CleanSpark, Inc.

Good afternoon. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to CleanSpark's first quarter fiscal year financial results 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'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Once again, star one. And if you'd like to withdraw your question again, simply hit star one again. Thank you. And at this time, I would like to turn the floor over to Isaac Holyoak, Chief Communications Officer. You may begin.

Hey, thanks, Greg, and thank you for joining us today for our first quarter fiscal year financial results call covering the period October 1st through December 31st, 2023. Our press release was issued about 30 minutes ago and is available on our website at cleanspark.com. Today's call is also being webcast, and a replay and transcript will be available on our website. On the call with me today is Zach Bradford, our Chief Executive Officer, and Gary Becchiarelli, 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. 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 available on our website. And with that, it is my pleasure to turn the call over to Zach.

Thank you for joining us this afternoon as we discuss our business and financial results from the first quarter of our fiscal year. I'm looking forward to walking you through an exceptional quarter. Today, we will highlight our key achievements, focusing on our outstanding quarterly revenue performance, strategic machine acquisitions, and our roadmap to achieving 20 exahash per second in mining capacity during the first half of this year, and our pathway to 50 exahash per second. I'm also looking forward to providing additional details about the ongoing Sandersville energization and our just announced move into Mississippi. Our financial performance this quarter has been exceptional. We achieved the highest revenue in our company's history, a testament to our team's hard work and the strategic decisions we've made over the past few months. Our revenue soared to $74 million, a 90% increase from our year-ago first quarter revenue. For perspective, our annual revenue for fiscal year 2023 was $168 million. In a single quarter, we have covered nearly half the distance to reach our total revenue from last year. This achievement is not just a number. It's a reflection of our growing efficiency, our strategic acquisitions, and our deep commitment to smart growth. It underscores our position as leaders in the Bitcoin mining industry and fortifies the trust that you, our investors, place in us. What's more? Our quarter ended with a net income of $26 million, and our adjusted EBITDA, an essential measure of our operational efficiency and financial health, also saw remarkable growth, reaching $69 million for the quarter. This figure represents not just profitability, but our ability to generate significant cash flow while investing in future growth. In addition to our financial metrics, our operational achievements this quarter have continued to build on our track record of success. We finished our infrastructure for our Sandersville expansion. And as of this moment, machines have already started hashing. On the sixth, our first day of energization, we set a record racking over 7,000 machines in 24 hours, and then successfully started hashing with over 8,900 miners, which produced approximately 1.25 exahash per second. We are now in our third day of energization and we have exceeded 3 exahash. This is an additional 3 exahash per second under 72 hours. We expect to have the full 4.2 exahash per second of additional hash rate live within the coming days. This is a testament to our strategies and the teams behind them coming together at the optimal time. While maintaining our operational effectiveness during high growth is challenging, it's a challenge we've embraced. We have excelled at hitting all the marks we set out to reach. We've also worked hard to optimize our energy consumption through strategic machine purchases that position us well for the future, and by deploying the best software on the market. Each of these steps have been carefully aligned with our long-term vision, ensuring that we continue to deliver value to our shareholders while leading the way in what a strategic, community-focused, and transparent Bitcoin mining company looks like. This quarter has been a period of significant achievement for CleanSpark. Our record-breaking revenue, alongside substantial improvements in efficiency and profitability, have laid a solid foundation for our future growth. Now let's delve into the specifics of our path to 20, 32, and 50 exahash per second, and our strategic initiatives that will drive our success in the coming quarters. Last month, we announced a strategic purchase agreement for up to 160,000 Bitmain S21 miners, which, if fully exercised, provides us the servers needed to reach 50 exahash per second. This purchase is made of two parts. and I want to spend some time describing our thoughts around this substantial purchase. The first part of the agreement includes an initial purchase of 60,000 units at $16.10 per terahash, which will begin delivery in April of 24. The second part of the agreement is an option to buy an additional 100,000 units at $16 per terahash. We've already paid 10% down for this option as a demonstration of our commitment to our growth prospects. To put this in plain language, you see a lot of bluster in press release headlines when a bull market is on the horizon. And I want to be clear that we aren't being rhetorical. With that in mind, we paid $32 million to secure 100,000 units at an even lower price than the initial units we acquired. This move is intended to provide us with maximum flexibility as we position the company for expansion in anticipation of a bull market. Crucially, it provides cost certainty and allows us to be strategic about our growth timing. Our approach, focused on the certainty of cost and expectations for robust growth, positions us uniquely in the market. The S21 is the most efficient miner And it aligns well with our focus on energy efficiency and high uptime. But to be useful, of course, machines need to be plugged in. So allow me to spend some time discussing how we expect to make good on our plans. The first step is our robust milestone to reach 20 exahash per second in the first half of 2024. We have previously guided to 16 exahash per second with the expansion of Sandersville. So the 20 exahash per second is a 25% increase in hash rate over 16 and 100% increase from where we started 2024. This ambitious growth is propelled by several key expansions and acquisitions that we recently announced. Energization, as I mentioned, commenced earlier this week in Sandersville. This development is a significant milestone in our growth journey. And I want to pause a moment to thank the city, the county, the various trades, and our teams at CleanSpark that have executed on this remarkable build. This massive site, capable of hashing at over 8 exahash per second, is one of the largest Bitcoin mining sites in the United States. As I stated earlier, as of this week, a majority of the site has been energized, and we expect about 4.6 exahash per second of operating hash rate to come online in the next few days. As you're aware, we have guided to 6 exahash per second for the full expansion. And