Q2 2025 CleanSpark Inc Earnings Call

Jeannie: My name is Jeannie and I will be your conference operator today.

Good afternoon, My name is Jamie and I will be your conference operator today.

Unknown Executive: At this time, I would like to welcome everyone to the CleanSpark fiscal year second quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise.

At this time I would like to welcome everyone to the clean spark fiscal year second quarter 2025 earnings conference call.

All lines have been placed on mute to prevent any background noise.

Unknown Executive: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star 1. on your telephone keypad. In order to withdraw your question, simply press star 1 again. Thank you.

After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star one.

On your telephone keypad.

To withdraw your question simply press Star one again. Thank you Terry you May begin your conference.

Harry: Harry, you may begin your conference. Thanks, Jeannie. And thank you for joining us today for the second quarter fiscal year financial results for CleanSpark, America's Bitcoin miner, covering the three and six months ended March 31st, 2025.

Speaker Change: Thanks, Jenny and thank you for joining us today for the second quarter fiscal year financial results for Greensburg America's Bitcoin miner, covering the three and six months ended March 31 2025.

Harry: Our press release was issued about 30 minutes ago and is available on our website at www.cleanspark.com. Additionally, the 10-Q will be filed shortly. Today's call is also being webcast, and a replay and transcript will be available on our website.

Speaker Change: Our press release was issued about 30 minutes ago and is available on our website at www dot clean spark dotcom.

Speaker Change: Additionally, the 10-Q will be filed shortly.

Speaker Change: <unk> call is also being webcast and a replay and transcript will be available on our website.

Harry: On the call with me are Zach Bradford, our Chief Executive Officer, and Gary Vecchiarelli, 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 business as we see them today. The statements and information provided remain subject to the risk factors disclosed in our most recently filed annual report and 10-Q.

Speaker Change: On the call with me are exact Bradford, our Chief Executive Officer, and Gary about growing our Chief Financial Officer.

Speaker Change: 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 business as we see them today.

Speaker Change: These statements and information provided remains subject to the risk factors disclosed in our most recently filed annual report and 10-Q.

Harry: We will also discuss certain non-GAAP financial measures concerning our performance during today's call. You can find the reconciliation of non-GAAP financial measures in our press release, which is also available on our website.

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 also available on our website and with that it's my pleasure to turn the call over to Zack.

Zachary Bradford: And with that, it's my pleasure to turn the call over to Zach. Thank you, Harry, and thanks to everyone for joining us today. Our second quarter of fiscal 2025 demonstrated our ability to deliver strong, consistent results across all operating environments. Because we focus on the fundamental, cash-on-cash return, and manage-to-margin, rather than any single metric, our scale, strategy, and operational excellence resulted in increased cash rate, improved efficiency, higher revenue, and laid the groundwork for continued growth. In Q2, revenue increased 12% quarter over quarter and 62.5% higher than the same period last year. Gross profit reached nearly $100 million.

Zack: Thank you, Gary and thanks to everyone for joining us today.

Zack: Our second quarter of fiscal 2025 demonstrated our ability to deliver strong consistent results across all operating environment.

Zack: Because we focus on the fundamentals.

Zack: Cash on cash return and managed to margin rather than any single metric our scale strategy and operational excellence resulted an increased tax rate improved efficiency.

Zack: Revenue and laid the groundwork for continued growth.

Zack: In Q2 revenue increased 12% quarter over quarter, and 62, 5% higher than the same period last year.

Zack: Gross profit reached nearly $100 million.

Zachary Bradford: up almost 5% sequentially. and more than 24% year over year with a gross margin of 53%. While we reported a net loss, this was primarily driven by the quarter-end decline in Bitcoin spot price and not by changes in our mining operations. Our Bitcoin production increased slightly compared to the prior quarter, outpacing difficulty. As a result of our strong margins, our Bitcoin treasury has grown to over $12,000 as of April 30th. Average revenue per Bitcoin was up 10.5% quarter over quarter, and nearly 69% year over year, while our marginal cost per coin rose, reflecting both increased network difficulty and higher nationwide power prices.

Zack: Up almost 5% sequentially.

Zack: And more than 24% year over year with a gross margin of 53%.

Zack: Well.

Zack: While we reported a net loss.

Zack: This was primarily driven by the quarter end decline in bitcoin spot price and not by changes in our mining operations.

Our bitcoin production increased slightly compared to the prior quarter outpacing difficulties.

Zack: As a result of our strong margins are bitcoin treasury has grown to over 12000 as of April 30.

Average revenue per bitcoin was up 10, 5% quarter over quarter, and nearly 69% year over year, while our marginal cost per coin rose, reflecting both increased network difficulty and hire nationwide power prices.

Zachary Bradford: We remain focused on margin and long-term performance rather than any single metric.

Zack: We remain focused on margin and long term performance rather than any single metric.

Zachary Bradford: I want to be clear on what that means. That means we do not manage the power prices, and when margins are healthy, we run through slightly elevated power prices, as long as this drives more value to the bottom line. As a result, the average power price printed higher while delivering increased gross profit. This resilience is the result of our infrastructure-first, portfolio-based strategy. By operating across four diverse states, Georgia, Tennessee, Wyoming, and Mississippi, we are able to balance regional price volatility and maintain consistent operations and production. The rise in power costs this quarter largely stemmed from higher prices in the southeast related to elevated demand charges and weather related increases in January and February due to winter storms. Since March, we have experienced improved prices in the region.

Zack: I want to be clear on what that means.

Zack: That means we do not manage to power prices and when margins are healthy we run through slightly elevated power prices as long as this drives more value to the bottom line.

Zack: As a result, the average power price printed higher wallet delivering increased gross profit.

Zack: This resilience is the result of our infrastructure first portfolio based strategy.

Zack: By operating across four different states, Georgia, Tennessee, Wyoming, and Mississippi, we are able to balanced regional price volatility and maintained consistent operations and production.

Zack: The rise in power costs this quarter largely stemmed from higher prices in the southeast related to elevated demand charges and weather related increases in January and February due to winter storms.

Zack: Since March we have experienced improved prices in the region.

Zachary Bradford: In addition, we were still implementing software to support a lower blockchain specific tariff in Wyoming at the end of March, which is now fully implemented. And we successfully moved to lower pricing in April. As we navigated the quarter, rather than curtailing operations to chase the lower per kilowatt price, we elected to maximize production and bottom line impact, a decision made possible by our leading fleet efficiency and strong revenue per bitcoin. As a result, we delivered a gross margin exceeding 53%. We ended the quarter with a total liquidity position of over $1 billion. Given our scale, we've evolved from the near 100% HODL strategy adopted in late 2023 and have begun using a portion of monthly Bitcoin production to support operations.

Zack: In addition, we were still implementing software to support a lower blockchain specific tariff in Wyoming at the end of March which is now fully implemented and we successfully moved to lower pricing in April.

Zack: As we navigated the quarter, rather than curtailing operations to chase a lower per kilowatt price, we elected to maximize production and Bottomline impact a decision made possible by our leading fleet efficiency and strong revenue per bed coin.

Zack: As a result, we delivered a gross margin exceeding 53%.

Zack: We ended the quarter with a total liquidity position of over $1 billion.

Zack: Given our scale, we have evolved from the near 100% hurdle strategy adopted in late 2023 and have begun using a portion of monthly bitcoin production to support operations.

Zachary Bradford: This marks a deliberate and disciplined shift, in contrast to peers who continue to fund operations through equity dilution. I want to reiterate, we concluded our outstanding ATM in November last year, and have since not issued a single share to capitalize the business. We have no plans to initiate an equity offering given the accretive opportunities available to a company with a strong balance sheet like ours. We remain committed to Bitcoin as a core long term asset. We believe shareholder value is best served by balancing treasury growth with strategic monetization. To that end, we are continuing to diversify our capital structure, and our strong balance sheet gives us the flexibility to act decisively.

Zack: This marks a deliberate and disciplined shift in contrast, the peers, who continue to fund operations through equity dilution.

Zack: I want to reiterate we concluded our outstanding ATM in November last year.

Zack: And have since not issued a single share to capitalize the business.

Zack: We have no plans to initiate an equity offering given the accretive opportunities available to a company with a strong balance sheet like ours.

Zack: We remain committed to bitcoin as a core long term asset we.

Zack: We believe shareholder value is best served by balancing treasury growth with strategic monetization.

Zack: To that end.

Zack: We are continuing to diversify our capital structure and a strong balance sheet gives us the flexibility to act decisively.

Zachary Bradford: As we move beyond 50x a hash, CleanSpark is well positioned to sustain long-term growth and shareholder value through focused execution and prudent capital management. We navigated this quarter not by chasing headlines, but by focusing on business fundamentals and delivering results. Some key highlights include revenue increased in both Bitcoin and USD terms, while cash overhead decreased 16% quarter over quarter. Although a mark-to-market adjustment to Bitcoin price created a gap net loss, this has since been offset by price recovery in April, and even now, Bitcoin sits above $100,000. Our scale also continues to yield competitive advantages. Fleet efficiency improved significantly from an average of 18 joules per terahash in December to less than 17 joules per terahash at the end of April.

Zack: As we move beyond <unk> clean spark is well positioned to sustain long term growth and shareholder value through focused execution and prudent capital management.

