CleanSpark, Inc.

Good afternoon. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to our conference call. All lines have been placed on mute to prevent any background noise. And 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 star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again, press star one. Thank you. And at this time, I would like to turn the floor over to Brittany Moore, Director of Investor Relations.

Thank you, Krista, and welcome to CleanSpark's fiscal full-year financial results call covering the period October 1st, 2023 through September 30th, 2024. 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 are 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 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, Brittany, and good afternoon, everyone. We appreciate your interest in our company as we share the results of a pivotal and transformative year for CleanSpark. The year marked the culmination of several years of strategic planning, preparation, and execution to fully leverage the halving event. We emerged with an optimal combination of power contracts, infrastructure, mining fleet, Bitcoin hodl, and organic growth pipeline as we enter the next phase of the cycle. Our financial performance this year reflects a sustained growth trajectory. with more than 378.9 million in revenue generated. That's a substantial increase from the 164.8 million reported last fiscal year. This year-over-year growth, over 125%, demonstrates our precise execution of plan before and after the halving that occurred midway through our fiscal year. Our adjusted EBITDA of 245.8 million for the year also showed impressive growth. That's an increase of 220.8 million or 882% growth over last year, underscoring the success of our infrastructure-first expansion strategy and its focus on fleet efficiency and operational excellence. As a result, we produced our strongest year of financial performance to date, solidifying a track record of effective execution and keeping promises to shareholders. Reflecting on the past year, our growth aligns closely with the clear strategic priorities and objectives that we've articulated since our pivot to Bitcoin mining. CleanSpark has prioritized infrastructure at its core foundation, putting us in the best position to source miners to optimize fleet efficiency and deploy new hash rate into production in the most capital efficient manner. A clear example of this strategy was the Bitmain order that we placed in January 2024. That order included 60,000 units and a strategic option to purchase another 100,000 units at the same low fixed price. This cost certainty allowed the team to focus on building and acquiring the underlying infrastructure that supported our targeted growth. Between our delivery schedule and growth in operational hash rate, the plan worked seamlessly. and allowed us to reach 27.6 exahash per second at the end of September and 33.5 exahash where we stand today. This keeps us on a path to achieve our next milestone of 37 exahash per second this month. I want to discuss the way that we grew our infrastructure to support this incredible volume. There are three distinct infrastructure growth engines. Greenfield development, organic expansion, and opportunistic acquisitions. Each pathway presents unique opportunities and challenges, yet our team has repeatedly proven its ability to achieve or exceed our goals across this strategy. I'd like to elaborate on these three drivers and emphasize their crucial role in advancing our strategic vision, positioning CleanSpark as the industry's leading operator. Our goal is to establish the CleanSpark way as the benchmark of excellence across every dimension. Growth, scale, efficiency, capital stewardship, community engagement, and employee satisfaction, uptime, and more. We aim to set CleanSpark apart as a name synonymous with innovative and cutting edge performance across all measures that flow through to the bottom line. Over the past 12 months, a rapid expansion has evolved our initial footprint into a robust portfolio of geographically diverse mining assets in Georgia, Wyoming, Tennessee, Mississippi, and New York. This regional structure maximizes operational efficiency, creating momentum in each local market, and disperses our mining assets in such a way as to harden us against extreme weather, price volatility in energy markets, and grid instability. Moreover, we've taken the front door approach of directly engaging with the communities in which we work and live that we templated in Georgia and tailored it to other rural communities that we call home. Allow me to highlight some other milestones we've reached over the past year. We've added over 425 megawatts to our operational power capacity. bringing our total portfolio to over 726 megawatts as of today. This expansion aligns with a threefold increase in our total hash rate, which now stands at more than 33 exahash per second, and putting us well on our way to achieve the goal of 37 exahash per second this month. This is a substantial leap from last year, when we were celebrating surpassing just 9.6 exahash per second. Our track record of execution and focus on delivering on our commitments has been instrumental in driving this performance, and we expect to repeat it in 2025 as we look to exceed one gigawatt of contracted capacity across our portfolio. With our infrastructure first approach to growth, we prioritize resource allocation across our three primary growth engines. We optimize every aspect of our operations through cutting edge technology upgrades, and ensure every new facility aligns with the exacting standards of our vertically integrated business model of wholly owned, self-operated sites. Emblematic of this commitment, I'd like to remind everyone that our coin mint contract is scheduled to expire shortly, making Cleanspark's operations 100% owned and operated by the end of next quarter. Our growth trajectory has been remarkable, but what I'm most proud of is that we achieve this expansion with the highest levels of efficiency. At the core of our approach is a philosophy that extends beyond achieving the lowest tools per terahash metric for our fleet or the best kilowatt hour price. It represents a commitment to integrity, operational excellence, and cost management that drives every decision. Growth is not solely about increasing capacity, but consistently optimizing our hardware, processes, and infrastructure to maximize output while conserving resources, ultimately delivering higher returns on investment. Our current