CleanSpark, Inc.

Good afternoon. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Isaac Holyoke, Chief Communications Officer. Please go ahead.

Thanks, Audra, and thank you for joining us today for CleanSpark's fiscal first quarter financial results call covering the period October 1st, 2022 through December 31st, 2022. Our press release was issued about 30 minutes ago and is available on our website at www.cleanspark.com forward slash investors. Today's call is also being webcast and a replay and transcript will be available on our website. I'm here with Zach Bradford, our Chief Executive Officer, and Gary Beccarelli, our Chief Financial Officer. Keep in mind that some of the statements we make today are forward-looking and based on our best view of the world and our businesses as we see them today. As described in our SEC filings and on our website, those elements may change as the world changes. We will also discuss certain non-GAAP financial measures about our performance during today's call. You can find the reconciliation of GAAP financial measures in our press release, which is available on our website. It is now my pleasure to turn the call over to Zach.

Thanks, Isaac. Good afternoon, and thank you for joining our call. The last time we spoke with you, we shared the results of our first fiscal year-end 2022. Today, we will discuss the results of our first fiscal quarter, which, as Isaac mentioned, covers the period of October through December 2022. During that time, our industry in particular and the economy more broadly faced significant macro headwinds. Even in the face of these headwinds, we persisted and we grew. Our average hash rate rapidly increased, outpacing global hash rate, resulting in significantly increased Bitcoin production for the quarter and the subsequent month. The number of machines hashing grew by over 20,000. We added a new mining campus to our portfolio, The growth and work from those dark winter days has since resulted in our highest Bitcoin production ever, last month, which was nearly 700 Bitcoin. We also grew our board, welcoming Amanda Cavallari, who is an expert in Bitcoin policy. No matter the measure, no matter how difficult the quarter, we grew. And we are just seeing the majority of the benefits of this growth today and beyond. In fact, we outpaced all of our peers. Every single one of them. Data recently published by the MinerMag, a research and data portal focused on institutional Bitcoin miners, placed us first amongst public miners in terms of percentage hash rate growth. As you can see from the visual, the network hash rate average grew by 46% since January 2022, while we grew over 200%. Not only did we outpace global hash rate, we did so at a tremendous clip. We started the quarter with a hash rate of 4.2 exahash per second. And by the end of the year, it had grown to 6.2 exahash per second for a 48% increase for the quarter. Since then, we've continued to grow, and our hash rate now stands at 6.6 exahash per second. We had 63,700 machines hashing as of December 31st. Our fleet was running at an average efficiency of about 31 watts per terahash. For perspective, we understand some of our peers come in at over 40 watts per terahash. Our fleet is tremendously efficient. Most of our machines come from Bitmain's S19 series, and we have started to acquire more XPs. The quality of the machines tells only part of the story. Our immersion-cooled facility has allowed us to test the limits of over- and underclocking as we leverage software and firmware to optimize performance. We are also testing additional software optimization techniques for our air-cooled fleet, which we expect to allow us to bring under and overclocking capabilities to all of our campuses. This optimization will prepare us to stay ahead of the curve when halving occurs in 2024. We mined a record number of Bitcoin for the quarter. a total of 1,531 Bitcoins. For comparison, in the first quarter of our last fiscal year, we mined 660 Bitcoins. This represents an increase of 131%, well outpacing global hash rate. We also increased production quarter over quarter by 25%. We have reliably grown as we execute on an operational strategy that we believe makes us one of the fastest growing, most reliable, and most efficient publicly traded Bitcoin miners in North America. The secret to our growth has been our proprietary mining model. There are many different mining models out there, from asset light on one side to proprietary mining on the other. In the asset light model, machines are owned by the company, but cared for and run by hosting companies that also take a cut of the profits. This model introduces less control over a company's destiny because the company is exposed to the risks and uncertainties of third parties, their ability to build facilities, procure power, operate the machinery, and importantly, stay solvent. We believe higher returns are consistently generated by actively participating in the mining process. Contrast that with proprietary mining. Miners like CleanSpark that operate almost exclusively as proprietary miners can exercise significant greater control over their own destinies. We believe this gives us a significant edge. First, it provides investors with predictability. Out of the various business models for Bitcoin miners, our proprietary mining model minimizes the impacts of unforeseen events. We can plan and react to the unexpected in real time. giving us greater optionality, even during difficult market conditions. We also have multiple sites in different jurisdictions that we own and operate with complete control. Second, it makes us more reliable. Last month, we had our highest uptime ever, over 98%. We believe we have one of the highest uptimes among publicly traded mining companies. We own our infrastructure. develop the teams and culture necessary to staff and run our campuses, and execute in very remarkable ways on our operational strategy. We exercise maximum control over timelines. Now, I want to underscore that 98% uptime only happens when you have a team of dedicated people who believe in the work and what we are doing and who share in the rewards of our successes. Third, our proprietary mining model introduces lower production costs. Many factors go into production costs, including staffing costs, power costs, and the cost of assets. But directly owning the infrastructure and other assets involved in producing Bitcoin means lower operating costs in the long run. We make long-term investments for long-term benefits. And those long-term benefits accrue to our shareholders directly, rather than being dispersed amongst a variety of service providers or third parties. We're very proud of these facilities and take every opportunity to open them up to the communities we operate in. Seeing our mining campuses