Zack: We navigated this quarter not by chasing headlines, but by focusing on business fundamentals and delivering results.

Zack: Some key highlights include revenue increased in both bitcoin and USD terms.

Zack: Cash overhead decreased 16% quarter over quarter.

Zack: Although a mark to market adjustment to bitcoin price created a GAAP net loss.

Zack: This has since been offset by price recovery in April and even now bitcoin sits above $100000.

Zack: Our scale also continues to yield competitive advantages.

Zack: Efficiency improved significantly from an average of 18 shows per tear hashed in December to less than 17 tools per care has at the end of April.

Zachary Bradford: largely mitigating higher energy prices and rising network difficulties. Our power contract, our power under contract is approaching one gigawatt, providing opportunities for future expansion. We remain on track to reach 50 exahash by mid-2025 on our position to pursue additional capacity where we see strong ROI, whether through organic growth, site expansion, or opportunistic acquisition. Beyond our nearly one gigawatt of power currently under contract, we also have an extensive pipeline of additional energy opportunities that we believe will support our growth into the future. Our Bitcoin treasury now exceeds $12,100, the third largest among public miners. and every coin was mined by us here in the United States and not bought in the open market.

Zack: Largely mitigating higher energy prices and rising network difficulty.

Zack: Our power contracts.

Zack: Our power under contract is approaching one gigawatt.

Zack: Finding opportunities for future expansion.

Zack: We remain on track to reach 50 extra hash by mid 2025 on our position to pursue additional capacity, where we see strong ROI.

Whether through organic growth side expansion or opportunistic acquisitions.

Beyond our nearly one gigawatt of power currently under contract.

Zack: We also have an extensive pipeline of additional energy opportunities that we believe will support our growth into the future.

Zack: Our bitcoin Treasury now exceeds 12100, the third largest among public miners and every coin was mined by us here in the United.

Zack: <unk> states and not bought in the open market.

Zachary Bradford: We've begun strategically and systematically monetizing new production to fund operations and are advancing a rigorous, accretive approach to digital asset management, all while preserving our commitment to shareholder value. Our disciplined approach to capital allows us to grow without equity dilution, supported instead by tools like our expanded line of credit with Coinbase. We're especially proud of how our fundamentals held strong amid a triple challenge, rising energy prices, declining Bitcoin spot prices, and increasing mining difficulty. At quarter end, Bitcoin traded at roughly $81,000, down from $93,000 at the start of the calendar year, requiring a mark-to-market adjustment to our treasury under GAAP accounting rules.

Zack: We began strategically and systematically monetizing new production to fund operations and are advancing a rigorous accretive approach to digital asset management, all while preserving our commitment to shareholder value.

Zack: Our disciplined approach to capital allows us to grow without equity dilution support instead by tools like our expanded line of credit with Coinbase.

Zack: We're especially proud of how our fundamentals held strong amid a triple challenge.

Zack: Rising energy prices declining bitcoin spot prices and increasing mining difficulty.

Zack: At quarter end Bitcoin traded at roughly 81 down from 93000 at the start of the calendar year, requiring a mark to market adjustment to our treasury under GAAP accounting rules.

Zachary Bradford: Encouragingly, these unrealized losses were reversed by price appreciation April Mining difficulty rose 3.6% during the quarter, while power cost increased. Yet, thanks to improved fleet efficiency, our gross margin compression nearly matched the difficulty chain. demonstrating our ability to absorb external pressures. through operational gain. Our approach has never been about chasing the lowest cost per kilowatt hour. Instead, we managed to margin making deliberate decisions, including running through higher price periods when doing so generates positive cash flow. At the core of this capability is our best in class power management team and powered by advanced technology, real time analytics and dedicated operations staff.

Zack: Currently these unrealized losses were reversed by price appreciation April.

Zack: Mining difficulty rose three 6% during the quarter, while power cost increased yet thanks to improved fleet efficiency, our gross margin compression nearly matched the difficulty change.

Zack: Demonstrating our ability to absorb external pressures.

Zack: Through operational gains.

Zack: Our approach has never been about chasing the lowest cost per kilowatt hour. Instead, we managed to margin, making deliberate decision, including running through higher price period that when doing so to generate positive cash flow.

Zack: At the core of this capability as a best in class power management team and powered by advanced technology.

Zack: Real time analytics and dedicated operation staff.

Zachary Bradford: This deep internal expertise allows us to maximize marginal profitability across our diverse portfolio. Only a flexible load like Bitcoin mining can respond with such agility, something traditional data centers simply cannot. It's one of the most compelling advantages of our pure play Bitcoin mining model.

Zack: This deep internal expertise allows us to maximize marginal profitability across our diverse portfolio.

Zack: Only a flexible low like bitcoin mining can respond with such agility.

Zack: Traditional data centers simply cannot achieve.

Zack: It's one of the most compelling advantages of our pure play Bitcoin mining model.

Zachary Bradford: Let me now address tariffs, a topic of increased relevance across all global markets. Thanks to proactive procurement, CleanSpark is well insulated from near-term tariff risks. The machines needed to reach our 50x a hash target are already in the U.S., giving us both certainty and flexibility as trade negotiations worldwide continue to evolve. While tariffs could create significant headwinds for less prepared operators, we have positioned ourselves ahead of the curve. Our scale, planning, and disciplined execution allow us to continue expanding towards our near-term targets without disruption.

Zack: Let me now address tariffs a topic of increased relevance across all global markets.

Zack: Thanks to proactive procurement clean spark is well insulated from near term tariff risk.

Zack: The machines needed to reach our <unk> target are already in the U S. Given.

Zack: Giving us both certainty and flexibility as trade negotiations worldwide continue to evolve.

Zack: While tariffs could create significant headwinds for less prepared operators.

Zack: Sure.

Zack: We have positioned ourselves ahead of the curve.

Zack: Our scale planning and disciplined execution allow us to continue expanding towards our near term targets without disruption.

Zachary Bradford: In fact, if tariffs persist, We may see opportunities to acquire smaller minors at a tract evaluation. particularly those unable to afford next-generation hardware under the new cost structure. This is a clear example of how our infrastructure-first, counter-cyclical strategy continues to generate strategic advantages over peers.

Zack: In fact, if terrorists if tariffs persist.

Zack: We may see opportunities to acquire smaller miners at attractive valuations.

Zack: Particularly those unable to afford next generation hardware.

Speaker Change: <unk>, the new cost structures.

Speaker Change: It is a clear example of how our infrastructure <unk> countercyclical strategy continues to generate strategic advantages over peers.

Zachary Bradford: Now let's turn to growth. where our portfolio based approach continues to deliver real advantage. Today, we operate 32 mining sites across four geographically diverse states. This footprint helps us mitigate weather-related risk while tapping into reliable power markets. particularly in states that are net electricity exporters. In Q2, we added more than 3x the hashrate capacity in Wyoming alone. The remaining exerhash needed to deliver on our mid-year target will include the completion of ground-up development in Wyoming and Tennessee, paired with the expansion and optimization of several of our operations in Georgia and Mississippi. Looking beyond mid-year, we have active projects ongoing with miners and infrastructure paid for that will push us over 57XX.

Speaker Change: Now, let's turn to growth.

Speaker Change: Where our portfolio based approach continues to deliver real advantages.

Speaker Change: Today, we operate 32 mining sites across four geographically diverse states.

Speaker Change: This footprint helps us mitigate weather related risks, while tapping into reliable power market.

Speaker Change: Particularly in states that are net electricity exporters.

Speaker Change: In Q2, we added more than three extra hazard capacity in Wyoming alone.

Speaker Change: The remaining SaaS needed to deliver on our mid year target will include the completion of ground up development in Wyoming, and Tennessee paired with the expansion in the <unk> of several of our operations in Georgia and Mississippi.

Speaker Change: Looking beyond mid year we.

Speaker Change: We have active projects ongoing with minors and infrastructure pay for that will push us over 57 ex ash.

Zachary Bradford: For long term expansion, we've already secured infrastructure in hand or under contract to support growth beyond 60XX. We intend to put this infrastructure into use in the lowest cost and most advantageous areas.

Speaker Change: For long term expansion, where we are.

Speaker Change: Already secured infrastructure in hand or under contract to support growth beyond 16 ex ash.

Speaker Change: We intend to put this infrastructure into use and the lowest cost and most advantageous areas.

Zachary Bradford: We currently view Tennessee and Wyoming as particularly attractive places to continue to grow.

Speaker Change: We currently view, Tennessee, and Wyoming, as particularly attractive places to continue to grow.

Zachary Bradford: Looking ahead. We intend to modify how we provide growth guidance. We will reduce the use of time-bound guidance related to hash rate expansion. Our growth will remain disciplined and opportunistic, pursued where and when we see strong ROI-positive potential, primarily funded through non-dilutive sources. This approach aligns with our proven counter cyclical strategy and reflects our commitment to preserving shareholder value. In today's more volatile market environment, strategic flexibility is essential, and we are focused on avoiding unnecessary, time-bound commitments that could undermine long-term value creation. To be clear, CleanSpark will continue to grow, and our current projects are expected to increase hash rate towards 57xx.

Speaker Change: Yeah.

Speaker Change: Looking ahead.

Speaker Change: We intend to modify.

Speaker Change: We provide growth guidance, we will reduce the use of time bound guidance related to hash rate expansion or.