fleet efficiency now stands at 19 joules per terahash and is significantly lower than our fleet average of 28.4 joules per terahash from September of last year. This efficiency continues to improve as we transition into the next more methodical phase of our expansion. For us, Cost reduction goes beyond mere budgeting. It is a discipline that enables us to reinvest in growth while remaining competitive in an industry where success is designed to continually get even more difficult. Operational excellence converges with these elements, ensuring that every facet of our operations from power management to employee workflows performs to the highest standards. This commitment, allows us to pursue an ambitious growth plan without compromising on efficiency or our core values, firmly establishing CleanSpark as a leader in our field. We've achieved this level of growth through a balanced approach across our three growth avenues, greenfield development, organic expansion of existing sites, and strategic acquisitions. While our acquisition strategy may receive more attention, we remain deeply committed to greenfield development. identifying and building new sites with the talent and expertise we've developed, particularly at our newest markets. In Wyoming, we are currently contracted at 75 megawatts in 2025 and have the potential of adding several hundred more. On the M&A front, we are realizing the rewards of our early countercyclical capital allocation. As noted, we began preparations for the halving over 24 months ago. anticipating that less efficient operators would face stark choices about their future. This foresight allowed us to position ourselves to capitalize on acquisition opportunities, consolidating over 178 megawatts in private asset acquisitions, including nine sites acquired in September alone. Notably, after the end of the year in October, we closed the grid acquisition, which included 68 megawatts of developed infrastructure in Tennessee and over 400 megawatts of identified upside expansion opportunity. As we move forward, we are more committed than ever to our focus on Bitcoin mining and setting industry benchmarks in this rapidly evolving sector. Through deliberate prioritization, efficient infrastructure acquisition, and a reliable pipeline of state-of-the-art equipment through our purchase agreements, we've established a process that has paved a path to reach our target of achieving 37 exahash per second by year end. With access to both power and hardware secured and a rigorously vetted growth strategy, we have a strong track record of execution that aligns seamlessly with our vision for 2025 and beyond. This strategy, grounded in countercyclical investment and the use of multiple avenues for efficient growth depending on current market conditions, has laid the foundation for our next milestone. a 50x a hash per second in 2025, while insulating our growth plans from the cyclical nature of the industry. Having overcome the challenges of finding the right approach and developing a winning formula, we stand ready to sustain our growth, even as we've entered a bull market, which will have the potential to inflate industry asset prices and may lead our competitors to make decisions that could ultimately prove to be capital destructive. As a result, We may turn our focus away from additional consolidation and towards maximizing the organic growth potential within our existing portfolio, providing us with great confidence and visibility on our journey to 50x a hash per second and beyond. Our decision-making process will be guided by delivering ROI to shareholders as we evaluate the options available. Before I finish, I'll comment on the recent trends that dominate conversations about our sector. While some competitors have diversified into AI and high performance computing, we remain committed to Bitcoin mining as a vertically integrated pure play operation. As we stay focused on mining Bitcoin, we start generating revenue at Greenfield sites in as little as six months. By contrast, a move into the AI or HPC space could extend that timeline significantly. potentially up to three to four years before our investors would see comparable high-margin revenue. This shorter payback period to revenue in Bitcoin mining underlines the value in our commitment as we deliver returns to our shareholders above all else. We will evaluate new opportunities on a case-by-case basis, but we believe in remaining focused on our core strength, at least for now. This conviction stems from the fact of Bitcoin's finite supply. which we see as a long-term support for our disciplined approach. In our view, each dollar invested in non-core areas represents a potential distraction at this phase in our growth. As we rinse and repeat our playbook into the future, we strengthen our path towards a dominant position in the mining space. In summary, we are extremely pleased with the results achieved this quarter and fiscal year. As we look ahead, we are confident in our path to growth. We are on a track to surpass 50 ExaHash in 2025 with plans to continue growing and expanding our operations. Our vision goes beyond reaching this milestone. It encompasses building a business that is scalable, resilient, and repeatable. Our growth strategy is rooted in operational efficiency, driving strong margins and consistent performance. We've successfully delivered similar results before, And we are committed to achieving sustainable growth again. In 2025, we will focus on increasing our installed hash rate and boosting our monthly Bitcoin production and always look for any opportunities to drive revenue and margin expansion. As we look ahead, timing is everything. And we position ourselves to fully capitalize on the current bull market. We're uniquely positioned with our power assets and mining Bitcoin represents the best way to monetize them. especially in favorable market conditions like we see today. During this time, we'll continue to optimize cash flow and explore diverse sources of new capital to deliver value for our shareholders, but never at the expense of our core operations. Finally, I'd like to extend my heartfelt appreciation to the team at CleanSpark. Their relentless effort, creativity, and commitment are the engines behind all we achieve. Each success we celebrate is a direct result of their dedication, and it's a privilege to work alongside such inspiring professionals. With that, I'd now like to turn the time over to Gary to review the quarter and fiscal full-year financial results in greater detail.