has a transformational effect on Bitcoin enthusiasts and skeptics alike. We see our owned and operated facilities not only as a competitive advantage in the Bitcoin mining industry, but as the key to winning the hearts and minds of the people and communities we work with. One of the newest communities to be brought into the CleanSparks team is the city of Sandersville, GA, home to our most recent acquisition, an 80-megawatt facility that we closed in mid-October. And we've quickly ramped up our hash rate there, allowing us to exceed our 2022 calendar year-end guidance not just once, but twice. We are well into planning the expansion of the Sandersville facility and expect to add an additional 150 megawatts to the site by the end of 2023. for a total of 230 megawatts, supporting over seven exahash in total. Subsequent to the quarter, we also broke ground on our 50 megawatt expansion in Washington. I'm particularly proud of our teams and partners that are working tirelessly day in and day out to complete this buildup. As an example, our teams were working long before the sun came up last Saturday to start pouring the concrete pads for the building. Construction is proceeding according to timelines. We expect all four buildings, each of which will house 12.5 megawatts of miners, to be completed with all miners racked and ready by the end of May. Energization is then expected to take a few weeks more, being completed sometime in late June. We receive regular updates from our construction partners and the utility provider, and we will share relevant information in a timely way. I can also tell you that the City of Washington is glad to have us building in the community. The construction provides jobs and keeps resources in the community. We are very proud to have found great partners in the City of Washington. Allow me to transition to the future and share with you how we plan to continue the rapid growth we've witnessed over the past year that has allowed us to triple our hash rate from January 2021 to January 2023. Our past performance should be viewed as the best indicator of our future performance. During our last earnings call, we shared with you our guidance of 16 exahash per second by the end of calendar year 2023. I'd now like to take a few moments to talk about how we plan to meet the expectations by talking in greater detail about our growth strategy and the financial strategy that backs it. Essentially, how we plan to build it and pay for it. First, I'd like to talk about how we plan to build it. We have 6.6 exahash per second operating now, and we expect to squeeze out a bit more efficiency in the coming months, which will allow us to incrementally increase this hash rate. As I mentioned, the Washington expansion is underway, which will result in rack space for over 15,000 miners. We are finalizing the plan on the miner mix, and based on the latest plans, we expect the site to ultimately increase our hash rate by 1.9 exahash per second. This expansion brings us to 8.5 exahash in June, leaving 7.5 exahash per second to meet our year-end target. The Sandersville expansion will commence in the coming months with a target completion date of November 2023. This timeline is dependent on the completion of a substation that is being constructed by our utility partners. We intend to align our construction schedules to have our site complete in advance of the power handoff date with the expectation that we have our facility built and the miners racked so that we can go live as soon as the power is handed over. We expect the Sandersville expansion to add approximately 5.5 exahash per second, bringing our total portfolio to 14 exahash per second. Now, this leaves us with a 2 exahash per second gap to fill over the next 11 months. We are confident in our ability to do so. We are currently evaluating several greenfield and acquisition targets to fill the 2 exahash per second gap and expect to source or acquire an additional 50 to 75 megawatts of new opportunities. We have multiple candidates in the pipeline and will provide additional details as appropriate. Lastly, I've recently been asked about Lancium. At this time, we do not have any further updates other than we still hold the contractual rights to the power when completed. We are currently not expecting any of it to come online in 2023, and as soon as we have more information about the 2024 outlook and beyond, we'll let you know. Now, how do we plan to secure all the miners to fill these shelves? Over the last few months, we have sourced brand new, in box, latest generation miners at bottom dollar prices. We've gone to the spot market for the majority of these purchases. The spot market continues to be full of opportunities and we expect to rely on the spot market for at least a portion of our miners. We also expect to shift our strategy when the time is right and look towards future contracts once again for opportunities. We believe the tides are starting to shift and locking in prices for large orders will begin to be part of our strategy in the coming months. Lastly, let me share a few thoughts about how we plan to pay for it. Central to achieving our guidance is a path premised on accretive growth. That means we issue shares for growth, for assets that quickly generate free cash flow. This is why, at our upcoming annual meeting, we have proposed to increase the number of shares authorized for issuance from 100 million shares to 300 million shares. It is important to note that these shares are simply authorized, and it is not required that we ever issue them. Rather, this proposal gives us the flexibility to use equity for targeted growth. We believe these shares would provide us the flexibility to not only maintain market share, but to substantially grow market share, just as we have in the past. To continue to scale, we need full access to capital markets. Increasing our authorized shares provides that. I want to thank our shareholders for trusting us and taking this journey with us. I want to thank our teams for all their hard work this quarter, which has allowed us to move forward even in these challenging times. As I said in our last call, Bitcoin is a technological and financial advancement that grows year after year. Markets rise and fall. but Bitcoin adoption just keeps rising. It just keeps growing, and price, well, we strongly believe will recover. We are seeing indications that some of that is starting to happen. And as I remind my colleagues all the time, and I'd like to remind you as our shareholders, we are just at the beginning. Thank you for choosing to invest in CleanSpark. I do not take lightly to trust you as shareholders placing us. Thank you for your support. I'd now like to give the floor to Gary, our Chief Financial Officer, to discuss our financial results. Thank you, Zach.