Speaker Change: Our growth will we will remain disciplined and opportunistic pursued where and when we see strong ROI positive potential primarily funded through non dilutive sources.

Speaker Change: This approach aligns with our proven countercyclical strategy and reflects our commitment to preserving shareholder value.

Speaker Change: In today's more volatile market environment strategic flexibility is essential and.

Speaker Change: And we are focused on avoiding unnecessary time bound commitments that could undermine long term value creation to be clear.

Speaker Change: <unk> will continue to grow and our current projects are expected to increase hash rate towards 57 access.

Zachary Bradford: and our vendor option can support growth to 65x.

Speaker Change: And our vendor option can support growth to 65 SaaS.

Zachary Bradford: And I look forward to providing more updates in the months and quarters to come. While we hold ourselves in high internal standards, we're also proud to be recognized externally for our growth and leadership. CleanSpark was recently ranked number 35 in the Financial Times 2025 list of the 500 fastest growing companies in the Americas. This is a reflection of our growth over the past five years and shows the value of our strategic discipline and our team's grit and adaptability in a rapidly evolving sector. We were also added to the S&P Small Cap 600 Index, a milestone that enhances our visibility in public markets and broadens access to our business model for institutional investment.

Speaker Change: And I look forward to providing more updates in the months and quarters to come.

While we hold ourselves.

Speaker Change: Hi, internal standards. We're also proud to be recognized externally for our growth and leadership.

Speaker Change: Clean Spark was recently ranked number 35 in the financial times 2025 list of the 500 fastest growing companies in the America.

Speaker Change: This is a reflection of our growth over the past five years and shows the value of our strategic discipline, and our team's grit and adaptability and a rapidly evolving sector.

Speaker Change: We were also added to the S&P Smallcap 600 index, a milestone that enhances our visibility and public markets and broadened access to our business model for institutional investors.

Zachary Bradford: Following our inclusion, institutional ownership and our common stock increased to nearly 64%. Strong vote of confidence from some of the world's most respected asset managers. All others may focus on headlines.

Speaker Change: Following our inclusion institutional ownership in our common stock increased to nearly 64%.

Speaker Change: Strong vote of confidence from some of the world's most respected asset managers.

Speaker Change: While others may focus on headlines.

Zachary Bradford: We remain committed to substance abuse. building a resilient, vertically integrated Bitcoin mining company. grounded in operational discipline and long-term vision. As the only remaining public pure play, vertically integrated Bitcoin mining company, we're building an enduring business, applying traditional discipline to one of the world's newest industries and most important assets. Because of the investments and decisions we have made. We are well positioned to capitalize on the improving landscape. We've established a strong track record of market leadership. CleanSpark has consistently led with four sets. We've invested early in infrastructure. We pioneered a capital strategy that will minimize dilution.

Speaker Change: We remain committed to substance.

Speaker Change: Building, a resilient vertically integrated bitcoin mining company.

Speaker Change: Grounded in operational discipline and long term vision.

Speaker Change: As the only remaining public pure play vertically integrated bitcoin mining company for <unk>.

Speaker Change: Building an enduring business.

Speaker Change: <unk> traditional discipline to one of the worlds newest industries and most important assets.

Speaker Change: Because of the investments and decisions we have made.

Speaker Change: We are well positioned to capitalize on the improving landscape. We've established a strong track record of market leadership.

Speaker Change: Clean spark has consistently led with foresight.

Speaker Change: We've invested early in infrastructure, we pioneered a capital strategy that will minimize dilution.

Zachary Bradford: We secured ASICs through counter cyclical buying. And now we're setting the standard for responsible digital asset management. Each of these moves has delivered real, measurable value. And we are confident our latest steps now and in the future will do the same.

Speaker Change: We secured a six through counter cyclical buying and now we are setting the standard for responsible of digital asset management.

Speaker Change: Each of these moves.

Speaker Change: <unk> has delivered real measurable value and.

Speaker Change: And we are confident our latest steps now and in the future we will do the same.

Zachary Bradford: I often use the term escape velocity to describe CleanSpark's current trajectory. In a business context, it means we've reached a critical inflection point. where our scale, operational performance and financial discipline combined to generate sustainable, positive cash flow, well in excess of our cost. or Operation . . Anchored by market-leading data centers and energy infrastructure powered by best-in-class miners are not only profitable, but also self-funding. This marks our transition from growth-dependent on external capital to a model capable of being driven by internally generated returns. It also reflects a deeper momentum. We are expanding our lead in operational efficiency, capital stewardship, and market adaptability.

Speaker Change: I often use the term escape velocity to describe clean Sparks current trajectory in a business context. It means we've reached a critical inflection point.

Speaker Change: Where our scale operational performance and financial discipline combined to generate sustainable.

Speaker Change: Sustainable positive cash flow well in excess of our cost.

Our operations.

Speaker Change: Incurred by market, leading data centers and energy infrastructure powered by best in class miners are not only profitable, but also self funding. This.

Speaker Change: This marks our transition from growth dependent on external capital to a model capable of being driven by internally generated returns.

Speaker Change: It also reflects a deeper momentum.

Speaker Change: We are expanding our lead in operational efficiency capital stewardship and market adaptability and that separation from the pack is accelerating.

Zachary Bradford: And that separation from the pack is accelerating. As the last pure play Bitcoin miner, we are creating a durable competitive advantage and reinforcing strong market fit. Our role as a flexible energy load adds even more strategic value, enabling us to support power grids while scaling nationwide. Escape velocity for us means optionality, the ability to invest in ourselves, adapt to changing conditions, and compound growth without compromising our core. We are achieving disruption through discipline. And we're just getting started.

Speaker Change: As the last pure play Bitcoin miner, we are creating a durable competitive advantage and reinforcing strong market fit.

Speaker Change: Our role as a flexible energy low to add even more strategic value, enabling us to support power grids, while scaling nationwide.

Speaker Change: Escape velocity for us means optionality.

Speaker Change: The ability to invest in ourselves.

Speaker Change: Adapt to changing conditions and compound growth without compromising our core.

Speaker Change: We're achieving disruption through disciplined.

Zachary Bradford: Finally, I want to recognize the incredible work of the CleanSpark team across the country. Your execution, dedication, and belief in our mission continue to set us apart one block at a time.

Speaker Change: And we're just getting started.

Speaker Change: Finally, I want to recognize the incredible work of the clean spark team across the country.

Speaker Change: Your execution dedication and belief in our mission continue to set us apart one block at a time.

Gary Vecchiarelli: With that, I'll turn it over to Gary for a closer look at the financials. Gary? Thank you, Zach. As Zach mentioned, our second fiscal quarter was solid for CleanSpark, despite some of the challenges. Let's look at the numbers. Our revenues for the quarter were $181.7 million, an increase of $69.9 million, or 62.5% over the same quarter last year. We produced $1,957 Bitcoin for the quarter, 74 less than the same quarter last year, only 3.6% fewer despite block rewards being cut in half in late April 2024. We are almost at the same number of Bitcoin produced as pre-halving due to our increasing exahash and increased fleet efficiency from our best-in-class miners.

Speaker Change: That I will turn it over to Gerry for a closer look at the financials Gary.

Gerry: Thank you Sir.

Speaker Change: Zach mentioned, our second fiscal quarter was solid for clean spark. Despite some of the challenges we face let's look at the numbers.

Speaker Change: Our revenues for the quarter were $181 7 million, an increase of $69 9 million or 62, 5% over the same quarter last year.

Speaker Change: We produced 1957 bitcoin for the quarter 74 less than the same quarter last year, only three 6% fewer despite block rewards being cut in half in late April 2024.

Speaker Change: We are almost at the same number of <unk> produced as pre having due to our increasing extra hash and increased fleet efficiency from our best in class miners is also important to note that our average revenue recognized per bitcoin produced in Q2 was $92811 which is in <unk>.

Gary Vecchiarelli: It is also important to note that our average revenue recognized per Bitcoin produced in Q2 was $92,811, which is an increase of approximately 38,000 or 69% over the same quarter last year. When compared to the immediately preceding first quarter, our revenues increased 12%. As Zach has pointed out, this is primarily due to the increase in average revenue per Bitcoin and growing hash. Looking at our margins, our gross profit increased by $18.8 million year over year with a profit margin of 53% for this quarter. When compared to the immediately preceding first quarter, our gross profit increased $4.3 million, or 5% during the period.

Speaker Change: Increase of approximately 38000 or 69% over the same quarter last year.

Speaker Change: When compared to the immediately preceding first quarter, our revenues increased 12% exactly as pointed out. This is primarily due to the increase in average revenue per bitcoin and growing cash rate.

Speaker Change: Looking at our margins our gross profit increased by $18 8 million year over year with a profit margin of 53% for this quarter.

Speaker Change: When compared to the immediately preceding first quarter, our gross profit increased $4 3 million or 5% during the periods.

Gary Vecchiarelli: This quarter, we recognize a net loss of $138.8 million, a change primarily driven by the decrease in the marked market adjustment in Bitcoin value between December 31st and March 31st. Our JustDepot was a negative $57.8 million per quarter, also driven by the mark-to-market adjustment. However, I want to point out that when normalized and adjusting for the mark to market item, our operations produced approximately 70 million of positive EBITDA. On a normalized basis, 70 million represents 39% net margin. which is representative of the Cash on Cash Returns. Notably, our marginal cost per coin was approximately $42,600, a 26% increase over the first quarter.