Thank you, Zach, and good afternoon, everyone. It's my pleasure to review the detailed results for the full 2024 fiscal year. Hopefully, you've had a chance to see the earnings release, which has been posted to our website. We anticipate our form 10K will be posted before market open tomorrow. As Zach said, it's been a pivotal and transformative year and our financial results reflect this. The central fact of fiscal year 2024 is that Q4 was the first full quarter following the most recent halving event. Warren Buffett has famously said, when the tide goes out, you find out who has been swimming naked. While I differ with him when it comes to the prospect for Bitcoin, Mr. Buffett's quip is a perfect metaphor for the impact of the halving event on the weakest operators in our space. When the tide came in this time, CleanSpark had nothing to be embarrassed about. And in fact, we're downright proud of our performance, one that fully justifies the pivot to Bitcoin mining we made several years ago. Our revenues for the year were $378.9 million, an increase of approximately $210.6 million, or 125%. This increase was primarily driven by the increase in our Bitcoin production, as well as a steady rise in its price. For reference, we produced approximately 7,100 Bitcoin for the fiscal year compared to approximately 6,900 Bitcoin for fiscal year 2023, which shows we have managed to outpace the significant increase in difficulty in the pre-programmed halving event in April. Our gross profit for the year was $213.5 million, an increase in approximately 138.6 million or 185% over the prior year. Again, the largest contributor here was the average Bitcoin price, which was significantly higher than last fiscal year. We also saw lower energy prices on a per kilowatt hour basis in fiscal 24. Looking at our GAAP net loss, we saw loss approximately 145.8 million for the fiscal year 2024. I want to point out that a large part of our net loss is due to a non-cash impairment expense of 197 million. most of which was recorded as our last quarterly report. Finally, with respect to adjusted EBITDA, this non-GAAP financial metric increased to $245.8 million compared to approximately $25 million in 2023. The largest contributor to this increase was due to the increase in value of Bitcoin as the company adopted a new accounting standard allowing it to mark to market its Bitcoin balance at each balance sheet date. I want to take a moment to discuss our power costs for the entire year. All-in power costs at our wholly owned sites for fiscal year 24 were 4.6 cents per kilowatt hour, which is lower than our all-in power costs in fiscal 2023 of 4.8 cents per kilowatt hour. Our wholesale electricity costs in 2024 averaged 3.1 cents per kilowatt hour, with prices as low as 1.2 cents at points during the year. Included in our all-in power costs is an additional 1.5 cents per kilowatt hour of costs related to transmission and distribution, profit margins to the cities we operate in, and taxes. Management considers its all-in power costs, which include these fees and costs on top of wholesale electricity numbers when analyzing its operations. We believe that we have one of the lowest all-in power costs amongst miners in the industry. And when combined with our uptime, CleanSpark is one of the top performers. I also want to point out our cost to mine of Bitcoin. Our average cost for 2024 was approximately $21,400 for our wholly owned facilities. Looking at the fourth quarter specifically, our cost to mine of Bitcoin was approximately $36,250, which is an increase of 35% over the third quarter's cost to mine of approximately $26,950. As a reminder, rewards were cut in half 20 days into the third quarter. As Zach mentioned earlier, October marked the closing of our deal to acquire Grid Infrastructure, a Bitcoin miner with operations primarily in Tennessee. Grid boasts 53 megawatts of installed capacity, and we've already begun greenfield development of another 80 megawatts, fully building out a location in eastern