Ladies and gentlemen, good afternoon. My name is Regina and I will be your conference operator today. I would like to welcome everyone to CleanSparks' Second Quarter Fiscal Year 2024 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. [Operator Instructions] I would now like to turn the floor over to Isaac Holyoak, Chief Communications Officer.

Thanks, Regina. Appreciate it. And thank you for joining us today for our second quarter fiscal year financial results call, covering the period January 1, 2024 through March 31, 2024. Our press release was issued earlier this morning and is available on our website at www.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 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 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, Isaac. We've had an exceptional quarter, made possible by the hard work of the many quarters that preceded it. In fact, this quarter has been, in many ways, the payoff for what has been years of careful, measured, and patient building. But rather than see this as a place where we stop to celebrate, I see this as a beginning. A beginning in which we have already laid a strong foundation for the future to come. Post halving, this foundation of grit, commitment, and importantly, the scale we've developed over the last few years will continue to pay off as we work to deliver exceptional returns to our shareholders during the next cycle. Our record-breaking revenue and adjusted EBITDA are a testament to our robust operational strategies and market positioning. We recorded $111.8 million in revenue and $181.8 million in adjusted EBITDA. These numbers are impressive on their own. Compared to the past performance and the speed at which we have achieved them relative to our peers, they become more so. Our revenue grew 52% quarter-over-quarter and 163% compared to the same prior year period. Adjusted EBITDA grew 163% quarter-over-quarter and then 12 times over the same prior year periods. Bitcoin production despite global hashrate growth stayed strong, even beating our prior quarters production, placing us amongst the highest producers in the industry. Since the start of 2024, we've experienced exceptional growth with our operating capacity increasing by an impressive 63%. And what we believe is the most hashrate added amongst any public miner. Our growth is supported by our newest Bitcoin mining facilities in Mississippi and Georgia. And as we announced moments before the call started, we plan to continue our growth in the great state of Wyoming, which I'll discuss in greater detail later in the…

Thank you, Zach. Hopefully, you have all seen our press release and Form 10-Q released early this morning. I'm happy to review our record results for the fiscal second quarter, which is a direct result of our thoughtful strategy and the grit and execution of our many team members. For the second quarter, we recognized $111.8 million of revenue, an increase of 163% over the same quarter last year. Compared to the preceding first quarter, we saw revenues increase 52% or $38 million. These increases in revenue were not only driven by increases in Bitcoin prices, but also increases in our hashrate, which yielded increased Bitcoin production. To give you context, at the end of Q2 last year, we had almost 68,000 machines in operation, representing 6.7 exahash. At the end of Q2 this year, we had approximately 134,000 machines deployed, representing 16. exahash. The average revenue per Bitcoin more than doubled between the year-over-year periods. As our Q2, 2023 average revenue was approximately $23,000 and this quarter our average was $55,000. When compared to our immediately preceding first quarter, our hashrate increased over 60% from 10.1 exahash to 16.7 exahash. Our revenue per Bitcoin in Q2 increased over 50% to $55,000 as our revenue per Bitcoin in Q1 was almost $37,000. CleanSpark's mining economics remained healthy through the second quarter as we saw gross profit improve 21 points over the same quarter last year and 8 points over the first quarter. Our market-based approach to power has helped with our margins as we saw wholesale power costs as low as 1.3 cents per kilowatt hour in the second quarter. For our wholly-owned locations, our all-in costs for the second quarter were a favorable 4.3 cents per kilowatt hour. This all-in cost represents wholesale costs of energy plus transmission and…

Thanks, Gary. 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. [Operator Instructions] And your first question comes from the line of Mike Colonnese with HC Wainwright. Your line is open.

Hi, good afternoon, guys. Great quarter and congrats on the new acquisitions. Great to see you here. First, for me, if you could just walk us through the expected construction and energization timelines for these newly acquired sites in Wyoming? And really how you guys are thinking about the power strategy and electricity cost for these facilities?

Yes. Hey Mike, thanks for joining the call. So as we mentioned, there's two sites, one at 45 megawatts, one at 30 megawatts. One of those sites is already partially ready, where the utility lines are in place for us to drop transformers right on top of it and continue to build. So we think that the 45 megawatts optimally can happen in quite a short period of time. I don't have anything specific on that, but we do think it can happen inside of 120 days is our target right now. More to come on that where I can provide a more detailed timeline probably in the next -- I call it in the next three weeks. After that, the 30 megawatts, it's totally greenfield. The utility is available basically at the property line. So it'll be a little bit more construction, but we're going to run both of these projects in parallel is the plan. So the target is to have all 75 megawatts built out before the winter kicks in is the goal. Obviously, Wyoming, one of the reasons we really like it is for the ambient air temperature year round is much cooler, but with that also comes winter and snow. So our goal is to get everything built before a winter freeze happens in late October, early November.

That's great. Super helpful color. And how has the M&A landscape and conversations you've had evolved since the having and the subsequent drop in hash prices we've seen? Is there a general profile of potential sellers that you've observed in your conversations? And then also, be curious to see, is there a specific range you're looking for as it relates to the scale of these mining facilities? Could we see -- I know you mentioned additional tuck-ins in the future, but how should we think about the megawatt of power capacity for any potential future acquisitions that you look at? Thanks.