Speaker Change: This quarter, we recognized a net loss of $138 8 million a change primarily driven by the decrease in the mark to market adjustment in bitcoin value between December 31, and March 31.

Speaker Change: Our adjusted EBITDA was a negative $57 8 million per quarter.

Speaker Change: Also driven by the mark to market adjustments.

Speaker Change: However, I want to point out that when normalized and adjusting for the mark to market item. Our operations produced approximately $70 million of positive EBITDA on.

Speaker Change: On a normalized basis.

Speaker Change: $70 million represents 39% net margins, which is representative of the cash on cash returns we seek.

Speaker Change: Notably our marginal cost per coin was approximately 42600% to 26% increase over the first quarter.

Gary Vecchiarelli: The increase in our marginal cost per coin can be attributed both to an increase in mining difficulty as well as rising power prices. Our average cost per kilowatt hour increased during the quarter to six cents. And as Zach mentioned, this was a result of intentionally managing to a margin rather than to a specific cost per kilowatt hour.

Speaker Change: The increase in our marginal cost per coin can.

Speaker Change: Can be attributed both to an increase in mining difficulty as well as rising power prices, our average cost per kilowatt hour increased during the quarter to <unk> <unk> and.

Speaker Change: And as Jack mentioned this was a result of intentionally managing to a margin rather than to a specific cost per kilowatt hour.

Gary Vecchiarelli: I want to again emphasize, we manage our operations based on margin, rather than to a specific unit price of We ended the quarter with $97 million in cash and $11,869 BTC, representing a fair value of approximately $980 million. In total, the company had almost $1.1 billion of liquidity at the end of Q2. When it comes to our Bitcoin treasury, I want to note one change on our balance quarter ended March 31st. You will see our Bitcoin value split between short term and long term classification. This classification meets accounting requirements as the company expects to hold at least 15% of its treasury in deep cold storage for at least the next 12 months.

Speaker Change: I want to again emphasize we manage our operations based on margin.

Speaker Change: Rather than to a specific unit price of energy.

Speaker Change: We ended the quarter with $97 million in cash and 11869, bitcoin, representing a fair value of approximately $980 million.

Speaker Change: In total the company had almost $1 1 billion of liquidity at the end of Q2.

Speaker Change: When it comes to a bitcoin treasury I want to note one change on our balance sheet.

Speaker Change: For the quarter ended March 31.

Speaker Change: You will see our bitcoin value split between short term and long term classifications.

Speaker Change: This classification meets accounting requirements as the company expects to hold at least 15% of its treasury and deep cold storage for at least the next 12 months.

Gary Vecchiarelli: The portions classified as short-term will be used to sustain growth and for strategic treasury purposes. I'll have more on that in a few moments, but it's important to note that all Bitcoin on the balance sheet as of quarter end remains liquid and available for us to utilize. Total debt, as of the end of the quarter, stands at $64.7.2 million. Note that this amount is net of debt issuance costs of approximately $16 million. which were incurred as part of the company's $650 million convertible transaction in December. As a reminder, this issuance has a 0% coupon and an effective conversion price of $24.66 per share.

Speaker Change: A portion classified as short term will be used to sustained growth and for strategic treasury purposes, I'll have more on that in a few moments, but it is important to note that all bitcoin on the balance sheet as of quarter end remains liquid and.

And available for us to utilize.

Speaker Change: Total debt.

Speaker Change: As of the end of the quarter stands at $67 2 million note that this amount is net of debt issuance costs of approximately $16 million.

Speaker Change: Which were incurred as part of the Companys $658 million convertible transaction in December.

Speaker Change: As a reminder, this issuance has a zero percent coupon and an effective conversion price of $24 66.

Gary Vecchiarelli: Looking deeper into the balance sheet, there are some other details I would like to highlight. Our capital strategy has matured significantly, enabling us to pursue non-dilutive funding options that support both our operations and long-term growth. CleanSpark has achieved escape velocity. We have the ability to sell fund operations and grow our Bitcoin balance while enhancing shareholder value. In April, we were proud to expand our relationship with Coinbase to their Bitcoin Collateralized Lending Program as part of our broader strategic approach to capital management and increasing our line of credit with Coinbase Prime to $200 million. Our Bitcoin holdings of 12,101 at the end of April represents over $1.2 billion in today's Bitcoin price, more than reversing the prior quarter's marked market unrealized loss.

Speaker Change: Per share.

Speaker Change: Looking deeper into the balance sheet. There are some other details I would like to highlight.

Speaker Change: Our capital strategy has matured significantly enabling us to pursue non dilutive funding options to support both our operations and long term growth.

Speaker Change: Clean spark has achieved escape velocity.

Speaker Change: We have the ability to self fund operations and grow our bitcoin balance while enhancing shareholder value.

Speaker Change: In April we were proud to expand our relationship with coinbase to their bitcoin collateralized lending program as part of our broader strategic approach to capital management and increasing our line of credit with Coinbase point to $200 million.

Speaker Change: Our bitcoin holdings of 12101 at the end of April represents over $1 $2 billion of today's pick one price more than reversing the prior quarters mark to market unrealized losses.

Gary Vecchiarelli: We believe this is the right time to evolve from a nearly 100% HODL strategy adopted in late 2023 to using a portion of our monthly production to support operations. This represents a meaningful strategic distinction from many of our peers who continue to rely on equity dilution to fund operating costs or increased leverage to grow their Bitcoin reserve. We view our approach as deliberately strategic rather than ideological, particularly now that we've reached our current scale. While we remain committed to Bitcoin as a long-term, hardened asset, we believe a more effective way to increase shareholder value is through a balanced approach between monetizing new production and growing and monetizing our treasury.

Speaker Change: We believe this is the right time to evolve from a nearly 100% huddle strategy adopted in late 2023, it's using a portion of our multi production to support operations.

Speaker Change: This represents a meaningful strategic distinction from many of our peers, who continue to rely on equity dilution to fund operating costs or increased leverage to grow their pick one reserves.

Speaker Change: We view our approach as deliberately strategic rather than ideological, particularly now that we've reached our current scale.

Speaker Change: While we remain committed to bitcoin as a long term harden asset.

Speaker Change: We believe a more effective way to increase shareholder value is through a balanced approach between monetizing new production and growing and monetizing our treasuries.

Gary Vecchiarelli: As part of this strategy, we tend to further diversify our capital stack. As we have consistently emphasized, our focus is on ROI and our ability to make real-time decisions in the market. Given today's market environment, we view the revolving line of credit as the most efficient and responsible path to supporting accretive growth, and our strong balance sheet positions us to take full advantage of that opportunity. It is our intention to use proceeds from the revolver for a creative CapEx purpose. Megan Moore, We are conscious of adding leverage to our balance sheet and expect that we will rapidly pay down the line of credit and not hold high balances for extended periods of time.

Speaker Change: As part of this strategy, we tend to further diversify our capital stack.

Speaker Change: As we have consistently emphasized our focus is on ROI and our ability to make real time decisions in the market.

Speaker Change: Given today's market environment, we view the revolving line of credit as.

Speaker Change: As the most efficient and responsible path to supporting accretive growth and our strong balance sheet positions us to take full advantage of that opportunity.

Speaker Change: It is our intention to use proceeds from the revolver.

Speaker Change: Accretive capex purposes.

Speaker Change: Furthermore.

Speaker Change: We are conscious of adding leverage to our balance sheet and expect that we will rapidly pay down the line of credit and not hold high balances for extended periods of time.

Gary Vecchiarelli: We intend to manage the business on a net debt basis to ensure proper liquidity to cover all debt. On top of CapEx, all infrastructure and machines required to get to 50x a hash is fully funded.

Speaker Change: We intend to manage the business on a net debt basis to ensure proper liquidity.

Speaker Change: We're all debt obligations.

Speaker Change: On the topic of Capex.

Speaker Change: All infrastructure and machines required to get the 50 extra cash is fully funded.

Gary Vecchiarelli: I want to take a moment to discuss our investment in growth past 50x a half. We have paid approximately $100 million towards additional infrastructure supporting almost 200 megawatts. We've also paid approximately $135 million for state-of-the-art. which equates to approximately 7 exahash above and beyond our 50 exahash target. And importantly, the vast majority of these are already stateside.

I want to take a moment to discuss our investment and growth past 50 exit cash.

Speaker Change: We have paid approximately $100 million towards additional infrastructure supporting almost 200 megawatts.

Speaker Change: We have also paid approximately $135 million for state of the art, Asics, which equates to approximately seven exit above and beyond our <unk> target and importantly, the vast majority of these are already stateside.

Gary Vecchiarelli: On the topic of tariffs, I'd like to discuss a unique transaction we recently completed. In April, we exercised a portion of our option with our vendor for $13,200 of the latest generation miner. The total amount due under this exercise was approximately $76.6 million. However, we negotiated a favorable payment arrangement using Bitcoin. or by the vendor accepted Bitcoin as consideration with an exchange rate at 150% of Bitcoin spot price on the date of payment. This means we transferred 691 Bitcoin with a fair value of approximately 66.7 million or a spot rate of 96,600 per Bitcoin. This resulted in savings of approximately $10 million as the vendor applied a Bitcoin price of $110,941, or 15% higher than spot, towards the purchase.