Tennessee while also breaking ground in Jackson in the central part of the state. Grid's footprint in the rural southeast is one that we're familiar with, and we're already porting best practices in community relations that we developed in Georgia to the cities and towns in Tennessee that we now call home. Better still, Grid developed a deep partnership with the Tennessee Valley Authority, one of the nation's premier providers of reliable and affordable power. Thanks in large part to Grid's efforts, TVA's senior management understands the benefits Bitcoin miners bring to the TVA system, while also providing desperately needed revenue to local power providers who have excess capacity but little hope of attracting large industrial customers to their communities. One of the challenges of the quarter came in September when Hurricane Helene made landfall in the southeastern US and disrupted operations at our facilities in Georgia. We suffered a partial outage for two to three days that reduced revenues by approximately $1 million per day. However, we suffered no property losses and made no insurance claims, a testament to the build quality of our facilities and the effort of our team to harden the sites against damage ahead of one of the worst storms to strike the U.S. in recent memory. But controlling insurance costs means more than limiting claims. It also means working with our insurance company to craft the best coverage at the best price. We've also made significant progress in obtaining costs for property and casualty insurance. Insurance expense for the year was approximately $5 million and is one of our larger G&A expenses. While we expect insurance expense to grow due to the large dollar value of our assets in operation, In November, we renewed our policy and cut our comparable rate by 25% going forward, owed in large part to the growing scale, quality, and diverse geography of our operations. On final note, I want to talk about our balance sheet and our liquidity position. As I previously mentioned, we've increased our Bitcoin holdings almost 260% in the year, and that number, as of today, is rapidly approaching 10,000 Bitcoin, which would represent almost $1 billion at current Bitcoin prices. We also had approximately 121 million in cash as of September 30th, which represents a significant liquidity position going forward. From my perspective, we have set the stage for a successful fiscal 2025 after navigating the halving in better shape than the rest of the industry. Not only do we have significant liquidity, but we have one of the industry's most efficient fleets at an average of 19 jewels a terahash. We have a low cost to mine Bitcoin and industry leading uptime. Bitcoin mining is a capital-intensive business that requires prudent growth and sufficient scale to succeed over the long term. Our company-wide commitment to this principle allows us to drive value through counter-cyclical investment, opportunistic growth, and increase operating leverage through continued scale. In August, we used a portion of our Bitcoin holdings to secure a $50 million line of credit with Coinbase, something that helped us take advantage of opportunities in the marketplace at a low cost of capital, which currently sits at an annual rate of 8.5%. Looking forward to fiscal 2025, we'll look to find ways to monetize or leverage Bitcoin on our balance sheet as we establish a digital asset management group within the company. Working with staff who have joined CleanSpark as part of the acquisition of grid infrastructure, we'll look to more actively manage the Bitcoin on our balance sheet with an eye toward capital preservation, generating yield on our Bitcoin, and protecting against price volatility. Heading into this new year, we have significant scale and size, a healthy balance sheet, industry-leading operations, and a strong liquidity position. We are well positioned to pursue diverse capital-raising strategies. With that, I'll turn the call back over to Brittany to open the floor for questions.