thus, there's a small gap of 1.4 exahash per second. We have learned that a utility substation transformer has not passed its most recent inspection. And we are eagerly awaiting a timeline to it coming online. We'll provide an update as soon as possible. And although we don't have a specific timeline, we are still planning for the remaining power to be delivered within the first half of 2024. Even then, we are positioned to continue our growth without missing a beat because of our newly announced Mississippi acquisition and Dalton acquisition. These facilities are slated to get us over 17 exahash per second by April of 2024. These, along with the expansion of our existing Dalton facilities, and the final megawatts from Sandersville are expected to propel us over 20 exahash per second again in the first half of this calendar year. We've begun the permitting process to expand our existing Dalton campus. Currently, at 0.8 exahash per second, the campus will double to 1.6 exahash per second once complete. We are calling this campus Dalton 1 to distinguish it from our newly announced acquisition of a second Dalton campus, which we'll refer to as Dalton 2 during the construction process. Dalton 2 is an investment in our future in Dalton, Georgia. While not a large site, it is expected to deliver about 0.8 exahash per second and will contribute to a cluster of sites in Georgia that are now supplying a critical need for the community that goes beyond Bitcoin mining. We have a unique relationship with the City of Dalton, which owns and operates its own utility. We are currently the City's only interruptible load customer, meaning we have signed an agreement that in the case of a grid emergency, we will shut off, making the power we use available to other grid users. We earn a fixed power credit for performing the service, which supports the grid and its stability. We view this as a best-in-class partnership and as an example of some of the creative ways that Bitcoin miners are working with utilities to improve grid performance, even in regulated markets like Georgia. We expect the Dalton 2 site to start hashing this coming April. In addition to the Dalton expansion, we are marking a significant milestone by venturing into new territory with the acquisition of three sites in Mississippi. Mississippi is a logical place for us to expand given our familiarity with the energy landscape in the southern United States. The expansion not only diversifies our operational footprint, but also enhances our resiliency and capacity for innovation. Our Mississippi expansion consists of three turnkey acquisitions. Two acquisitions are in central Mississippi, along the I-20, one in the Delta in Vicksburg, and another in the Pines in Meridian. The third campus is in Southern Mississippi in Wiggins. These three campuses draw power from two utilities. One is Mississippi Power, which is a sister company to Georgia Power and is owned by Southern Company. The second utility is Entergy. All the acquired sites come with a favorable fixed five-year power purchase agreements, and an all-in power cost in the $0.05 range. We expect to formally close the purchase before the end of February. We will immediately begin racking our own machines, which will start hashing just as soon as they are plugged in. The combined hash rate in Mississippi will be about 2.4 exahash per second, or just over 10% of our operations once we reach our 20 exahash per second milestone. Already, our deployment teams are finalizing plans, including staffing and hiring, property improvements, community relations, and other core initiatives that have come to be part of what we call the Clean Sparkway. We are confident in our ability to execute in this new environment and look forward to passing these gains on to our shareholders. Looking ahead, the next time we discuss our financial results with you will be May. The halving event will have passed. We view the halving event as an important moment, and I'd like to take a moment to discuss how we believe it will impact our operations. The most obvious impact is that the blocked award will be cut in half. Our margins are in an excellent place to navigate this halving, as last quarter we mined at greater than 60% margins. Our costs to mine are industry leading, and we are prepared for this momentary drop. I say momentary. because it is not exactly true that our production will be cut in half. While it is true that block rewards are halved, we also anticipate a 15% to 30% drop in the overall hash rate, which means our share of global hash rate will grow without any additional cost on our part. This is a naturally accretive moment for a miner of our scale. As we approach the Bitcoin halving event, we anticipate a significant shift in the mining landscape. The halving will naturally phase out less efficient miners, allowing CleanSpark to increase its share of the global hash rate. This organic growth in market share means we can capture a larger portion of Bitcoin rewards without additional infrastructure investments, leading to enhanced returns for our shareholders. This strategic advantage highlights our commitment to efficiency and positions us favorably for sustained growth in a post-halfing environment. This scenario is only possible because of our obsession with preparation. Our focus on efficiency will continue to drive down our production costs, especially when paired with our best-in-class power rates. Furthermore, this halving is not just a challenge, but a catalyst. for positive price action in Bitcoin. I'd like to conclude with a few additional considerations that make us different amongst our peers and the broader market opportunities as they relate to Bitcoin. With the approval of the ETF and the parade of miners going public over the past few years, investors have a lot of options for how they invest in this extraordinary industry. Our differentiation lies in our strategic approach to energy and geography. leveraging a low cost active power management strategy. Our mining rigs are among the most efficient on our infrastructure and scale, wholly owned and operated by us, sets us apart. Our cost of mine remains amongst the industry's lowest, providing a stark contrast to our competitors, especially when compared to the cost to acquire Bitcoin directly versus ETS, which must purchase the Bitcoin at spot market prices. As I've said numerous times before, Bitcoin is critical technology for our digital age. It is both a powerful commodity and a transformation in the history of money. This fact can sometimes get lost, but we believe the true value of Bitcoin, the reason for its adoption by millions of people, and the reason for its consistent price appreciation lies in Bitcoin's fundamentals. It is digital money for a digital age, which the history books will one day show is only just beginning. I want to take a moment to thank our shareholders for their continued support. I would like to thank our incredible team, especially our teams in Sandersville. The work accomplished this quarter has set new standards for the industry, and it's all thanks to our dedicated employees. Your hard work and commitment have not gone unnoticed. Now I'll hand it over to Gary to delve deeper into our financials and provide a detailed outlook for the coming quarters. Thank you, Zach.