Speaker Change: On the topic of tariffs I would like to discuss a unique transaction. We recently completed.

Speaker Change: In April.

Speaker Change: We exercised a portion of our option with our vendor for 13200 of the latest generation miners.

Speaker Change: The total amount due under this exercise was approximately $76 6 million.

Speaker Change: <unk>.

Speaker Change: We negotiated a favorable payment arrangement using bitcoin.

Speaker Change: By the vendor accepted bitcoin is consideration with an exchange rate at 150 <unk>.

Speaker Change: <unk>.

Speaker Change: A bitcoin spot price on the date of payment.

Speaker Change: This means we transferred 691 bitcoin with a fair value of approximately $66 7 million or a spot rate of 96600 per bitcoin.

Speaker Change: This resulted in savings of approximately $10 million as the vendor applied a bitcoin price of $110941 or 15% higher than spot towards the purchase.

Gary Vecchiarelli: Additionally, as part of the transaction, we received a free call option to repurchase For more information, visit www.fema.gov 691 Bitcoin at the $110,000 price on a date later this fall. We expect to exercise this option if the fair value of Bitcoin is greater than this amount. If the fair value is less. We essentially have locked in our miners at a lower price and more than offset any potential tariff.

Speaker Change: Additionally, as part of the transaction, we received a free call option to repurchase 691 bitcoin at the 110000 are priced on a date later this fall.

Speaker Change: We expect to exercise this option if the fair value of bitcoin is greater than this amount.

Speaker Change: The fair value is less.

Speaker Change: We essentially have locked in our miners at a lower price and more than offset any potential tariff impacts.

Gary Vecchiarelli: Now we want to provide an update on our Bitcoin Treasury effort. On our past few calls, we've provided a brief glimpse of how we have been building an institutional-grade digital asset management function. As of today, one of the final stages of negotiating and executing ISDA agreements, which will govern how trades will be settled and the amount of collateral we will need to post. Additionally, we have identified strategies complementary to our operations and capital strategy for the first phase in which we have referred to as the crawl, walk, run process. Overall, when it comes to execution, we're in the crawl phase, and we'll soon be implementing our strategies to rapidly advance to the walk phase and continue scaling from there.

Speaker Change: Now I want to provide an update on our bitcoin treasury efforts.

Speaker Change: On our past few calls we provided a brief glimpse of how we have been building in institutional grade digital asset management function as of today when the final stages of negotiating and executing is the agreements, which will govern how trades will be settled and the amount of collateral we will need to post.

Speaker Change: Additionally, we have identified strategies complementary to our operations and capital strategy for the first phase in which we have referred to as the crawl walk run process.

Overall when it comes to execution, we're in the crawl phase and will soon be implementing our strategies to rapidly advance to the walk phase and continue scaling from there.

Gary Vecchiarelli: I will tell you, however... But based on the modeling and indicative pricing we are monitoring in real time, the opportunity is quite exciting. If it seems as if this has taken some time, that's right. This has been a very deliberate process. We've been engaged in rigorous evaluations of treasury strategies and the counterparties we choose to work with. We are also very conscious of collateral requirements in order to maximize returns.

Speaker Change: I will tell you however.

Speaker Change: But based on the modeling and indicative pricing, we're monitoring in real time, the opportunity is quite exciting.

Speaker Change: If it seems as if this has taken some time that's right. This has been a very deliberate process. We've been engaged in rigorous evaluations of treasury strategies and the Counterparties, we choose to work with.

Speaker Change: We're also very conscious of collateral requirements in order to maximize returns.

Gary Vecchiarelli: and Minimize Counterparty Despite Our Deliberate We have led the rest of the industry when it comes to establishing this function, performing proper diligence. and are now prepared to maximize performance of our Bitcoin treasury. In many of the conversations we've had with potential counterparties, the message has been the same. We are the first public miner to have a professional and thorough RFP and due diligence process. We appreciate the partnerships. we have developed, and the willingness to lean into this due diligence process. Together, we all agree reducing counterparty risk is important for the industry as a whole.

Speaker Change: And minimized counterparty risk.

Speaker Change: Despite our deliberate pace, we have led the rest of the industry when it comes to establishing this function performing property diligence.

Speaker Change: And are now prepared to maximize performance of our <unk> Treasury.

Speaker Change: And many of the conversations we've had with potential counterparties. The message has been the same we are the first public miner drove a professional and thorough RFP and due diligence process.

Speaker Change: We appreciate the partnerships.

Speaker Change: We have developed.

Speaker Change: And the willingness to lean into this due diligence process together, we all agree reducing counterparty risk is important for the industry as a whole to those partners. We have selected at this time, we look forward to working with you.

Gary Vecchiarelli: To those partners we have selected at this time, we look forward to working with you.

Gary Vecchiarelli: As we enter our next phase.

Gary Vecchiarelli: Growing beyond 50x a hash, we believe CleanSpark is uniquely positioned to deliver sustained long-term shareholder value as we continue to execute on our strategic vision and evolve.

Speaker Change: As we enter our next phase.

Speaker Change: Growing beyond 50 exit Ash, we believe clean spark is uniquely positioned to deliver sustained long term shareholder value as we continue to execute on our strategic vision and evolve.

Harry: With that, I'll turn the call back over to Harry to open the floor for questions. Thanks, Gary, for that detailed financial overview.

Speaker Change: With that I'll turn the call back over to Harry to open the floor for questions.

Unknown Executive: We will now open the floor to questions from the analyst community.

Harry: Thanks, Gary for that 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.

Unknown Executive: Operator, please provide instructions and manage the queue for the Q&A session. At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.

Speaker Change: At this time I would like to remind everyone in order to ask a question. Chris Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Michael Colonnese: Your first question comes from the line of Mike Colonnese with H.C. Wainwright. Your line is open. Good afternoon and great quarter from an operating standpoint guys.

Harry: Yeah.

Harry: Yeah.

Speaker Change: Your first question comes from the line of Mike <unk> with H C. Wainwright. Your line is open.

Zachary Bradford: First one for me, maybe maybe to Zach, it'd be great to get your outlook for the growth in the network cash rate in 2025 and how you're thinking about CleanSpark's market share within that context, especially now with the tariffs and some of your peers pivoting over to HPC AI. Hey, Mike, great question. Thanks for joining the call today. You know, I we what we've seen, I think is a little bit of a plateau effect that's kind of interspersed with with some growth. And so, you know, I think that the limited growth we've seen on the network is likely due to upgrade cycles that are naturally occurring in the space.

Mike: Good afternoon, great quarter from an operating standpoint, guys first one from me, maybe maybe to Zack I'd be curious to get your outlook for the growth in the network cash rate in 2025, and how youre thinking about clean spark some market share within that context, especially now with the tariffs and some of your peers pivoting over to HTC.

Mike: Uh huh.

Zack: Hey, Mike Great question, Thanks for joining the call today.

Zack: We what we've seen I think is a little bit of a plateau effect, that's kind of interspersed with some growth and so I think that the limited growth. We've seen on the network is likely due to upgrade cycles that are naturally occurring in this space, but I don't know that were seeing a lot of meaningful new investments, which.

Gary Vecchiarelli: But I don't know that we're seeing a lot of meaningful new investments, which is a great thing for us. You know, we're sitting at about 5% of market share and growing. And, you know, our intention is to maintain and grow that market share. And we think all things considered with how we're monitoring kind of global movement going that we will that we're incredibly well positioned to do. Great, appreciate it, Zach.

Zachary Bradford, Isaac Holyoak, Brittany Moore, Unknown Executive

Gary Vecchiarelli: And maybe one for you, Gary, if you could just talk about how you envision the digital asset management team, generating shareholder value over time, and how that treasury approach differentiates you from some of your peers out there. Yeah, thanks for the question, Mike. So we've been, as I mentioned, my comments, you know, we've been hard, making sure that we select the right counterparties and partners on this journey. And we feel confident that we've really chosen the best of the best. And I'll tell you, you know, there's a number of strategies that we're looking at, the ones you've heard me talk over the past really couple years is something as vanilla as covered calls.

Speaker Change: Great, appreciate some of those, Zach, and maybe one for you, Gary, if you could just talk about how you envision the digital asset management team generating shareholder value over time, and how that treasury approach different you, different you see from some of your peers out there.

Speaker Change: Yeah, I think thanks to the question Mike. So we've been, as I mentioned in my comments, you know, we've been hard, making sure that we select the right counterparties and partners on this story. Thank you very much.

Speaker Change: and we feel confident that we've really chosen the best of the best.

Speaker Change: and I'll tell you, there's a number of strategies that we're looking at. The ones you've heard me talk over the past really a couple of years is.

Gary Vecchiarelli: Let me share some information that I pulled this this morning, because we monitor this in real time. And I really can't think of any other word to use, other than, you know, these, these premiums are rather juicy. I know it might be a little hard to model juicy sometimes, but let me give you an idea of what excites us here. You know, Bitcoin's trading around, what, $101,000 right now. So if we were to issue covered calls at the money, so with a strike price of $101,000 one week out, that's a premium of a little over $2,400 or 2.4%.

Speaker Change: Something as vanilla as covered calls. Let me share some information that I pulled this this morning because we we monitor this in real time and I really can't think of any other word to use.

