truly scarce.
Sam: For like and permission a store of value and medium of exchange.
Sam: Belief reinforced by its growing adoption.
Sam: Clean spark.
Sam: One is central to our capital strategy driving our revenue as a pure play miner and serving as the largest asset on our balance sheet.
Sam: Our decision to aggressively hold bitcoin has proven highly rewarding with significant value appreciation overtime.
Sam: Our perspective on energy also sets us apart from much of the industry.
Sam: Unlike others, we've adopted a broad portfolio strategy expanding across four states and 31 facilities powered by abundant energy and net exports states.
Sam: This energy profile combined with our commitment to operational excellence that made us an industry leader in global.
I will discuss our growth strategy in more detail later, one thing is clear the regions. We have strategically selected will more than support our expansion.
Sam: Being an industry leader doesn't require slopping every important industry metric.
Sam: We are the only operator ranked in the top three across key measures.
Sam: Total assay.
Sam: Fleet efficiency marginal cost for bitcoin total uptime and bitcoin Paul.
Sam: This consistency has propelled us to achieve escape velocity driven by both scale and grit and as we proceed down the path of <unk> beyond every additional extra ask beyond our quarter end position of $39. One further enhances our operating leverage and margins delivering these gains.
Sam: Straight to the bottom line.
Sam: Simply put.
We are position to mine more bitcoin.
Sam: More profitably over the long run.
Sam: A key milestone this quarter was securing a $650 million convertible bond a significant achievement for our company.
Sam: Unlike our competitors, we have taken a different approach and used the proceeds to invest in our growth and capital strategy.
Sam: <unk> will provide further details later, it's important to highlight that our path to reach 50 <unk> by the first half of 2025 is fully funded without relying on equity to fund that growth.
Sam: We expect to achieve this target solely through greenfield construction and expansion of our sites in Georgia.
Sam: And Tennessee.
Sam: Natural extension of our proven land and expand strategy that has driven our success thus far.
Sam: We've laid the foundation to continue our growth with maximum efficiency and now the road ahead is ours to shape with their expertise strategy and relentless drive I have no doubt that our team will not only meet but exceed expectations setting new benchmarks for success with.
Sam: With this foundation in place, let's take a closer look at the numbers.
Sam: Our first quarter revenue was $162 3 million, representing a 120% growth compared to the same period last year.
Sam: We closed the quarter with net income of $246 8 million or <unk> 85 per basic share while our adjusted EBITDA, our key measure of operational efficiency and financial strength.
Sam: Alright at $321 6 million setting a new benchmark for the industry.
Sam: Well the current price appreciation during the quarter was a contributing factor to our strong performance. It was not the sole driver.
Sam: Our success is the result of our best in class Bitcoin mining operation.
Sam: Disciplined capital strategy and long term view of bitcoin as a strategic asset.
Sam: Like others, we sell mine bitcoin immediately our strategy of holding self mining bitcoin on our balance sheet, coupled with world class operational execution continues to be a key differentiator and delivering these exceptional results.
Sam: During the quarter the average price of bitcoin exceeded 83000, reaching a peak above a 108000.
Sam: Where our marginal cost per coin was approximately 34000.
Sam: This is a $2000 improvement from the prior quarter.
Sam: Meanwhile, our total bitcoin inch treasury stood at 9952 at the end of the quarter and reached 10556 as of the end of last month, demonstrating our ability to outpace the increase in global have freight and mining difficulty.
Sam: We now hold one of the largest self mind the coin treasuries in the industry.
Speaker Change: Every bitcoin with my right here in America by American employees.
Speaker Change: Using a locally sourced tower that supports rural communities reinforcing <unk> commitment to responsible growth and operational excellence.
Turning now to our fully owned and operated infrastructure our team not only met but exceeded our 37 ex the hedge target closing the first quarter of our fiscal year at $39, one excess solidifying our position as the largest bitcoin mining operator on U S soil.
Speaker Change: Fleet efficiency stood at $17 590, joules per Taro has at quarter's end and has since improved to $16. One five tools care care has as of January 31.
Speaker Change: Making our fleet one of the most efficient in the world.
Speaker Change: Metric, we expect to continue improving in the coming weeks.
Speaker Change: Our strategic presence in energy abundance states strengthens our ability to scale efficiently.
Speaker Change: By all measures.
Speaker Change: With an exceptional quarter.
Speaker Change: One that sets the stage for our next major milestone 50.
Speaker Change: <unk> SaaS.
Speaker Change: The foundation for this growth was late in January of last year when.
Speaker Change: When we secured.
Speaker Change: <unk> thousand F. 'twenty, one units with a strategic option to acquire an additional 100000, yet at the same low right.
Speaker Change: This commitment and gave us a significant competitive advantage and scaling efficiently over the past year.
Speaker Change: Building on that success, we expanded our investment in efficiency six months later with another order for 26000 F. 'twenty, one X the emerging yet.
Speaker Change: Most efficient model to date.
Speaker Change: Again, securing an option for an additional 50000 units.
Speaker Change: This structure enables us to deploy new highly efficient machine.
Alignment with our <unk> capacity, ensuring immediate productivity and eliminating idle assets.
Speaker Change: While these units with these unit secured financing.
Speaker Change: Financing in place, we are advancing Greenfield development and facility expansion across five states five sites in four states positioning us to achieve 50, yes. It has in the first half of 2025.
