Ladies and gentlemen, good afternoon. My name is [ Krista ], and I will be your conference operator today. At this time, I would like to welcome everyone to the CleanSpark's Third Quarter Fiscal Year Financial Results Conference Call. [Operator Instructions] I will now turn your conference over to Brittany Moore, Director of Investor Relations. Brittany, you may begin.

Thank you, Krista, and welcome to CleanSpark's Third Quarter 2024 Earnings Call, covering the period April 1 to June 30, 2024. Our press release was issued about 5 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 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 remains 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. Good afternoon, everyone, and thank you for joining us today. Before I start with my prepared comments, I want to thank you all for your patience due to the short unforeseen delay with our earnings release in this call. As a result of our rapid growth, we've gone through a number of changes, most recently, upgrading our external audit firm to a well-known, highly respected national firm, BDO. The team of BDO have been incredible in their efforts to familiarize themselves with our company as part of our first quarter together. Ultimately, as you can expect with any new relationship, sometimes you just need a little extra time. In addition, as you read in our Form 10-Q filed today, I'm pleased to announce our agreement to acquire up to an additional 22.8 exahash per second of the all-new S21 XP series of immersion-cooled miners, operating at an efficiency of 13.5 joules per terahash. We've secured 7.8 exahash per second of these miner for delivery before year-end, which will be going to Wyoming. This purchase will drive us even further ahead of the pack when it comes to overall fleet efficiency, which we believe will be a critical differentiator during this cycle. And as usual, we've secured the best pricing available for these units. With that, and again, thanks for your patience, let's begin. This quarter has been one filled with change. The Bitcoin halving event is now behind us, and I'm pleased to report that our momentum has not slowed down. For the second consecutive quarter, we've exceeded $100 million in revenue and produced $290 million in revenue since the beginning of our fiscal year in October 2023. We grew our hash rate by 4 exahash per second and delivered on our commitment to achieve 20 exahash…

Thank you, Zach, and good afternoon, everyone. Hopefully, you've all had a chance to review our detailed financial results and our press release. Our Form 10-Q is expected to be filed shortly. I'm pleased to review our results for the fiscal third quarter, which reflect the continued execution of our long-term growth strategy, thanks to the commitment and hard work of our team. Revenue for the third quarter came in at $104 million, an increase of 129% over the prior year. This was due to our growth in hash rate and appreciation of Bitcoin price between the periods. When comparing the immediately preceding second quarter, our revenue decreased only slightly, 7%, or $7.7 million, despite the halving occurring early in the third quarter. We managed to grow our hash rate during the quarter and produced 1,583 Bitcoin compared to 2,031 in the prior quarter. This reflects a decrease of only 22% in production despite the halving bringing a 50% reduction in block rewards. The halving always brings challenges for miners. However, we met the halving with the most efficient fleet amongst our peers and continue a very high uptime of approximately 98%. Looking at our gross margins, for the third quarter, we had approximately $59 million in gross profit, which is an increase of $34 million, or 137% over last year. When compared to the preceding second quarter, our total margins decreased from $78 million to $59 million. However, our margins remain healthy above 50% as the margins are directly attributable to our strong mining operations, effective power management strategy, and upgrades to our state-of-the-art machines happening throughout our portfolio. We did recognize a net loss of approximately $236 million in the third quarter, which was driven by 2 significant non-cash items. Foremost, Bitcoin price at June 30 was lower…

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.

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

Congrats on achieving your midyear target here. It's great to see. First one for me. If you could just provide an update on the GRIID acquisition. What needs to happen to finalize the transaction? And do you still expect to close the deal this quarter?

Mike, thanks for joining the call. So really, the only thing that needs to happen is the S4, which we filed. So that -- what the S4 does, you probably know this; for anybody that doesn't, it allows the shares that their shareholders will get to ultimately be registered. That needs to go through the SEC review process. So we'd love to close this quarter. It's ultimately going to come down to time lines around that. So I don't really have a specific time line other than it's going to take as long as the SEC takes.

Got it. Fair enough. Appreciate the color there. And I know you're still working through the final deal terms, but doing some quick math, it looks like you'll be paying just a bit more for GRIID's assets than you have for previous acquisitions that you have now in the portfolio. What made GRIID the right choice compared to other acquisition opportunities in the pipeline that may have been available to CleanSpark at a lower price?