Thank you, 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.

Thank you. Ladies and gentlemen, at this point, we will begin the question and answer session. To ask a question, you may press star and then 1. And if you would like to withdraw your question, again, press star and 1. If you are using a speakerphone, we do ask to please pick up your handset prior to pressing the numbers to ensure the best sound quality. Your first question comes from Mike Colonies with HC Wainwright. Please go ahead.

Hi, good afternoon, guys, and congrats on a very strong fiscal year here. Just a couple for me. First, it would be great to get your perspective as to why you believe that miners have lagged Bitcoin this year, especially considering that, at least historically speaking, CleanSpark and some of the other top-tier miners in the space have actually outperformed Bitcoin during this stage of the cycle. It would be great to get your views there.

Hey, Mike, thanks for joining the call. I think the key with this is you have to zoom out a little bit. If you zoom out a little bit over this, you know, call it a two-year period, the miners, CleanSpark included, have meaningfully, you know, continued to outperform Bitcoin. I look at this as, you know, Bitcoin's catching its breath and catching up. But I think it's positioned us incredibly well for what is ultimately going to be a slingshot in value. as the market begins to better understand what the miners can do and how the yields continue to be generated. So hopefully I see this as just a plateau point right before we see another upswing.

That's great. Great to get your perspective, Zach. And I'm curious if you could provide some more insight in terms of how you're thinking about the current market environment for ASICs. I know you're looking at 50x a hash by the end of next year. But, you know, how should we expect, you know, Clean Spark to approach the ASIC market? How are you thinking about pricing and future repurchases here?

Yeah, the key for us is we've already locked in price certainty. You know, I mentioned during the call the S21 Pro purchase, which was 160,000 miners. But we also have the XP purchase, which is, you know, a meaningful option for us. So in addition to the miners we've committed to, that essentially get us just about to 50, we have the ability to take down even more. So there's another 50,000 units with price certainty on them. So we don't have to worry as much about that swing in whatever the market does. Again, certainty is what we created. We actually have price certainty through 63 exahash on the ASIC market. With that said, regardless of where the ASICs are at on the go forward and in the future, Beyond that, we've proven that we have a great track record of having a best-in-class purchasing. So wherever the market lands, we will make the right capital decision on timing of investment, when to add more to those options, when to take down the option, and how we deploy that. So again, I think we've handled it really well as a track record-based. We have enough optionality ahead of us over the next, I'll call it, six months. But definitely, you know, our relationships are strong. So I expect regardless we'll get best in class pricing.

Thank you for taking my questions.

Your next question comes from the line of Brian Dobson with Clear Street. Please go ahead.

Good evening. You know, I want to talk about this digital asset management initiative that you highlighted. I suppose, what are some of the paths you can take to generate yield on your huddle, and what level of yield do you think might be possible?

Hey, thanks for the question, Brian. Look, we're quite excited about pursuing this digital asset management strategy as well, but I'll say that we're going to pursue a strategy of crawl, walk, run, and really that's going to be rooted in a first focus in making sure that, you know, we preserve the capital, right? Because when you have the Bitcoin huddle bounce that we have, we want to make sure that we really protect that. When it comes to finding those opportunities to generate the yield, you know, we're looking at various strategies right now. You know, we just closed the grid transaction here end of October. So the team's just getting up to speed and really looking at who those partners are. But ultimately, it could take, you know, various forms of providing covered calls, lending the Bitcoin. You know, there's even some talk about, you know, providing liquidity to ETFs in the marketplace. But you'll expect to hear more information from us as fiscal year 25 goes on, and we'll really be focused on, you know, getting a healthy return on those assets as the year goes on.

Great to hear that. That's very exciting stuff. And then I guess just just stepping back and you can look at the big picture of the industry. What trends do you expect to drive mining in 2025? And how has the recent presidential election impacted your outlook for doing business in the United States?