Speaker Change: Our Austin contract also provides the flexibility to scale beyond 60 excess at a cost of $21 50 per <unk>, which is significantly below the spot market where prices are currently more than 37% higher.
Speaker Change: The infrastructure required to achieve the additional 10 exit as necessary for our midyear target is already source, including Transformers power distribution low voltage components and additional emerging cooling infrastructure like those successfully deployed in Cheyenne, Wyoming in Jackson, Tennessee.
Speaker Change: These projects underscore two key points first the proven performance of our most advanced F. 'twenty, one XT emerging yet.
Speaker Change: The operational efficiencies, we continue to unlock with our cutting edge mining environment.
Speaker Change: Construction is already underway, and Tennessee, Wyoming and Georgia.
Speaker Change: And we will provide updates as additional megawatts in Axa has come online.
Speaker Change: So M&A is not required to reach 50 Xtra has we remain disciplined in evaluating strategic opportunities and.
Speaker Change: In a bull market.
Speaker Change: Acquisitions, often come at a premium and can be capital destructive however.
Speaker Change: However, we continue to assess opportunities selectively, particularly those involving companies with strong power contracts, but lower efficiency.
Speaker Change: Yes.
Speaker Change: Other targets may include small scale sites, where owners face capital constraints and upgrading our fleet.
Speaker Change: Lack access to next generation hardware.
Speaker Change: That competitive pricing.
Speaker Change: For long term expansion beyond 50, SaaS. We may also explore greenfield projects with extended lead times that requires substation construction.
Speaker Change: <unk>, we can develop to clean spark high standards.
Speaker Change: Additionally, as some operators pivot from mining to high performance computing, we may see opportunities to acquire bitcoin mining specific assets at attractive valuation.
Speaker Change: Summary, we remain focused on disciplined growth operational efficiency and strategic expansion.
Speaker Change: We maximize shareholder value as we scale towards <unk> and beyond.
Speaker Change: Yes.
Speaker Change: Over the years, we have refined our approach and proven operating clean spark on minors in clean spark manage rats maintained by clean spark employees is the most efficient way to deliver on our commitment to operational excellence.
Speaker Change: This fully integrated model not only Optimizes site performance, but also mitigates the counterparty risks that a challenge the industry.
Speaker Change: Risks that we're not always fully appreciate it at the time.
Speaker Change: Expanding on that theme I want to address another model that introduces similar counterparty risk.
Speaker Change: Partnering with the artificial intelligence and broader high performance computing sector.
Speaker Change: Well some of our industry have pursued a speculative approach to HBC.
Speaker Change: Repurposing of Bitcoin mining facility for high performance computing is far more complex than it may appear.
Speaker Change: These deployments require extensive customization integration and optimization.
Speaker Change: Now just at the hardware level, but also across software and physical infrastructure to meet the increasingly sophisticated demands of AI and enterprise computing.
These challenges have a direct impact on both revenue generation and profitability.
By contrast.
Speaker Change: Bitcoin mining remains an efficient proven and scalable business model we.
Speaker Change: We can bring a bitcoin mining site online and start generating revenue within months.
Speaker Change: Whereas a fully developed HBC site can take two to five years now.
Speaker Change: Not including the time and cost required to secure high quality long term customers.
Speaker Change: Clean spark we remained disciplined in our approach focusing on high return strategic opportunities that align with our core strengths.
Speaker Change: As we evaluate emerging technologies, we will continue to apply the same rigor and operational excellence.
Speaker Change: Defined our success in bitcoin mining.
Speaker Change: Ensuring that any expansion into adjacent markets is both measured and value accretive for our shareholders.
Speaker Change: And now I want to take a few moments to address the significant shift in sentiment we are seeing in Washington D. C regarding bitcoin.
Speaker Change: Over the past four years, we have built our business in the face of meaningful.
Speaker Change: Regulatory headwinds.
Speaker Change: This presented challenges it also strengthened our resilience operational discipline and strategic focus.
Speaker Change: Ultimately positioning us well for a more constructive regulatory environment.
Speaker Change: Since the November election that environment began to shift.
Speaker Change: President Trump has expressed consistent support for our industry reinforcing his commitment through key policy positions and regulatory appointment.
Speaker Change: One of the most favorable pivotal development came on January 24, when the Securities and Exchange Commission for appeal SAB 121 at.
An accounting rule that discourage banks from offering digital asset custody services.
Speaker Change: This repeal marks a major turning point for bitcoin regulation clearing a path for major financial institutions to play a more active role in participating in a bitcoin ecosystem and broadening access for institutional and main street investors alike.
Speaker Change: In addition, we are encouraged by strong legislative leadership in Congress.
Speaker Change: Two of the most vocal advocates for our industry Senator Lummus of Wyoming, and Senator Haggerty of Tennessee.
Speaker Change: I pointed to the Senate financial services Subcommittee on digital assets there.
Speaker Change: Their deep understanding of our industry will be invaluable as lawmakers work to establish a more balanced responsible regulatory framework for bitcoin and digital assets.
Speaker Change: Beyond regulation energy policy will also play a critical role in shaping the industry future.
Speaker Change: And bitcoin mining and data center expansion drive new demand for electricity.
Speaker Change: Energy markets are naturally experiencing upward price pressure pricing pressure.