I think the key with this is it became one of several opportunities we executed on. So when measured with that is the real driving factor of what led us to GRIID. GRIID's strongest asset is something that isn't reflected on a balance sheet or on a P&L or even in megawatts right now from an active contract point of view. It's their robust pipeline of opportunities. So the reason that we chose to acquire GRIID falls in the fact that they have a lot of opportunities, they have a lot of relationships in the state. And we've seen how -- in the State of Georgia, what allowed us to grow so quickly and so rapidly and successfully was our relationships. And so we could spend another year or two developing the same relationships in Tennessee or we can bring on to the CleanSpark family a group of individuals that have those relationships. Now GRIID, they have their own story, but it took them a while to get public. And I think that for them, this is a great merge because it allows them to execute on the plans they put in place with the capital and access to -- that we have. And so that's the real value of GRIID. We do get immediate megawatts, we do expect to optimally have over 100 megawatts live this year. But it's really about the 200, 300 and 400 megawatts that we think we can rapidly bring online in the future.

Your next question comes from the line of Brett Knoblauch with Cantor Fitzgerald.

Maybe if I can just start on the Coinbase transaction. I guess, what is the thinking there, is that you want to maybe add some leverage to the balance sheet and maybe diversify away a bit from equity capital? And curious as to what rate you'll be paying on that facility.

Yes. Thanks for the question. So this is just going to be another tool in our toolbox. We don't have immediate plans to draw down on that. But depending on the cost of capital and where the equity lever is and where the stock price is at that time, we might choose to draw down on the Coinbase line of credit to really take advantage of opportunities, whether it's purchase of machines or potentially some tuck-in acquisitions that we're looking at as well. In terms of the cost of that capital, it's really market-based, but I'll tell you that the cost of capital is below 10%. Or, we would expect it would be 10% at least in near future.

And then on the expansion in Wyoming, I believe you said to several hundred megawatts. Could you maybe provide some timing there and what you need to do on your end to start ramping the capacity in that new region for you guys?

Yes. So going back to the foundation, we have 75 megawatts under contract out there right now. That several hundred megawatts is something we're building towards. I expect that to be more '25 and '26 megawatts. Nothing that's going to happen tomorrow. And what it's going to take from us is it's going to be continuing to build the relationships. Well, the relationships we have established thus far show that we can get access to quite a bit more megawatts kind of using similar structures, and there's definitely a willingness in the state of Wyoming. As everybody knows, Senator Lummis has been a longtime supporter of Bitcoin. And so we want to really go in and support Wyoming as part of that process being a friendly state on that side. So we're really confident on our ability to execute on that, but it's going to be more '25, '26 as we push past what we have now.

Perfect. And maybe if I could just add one more question on the -- I guess, the new fleet upgrade timing that you guys have outlined. Could you just maybe remind us from like a unit economic level of payback periods and what you are -- I guess, what the ROI is on a per-machine basis that gives you confidence that you can go out and do this every 3 years despite what would be considerably high CapEx every 3 years?

Yes. The great thing about miners themselves is their value is largely indexed also on whatever the market is doing with Bitcoin. So we would execute on the strategy we've always done, which is we build in bear markets. We intend to take advantage of fleets that are in place and highly efficient during bull markets. And from there, with the capital that we access during bull markets, we should be well-positioned to upgrade during bear markets. If -- our statement around 3 years is a very generalized statement in the sense that if we're mid-bull cycle in year 3, why would we upgrade machines that are cranking out Bitcoin and that we turn into cash, of course. We would do that in the bear cycle where machine prices get low, and we would use our size and scale to leverage into that. So again, don't take 3 as something hard and fixed. But what it is, is what we've done is we've essentially looked at Moore's Law, seeing how it has proved out. We, frankly -- I'll tell you, I think that I thought it would take a little bit longer for a machine to get below 15 joules per terahash. And based on what we're seeing in the technology that's coming in line over the next 3 to 4 years, we think that it will be maybe 3 years from now we see some units that are going to be sub-10. I think there's some interesting challenges, I will say, that they have to face from a heat extraction, which is why we're leaning into immersion right now. So I think that it's going to come just like it is when -- where we address our HODL balance. It's going to come in real-time market-based decisions. But I would expect really what we're pointing to is we think that there's still a solid, long bull cycle ahead of us, and then the next bear cycle every time to upgrade.

Perfect, makes sense. Congrats on the quarter.

Thank you.

[Operator Instructions] And we have no further questions in our queue at this time. I will now turn the call back over to Brittany for closing remarks.

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

This concludes today's conference call. Thank you for your participation, and you may now disconnect.