Speaker Change: Other than these premiums are rather juicy. I know it might be a little hard to model juicy sometimes, but let me give you an idea of what excites us here.

We know Bitcoin's trading around, what, $101,000?

Speaker Change: Right now, so if we were to issue covered calls at the money, so with a strike price of 101,000, one week out, that's a premium of a little over $2,400 or 2.4% Analyze at 97%.

Gary Vecchiarelli: Analyze that's 97%. Now, naturally, we wouldn't put the entire Bitcoin balance at risk at the money, but at least a covered call at the money would allow us to always stay ahead of spot by at least a couple points. And we've always been confident we'd be able to do that with this basic strategy. And since we're sellers now of Bitcoin to help pay for operating expenses, that's going to be very important for us to always stay ahead of the spot. Additionally, when you start to ladder this out, I mean, if you were even to look at, you know, a two week strike at $101,000, it's like 3.4%.

Speaker Change: Now naturally we wouldn't put the entire Bitcoin balance at risk at the money, but at least a cover call at the money would allow us to always stay ahead of spot by at least a couple points and we've always been confident we'd be able to do that with this basic strategy.

Speaker Change: and since we're sellers now of Bitcoin to help pay for operating expenses, that's going to be very important for us to stay ahead of the spot.

Speaker Change: Additionally, when you start to ladder this out, I mean, if you're even going to look at

Gary Vecchiarelli: You go to $102,000 or so, $1,000 out of money, it's about 3%. So again, those are pretty, pretty interesting premiums. And again, you know, juicy yields for such short dated options. But that's just one example of what we're looking at. And ultimately, this is going to generate what we're internally calling this flywheel, this treasury flywheel that will allow us to generate some cash that we can then have optionality and flexibility as to whether we then further reduce the reliance on selling a production and apply towards operating expenses. We could pay down debt or we can roll it into other instruments and maybe even into Bitcoin.

Speaker Change: You know, a two week strike at 101,000, it's like 3.4%, you go to 102,000, so 1,000 hours out of the money, it's about 3%

So again, those are pretty good.

Speaker Change: Pretty interesting premiums, and again juicy yields for such short dated options, but that's just one example.

Speaker Change: of what we're looking at, and ultimately this is going to generate...

Speaker Change: where we're internally calling this this flywheel, this Treasury flywheel, that will allow us to generate some cash that we can then have optionality and flexibility as to whether we then further reduce the reliance on selling a production.

Speaker Change: and applied towards operating expenses. We could pay down debt or we can roll it into other instruments and maybe even into Bitcoin. [inaudible]

Unknown Executive: Thank you for taking my question.

Gregory Lewis: Your next question comes from the line of Greg Lewis with BTIG. Your line is open. Yeah, thank you. And good afternoon. And thanks for taking my question.

Thank you. Thank you for telling my questions to us.

Greg Lewis: Your next question comes from the line of Greg Lewis with BTIG. Your line is open.

Gregory Lewis: Um, you know, I wanted to follow up on Mike's comment, um, kind of questioning, but in a different way around, you know, I mean, CleanSpark, you know, you guys have kind of stayed true to Bitcoin mining and have really kind of, you know, move this forward as, you know, other companies explore, you know, other opportunities elsewhere outside of Bitcoin. Has that had any impact? These other less appetite for rigs from some of these other larger players? Has that had any noticeable impact on on the price, um, pricing of mining rigs and just, you know, given the fact of, you know, you know, CleanSpark and a couple others real focus on just Bitcoin mining.

Greg Lewis: Yeah, thank you and good afternoon and thanks for taking my question. You know, I wanted to follow up on Mike's kind of questioning but in a different way around.

Greg Lewis: You know, I mean, CleanSpark, you guys who kind of stay true to Bitcoin mining and really kind of, you know, move this forward as, you know, other companies explore, you know, other, other opportunities elsewhere outside of Bitcoin.

Greg Lewis: These other less appetite for rigs from some of these other larger players. Has that had any noticeable impact on on the price pricing of mining rigs and just, you know, given the fact of, you know, you know, clean spark and a couple others real focus on just Bitcoin mining. I mean, I imagine that, you know, pretty much any rig.

Gregory Lewis: I mean, I imagine that, you know, pretty much any rig. OEM, you know, is looking to really increase or build that relationship with you. I mean, is that something that, you know, I guess in that question, really, what is happening with rig pricing, just given the lack of, you know, the slowdown in buying from some of your larger competitors? Has there been any impact?

OEM

Greg Lewis: You know, it is looking to really increase or build that relationship with you. I mean, is that something that, you know, I guess in that question really what is happening with rig pricing just just given the lack of, you know, the slow down and buying from some of your larger competitors? Has there been any impact? Next.

Zachary Bradford: Yeah, hey, great question. I appreciate you joining the call. You know, it has, I think it's what created the opportunity for that unique transaction that led to a 15% decrease into what was already an industry leading best price. And so, you know, we've always prided ourselves for the capital that we're deploying, especially to rigs, as being market leading. So we've always attempted to have the very best price that rigs are being purchased at. But I think what we're seeing now is because there are less buyers in certain pockets of the market, it's a supply and demand question that we have the answer to.

Yeah, hey, a great question. I appreciate you joining the call.

Greg Lewis: You know, it has. I think it's what created the opportunity for that unique transaction that led to a 15% decrease into what was already an industry-leading best price.

Greg Lewis: and so we've always prided ourselves for the capital that we're deploying, especially to rigged.

Greg Lewis: as being market leading. So we've always attempted to have the very best price that Richard being purchased at.

Greg Lewis: But I think what we're seeing now is because there are less buyers in certain pockets of the market.

Gary Vecchiarelli: And so it does give us a great opportunity to acquire more rigs at a lower cost. So we are seeing some, I think that, you know, this 15% discount down is probably step one of many. Because I think, you know, if you think of the how this market really works, they have to print chips, you know, six to nine months in million of Bitcoin.

Greg Lewis: is a supply and demand question that we have the answer to. And so it does give us a great opportunity to acquire more rigs at a lower cost. So we are seeing some.

Greg Lewis: I think that the 15% discount down is probably step one of many because I think if you think it the how this market really works.

Greg Lewis: They have to print chips, you know, six to nine months in advance, then assemble it into the final units that ultimately then get delivered to customers.

Greg Lewis: So, this slowdown in buying this happened, I believe the shock to the minor in ACIP market has not yet been felt. And I think we'll continue to see prices pushing down even on potentially even the next generation beyond this one. So, we'll continue to see prices pushing down even on potentially even the next generation beyond this one.

Greg Lewis: I would expect to see price improvement that we would stand to benefit from greatly.

Speaker Change: Okay, great. Super helpful, Zach. And then Gary, you know, you know, cognizant of the announcement, the kind of the, you know, covering our expenses through Bitcoin mining sales, by where you just look at, you know, Q1, you know, looks like you're, you know, kind of op-ex.

Speaker Change: You know, between us, GNA and services, et cetera, is like in the, in the, you know, low 30 million dollar range, you know, basically in April , you sold.

Gary Vecchiarelli: Like, you know, without putting pigeonholing you, you know, like, is that like, did we just did we just cover the CapEx for the quarter with with a month of sales? Or, you know, or put another way, did we just cover the CapEx for Q2 with April sales? Is that a fair way to think about it, Gary? Yeah, this is how I would think about it. Essentially, take the inverse of our margin, and that's ultimately what we have to pay, obviously, plus overhead. But that nut is monthly about $35 million, give or take, right? Because you have some payables that come and go.

Speaker Change: It looks like around 35 million of Bitcoin. Without putting pigeonholing you, did we just cover the cat-backs for the quarter with with among the sales or or

Speaker Change: You know, put another way, did we just cover the cat-backs for Q2 with April sales? [inaudible]

Darren: Like if I was there a way to think about it, Gary, yeah. Yeah, this is this hour to think about it.

You essentially take the inverse of our margin. [inaudible]

and that's ultimately what...

Darren: What we have to pay, I mean, obviously plus overhead, but that nut is monthly about $35 million.

Gary Vecchiarelli: But on average, it's about $35 million a month. Anything that we raise above that could go towards CapEx or servicing the line of credit. As you may have noticed, at least on the April monthly production, we've drawn down a little over $100 million for the line of credit, 100% of which is being used for accretive CapEx. And obviously, we'll have to pay down. We'll have to sell some Bitcoin to service that. But with Bitcoin price rising and the fact that we have, you know, less Bitcoin every month just to cover the monthly. Yeah, no doubt.

Darren: Give or take, because you have some payables that come and go, but on average it's about $35 million a month.

Darren: Anything that we raise above that could go towards CAPEX or servicing the line of credit. As you may have noticed, at least on the April monthly production, we've drawn down a little over $100 million for the line of credit, 100% of which is being used for a creative CAPEX.

Darren: And obviously we'll have to pay down, we'll have to sell some Bitcoin service that, but with Bitcoin price rising and the fact that we have, you know, where it's going to ask coming online, that just means that we have to sell less Bitcoin every month just to cover the month or not.

Gary Vecchiarelli: All right. Super helpful. Thank you very much. Thank you.

Brian Dobson: Your next question comes from the line of Brian Dobson with Clearsky. Your line is open. Yeah, thanks very much for taking my question. You know, I think avoiding dilutive capital raises is pretty impressive. And given where the shares are probably a smart thing.

