Good afternoon. My name is Brent, 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 speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Thank you. At this time, I would like to turn the floor over to Isaac Holyoak, Chief Communications Officer.

Thanks, Brent. And thank you for joining us today for CleanSpark’s fourth quarter and fiscal full year financial results call. Our press release was issued about 30 minutes ago and is available on our website at www.cleanspark.com/investors. Today’s call is also being webcast, and a replay and transcript will be available on our website. I am here with 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 it 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. I want to pause for a minute and say, “What a year”. It's true what they say about Bitcoin. It moves lightning fast, and so do we. Much like dog years, it feels like a year in Bitcoin is about seven years of experience in traditional markets. And for CleanSpark, that time distortion has been even greater. We've established ourselves as one of the leading publicly traded Bitcoin miners in the world, all in just one year. When we checked in with you last December for our fiscal year 2021 earnings call, we reported revenue for that fiscal year of $49.4 million. We had just over 10,000 machines operational for about 1 exahash. And at the time, we were just using 33 megawatts of power. We had two sites, one fully running at College Park and one under development at Norcross. And for the fiscal year, we mined 892 Bitcoin last year. And we were also operating two business segments. Now this fiscal year we've doubled, tripled, and even quadrupled some of these key performance indicators. Our revenue for fiscal year 2022 was $131.5 million, almost a 250% increase over the prior year. Our adjusted EBITDA was $65.7 million, a 500% increase. At the end of the fiscal year, we had over 42,000 miners operational, a 330% increase -- a 313% increase. Our hash rate was 4.16, a 312% increase. And our operational megawatts were 140 megawatts, a 324% increase. As of this call, we have four owned and operated sites that we own 100% with no partners and little debt. And for fiscal year 2022, we mined 3,750 bitcoins, a 320% increase in our production. I get asked all the time when I'm at events, what our secret…

Thank you, Zach. I would like to echo a few points Zach made, as they cannot be emphasized enough. 2022 was a transformative year for CleanSpark, and while the Company achieved historical revenues and adjusted EBITDA, it would not have been possible without what we consider to be a best-in-class operational team. It is that team and the individuals who comprise that team, which have made us one of the most efficient Bitcoin mining operations on the planet. Their efforts are the reason why we can talk about these record numbers today. Reviewing the numbers for the 2022 fiscal year, you'll note that our revenues were $131.5 million, which was an increase of 235% over the prior year. This was obviously due to a full year of Bitcoin mining operations, where we increased our hash rate by over 3 times by the end of the year. Granted, Bitcoin has been a volatile asset, we started the fiscal year with Bitcoin prices at near all time highs, only to end at multi-year lows. While our GAAP revenues reflected a significant decline at Bitcoin prices, we continue to mine more Bitcoin every single month and ended the year with 3,750 bitcoins mined for the year. We did see a significantly greater net loss this year, more than doubling. The primary drivers of this net loss were non-cash in nature with over $100 million of non-cash items hitting our P&L. Some of these items relate to the exiting of the energy business, as we discussed on our Q3 call. We also have significant non-cash charges related to modification of equity instruments, primarily driven by the volatility in our stock in recent years, for which volatility is a key put in evaluation of valuing equity instruments. We also saw almost $50 million in depreciation,…

Thanks, Gary. Operator, this concludes our prepared remarks. We would now like to open the line for questions from analysts.

[Operator Instructions] Our first question comes from the line of Mike Colonnese with H.C. Wainwright. Your line is open.

Good afternoon, guys, and congratulations on how much you’ve been able to accomplish over the past few months, despite this bear market, really -- really impressive to see. My first question, if you could provide a little bit more color on the expansion roadmap and deployment timeline for the additional buildout at Washington and Sandersville. I know you mentioned you had about 200 megawatts of additional capacity at those two sites, so just curious how we should expect that to layer in over the course of 2023.

Yes. This is Zach. I'll address that. So something exciting about our Sandersville site is we are still actually shelfing more minors. So, we actually have some capacity yet to come online, almost 35 megawatts that will come online, likely by the end of January, fully billed, fully paid for. As we mentioned earlier in the call, we are just waiting for machines that were temporarily being hosted there as part of the exit of the prior owner to come off shelf. So, you're going to see a bit of a bump in the very near term in Sandersville. Now, after that, we intend to expand Sandersville another 150 megawatts. We expect that buildout to be complete and functional, likely near the end of 2023. It's going to be a fairly significant process, so it's going to take a while. But Washington, we are adding 50 megawatts, and that construction has actually begun. We expect that to be ready and energized by April of this year, which will give us room for I think about 16,000 machines.

That's great. Appreciate the color there. And any visibility you can provide on blended power costs for the quarter, how prices have trended since, and when we might expect you to negotiate any additional power contracts similar to what you’ve secured at College Park, as we look out?