Yeah, so from a trend point of view, I think that, you know, we have a lot of tailwinds right now. And that has, you know, your second point on the political side. I think we're going to see a lot of opportunities in the capital market further open as we see a change really on the SEC side. It's been a tough couple years for anybody involved in this sector based on how the regime was previously run. So I think capital is going to open up even more than it already has in ways that will be very positive. In addition to that, I think we're going to end up with regulatory certainty, but just generally a friendlier regulatory environment. So we're incredibly excited about how things go. Now, from an industry trend point of view, I'm going to go back to something that I've kind of been beating the drum on, and that is scale matters. And so the bigger miners like ourselves are going to continue to get the best access and the best pricing to capital, which is going to create the best access and pricing for opportunities. I do think that you know, acquisitions are going to look differently. Private miners are still in the same situation. Just because capital opened up to the public doesn't mean it's necessarily going to open up to the private miners. So there's still going to be opportunities there. But how we view them is going to really come down to valuation. We've seen, you know, people that are very reasonable, they come in at the same valuations. We've also seen, you know, private miners that want substantially higher valuations. This comes down to my comment where I said, we're going to avoid making the wrong decision. But we do think miners that have fallen behind may be put in a position where they may choose capital destructive activities as we view them. So there may be some headlines on opportunities that we pass on. And we pass on because it doesn't create the ROI that we want to have. Just because Bitcoin's up, we still have to measure timing to ROI for any investments we make. And that's incredibly important to us. Again, a ton of opportunity in the future, but we're going to approach it with a very measured approach. The great thing is we have several hundred megawatts of opportunities for organic growth, and we've proven that we have a track record of being able to build sites. And so, we're going to focus probably in 25 more on building than on buying.

Yeah, excellent. Thanks for that color. And I suppose just as a final question. Have your thoughts on HPC opportunities changed at all since your last call?

No, we still think that a very focused approach and what we have. As Gary mentioned, we had a great cost of production of Bitcoin. And with Bitcoin going up, that even further enhances what was very healthy margins. And so when you look at margins that we can produce essentially tomorrow, right, on any opportunity we look at, The path to high margin revenue is quickest for Bitcoin mining as compared to HPC, and it's not even close. So until such a time as that changes, we are going to stay very focused on what we're doing and what we do best, which is Bitcoin mining.

Excellent. Great to hear. Thanks very much.

Your next question comes from the line of Tyler DeMario with BTIG. Please go ahead.

Hi, guys, and thanks for taking the question. Zach, I wanted to follow up on your comments there in terms of the, you know, the buy versus build decision and how you're kind of prioritizing maybe the build decision in 2025. I guess, you know, where do you kind of see the opportunity in terms of the current footprint? I know you have Wyoming, which is, you know, some incremental couple hundred megawatts. I guess just how do you kind of think about the footprint here more broadly and, you know, what's the most readily available as you look out to next year, broadly speaking?

Yeah, I'm going to speak broadly about we see the U.S. still as a very ripe opportunity, and it's because we understand power markets here. But we think that based on the changes in the administration, that the power markets will just continue to get better. The U.S. is full of abundant, low-cost power, if you know where to find it. And we focus heavily on rural areas that are being overlooked as an opportunity. So that's where we see the opportunity being the best in the U.S., is in rural USA. And as we go to these towns, we find that, you know, I look at it this way. If we're going to build something, the best opportunity is to build hardened, immersion-cooled infrastructure. And if we're going to go buy something, there's a lot of air-cooled infrastructure readily available. So that's really going to be how we look at this. First, rural America. Second, the majority of our builds are going to be immersion-based. And if, to the extent we do do M&A, which I'm sure there'll still be some, it'll probably be air-cooled. But it's going to be in areas where The advantages to air-cooled are going to be that we can turn it on immediately. It's that turnkey, walk-in, generate revenue. And again, we've built our immersion and air-cooled systems in a way that we can now build for essentially the same cost. And so that's how we're viewing how we're going to build and how we're going to buy and where we're going to do it.

Got it. Okay, thankful. And then my follow-up here, I just wanted to talk a little bit about Fleet Efficiently. You guys have done a nice job over the last year improving that. I guess, how do you kind of think about that going through the next 12 months here? And more broadly, as an industry, in terms of newer generation of rigs, how do you kind of think about the step function of fleet efficiency and kind of where, you know, that improvement can really end up over time as we're, you know, kind of sitting in this high-team joules per terahash, but potentially other rigs coming down into the, you know, low double digits?