Yes, so the landscape has opened up quite a bit. We have historically always kept a dozen names in a pipeline that we kind of rotate through, saying no to a lot of opportunities. I'd say that the opportunities are continuing to grow. It was interesting because at the halving, there was the fee events where for a few days, transaction fees spiked. And I think it breathed some hope into some miners that were less efficient. And now that a few days or weeks have gone by, we've seen kind of a few of them give up. A lot of incoming calls, a lot of opportunities that exist. Now, as it relates to size, we're really open to anything. Now, the benefit we have is with the access to capital and the tools we have in place, big or small works great for us. We've already proven that we can accomplish a lot with a little. If you look at how we did Dalton, we started that location with 20 megawatts and have since added on top of it and will continue to grow. Same thing in Mississippi. We have three sites. Some are small, some are large, and we have the ability to continue to grow in Mississippi. So for us, I think that the importance is, if it's a small site, what is the ability to grow in the surrounding area? Or if it's a large site, what scale are we going to get? What I will say, I made the comment about how we prefer acquisitions over mergers, and that's because sometimes mergers are harder to do. In order to gain the efficiencies that need to come from a merger, it means that there's largely -- there's likely going to be overhead that needs to come off. And so I think that that is still conversations that are open and happening. They are happening, but it's going to be something where the more large scale companies that do have a lot of overhead, they're slower coming to the table. Because of course, it means that part of their overhead operations won't exist afterwards, because we are positioned to absorb that. So how we're thinking about it is, I think private is the quickest path to adding megawatts. Public will come later, but it's going to come when the other side is ready to let go of some of the overhead and ultimately the salaries that are involved in that.

Really interesting color. Thanks for taking my question, Zach.

Absolutely.

And our next question comes from the line of Brian Dobson with Chardan Capital Markets. Your line is open.

Thanks so much for taking my question. I guess just to follow up on your investment in Wyoming, can you speak a little bit to the, call it, relationship with the utility or local municipality that may have led you to choose this as a site for expansion?

Yeah, Brian, thanks for joining. Wyoming has been a state where there's a lot of support. You have Senator Lummis there who has really been an outspoken supporter of Bitcoin and really blockchain technologies. In the state of Wyoming, there's actually a blockchain rate that we are going to get access to as part of this. And so, in addition to that, there's a lot of abundant power. So wholesale power prices are incredibly low cost. And that's really what drew us there is a very strong political environment in support of Bitcoin and then a utility that is so welcoming to it that there are rates established around it. So from a relationship side, we've had conversations off and on with many utilities, but this is 1 of those utilities that we've spoken to for -- as far back as three years ago. And we put down conversations, picked them back up, and we decided now is the right time. So these -- I think that's another benefit that we don't speak about often enough as we spend a lot of time building relationships and the credibility that we've been able to gain in the communities we do operate in it then carries over so that when the communities are ready to embrace Bitcoin mining, and CleanSpark, we're one of the first calls that can come in.

Excellent. Thank you very much. That's great color. As you're thinking about the M&A environment in the back half of the year, do you think you could elaborate on potential funding sources for an acquisition? Would you be looking at equity? Would you be looking to use coin? Or would it be potentially a mixture of both?

We would probably look at cash on the balance sheet and also equity. We're at a stage two where there are small groups, private, public, both sides, that of interest to them is not selling and giving up, but it's really joining the team. And as part of joining the team, they would take equity. Historically, almost all of our transactions where we've acquired companies, it's been in the form of cash, because the other parties needed cash to pay off debts or obligations, things like that, so they didn't have a choice. Some of these operations now, again, it's about joining the team. And so, I think that we could see an acquisition, even where equity is the sole use that we have where they become shareholders. It's not an issuance of --into a raise, but instead where they fold in and become part of the CleanSpark team.

Yes. Very good thanks. I'll hop back in the queue. Thanks very much.

Thanks, Brian.

And your next question comes from the line of Reggie Smith with JP Morgan. Your line is open.

Hey, thanks for taking the question. This is Charlie on for Reggie. I was hoping to get a few more details on the two Wyoming sites. First is the 40 megawatt site, was that site already being used for Bitcoin mining? And then second question related to the 30 megawatts site. Have you guys built out a facility from scratch before? I know your recent acquisitions have been turnkey. Just wondering what experience you have in building out a greenfield site. Thanks.

Hey, Charlie. Thanks for joining the call. I'll address the buildout. We just finished 150 megawatt buildout. Before that, we built out 80 megawatts. Before that, it was 20 megawatts. And before that, it was 30 megawatts. So we have quite a few megawatts in a lot of different locations under our belt, so I consider us pros on the on the build outside. As it relates to these sites, the 45 megawatt site, yes, has been used for Bitcoin mining. But as part of the purchase the seller is taking the equipment with them, which we're okay with, because we like the sites to be built the CleanSpark way. As we mentioned, we prioritize high uptime as one of our key tenants. We will be adding in infrastructure to support that tenant of high uptime. And again, the benefit though is some of the utility side is already done. So our goal is to be able to come in, drop transformers, drop the infrastructure quickly. And so, even though the other party will be removing their infrastructure, which is in the form of pods, we should be able to drop things in right on the back end of it very quickly.

Got it. And then in terms of longer lead time items, like transformers, maybe I just missed it. But are those staying on site, or do you have those on hand and you're going to be bringing in your own, any details that would be great?

Yes, we stay ahead of the curve by actually buying more infrastructure than we have immediately going on. So we have over 50 megawatts of transformer and switch gears already ready to go. So that will be our jumping off point. We have strong relationship with these manufacturers with the ability to ramp up their supply chain. So in this case, as of right now, we do not see supply chain constraints impacting these at all, because we already have a very large portion of the 75 megawatts already secured.

Perfect. Thanks for taking the question.

Appreciate it. Thanks, Charlie.

And with no further questions, I would now like to turn the call back to Mr. Isaac Holyoak for closing remarks.

Thank you, Regina. And thank you to all who joined our earnings call today. We look forward to sharing more of our journey with you in the coming quarters. Stay tuned for more groundbreaking events from CleanSpark.

Ladies and gentlemen, this concludes today's call and we thank you for your participation. You may now disconnect.