Yes, absolutely. So, over the last quarter, our fourth quarter, our power prices landed on a weighted average basis, just over $0.05. And it's interesting. I was in Amsterdam. I spent some time speaking on panels as we looked also at sites worldwide. And here in the U.S., what we are seeing as a result of the different pressures in the market is pressures related to pricing. What we are not seeing pressures on is access, like they are in Europe. And anybody can see -- and a great place I would point people to is following the Henry Hub. We use that as part of our predictions for power pricing. So, we are starting to see power prices come in on an elevated basis as a result of the macroeconomic events, but we are also predicting those to drop off fairly quickly come spring. And so, yes, we have absolutely seen these pressures. But one of the key things, and we've spent a lot of time and effort on this, and I mentioned in the call, we're the largest power purchaser for MEAG, which is our largest provider. They partner with the cities that we operate in. And as a result, we have a lot of purchasing power. So we are actively working on securing agreements to lock in lower rates from a long-term point of view across all of our sites. And that's what we want to bring to the table in this process is our combined purchasing power with three out of the four cities we operate in, being through, through MEAG. And we expect the right time to lock in the best rates is going to be the same time that we start to see the declines. So we're kind of aiming for a springtime period to make some of those moves. But with that said, I want to emphasize we picked Georgia for a reason because we're comfortable in our ability to manage rates wherever they may be and still manage to run profitably and effectively from a direct mining cost point of view. So, we're really happy with where we're at, but we do expect to make moves early ‘23, mid ‘23 to bring significant improvements to our blended power cost long-term.

Your next question is from the line of Josh Siegler with Cantor Fitzgerald.

I was curious, if you can make some commentary on what you're currently seeing in the secondary market as far as pricing for rigs is going. What gives you confidence in your ability to acquire the 95,000 or so of rigs to hit your 16 exahash target based off the prices right now? Thank you.

Hey, Josh. Thanks for listening in. What we're seeing right now from a rig pricing point of view is we are seeing buying opportunities continue to persist in the teens. And we do expect to -- and what I mean teens, it's in the dollars per terahash anywhere from $11 to $19 and most of that on the low end, depending on if the units are state side or not. What we are anticipating is we're anticipating there to be plenty of inventory available, especially over the first six months of next year. I do think that prices will stay largely suppressed for at least a few more months. With that said, though, one of the things we're keeping a very close eye on is that when Bitcoin prices move up, the price of rigs seems to move up a little quicker than Bitcoin does because everybody's moving in anticipation and worry that they're seeing in the rear view mirror, which is why we have strategically chosen and the way that we're going down its path is from a dollar cost average point of view. We've acquired machines in the low teens. We've acquired machines in the 20s. We think that the fundamental long-term value is probably in the 30s. So, anything below the 30s we see is a really good thing. But we are absolutely confident that we can acquire those rigs at the low prices. So, a lot of inventory out there, we've obviously been privy to everything from new rigs coming directly from brick Bitmain. We've seen bankrupt asset cost. We've seen a lot of different things. So, there's definitely 95,000 rigs out there for us to acquire. We also could, of course, evaluate doing future contracts back to the traditional way with Bitmain. And again, Bitmain is not the only manufacturer out there. There's MicroBT and, and Canaan. We, of course, have chosen to work mostly with Bitmain. That's what we watch closest, but we're seeing some really great technology moves out of MicroBT and the whatsminers in particular. So, suffice it to say, great prices, plenty of rigs.

Great. That's extremely helpful color. Thank you. And I was wondering if, you can provide investors with the update on how to think about your auto [ph] balance, especially, the significant decline we saw in October. Is this kind of the new level that you feel comfortable with or is it more around tactically selling Bitcoin to help fund both, your site expansions as well as your miner rig purchases? Thanks.

Yes. How we want our investors to think about it is simply that using Bitcoin real time is the right move. Auto [ph] balance is the same as having cash in a bank account. But if we can use Bitcoin to get more Bitcoin by putting the cash flow from those into expansion, into rigs, whatever it may be, that's the reason that we're selling Bitcoin. It's the one to support our operations -- essentially we're paying for our own lunch and not our shareholders. And that's really how we want to see it. So, our shareholders should know that whenever we're selling Bitcoin, that means we're not pulling the equity lever or the debt lever to grow our business.

Your next question is from line of Brian Dobson with Jardine Capital Markets. Your line is open.

Hi. Thanks so much for taking my question. You've given us some really good color on your hash outlook, but could you maybe clue us in a little bit about how you're thinking about global hash and how that might evolve over the next 12 months if Bitcoin pricing was to remain near current levels?