Speaker Change: Given that electricity is the largest component of our direct costs.
Speaker Change: Any policy initiatives aimed at reducing energy prices will have far reaching implications for our business.
Speaker Change: President Trump's stated commitment to make the United States. The global center of Bitcoin mining signals of potential shift towards more energy friendly policies, an outcome that could enhance both industry growth and U S competitiveness at the global stage.
Speaker Change: We will continue to monitor these developments closely and remain engaged with policymakers to ensure that our industry has a seat at the table as these regulatory and energy policy decisions on bolt.
Speaker Change: On Monday January 27.
Our management team alongside employees families and friends.
Speaker Change: Gathered at the NASDAQ market site in New York to ring the opening Bell.
Speaker Change: Martin the start of the trading day and celebrating our fire.
Speaker Change: Millstone, a five years in the making.
Speaker Change: We were there to commemorate the fifth anniversary of our uplifting to Nasdaq.
Speaker Change: Ah moment made even more meaningful peak by sharing it with many of the people who have worked tirelessly and sacrifice to build clean spark into what it is today.
But the truth is a bit more complex there.
Speaker Change: This celebration wasn't just about our five year milestone.
Speaker Change: It was also about resilience.
Speaker Change: When we uplifted five years ago, the COVID-19, pandemic or our opportunity to ring the bell on whole missing.
Speaker Change: Missing that moment with our team with a deep disappointment.
Speaker Change: But if there's one thing we've learned at Galena Park, it's a setback for Austin, just delayed or victories in the skies.
Speaker Change: As a student of philosophy.
Speaker Change: Inspiration from Marcus Aralia can is riding some stellar philosophy at.
Speaker Change: As a management team we've embraced many of these principles and leading clean spark and have worked to instill them as a core part of our culture.
Speaker Change: One passage has always stood out.
Speaker Change: Impediment to action advances action what stands in the way becomes the way.
Speaker Change: That mindset grit perseverance and the ability to turn obstacle into opportunities defines how we operate it has shaped our approach to scaling queen spark into a repeatable.
Speaker Change: <unk> and durable bitcoin mining businesses.
So instead of dwelling on what we missed we refocused and move forward in.
Speaker Change: And standing on that NASDAQ podium five years later, it felt less like a delayed celebration and more like a culmination of everything we've worked towards.
Speaker Change: But it also represented a new beginning as we continue on this journey at scale.
Speaker Change: That feeling was reinforced as we spent time in New York meeting with investors for capital markets day, where.
Speaker Change: Where we shared our vision for the future and explain why the path to <unk> and beyond is wide open for clean floor.
Speaker Change: Now before turning things over to Gary I wanted to take a moment to recognize the exceptional team behind clean spark success.
Speaker Change: As we've outlined before we set a target to reach 37 X, perhaps by the end of the calendar year.
Speaker Change: Not only did our team deliver they exceeded expectations, surpassing 39 extra hash before the ball drop in times square on New year's Eve.
Speaker Change: Standing on the NASDAQ Odeon my thoughts turned towards our teammates working in Nevada.
Speaker Change: Tennessee, Georgia, and Mississippi some of them may not have even had time to watch the ceremony because they were already working towards our next target <unk> by mid year.
Speaker Change: So when I rang the bell rang out for them.
Speaker Change: The coin mining may not have traditional customers.
Speaker Change: Great irony is that it may be one of the most people centric businesses in the world.
Speaker Change: <unk> success is built on the talent dedication and relentless drive of our people.
Speaker Change: And as always had been human capital remains our greatest asset.
Speaker Change: Now I'd like to turn the call over to Gary for a more detailed review of our financial results and a look at our balance sheet.
Speaker Change: Eric.
Speaker Change: Thank you Zac zac.
Speaker Change: Zach mentioned, our first fiscal quarter was spectacular for clean spark, let's dive directly into the numbers, which I am excited to share with you.
Speaker Change: Our revenues for the quarter or $162 3 million, an increase of $88 5 million or 120% for the same quarter last year.
Speaker Change: This increase was primarily driven by an overall increase in average price.
Speaker Change: <unk> year over year, we produce only 4% less bitcoin compared to the same quarter last year, Despite block rewards being cut in half this past may.
Speaker Change: We are.
Speaker Change: Almost at the same number of bitcoin produced.
Speaker Change: Pre having due to our increasing extra hash and increased fleet efficiency from our best in class miners.
Speaker Change: It is also important to note that our average revenue recognized per bitcoin to produce in Q1 with almost $84000, which is an increase of 130% over the same quarter last year.
Speaker Change: When compared to the immediately preceding fourth quarter are.
Speaker Change: Our revenues increased 82% due to the increase in bitcoin prices <unk> production.
Speaker Change: Parison, we produced 480, 433% more bitcoin and the first quarter than the fourth quarter and the average revenue per bitcoin at our wholly owned sites increased 38% between the periods.
Speaker Change: Greensburg has industry, leading uptime is typically in excess of 98%.
Speaker Change: However, this past quarter, we saw a slight temporary decrease in our uptime of $2, 94%. This was driven by several factors foremost the quarter started with limited SaaS online because of the hurricane.
Speaker Change: We moved approximately 80000 miners as a result of our fleet upgrades and racking at new locations. However, our pointed out why we saw a slight dip in one of five key industry metrics. There is an inverse relationship as.