You know, we're adding – latest generation. So we're adding the latest generation rigs that are in the 13s already. But what we're not doing is we're not retiring things without need. So yeah, we still have some XPs online because they are generating meaningful capital. And it's not capital that we're going to throw out, maybe with the bathwater, just to chase a number. That's one of the key things that we want to drive home is It takes balance when you're talking about capital allocation. So we're not going to chase the lowest number at the cost of spending capital for ways that's essentially unnecessary. And so we do expect to move from 19 to 18 to 17 and so forth all the way down. It's going to be an incremental path that's going to be very measured about return to capital to our shareholders. Where do I think that, you know, we're going to go from a Moore's law point of view? I think we're going to continue to approach, you know, that 10 or nine level. And then I do think that's where technology changes are going to be required. The chips are going to be able to do it, but what about the heat extraction? This is part of the reason we're going to build more immersion into the future. I think that air cooled heat extraction will get more difficult over the next four years. And so it will be more valuable to invest in immersion. Do I think that we'll get into the single digits and continue to go? Moore's law says absolutely we're going to do that. But it's about having the infrastructure ready and available to accept the newest technologies as we progress. Because this is not a measurement of where we're at today or where we're at tomorrow. This is a measurement about how are we going to use capital efficiently to have the right mix of efficiency and power price, generate yield, not now, but also at the 2028 halving. So we're going to look at this really over the entire cycle, but we do think that immersion is going to be a key role in kind of keeping up with that efficiency.

Thanks for the call there, Zach. I'll turn it back to the queue.

Our next question comes from the line of Brett Noblek with Cantor Fitzgerald. Please go ahead.

Hi, guys. Congrats on the quarter, and thanks for taking my question. Maybe just cutting on CapEx for a minute. And you guys have kind of pre-fixed prices on the miner side. But on the infrastructure side, the build out in Wyoming and likely other locations, I guess, what should we be expecting for next year? And in terms of liquidity, you know, would you tap into the Bitcoin position or would you rely just more on the equity markets for funding the remaining build out and mining purchases?

So, you know, we, we think that the markets are going to be a lot more open to, you know, diverse options. So I'm not going to commit to any one type of capital at this point in time. We think that there's plenty of room to expand our ability to leverage our Bitcoin further, but there's also other, you know, there's the equity markets, there's non-dilutive, you know, access to capital we can do. There's just opportunity that that's the great thing about being a Bitcoin miner right now is, is capital markets are open for business. And so how we do that is going to be whatever is going to generate the best return to our shareholders. From an infrastructure side, kind of to your point, between here and 63 is about roughly a $200 million investment. And then the miners are on top of it, which we've secured at very advantageous prices. there's not a huge barrier between here and getting to, you know, beyond 50.

Perfect. Thank you. And then maybe just on the M&A landscape, I guess post-having, I thought it would be, you know, there would be a lot more deals than we saw, and I know you guys have been aggressive. Do you think the reason for maybe not seeing more deals in this space is that a lot of maybe the subscale miners were looking into alternative use cases for their facilities like AIHPC and maybe they're evaluating that before they kind of consider selling or we see another wave of consolidation?

You know, I think it just depends on where you were at. We've obviously took advantage of a lot of private opportunities that existed. I think that there's still a lot of people that believe in Bitcoin and want to continue to mine privately. And so I think that that's where we're going to see some additional opportunities come is the private miners that wanted to see the other side of the happening. You remember, you know, Bitcoin has proven itself to be very cyclical and, you know, there was generally in past cycles, it took 180 days plus for Bitcoin price to really adjust. We saw that happen this time around. So there's also the reality where some, private miners, they basically just held off. They didn't run anything and they waited for the 180 days to go by to turn back on. I think that we're going to see some of them, I'll call it exhaust themselves, as the whatever fleet they had that they just kind of held on and waited to turn back on until Bitcoin broke, for example, 75,000. They're going to have a real decision to make whether they upgrade their fleets or whether they put the facility up for sale. And I think we're going to see quite a few facilities come up for sale after they get one more bite of the apple from ROI on machines that they maybe bought four years ago. And so I think that there's a second wave of private acquisitions to go on. And I think on the public side, it's complicated to do any sort of public deal, and it rarely makes sense to pay the premiums that a public-to-public transaction would require. And so you really have to find the diamond in the rough that makes sense. And that's why I think there wasn't more public to public consolidation also.