Yes. I think if Bitcoin mining was to remain near current levels, we'd see a fairly muted growth in global hash rate. The fact that we saw global hash rate climb last month and then start to taper back off with the decrease in difficulty, but also how quickly we saw, it -- looking to move back up a little bit, and right now just with Bitcoin moving, another $1,000 dollars what it was averaging a few weeks ago, as it moves into the 18th. So, I think it's going to be fairly muted at these levels because I think we've found a point where either less efficient or the higher cost miners are really having a lot of pain and having to unplug. And even a few thousand more dollars in, in Bitcoin price goes a long way for them to bring them back online. So overall, if it was to stay where it is, I think we kind of see it trend slightly up, but mostly flat. Now, we are of course, believers that Bitcoin is going to go up, so I do think that we'll see a healthy amount of hash rate come online. But, we feel confident also to keep up in both scenarios.

Yes, thanks. And you've also given us some great color on your appetite for acquisitions and the hurdle rates that you consider. As you step back and view the entire industry, I suppose, do you think that your competitors are as disciplined as you are, and what type of consolidation would you expect?

Yes. I'll speak to the consolidation on that. I think we have set a good example of how consolidation can be done responsibly. I still think that there is more consolidation to come. Some of that's going to come from pain of other players, but also there is other private miners out there that are creating some interesting opportunities. There is also infrastructure players that build infrastructure that needs to be finished off that will create great opportunities for new sites. So, I do think that companies like ours -- we are going to continue to have great opportunities to consolidate in public, private and also just infrastructure that's underutilized, in the very near-term. And, yes, we are really happy with the direction that we see it going.

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

Thank you and good afternoon, everybody, Zach, Gary. Gary, I was wondering if you could talk a little bit about the rig finance market. Clearly there has been a lot of stress in that market. And really just kind of curious as you think about acquiring more rigs over the next few quarters, is there any kind of market currently for rig financings?

Yes. Great question. So, primarily the rig financing market has been the secondary market. And that's typically -- it has -- before the recent interest rate hikes, they were like low to mid-teens. And with the recent hikes, it's really gone to the high teens and it's just dried up, right? The economics just don't work for financing rigs at 18%, 20%, 24%. As good as anyone else, I mean, there is money out there to be loaned at 20%, 25%, 30% because there is that risk reward. So, if we wanted that cost of capital, we could go get it, but that's not -- doesn't fit into our ROI calculation. And so, we are just being much more-choosy when it comes to debt. Looking forward, I think that, we are really going to wait for the more traditional debt markets to open up and for that margin expansion, just because we want to be more comfortable to be able to service that debt, which means that we -- we are not going to be going after 18%, 20% cost of capital. And so, so going forward, I just -- I think we are just going to keep our eye on it. And as things improve, I think that there is going to be more money that's available for financing.

Okay, great. And then, I mean, like you guys kind of highlighted your ability to execute and grow hash, a lot of your competitors haven't been able to achieve what you’ve done. Clearly, there is a lot of rigs now that have gone from, I guess, you'd say, more traditional conventional Bitcoin miners, maybe to some financiers that were providing financing for rigs. Have discussions started to come into the market about these new owners of rigs looking to deploy those rigs? And really, I guess what I'm wondering is, is that something -- just given what you've done on the infrastructure side, is that something that CleanSpark would think about entertaining in 2023, i.e., I guess I'm kind of asking is there any -- do you -- Zach, do you see a path forward where CleanSpark is actually hosting other miners?

I think that's an easy answer for us, and that'd be absolutely not. The colocation business is a business where you have to take margins that are not only highly volatile, but when in a time of strain to get highly compressed, and you have to try and chop those amongst multiple players. You have to cover your own dollar plus a margin, and then there's the owner of the rig that has to try and not only make money to pay your bill, but then they want to, of course, make something else. We specifically chose to avoid hosting anybody all the way from the beginning. And we definitely wouldn't go back into that. I think if you look at where the most pain has been experienced in this industry over the last nine months, you're going to find it in the colocation space. So, we wouldn't take that risk, and we also would much rather just buy those rigs from other players. And when it comes to the opportunities too, we -- when we evaluate a site, it's got to meet the CleanSpark standard. And that standard means that we have to run it in the CleanSpark way. And that means, we are going to manage our power actively. And that's also one of the biggest strain points that colocation client -- colocation businesses don't have. If you have an uptime guarantee with a client, you may not be able to make the right choice to manage power the right way without a lot of complications in an agreement. So, we're going to stick to doing what we do best and run our own sites and self mine.

There are no further questions at this time. I will now turn the call back over to Mr. Isaac Holyoak.

Thank you. I'd like to thank you for your questions and everyone who's joined us today. We wish everyone a good afternoon, a good evening, and happy holidays.

Ladies and gentlemen, with that, we'll conclude today's conference. We thank you for attending. You may now disconnect your lines.