Speaker Change: As we saw significant gains in efficiency and bitcoin produced as well as reduced cost per quarter.
Speaker Change: Upgrade resulted in significant ROI as our fleet efficiency dropped from 20, 194 drills procure ash the $17 $5 nine Jules procure ash or 20% between Q4 and Q1 alone.
Speaker Change: And as I mentioned earlier.
Speaker Change: Corn production rose 33% between periods.
Speaker Change: Looking at our margins, our gross profit increased by $47 $1 million year over year with a profit margin of 57% for this quarter.
Speaker Change: When compared to the immediately preceding fourth quarter, our gross margins increased $69 9 million or 186% during the periods.
Speaker Change: While you have heard US mentioned several times that our fleet efficiency continues to increase the power of scale is demonstrated here through our margins. For example, our cost of mine a bitcoin was $36250 in the fourth quarter. However, in the first quarter, we saw that cost per bit quaint decrease to approximately 34.
Speaker Change: Which.
Speaker Change: Since the quarter over quarter favorable improvement of about 6%.
Speaker Change: Our strategy to maintain we're the most efficient fleets in the world combined with best in class Uptime and operations is translating to significant margins and all while the global difficulty has increased during the same timeframe.
Speaker Change: This quarter, we recognized net income of $246 8 million, which is a significant improvement from prior periods.
Speaker Change: This increase was primarily driven by the growth in our fair value of our bitcoin and a gain related to bitcoin returns as a result of our paydown of the coin baseline of credit Suisse.
Speaker Change: <unk> continued with $321 6 million of adjusted EBITDA for the quarter.
Speaker Change: As we look over the numbers I want to provide some additional color.
Speaker Change: For cost of power for the first quarter was $4 nine kilowatt hour. This is higher than our cost for power or for <unk> in the same quarter last year and slightly higher than our fourth quarter cost of $4 eight.
Speaker Change: Our cost of power per kilowatt hour in this quarter is running higher than prior periods. Our margins are far exceeding this increase thanks to the efficiency of our fleet and onsite operations.
Speaker Change: Additionally, with bitcoin mining economics better than prior periods, we have more headroom and capability.
Speaker Change: This allows us to run our fleet through periods, where the cost per kilowatt hours elevated because we do not manage the business to a price per kilowatt hour, but rather to our margin and profitability on a per <unk> basis.
Speaker Change: This is why you hear US say, we have reached escape velocity and always prioritize cash on cash returns.
Speaker Change: With respect to our indirect costs.
Speaker Change: In the first quarter of total professional fees payroll and G&A expenses totaled approximately $34 8 million.
Speaker Change: This is a decrease of $5 8 million or 14% compared to the preceding fourth quarter.
Speaker Change: This decrease was attributed to lower professional fees of approximately $1 8 million, primarily due to the transactional fees. We had in Q4 related to M&A activities.
Speaker Change: Italy.
Speaker Change: Payroll expenses decreased 16% or $3 $9 million quarter over quarter due to year end bonuses recognized in the fourth quarter Lastly, our G&A expenses saw a slight decline of about 1%.
Speaker Change: While professional fees may fluctuate with activity related to M&A and financing transactions I'd expect indirect expenses otherwise to be relatively flat or increase only a nominal amount for the remainder of the fiscal year.
Speaker Change: With the combination of the increased margins and relatively flat indirect expenses. This is an example of how clean spark is delivering operating leverage at scale.
Speaker Change: Next I wanted to talk about the balance sheet liquidity position and our larger overall capital strategy.
Speaker Change: We believe our balance sheet is one of the best in the business, we have almost $2 8 billion of total assets.
Speaker Change: Almost half of which is liquid in the form of cash and bitcoin.
Speaker Change: As you're aware, we issued a $650 million convertible note transaction, which we closed on December 17, the industry's only zero percent coupon, 100% up with stock buybacks with the net proceeds we purchased a capped call which may be effective conversion premium of 100% or $24 66.
Speaker Change: Sure.
Speaker Change: And we bought back approximately 11 8 million shares of our stock.
Speaker Change: The stock purchase is reflected as treasury stock and our total outstanding shares have decreased as a result.
Speaker Change: Additionally, we used $50 million of the proceeds to pay off the line of credit with Coinbase and that capacity remains available for us to use at our discretion.
Speaker Change: We're proud to have caused this offering which more than fully funds our growth through <unk> and beyond.
Speaker Change: In addition to funding the growth to 50 exit last year share buyback and cap call. The remaining proceeds will allow us to keep adding the big quarter, we mined for balance sheet for the near term.
Speaker Change: Beyond our expansion efforts already underway.
Speaker Change: We remain well positioned to continue executing on opportunistic acquisitions importantly, this offering provides our stockholders with greater clarity on near term share count given our ATM offering was completed in early November and we have no immediate plans to commence another equity or ATM offering as a catheter receipt.
Speaker Change: From the convertible notes sufficiently covers our near term strategic objectives.
Speaker Change: As of close of the quarter, we had over one $2 billion of liquidity, which includes approximately $276 6 million cash and almost 10000 decline.
Speaker Change: You may have heard us speak about our conservative approach to debt on our prior calls.