I guess as you look at the public miners, I think, you know, the top 10 largest have kind of owned, you know, call it 25% of network cash for the last 18 months. Do you think that changes over the next four years? You know, I guess talking about yourself and just, you know, the industry as a whole, or do you think other you know, nation state backed entities are going to increase hash maybe faster than public entities are. How should we think about just kind of like your share of rewards going forward?

You know, I think that we will see some nation state mining, of course, but I don't think it'll overtake kind of a public market side of mining. And the reason is, is we just have different reasons to mine. You know, a nation state is going to want to mine just as a to kind of pad the balance sheet on one side or to just add to their own treasuries on another. Whereas as a public company, we're incentivized to really maximize and build on our percentage of market share or global hash rate. And so I think that's gonna continue to drive miners to either increase or at least stay where we're at as a percentage of global hash. So I think that if you think about it a different way, we may be competing a little bit, but we're incentivized to keep up. Thank you, guys. Really appreciate it.

Your next question comes from the line of Reggie Smith with JP Morgan. Please go ahead.

Hey, guys. Thanks for taking the question. I wanted to follow up. I know you talked about locking down or guaranteeing your price on devices. I was curious what, if any, impact tariffs could have on that. I'm not sure. the relevancy to the space and then have a follow up. Thank you.

Yeah, it definitely could. Now, the units we're buying are not coming directly out of China. They're coming out of other Asian markets. But what we've also seen, and I think it's been an anticipation of this happening, is we've seen most of the major manufacturers build out their production capabilities to include Mexico, which, again, is still another place that may or may not have tariffs on the next upcoming future, but also domestics. I think that as we see some of the foundries that are starting to get built under the CHIPS Act actually come into reality over the next couple years, we're going to see a lot of them having domestic capabilities. So I think that there's at least some tariff risk on that that no one can protect against because it just depends on when you bring it in and where you bring it in from. But that's also the benefit of having a very large fleet stateside. One way to look at it is if we're at 50 and somebody else is at 20, and they want to catch up, they now have to pay the tariffs on everything in the gap to catch up. So I think there's going to be a potential barrier to growth for some of the smaller scale miners. And of course, the smaller you are, the more expensive your capital is. So again, I think scale matters in a lot of different ways when you look at that. But we'll see what happens with the tariffs and we'll react accordingly.

Got it. Now that makes a lot of sense. I hadn't thought about it as a barrier to entry for smaller guys to renew or refresh their fleet. So that's a good point. Another question, you know, we've talked about this kind of build versus buy. And, you know, obviously the discussion thus far has been mostly around like building your own sites versus, you know, acquiring a site. Curious, you're thinking on just buying Bitcoin outright. And, you know, what may, what could happen that may change your view on that? I bring that up because obviously there are two big players in the space that have been pretty aggressively buying Bitcoin. I was curious where you shook out on that. Thank you.

So how we look at this issue is it's the right time, right place, you know. It's a never say never as part of our strategy to continue to manage our HODL balance. There's going to be times we're going to buy and sell Bitcoin in certain transactions. In addition to just kind of buying to add to the HODL, one of the things we pay close attention to is basically the average value of what makes up our cost basis for our HODL, which we believe to be amongst the lowest because, of course, we're producing it at very healthy margins. So really, the way we look at it is you're faced with the decision, do you buy assets to produce Bitcoin on a reoccurring basis at what right now is better than 50% margins to spot price, or do you go buy Bitcoin? And again, it takes a more long term view on that when you're buying assets to produce Bitcoin than just buying Bitcoin tomorrow. But again, I think that for the right strategic reasons, we're absolutely not opposed to it. We just feel that the best use and the highest return of capital to our shareholders has really been either buying or building facilities that produce Bitcoin. Now, we are amongst one of the top 10 corporate holders of Bitcoin, and we do monitor that and plan to, of course, increase our standing on that list. And, you know, some of the miners that are buying are also the same ones that are mining at, you know, a loss or a very small margin. So they have less advantages than we have.

I appreciate that. Thanks for the insight and the color, as always, guys. Great quarter. Congrats. Thank you. Appreciate it.

And that concludes our question and answer session. And I will now turn the conference over to Brittany Moore.

Thank you for joining us today. We appreciate your interest in CleanSpark, and we look forward to speaking with you again next quarter.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.