Core Scientific, Inc.

Good afternoon, ladies and gentlemen. Thank you for joining today's Core Scientific first quarter fiscal year 2024 earnings conference call. My name is Tia, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the call over to your host, Steve Titlin. Please proceed.

Good afternoon, ladies and gentlemen, and welcome to Core Scientific's first quarter fiscal year 2024 earnings call. This is Steven Gitlin, Senior Vice President of Investor Relations for Core Scientific. At this time, all participants are in a listen-only mode. We will conduct a question and answer session after management's remarks. As a reminder, this conference is being recorded for replay purposes. Before we begin, please note that on this call, certain information presented contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement other than historical or current facts that predict or indicate future events or trends, forecasts, performance, or achievements, and may contain words such as believe, anticipate, expect, estimate, intend, project, plan, or words or phrases of similar meaning. Forward-looking statements are based on current expectations, forecasts, and assumptions that involve risks and uncertainties that may cause actual results to differ materially. For further information on these risks and uncertainties, we encourage you to review the risk factors discussed in the company's annual report on Form 10-K, filed with the Securities Exchange Commission, and the special note regarding forward-looking statements contained in the company's current report on Form 8-K, filed today, and the earnings release and slide presentation contained therein. Today's presentation is available on our website at CoreScientific.com in the events and presentation section. The content of this conference call contains information that is accurate only as of today, May 8, 2024. The company undertakes no obligation to update statements made today to reflect events or circumstances occurring after today. Joining me today from Core Scientific, our Chief Executive Officer, Mr. Adam Sullivan, and Chief Financial Officer, Mrs. Denise Sterling. We will now begin with remarks from Adam Sullivan. Adam? Thanks, Steve.

I'll start today's call with a high-level summary of our positioning as we enter 2024 and some highlights of our exceptional first quarter performance. I will then hand the call over to Denise Sterling to review our first quarter financials. After Denise's remarks, I'll take some time to talk about the current industry environment and our strategy to drive continued growth and value creation for 2024 and beyond. We will then take your questions. Core Scientific is a market leader position for growth. Slide 3 summarizes the position of strength from which we operate today, highlighted by the following key points. First, we operate the largest owned Bitcoin mining infrastructure in the industry in terms of operating megawatts, comprising approximately 745 megawatts of operational power and contracts for a total of up to 1.2 gigawatts of power. Next, we own and control every structure, every transformer, and every concrete pad in our seven mining data centers. Finally, we have the experience, track record, and team to monetize our infrastructure for the highest value uses and to secure additional infrastructure opportunistically. We started our business by identifying high-power sites with attractive power rates that could support emerging high-value compute applications. We focus on designing and building efficient, low-cost, proprietary infrastructure for Bitcoin mining operations that offer attractive hosting opportunities for third parties. When the price of Bitcoin increased, we used our expertise to mine for our own account. We invested in mining equipment and expanded the geographic footprint of our infrastructure, increasing our revenue and the ROI of our original infrastructure investment. You can see our current infrastructure footprint on slide four. Our industry-leading infrastructure has allowed us to produce more Bitcoin than any other public company for the last three years through our self-mining business shown on slide five. We now believe our infrastructure is well-positioned to take advantage of the enormous demand for power and infrastructure required for high-performance compute, and we see this as the next major growth opportunity for our business. With the demand for ready high-power sites increasing rapidly, our infrastructure can be repurposed to provide access to HPC without the development, planning, regulation, construction, permitting, and supply chain timelines associated with Greenfield HPC sites. According to Bank of America research, power demand from data centers is expected to double in the next three to five years. With this in mind, we'd like to bring today's conversation around a simple central theme. Owning and controlling all our valuable high power data center infrastructure gives us a significant advantage at a time when the demand for such infrastructure exceeds the available supply. Our high-powered data center infrastructure places us in a uniquely valuable position where we can balance our portfolio between Bitcoin mining and alternative compute hosting to maximize cash flow, minimize risk, and maintain significant exposure to Bitcoin's upside potential. We can offer clients a shorter time to power as compared to them waiting potentially three to five years for new Greenfield data center capacities to come online. We see this as a powerful mix that provides the potential for multi-year high visibility cash flows to buffer against the inherent volatility of Bitcoin pricing. And because we own and control our infrastructure, we can optimize for the allocation of our infrastructure portfolio. Investing in Bitcoin mining position as well, we now have the opportunity to maximize the value of these assets. Moving forward, we will continue to seek out low cost, abundant power for Bitcoin mining as our entry point, and we'll constantly evaluate the market for a way to pair that power with another higher value use case. With Bitcoin mining as our base business, our infrastructure becomes the platform upon which we will continue to grow and optimize. We have created a unique business opportunity for us and for you, our shareholders, to monetize our own infrastructure for both Bitcoin mining and HPC hosting. I will discuss this further after Denise's comments, so now let's review our strong first quarter results, summarized on slide six. We entered 2024 with strong momentum from 2023, continuing to set the pace for our industry by earning 2,825 Bitcoin in the first quarter, more than any other listed miner. Our leading Bitcoin production generated $150 million in revenue plus $29 million from our hosting business for total revenue of $179 million, up 49% year-over-year. Nearly all our key financial metrics reflect strong performance in the quarter. Our gross margin was 43%, operating margin was 31%, Net income was $211 million and adjusted EBITDA was $88 million, up 118% year over year. We exited the quarter with healthy liquidity, consisting of $98 million in cash and cash equivalents and $16 million in restricted cash. Shortly after the end of the quarter, we deployed capital to pay down $19 million in debt associated with outstanding mechanic cleans and fund a $1 million project at our Denton Data Center to add 72 megawatts of infrastructure. Throughout the first quarter, we continued to deliver strong cash rate utilization, which remained higher than the average for our peer group and for scaled miners, illustrated on slide seven. We also continue to refresh our self-mining fleet with new F21s, completing the deployment of 2.5 exahash in April and improving our average miner efficiency to 25.78 joules per terahash. We are waiting to make counter-cyclical miner purchases to take advantage of improved pricing after the recent halving. We are already seeing that dynamic take shape with post-halving pricing lower than pre-halving. In March, we entered into a contract for high-performance compute hosting at our new Austin data center, which we believe. Importantly, we delivered the 16-megawatt data center to our client, CoreWeave, more than 30 days ahead of schedule, helping them accelerate their time to power, which refers to how long it takes to establish operations and service their clients. Upgrading this data center was no small task and required a team effort to completely reconfigure 118,000 square feet of compute space, including pulling 18 miles of fiber and 500 miles of copper cable, removing 1,500 racks, and installing 4,500 new PDU strips. Our team's performance was nothing short of spectacular. As we look to the remainder of 2024, We are confident our outstanding first quarter has positioned us well to continue building on our momentum and capitalizing on the significant growth opportunities we see ahead. Now, I'll turn the call over to our CFO, Denise Sterling.