Speaker Change: That we will continue to be cautious and further leveraging our balance sheet as we will evaluate our balance sheet health on a net debt basis to ensure we have proper liquidity to operate the business and service near term debt at all times, we continue to have discussions regarding non dilutive or less dilutive options, which is reflective of the maturity.
Speaker Change: <unk> of our capital strategy as we build out our capital stack and utilize our very profitable operations and clean balance sheet for accretive growth opportunities.
Speaker Change: Turning to our big point Treasury.
Speaker Change: It is important to note that it represents the fourth largest position amongst public corporations in the world trailing only a handful of competitors and larger than the holdings of major corporations, such as Tesla Coinbase and block.
Speaker Change: In contrast to many of our peers are bitcoin huddle was mined exclusively in the U S by clean spark at a significant discount to the spot market price on the back of our best in class operations, our net debt approach to the balance sheet gives us far more flexibility when it comes to cash management and funding future growth.
Speaker Change: As impressive as our <unk> stack, maybe we want to put it to work productively to help fund the business.
Speaker Change: We are actively building an institutional grade bitcoin treasury team and strategy.
Speaker Change: With the goal of preserving capital Opportunistically, managing cash and driving a lower cost of growth capital and non dilutive ways.
Speaker Change: Because of <unk> unique place as an emerging global financial asset, we can adopt best practices and Treasury management from traditional finance, while harvesting volatility for our benefit.
Speaker Change: We are currently engaged with high quality counterparties to evaluate a holistic approach and utilizing our treasury to meet business needs and we expect to go live shortly are ramping up activity or the ensuing quarters.
Speaker Change: Mentioned earlier in the call, we want to invest in ourselves and the business after all whereby that coin at $100000. When you can mind it as low as 34000.
Speaker Change: With that I'll turn the call back over to Barbara to open the floor for questions.
Barbara: Thank you Jay.
Barbara: Detailed financial overview, we will now open the floor to questions from the analyst community that please provide instructions and Nash the Keith Q&A session.
Speaker Change: At this time I would like to remind everyone in order to ask a question. Please press star one on your telephone keypad.
Barbara: Pause for a moment to compile the Q&A roster.
Barbara: First question comes from the line of Mike colonies with H C. Wainwright. Please go ahead.
Good afternoon, guys and congrats on a really strong quarter here. Thanks for taking my questions. Gary you alluded to some of this.
Barbara: Paired remarks, but just.
Barbara: Curious if you could provide a bit more color here. So you guys had built out nice reserve a bitcoin over the past year and now have over 10000 decline in the balance sheet. Any further details you can share in terms of what your breakpoint in Treasury management team is strategizing to put those points to work.
Barbara: Counterparties current market yields youre seeing and what portion of the treasury you'd be willing to dedicate to your generation strategies.
Speaker Change: Yes, thanks for the question Mike.
Barbara: So we are in the process right now of gathering Rfps.
Barbara: A request for proposals to evaluate counterparties and look at the various options.
Barbara: I want to commit to a strategy in fact I'll refer you to what we said last call where it is going to be a crawl walk run type strategy.
Barbara: And ultimately we have a number of options available at our fingertips.
Barbara: So we'll see how those rfps come back and really what the transaction opportunities look like but ultimately.
Barbara: Don't think in the near future, we're going to leverage 100% of a hollow balance for us.
Barbara: Put 100% of it to work or just kind of slowly kind of week into it.
Barbara: And well have more to report on in future quarters.
Speaker Change: Fair enough, Gary and exact maybe for you. This one here.
Speaker Change: Should we think about the cadence of past rate growth from the <unk> has deployed today to your mid year targeted <unk>. I know you guys are working on a number of projects across the portfolio. So it'd be great to get a better sense as to when you expect those projects to energize.
Speaker Change: Yes.
Speaker Change: And thanks for joining the call Mike.
Speaker Change: It should be a pretty even cadence over the next six months as we roll things out so.
Speaker Change: I don't think it'll be that chunky or just kind of be a little bit of added every single month as we move along through the period. So as we mentioned the majority of this will all of it is happening essentially in our backyard and so these are projects at existing sites for the most part with a few greenfield site to add on that we're basically rolling into two things. So again this is going to be very.
Speaker Change: Natural cadence for us just to add that remaining 10 SaaS over the next couple of months.
Speaker Change: Okay. Thanks again guys.
Speaker Change: Hey, Thanks, Mike.
Speaker Change: Your next question comes from the line of Brian Dobson with clear Street. Please go ahead.
Brian Dobson: Hey, Thanks, very much for taking my question.
Brian Dobson: So you alluded to your capital allocation strategy, which which is shown through your call. It but the fruits of which are ashamed through your relentless sequential improvements, but do you think you could speak a little bit to your management philosophy that drives that improvement separates you from your peers.
Brian Dobson: Yes.
Ryan: Ryan Thanks for joining us I'll jump in on that one so.
Speaker Change: We live at the intersection points.
Speaker Change: So many things ultimately results in the profitability of mining bitcoin.
Speaker Change: And living at the right pointing to that crossroads is ultimately how we look at it.
Speaker Change: We don't feel the need to pursue a number to pursue a number and I think that that's a differentiator in our management team. We haven't held a one thing out and said that the most important because we actually believe that the intersection points are the most important part.
Speaker Change: <unk>.
Speaker Change: As we pursue these kpis.
Speaker Change: And.