Speaker Change: Yep, no doubt. Super helpful. Thank you very much.

Thank you.

Speaker Change: Your next question comes from the line of Brian Dobson with ClearStreet. Your line is open-team.

Brian Dobson: Yeah, thanks very much for taking my question. You know, I think avoiding dilutive capital raises is pretty impressive. And given where the shares are, probably a smart thing. You know, as you think about the valuation of your of your public equity, would you ever consider using some of your hodl to repo the shares?

Gary Vecchiarelli: You know, as you think about the valuation of your of your public equity, would you ever consider using some of your hodl to repo the shares? Yeah, yeah, I'll take that one. And Zach, chime in if you have any, any input. I'll tell you, look, we look at all levers available to us. I mean, that's why we're a public company, right. And as we mature, and we talked about building out this capital stack, there's other instruments, and new instruments that become available to And I'll tell you right now, when we look at the fact that our book value is greater than our market cap, that really nudges us towards not utilizing equity.

Brian Dobson: Yeah, yeah, I'll take that one. And Zach, chime in if you have any on.

Indian Putt

Brian Dobson: I'll tell you, look, we look at all levers available to us. I mean, that's why we're a public company, right? And as we mature, and we talked about building out this capital stack, there's other instruments.

and New Instruments that become available to us.

Brian Dobson: And I'll tell you right now when we look at the fact that our book value is greater than our market cap.

Gary Vecchiarelli: And so when you have, you know, a billion dollars plus sitting on the balance sheet of Bitcoin, we just think that that's a whole lot easier capital and, of course, lower cost capital to access. So that's just how we think about it. I mean, you know, if we were to get a premium on the equity, we would consider that. But at the remains one of our top priorities. And the way that we're doing that is to continually grow the balance sheet by paying down debt and growing the Bitcoin balance.

Brian Dobson: that really nudges us towards not utilizing equity. And so when you have, you know, a billion dollars plus sitting on the balance sheet of Bitcoin, we just think that that's a whole lot easier capital and, of course, lower cost capital to access. So that's just how we think about it. I mean, you know, if we were to get

Brian Dobson: A premium on the equity, we would consider that, but at the end of the day, you know, driving sureholder value remains one of our top priorities. And the way that we're doing that is to continually grow the balance sheet by paying down debt and growing the Bitcoin balance.

Zachary Bradford: And Brian, you know, to add on that, you at the tail end here, the tail end of the comment was, you know, about buying back shares. And, you know, from from our point of view, with a 53% margin to produce Bitcoin, which we think is, you know, current, if I'm going to step back, the way we think about Bitcoin is there's going to be half the amount of Bitcoin produced every day in the world in three years. And as a result, there is no better time to acquire Bitcoin than right now. And so we are prioritizing that Yes, we are putting some of that back in the market.

Speaker Change: And Brian, you know, to add on that, you at the tail end here, the tail end of the comment was, you know, about buying back shares. And, you know, from from our point of view, with a 53% margin to produce Bitcoin, which we think is

Brian Dobson: You know, current, I'm going to step back. The way we think about Bitcoin is there's going to be half the amount of Bitcoin produced every day in the world in three years.

Brian Dobson: And as a result, there is no better time to acquire Bitcoin than right now. And so we are prioritizing that. Yes, we are putting some of that back in the market. But you know, we really believe that Bitcoin is the right place to do it. And as we roll Bitcoin into more Bitcoin. Bitcoin.

Zachary Bradford: But, you know, we really believe that Bitcoin is the right place to do it. And as we roll Bitcoin into more Bitcoin, via investing in CapEx, that of course, then Yeah, very good.

The investing in Capac, of course, then...

Speaker Change: Gets us Mark Bitcoin is the way we're thinking about it. So as of right now at the current market price of Bitcoin

Speaker Change: You know, we're going to continue investing in things that get us more Bitcoin. It's always an option, and you know, optionality is one of the things I reference is in my talking points.

Speaker Change: That's how we view it. We have flexibility, we have optionality. There's nothing that says we can't do it, but as we say here today, that's how we're thinking about it.

Gary Vecchiarelli: And just as a follow up to some of the comments that you made on that on the facility, you know, do you think we'll see more Bitcoin-backed facilities in the future? And, you know, as mining operations proceed to the next halving, do you think this is, you know, called the way forward for the business? Not just your business, but the sector in general? Yeah, look, we had a market clearing exercise when we went out and looked at really upsizing the Coinbase line of credit. They had the really the best cost of capital. And we received a lot of inbounds after our press release.

Speaker Change: Yeah, very good. And just as a follow up to some of the comments that you made on that on the facility, you know, do you think we'll see more Bitcoin-backed facilities in the future? And, you know, as mining operations proceed to the next halving, do you think this is, you know, called the way forward for the business? Not just your business, but the sector in general?

Speaker Change: Yeah, look, we are market clearing exercise when we went out and looked at really up-sized in the coin base by the credit they had the really the best cost of capital.

Gary Vecchiarelli: So I would tell you that, yes, there's a lot of capital that wants to be deployed out there using Bitcoin as as collateral. Great.

Speaker Change: And we received a lot of inbounds after our press release, so I would tell you that, yes, there's a lot of capital that wants to be deployed out there using Bitcoin as collateral.

Zachary Bradford: And just one final one, if I may, as you look out in the market, you know, there are many of your competitors that are trying to pivot to HPC.

Speaker Change: Great, just one final one, if I may, as you look out in the market, you know, there are many of your competitors that are trying to pivot to HPC, what is the market look like for bolt on acquisitions and, you know, M&A in general for mining operations? Is that something that interests you?

Zachary Bradford: What does the market look like for bolt-on acquisitions and M&A in general for mining operations? Is that something that would interest you? Yeah, absolutely. You know, we were the most active acquirer for the last couple of years, you know, last year, it was mostly private companies, we, of course, did do one public company last year. But in addition to grid, we did six private acquisitions. So both on acquisitions are something we're always open to, especially when valuations are advantageous. And we do think that, you know, depending on how the market goes, and you know, if there's tariffs and different tariff pressures on the cost of mining rigs in any area, great opportunity for us to come and capture some of that market share with, you know, as we said earlier, beyond 50, we already have seven extra hash of rigs that we've largely brought stateside.

Speaker Change: Yeah, absolutely. You know, we were the most active acquirer for the last couple of years, you know, last year. There's mostly private companies. We of course did do one public company last year, but in addition to grid, we did six private acquisition.

Speaker Change: and we do think that depending on how the market goes and if there's tariffs and different tariff pressures on the cost of aqua mining rigs in any area.

Speaker Change: Great opportunity for us to come and capture some of that market share with, you know, as we said earlier, beyond 50, we already have 7x to hash of rigs that we've largely brought stateside. So absolutely, just like always, our highest and best interest is of empty shelves.

Zachary Bradford: So absolutely, just like always, our highest and best interest is of empty shelves, and high quality infrastructure. So I do think that there will be opportunities. So and we look forward to, you know, some of our peers as well, as they exit, you know, we're always willing to take the phone call.

Speaker Change: and High Quality Infrastructure. So, I do think that there will be opportunities. So, and we look forward to, you know, some of our peers as an exit, you know, we're always willing to take the phone call.

Zachary Bradford: Great. Thanks very much.

Paul Golding: Your next question comes from the line of Paul Golding with Macquarie Capital. Your line is open. Thanks so much.

Thanks very much.

Brian Dobson, Gregory Lewis

Zachary Bradford: For Zach or Gary, I just wanted to drill down a little bit more on the incremental capacity that you've paid for ahead of or past the 50 X a hash goal. How much of that capacity is liquid cooled versus air cooled? And are you making new or different determinations as to the type of infrastructure and cooling that you're rolling out because of the the tariff dynamics? Not to say that that is a hindrance to deploying the capacity, but just how you're thinking about that and whether that might have an impact on efficiency going forward or any other impact operationally.

Speaker Change: Your next question comes from the line of Paul Golding with McCory Capital. Your line is open.

Thanks so much.

Paul Golding: For Zach or Gary, I just wanted to drill down a little bit more on the incremental capacity that you've paid for ahead of or past the 50 X a hash goal. How much of that capacity is liquid cooled versus air cooled and are you making

Paul Golding: New or different determinations to the type of infrastructure and cooling that you're rolling out because of the the tariff dynamics not to say that that is. [inaudible]

Paul Golding: a hindrance to deploying the capacity, but just how you're thinking about that, and whether that might have an impact on efficiency going forward or any other impact operationally. Congrats on the quarter otherwise, thanks.

Paul Golding: Congrats on the quarter. Otherwise, thanks.

Zachary Bradford: Hey, thank you, Paul, for joining. I would say, when you look at the prepaid amount on the infrastructure, it really all relates to immersion cooling. We think that it is still the best path forward. The majority of the rigs that we've also brought in country related to that are also immersion cooled. Now, we have brought over a portion of latest and also air cooled to fit into tuck-in acquisitions and other similar opportunities, because that's often what is readily available on the market. But on our ground up builds, we are committed into the future, into immersion cooled, because we think it provides the optionality that will be necessary in the next three to five years, in particular, and into the next half year.

Thank you, Paul, for joining.