Speaker Change: Ultimately, how do we see as critical.
Speaker Change: We think our secret sauce is really the grit and perseverance dedication of our people.
Speaker Change: And I think that as we go through that it's about instilling the same values that we've had since really the founding of the company is we're ready to work hard all of us top to bottom and I think that that shows through ultimately into results.
Speaker Change: Yes, thanks very much.
Speaker Change: And then do you have any comment on the potential for in kind exchange in terms of driving yields up model.
Speaker Change: Yes, so look I think that debt.
Speaker Change: The applications that are on file for the Etfs are a really positive singles or offer bitcoin.
Speaker Change: And it will be interesting to see how that really affects at all but for US. We're really just focused on managing our hurdle balance we are looking at potentially.
Speaker Change: Using the Etfs as part of that Treasury management.
Speaker Change: The derivatives around those products as well, but I think it really remains to be seen how it is going to impact us directly other than just the general adoption of a big point of growth.
Speaker Change: Yes, thanks very much.
Speaker Change: Your next question comes from the line of Brent Novak with Cantor Fitzgerald. Please go ahead.
Brent Novak: Hi, guys. Thanks for taking my question and congrats on the quarter.
Speaker Change: Maybe just looking and I know you guys have a lot on your plate for 2025, but kind of looking beyond 2025.
I guess what type of power capacity do you have in your pipeline and maybe in which states would you look to expand as it maybe within TVA, where I know you guys are very positive on.
Speaker Change: Okay.
Speaker Change: Yeah. So.
Speaker Change: The ability to expand and really all of the regions that we're operating in.
Speaker Change: Do expect that Youre going to see the majority of that growth happened in the bulk of Tennessee in Wyoming areas.
Speaker Change: Those are the areas that frankly had the most blue sky to them.
Speaker Change: We've been expanding for a long time in Georgia in that region and so I think that that's that's where you should expect to see the majority of it.
Speaker Change: Frankly, we're incredibly excited about that.
Speaker Change: Those utilities and frankly, they're also their willingness to lean in and understand the value of interruptible loads in the utility so that that willingness to continue to educate themselves, but also both of those regions.
Speaker Change: We're ready and willing to adopt energy tariffs that benefit bitcoin mining due to the interrupt ability of those loads. So that that's likely to be our focus in the coming year.
Speaker Change: I appreciate it and maybe just one follow up I think if I look at kind of like your Opex for this quarter professional fees payroll G&A all.
Speaker Change: All declined and I think Eric has rating improved from around 40% quarter over quarter.
Speaker Change: Could you maybe talk about the strategy you guys deploy in managing opex, while delivering such strong growth.
Speaker Change: I guess, how sustainable is that and is there any incremental opex needed to drive you guys to 50 to 63 and beyond.
Speaker Change: Yes, thanks for the follow up Brett.
Speaker Change: I think ultimately we just built.
This foundational.
Speaker Change: This foundation of just indirect expenses frankly, we just have a very strict budgeting process watch every dollar that goes out and really where we're investing is on the operational side and given the fact that our cost of Capex is one of the lowest in the industry I mean, I'll remind you that we have contracts out there for $21 50 Tera <unk>.
Speaker Change: Right now, which is we're at least 30%.
Speaker Change: Lower than what the fair value of those of those machines are.
Speaker Change: How does that focus really on operations really allows us to have every extra cash it comes online almost dropped to the bottom line, because we don't need to incremental corporate overhead to support a dollar of additional revenue. So that's why I feel comfortable.
Speaker Change: And on the indirect being relatively flat for the remainder of the year and really the only wildcard is in our professional fees and that depends on the activity of the M&A.
Speaker Change: M&A landscape.
Speaker Change: And Brett I'm going to add one more thing because I think it's part of our management strategy is and.
Speaker Change: And how we think big.
Speaker Change: About what we do.
Speaker Change: We have a portfolio of.
Speaker Change: Properties, but in building a portfolio we had to solve the unique problems that we prepared for and basically we built on our ability to expand early on so we're leveraging technology, such as remote management and other things.
Speaker Change: That are the same types of technologies that large and your hyperscale data centers are utilizing to keep their head count down and reasonable and so we do that across the entirety of what we do whether it's on an overhead side, whether it's on the operational side.
Speaker Change: We've always been an expansion state, but we wanted to plan that expansion for for the future we're truly bill.
Speaker Change: We have built a scalable business at the current size on the operations, but because of the thought process that occurred.
Speaker Change: Two and three years ago.
Speaker Change: I appreciate the answers thanks guys.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line comes from the line of Tyler Dimatteo with BT AIG. Please go ahead.
Tyler DiMatteo: Hey, guys. Thanks for taking the question I appreciate the time here.
I'm curious you guys have done a really nice job kind of growing excess cash over time getting into 40 extra hash mark but as you think about going to 50 ex ash and then ultimately.
Speaker Change: <unk> 60, if you exercise the option does going from say $40 to 50, and 50 to 60 is the implementation different or how could it be different given that you now have a bigger scale and you look to put those rigs to use I'm curious just maybe how you think about the actual execution and implementation of that now that you have.
Tyler DiMatteo: <unk> 48 cash online.
Tyler DiMatteo: Yeah, I'm going to point a phrase we have continued to use nets repeatability. So everything we've done is to base to build a blueprint that can be stamped outs on a repeat basis and our goal just like all things done at scale is the as the process becomes more and more repeatable that we find.