Paul Golding: I would say when you look at the prepaid amount on the infrastructure, it really all relates to emerging cooling. We think that it is. [inaudible]

Paul Golding: Still the best path forward. The majority of the rigs that we've also brought in country related to that are also immersion cool. Now we have brought over, you know, a portion of latest and also air cooled. [inaudible]

Paul Golding: to, you know, fit into tuck-and-acquisitions and other similar opportunities because that's often what is readily available in the market.

Paul Golding: but on our, you know, ground up builds, we are committed, you know, into the future, into immersion cool because we think it provides the optionality that will be necessary in the next three to five years in particular and into the next staffing.

Zachary Bradford: Thanks.

Zachary Bradford: And I guess there's just a quick follow up. Are you seeing any impact to pricing on that as, as Maybe not the emerging tanks given more direct-to-chip liquid cooling for AI, but some of the infrastructure around heat exchanging and pumps. Are you seeing any price impacts from the demand that we're seeing in HPC and how that might be pressuring the products to enable this functionality in the space? You know, what I can say is in our supply chain, we are still the largest buyer, because of our growth. A lot of, you know, if you're an HPC group that wants to announce something you're going to do tomorrow, you're probably not purchasing still for a while as you work on your permits, your designs, your plans.

Paul Golding: Maybe not the emerging tanks given more directed ship liquid cooling for AI, but...

Speaker Change: But some of the infrastructure around heat exchanging and pumps, are you seeing any price impact from the demand that we're seeing in HPC and how that might be pressuring the products to enable this functionality in the space?

Speaker Change: You know, what I can say is in our supply chain, we are still the largest buyer. Because of our growth, a lot of you know, if you're an HPC group that wants to announce something you're going to do tomorrow, you're probably not purchasing still for a while as you work on your permits, your designs, your plans.

Zachary Bradford: As we all know, most HPC data centers take three to five years to build. So we are still well ahead of the curve. And we do buy our supply chain in advance. That has given us an advantageous place in is probably the way to say it, as we have demand for infrastructure. Great color. Thanks so much.

Speaker Change: As we all know, most HPC data centers take three to five years to build, so we are still well ahead of the curve, and we do buy our supply chain in advance. That has given us an advantageous place in line, is probably the way to say it, as we have demand for infrastructure.

Unknown Executive: Again, if you would like to ask a question, press star then the number one on your telephone.

Great color. Thanks so much.

John Todaro: And your next question comes from the line of John Todaro with Needham. Your line is up. Hey, guys, thanks for taking my question and appreciate the commitment to limiting dilution. First question, just going back to Gary, some of your comments on the yield you could generate on Bitcoin and the treasury strategy. I mean, do you think we're getting to a point where it's fair for us to start forecasting out a yield on that? Any kind of guardrails? I know you laid out some, but it seems like it's still kind of up in the air. And then my next question is, and I guess I'd frame it almost the opposite way, that a lot of other peers have asked it, but do you actually think, you know, we keep hearing that major hyperscalers like Microsoft are actually kind of pulling back spend?

Speaker Change: Again, if you would like to ask a question, press star, then the number one on your telephone keypad.

Speaker Change: And your next question comes from a line of John Tadaro with Needhaman Company. Your line is open.

Speaker Change: Hey guys, thanks for taking my question and appreciate the commitment to limiting delusion.

Speaker Change: Um, first question, um, just going back to, to get in some of your comments on, uh, the yield you could generate on Bitcoin, the Treasury strategy. I mean, do you think we're getting to a point where it's fair, um, for us to start forecasting out a yield on that any kind of.

Speaker Change: Guardrails, I know you laid out some, but it seems like it's still kind of up in the air. And then my next question is, and I guess I'd frame it almost the opposite way as other peers have asked it, but do you actually think, you know, we keep hearing that major hyperscalers like Microsoft are actually kind of pulling back?

John Todaro: Have you noticed it might be actually getting easier to find power in sites now, whether that's kind of a weekly or month-over-month basis? Any commentary there would be appreciated.

Speaker Change: Spend. Have you noticed it might be actually getting easier to find power insights now, whether this kind of a weekly or month-over-month basis, any commentary there would be appreciated?

Gary Vecchiarelli: Hey, John, thanks for the question. I'll take the first part of that. You know, when it comes to the yield, I mean, we're not prepared to give any guidance here. Again, we're in the crawl phase of the process. But I believe on the last call, we said that we're targeting like mid single digits on an annualized basis for the entire Bitcoin balance. I think that's a reasonable yield to expect, again, on an annualized basis. Because again, we want to be, we want to make sure that the risk reward relationship is well in balance. And we're not taking, you know, unnecessary risks and not getting a lot of reward for that.

Speaker Change: Hey, John, thanks for the question. I'll take the first part of that.

Inaudible.

Speaker Change: You know, when it comes to the yield, I mean, we're not prepared to give any guidance here again. We're in the crawl phase of the process, but

Speaker Change: I believe it's on the last call. We said that we're targeting like mid single digits on an annualized basis for the entire Bitcoin balance.

Speaker Change: I think that's a reasonable yield to expect, again, on an annualized basis.

because, again, we want to be...

Speaker Change: We want to make sure that the risk-reward relationship is well and balanced and we're not taking, you know, unnecessary risks and not getting a lot of reward for that. We want to make sure that it's very strategic and. And.

Gary Vecchiarelli: We want to make sure that it's very strategic and precise, and really conservative.

Zachary Bradford: So, so internally, we're looking at that 4 to 6% And, you know, I want to sort of address the access to power in HPC. You know, I think it's important when you read in between the lines of what those headlines actually say, the hyperscalers are still committed to investing and building in that space. What they're spending less on is in co-location contracts, which is why we see it as incredibly dangerous for anybody and, you know, frankly, reckless for anyone that goes out there and plans to build it without a customer that is ready to take that rack space, because they're already, you know, canceling the soft commitments they have.

Speaker Change: Precise, and really conservative, so internally we're looking at that 4-6% range.

Speaker Change: and I want to address the access to power at HPC. I think it's important when you...

Speaker Change: Read in between the lines, what those headlines actually say, the hyperscalers are still committed to investing and building in that space.

What they're spending less on is in co-location contracts.

Speaker Change: which is why we see it as incredibly dangerous for anybody and frankly reckless.

Speaker Change: for anyone that goes out there and plans to build it without a customer that is ready to take that rack space.

Zachary Bradford: And again, it's because they're doubling down on their build. This is important to note because NVIDIA, for example, has come forward and they've been very clear that the data center of yesterday is not a data center that works tomorrow. And I think that's what's driving the cancellations is the hyperscalers are well positioned to make the right investments and the right technology to build in what is going to be a new normal for data centers into the future. Density is getting to a point where there's no, you know, there's gonna be hundreds of thousands and even millions of square feet of empty data centers because the density can be tucked off into the corner.

because they're already...

Speaker Change: You're canceling the soft commitments they have. And again, it's because they're doubling down on their build.

Speaker Change: This is important to know because the video, for example, has come forward and they've been very clear that the data center of yesterday is not a data center that works tomorrow.

Speaker Change: And I think that's what's driving the cancellations is the hyperscalers are well positioned to make the right investments in the right technology to build in what is going to be a new normal for data centers in the future.

Speaker Change: Density is getting to a point where there's no, you know, there's going to be hundreds of thousands and even millions of square feet of empty data centers because the density can be tucked off into the corner and if you, if you built a data center five years ago, it's already obsolete.

Zachary Bradford: And if you built a data center five years ago, it's already obsolete. That is the reason why hyperscalers, we believe, are canceling their spend in co-location. So again, I don't think it's the power demand is going to go away. It's just where and how that demand comes to the market. Now, what we are seeing is in the areas we're operating, we are still finding access to power readily available and prevalent. And it's because of how we find power in rural America, in the areas that the freeway went around and the rest of America forgot about.

Speaker Change: That is the reason why hyper-scalers we believe are canceling their spend in co-ocation.

Speaker Change: So again, I don't think it's the power demand is going to go away. It's just where and how that demand comes to the market.

Speaker Change: Now, what we are seeing is an area we're operating.

We are still finding access to power.

Speaker Change: Reddily available and prevalent, and it's because how we find power in rural America in the areas.

Zachary Bradford: That is what makes our strategy successful.

Unknown Executive: Great. Thank you guys. Appreciate it.

Speaker Change: that the freeway went around and the rest of America forgot about. That is what makes our strategy successful.

Harry: There are no further questions at this time. Harry, I turn the call back over to you. Thank you again, Jeannie, and thanks to everybody for joining today's earnings call. We look forward to staying in touch and sharing future results with you in the coming quarters. Stay tuned for more groundbreaking achievements from the CleanSpark team, America's Bitcoin miners. This concludes today's conference call.

Great, thank you guys, appreciate it.

Speaker Change: There are no further questions at this time. Harry, I'd turn the call back over to you.

Speaker Change: Thank you again, Jeannie, and thanks to everybody for joining today's earnings call. We look forward to staying in touch and sharing future results with you in the coming quarters. Stay tuned for more groundbreaking achievements from the CleanSpark team, America's Bitcoin Minor. Thanks for joining today's earnings call. Thanks for joining today's earnings call. Thanks for joining today's earnings call.

Unknown Executive: You may now disconnect.

This concludes today's conference call. You may now disconnect.

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