Tyler DiMatteo: Every opportunity to drive costs down, while increasing quality and so that that's been our goal. We're incredibly excited and we've mentioned this multiple times. The last few earnings calls about the technology that we're deploying on the emergent cooling side.
Tyler DiMatteo: We are seeing immense operational efficiencies and a lot of operational leverage.
Tyler DiMatteo: Around the way that we are deploying us and we see it as the right blueprint to stamp out so as we March from 40 to 50 to beyond.
Tyler DiMatteo: We see ourselves using our successful and proven blueprint that were able to re staff on a repeat basis.
Tyler DiMatteo: Add to that as well I mean, we havent track record of growing SaaS right a year ago last January 2024, we were just a little over 10 extra fashion as we sit today. We're 40, so we have that proven excellence to be able to execute on this.
Tyler DiMatteo: We're very confident we'll be able to get there.
Speaker Change: Okay, Great. Thanks, guys and then my follow up here realizing that you had.
Speaker Change: The fixed price option at the $21 50.
For the next level of growth in rigs I'm curious how would you describe kind of the rig market dynamics I know you pointed to I think it was 37% higher potentially for some of the rig pricing I guess just broadly how would you describe some of those dynamics and really what are you seeing as you kind of look to keep an open mind in terms of the <unk>.
Speaker Change: The profile of the business.
Speaker Change: Yeah, I think that.
Speaker Change: As we see it it's all about relationships.
Speaker Change: We've got deep vendor relationships, not just with a single vendor, but across multiple parties that we believe will allow us to always maintain the competitive pricing.
Speaker Change: As Jerry talked about track record just a moment ago, but our track record is to on a repeat basis set the floor price of the rigs as new units come out, but it's also to not jump just because something comes out which you saw in our activity two or three years ago, when rig prices Werent, where we thought that.
Speaker Change: It should be.
Speaker Change: So that the benefit of the scale, we have and frankly, how far ahead, we've gotten for the majority of this industry on a SaaS basis.
Speaker Change: Means that we have the opportunity to time presents where we can be selective about our timing.
Speaker Change: I think it's one of the things that we've done.
Speaker Change: Amongst the best in the entire industry is not trying to dollar cost average into our equipment, but instead is to relentlessly drive to the low cost high quality model and we just intend to do to get so regardless of where the market shifts and moves too we've got through.
Speaker Change: Beyond 63 or price certainty has argued that everything beyond that it's somewhat speculative other than we would just look to continue to leverage our relationships to always.
Speaker Change: The best in class.
Speaker Change: Okay, great. Thanks, guys really appreciate the time.
Speaker Change: Thank you.
Speaker Change: If you'd like to ask a question. Please press star one on your telephone Keypad. Your next question comes from the line of Steven <unk> with Jones trading. Please go ahead.
Speaker Change: Hi, Matt Zack Gary Thanks for the question you.
Speaker Change: You highlighted the benefits of increasing scale to your margins long term in your prepared remarks, and as you approach 50, <unk> is there a point, where you think increasing scale becomes less of a focus from the business versus looking to maybe increase the free cash flow generation and productivity of the assets. You currently have and also potentially written.
Speaker Change: Turning capital back to shareholders. Thanks for your thoughts there.
Speaker Change: Yes, I think that I'm going to use that phrase again on having achieved escape velocity, that's where we are at right now in the business is for every exit how should we add it does produce free cash flow that does flow to the bottom line will ultimately it does benefit the shareholders.
Speaker Change:
Speaker Change: Would it.
Speaker Change: Make a comparison if you look at most of the industry.
Speaker Change: Based on our math there is less than five companies that even have the opportunity to achieve the same scale, which will.
Ultimately result in positive cash flows the balance have a lot to do to catch up so again I'm going to point back to what I said earlier.
Speaker Change: <unk>.
Speaker Change: There is going to be time to push the gas pedal all the way down and there's going to be a time to let the car coast and frankly, it's likely going to be driven by input costs input costs of materials, whether thats the servers, whether it's the infrastructure and.
Speaker Change: Rather than speculate about timing right now it's about how.
Speaker Change: How well are we positioned to react to market dynamics and I would say we're position amongst the very best and so and I think that comes in multiple forms again I'm at a point to vendor relationships the cost certainty that we've already locked into place.
Speaker Change: But also the fact that we don't have to push to catch up because theres a theres a point that we've arrived.
Cash flows are already flowing in a way that's benefiting the shareholders, but also allows us to continue to grow through those cash flows.
Speaker Change: Im going to turn to Gary to CBS, Yes, Adam.
Speaker Change: I would just reiterate comments on Optionality right. That's how we built the business and I think that we would love to to look to return capital to shareholders, but most importantly, we got to shore up the balance sheet, which again is extremely healthy right and as we increase our cash flows. It's just can provide us more optionality as to whether we reinvest in the business.
Speaker Change: Because the ROI is greater there or if that means that we need to return capital to shareholders through a stock buyback or some other means and thats. The best use of capital. We've said, that's probably been a while since we've talked about it on a call, but we absolutely would put that but again, we can't do that unless we have.
Speaker Change: Significant margins and a healthy balance sheet and I'll tell you. That's why these fleet upgrades is so important because the efficiency.
Increased favorably by 20% between the two quarters and our total cost our cost combined.
Speaker Change: Cost of money for big quite dropped by $2000 of decline, which only adds to our cash flow. So it's those types of investments that we see are not only going to pay off in the short term, but long term and again ultimately once we have that fortified balance sheet and we've taken advantage of as many opportunities media opportunities. We can look to find other ways too.
Speaker Change: <unk> capital to shareholders.
Speaker Change: And the last point.
Speaker Change: We bought back almost 12 million shares as part of the convert.
Speaker Change: Big Big reason for doing that was to really invest in ourselves because we have this clear path to 50, and even beyond and we feel good about where we're going so so really better ourselves at this point, we think that's going to translate to shareholder returns.
Speaker Change: Alright, Thanks, Gary and thanks, Zack I appreciate it.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Bill <unk> with <unk> W. Please go ahead.
Yeah, good evening, gentlemen, and congrats on the quarter.
Speaker Change: For my question was just hoping you could add some color on how you're weighing the growth strategy beyond 50 acts of hash.
Speaker Change: Clearly demonstrated an attractive operating profile.
Speaker Change: And where you guys stand today at 40 extra cash are not very far from being the leader in the space in terms of scale.
Speaker Change: So how important is it in the road ahead to scale just given that all your peers are moving to AI H P C.
Speaker Change: It seems like it could be a low hanging fruit opportunities for investors that are looking for a high beta play on bitcoin.
Speaker Change: Yeah.
Speaker Change: I appreciate you joining the call good question.
Speaker Change: We love when we hear it somewhat pivoting to HBC because it means local difficult it goes down and so as we continue to scale in that environment. It just means that piece of the pie that we're getting daily bitcoin rewards, which again are scarce or every four years. So now is the best time to acquire it means our piece of the pie gets bigger.
Speaker Change: Yes, continuing to scale is important but it's not an end all beall right again, we don't grow to grow we grow because it's strategic to do so and it means that we have more to gain again at the point where at every extra ask we add is dropping.
Speaker Change: Point $4 to the bottom line and so as long as that continues to improve we will continue to grow responsibly in the way we do.
Speaker Change: I appreciate the color. Thank you.
Speaker Change: Thank you.
Speaker Change: Your final question comes from Greg Lewis with <unk>. Please go ahead.
Speaker Change: Thank you and good afternoon, guys for taking my question and apologize. If this has been asked I've been having some issues. This afternoon.
Speaker Change: Zach you touched on it on the.
Speaker Change: The capital markets day, you know really around your ability to create partnerships in the community and just.
Speaker Change: As we think about what's happened over the last couple of years in companies like clean spark really building.
Speaker Change: And helping communities across Georgia, and beyond and the success that we've seen with other.
Speaker Change: Other miners in Texas at ERCOT.
Speaker Change: Has there been any shift or maybe.
Speaker Change: Maybe not that there's inquiries now for clean spark delivering bitcoin mining solutions and some of these rural areas that youre looking at target, but it is the tenor from potential.
Speaker Change: Small utilities or customers or municipalities.
Speaker Change: Or was that kind of shifted and as you look out.
Speaker Change: Over the next 12 months I have to believe with the current administration, that's a huge tailwind.
Speaker Change: As you look to kind of continue to expand your infrastructure footprint is.
Speaker Change: Talk a little to that thank you.
Speaker Change: Yeah.
Speaker Change: We shifted into an environment, where instead of people being worried about the big bad Bitcoin minor, it's going to come to town.
Speaker Change: We get inbound inquiries.
Speaker Change: There are cities now understand the economic benefit that we can bring.
Speaker Change: That's through the tax base or whether it's through an employee base. There is different parts of the countries that are frankly looking for different things in that so.
Speaker Change: I will say, specifically commenting on small utilities.
Speaker Change: That's where also we're seeing a lot of benefit because these small utilities.
Speaker Change: They may have made 50 and 100 year long investments over the past several decades.
Speaker Change: And when they have idle assets that are no longer producing revenue they start to lack the ability to continue to upgrade their equipment.
Speaker Change: And so we can be the answer to that we can come in we can use the idle assets and communities where.
Speaker Change: The freeway didn't go through and everything went around.
Speaker Change: We can make a real impact in rural America.
Speaker Change: I would say that.
Speaker Change: Win win with our name goes into these communities and I think I'm proud that it is our name going in.
Speaker Change: We're getting welcomed with open arms to get these communities are ready to reap the benefits of a bitcoin mining really can bring to rural America is one of the things we're incredibly proud of and partnering with utilities is a big part in the education.
Speaker Change: Having a large load can be scary to the utility.
Speaker Change: Their willingness to listen and understand interrupt ability of that so they can continue to serve all of our citizens, while driving down their costs and increasing their revenue is the key message. We're driving forward. So I'm incredibly happy and optimistic about what I expect to see.
Speaker Change: In the Heartland that the U S. As we continue to grow.
Speaker Change: Great to hear thank you very much.
Speaker Change: And we have no further questions in our queue at this time, Barbara I'll turn the call back over to you.
Speaker Change: Thanks again for everything to everybody for joining today's earnings call and we will look forward to staying in touch with you and sharing feature results with you in the coming quarters. Thank you for more achievements from Queensbury American state clean liner.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change:
Speaker Change: