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 Fiscal Year First Quarter 2025 Earnings Conference Call. [Operator Instructions] Thank you. And Barbara, you may begin your conference.

Thanks so much, Krista, and thank you for joining us today for the first quarter fiscal year financial results call for CleanSpark, America's Bitcoin Miner, covering the period from October 1 through December 31, 2024. Our press release was issued about 30 minutes ago and is available on our website at www.com -- sorry, www.cleanspark.com. Additionally, the 10-Q will be filed shortly. 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 that 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 and 10-Q. 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's my pleasure to turn the call over to Zack. Zack?

Thank you, Barbara, and thanks to everyone for joining us as we review CleanSpark's performance for the first quarter of our 2025 fiscal year. Before diving into this quarter's results, I'd like to take a moment to discuss our strategic positioning in greater detail. As a vertically integrated pure-play Bitcoin mining company, we operate at the crossroads of Bitcoin, Energy, operational excellence and capital stewardship. This strategic positioning has enabled us to become the largest producer of Bitcoin in the U.S., world's largest publicly traded pure-play bitcoin miner. We firmly believe that Bitcoin is the only truly scarce decentralized and permissionless store value and medium of exchange reinforced by its growing adoption. At CleanSpark, Bitcoin is central to our capital strategy, driving our revenue as a pure-play miner and serving as the largest asset on our balance sheet. Our decision to aggressively hold Bitcoin has proven highly rewarding with significant value appreciation over time. Our perspective on energy also sets us apart from much of the industry. Unlike others, we've adopted a broad portfolio strategy, expanding across 4 states and 31 mining facilities powered by abundant energy and net export states. This energy profile, combined with our commitment to operational excellence has made us an industry leader in upside. While I will discuss our growth strategy in more detail, one thing is clear. The regions we have strategically selected will more than support our expansion. Being an industry leader doesn't require topping every important industry metric. We are the only operator range in the top 3 across key measures of total ash rate, fleet efficiency, marginal cost per bitcoin, total uptime and Bitcoin HODL. This consistency has propelled us to achieve a velocity driven by both scale and grip. And as we proceed down half the 50 exahash and beyond,…

Thank you, Zach. As Zach mentioned, our first fiscal quarter was spectacular for CleanSpark. Let's dive directly into the numbers, which I'm excited to share with you. Our revenues for the quarter were $162.3 million, an increase of $88.5 million or 120% over the same quarter last year. This increase was primarily driven by an overall increase in average Bitcoin price. The importance, year-over-year, we produced only 4% less Bitcoin compared to the same quarter last year, despite block rewards being cut in half this past May. We are almost at the same number of bitcoin produced as pre-having due to our increasing exahash and increased fleet efficiency from our best-in-class miners. It is also important to note that our average revenue recognized per bitcoin produced in Q1 was almost $84,000, which is an increase of 130% over the same quarter last year. When compared to the immediately preceding fourth quarter, our revenues increased 82% due to the increase in Bitcoin prices and our plant production. For comparison, we produced 480 or 33% more Bitcoin in the first quarter than the fourth quarter, and the average revenue Bitcoin at our wholly owned sites increased 38% between periods. CleanSpark has industry-leading uptimes typically in excess of 90%. However, this past quarter, we saw a slight temporary decrease in our uptime to 94%. This was driven by several factors. Foremost, the court started with limited exahash online because of a hurricane. Second, we moved approximately 8,000 miners as a result of our fleet upgrades and racking at new locations. However, I want to point out that while we saw a slight dip in one of 5 key industry metrics, there's an inverse relationship as we saw significant gains in efficiency and Bitcoin produce as well as reduced cost per coin. This upgrade…

Thank you, Gary, for the very detailed financial overview. We'll now open the floor to questions from the analyst community. Krista, please provide instructions and manage the queue for Q&A session. .

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

Congrats on a really strong quarter here. Gary, you alluded to some of this in your prepared remarks, but just curious if you could provide a bit more color here. So you guys have built out a nice reserve of bitcoin over the past year. We now have over 10,000 pickling the balance sheet. Any further details there in terms of what your Bitcoin treasury management team is strategizing to put those points to work, be it the counterparties, current market yields you're seeing? And what portion of the treasury you'd be willing to dedicate to your generation strategies?

Yes. Thanks for the question, Mike. So we are in the process right now of gathering fees, request for proposals to evaluate counterparties and look at the various options. I don't want to commit to a strategy, in fact, I referee to what we said last call where it's going to be a crawl walk run type strategy. And ultimately, we have a number of options available at our fingertips. So -- we'll see how those RFPs come back and what the transaction opportunities look like. But ultimately, I don't think in the near future, we're going to leverage 100% of HODL balance or put 100% of it to work. We're just going to slowly kind of lead into it, and we'll have more to report quarters.

Fair enough, Gary. And then, Zach, maybe for you, this one here. How should we think about the cadence of cash rate growth, the 40 exahash deployed today to your midyear target of 50 exahash? I know you guys are working on a number of projects across the portfolio. So it would be great to get a better sense as to when you expect those projects to energize.

Yes. Appreciate and thanks for always joining the call, Mike. It should be a pretty even cadence over the next 6 months as we roll things out. So I don't think it will be that chunky. It will just kind of be a little bit added every single month as we move along through the period. So as we mentioned, the majority of this will -- all of it is happening essentially in our backyard. And so these are projects at existing sites for the most part with a few greenfield sites added on that we're basically rolling into things. So again, this is going to be a very natural cadence for us just to add that main 10 exahash has over the next couple of months.

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

So you alluded to your cell allocation strategy, which is shown through our call it, both of which were shown through your relentless sequential improvements. Do you think you could speak a little bit to your management philosophy that drives that improvement and separates you from your peers?

Yes. Brian, thanks for joining us. I'll jump in on that one. So we look at the intersection point of so many things ultimately results in the profitability of mining Bitcoin. And living at the right point of that Crossroads is ultimately how we look at it. We don't feel the need to pursue a number to pursue a number. And I think that, that's a differentiator of our management team. We haven't held the one thing out and said it's the most important because we actually believe that the intersection points are the most important part. So as we pursue these KPIs -- and ultimately, what we see is critical. We think our secret sauce is really the perseverance, dedication of our people. And I think that as we go through that, it's about instilling the same values that we've had since really the founding of the company is we're ready to work hard. All of us top to bottom, and I think that, that shows through ultimately in the results.

Yes. And then do you have any comments on the potential for in-kind exchange in terms of driving yield to

Yes. So look, take the debt -- the applications that are on file for the ETFs are really positive thing overall for Bitcoin, and it'll be entering to see how that really affects it all. But for us, we're really just focused on managing our auto balance. We are looking at potentially using the ETFs as part of that treasury management and the derivatives that are around those products as well. But I think it really remains to be seen how it's going to impact us directly other than just the general adoption of Bitcoin overall.

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

Congrats on the quarter. Maybe just looking -- and I know you guys have a lot on your plate for 2025, but kind of looking beyond 2025, I guess, what type of power capacity do you have in your pipeline? And maybe in which states would you look spend? Is it maybe within TVA where I know you guys are very positive on?

Yes. So there's the ability to expand in really all the regions that we're operating in. I do expect that you're going to see the majority of the growth happen in both the Tennessee and Wyoming areas those are the areas that, frankly, have the most voice guide to them. We've been expanding for a long time in Georgia in that region. And so I think that, that's where you should expect to see the majority of it. Frankly, we're in credited about those utilities. And frankly, they're also their willingness to lean in and understand the value of interrupt looks in the utility. So that willingness continue to themselves. But also both those regions are ready and willing to adopt energy tariffs that beat Bitcoin mining due to the interruptibility of those loads. So that's likely to be our focus in the coming years.

Appreciate. And then maybe just one follow-up. I think if I look at kind of like your OpEx for this quarter, professional fees, payroll, G&A, all declined, and I think your cash rating improve somewhere around 40% quarter-over-quarter. Can you just maybe talk about the you guys deploy in managing OpEx while delivering such strong growth? And I guess, how sustainable is that? And is there any incremental OpEx needed to drive you guys to 50 to 63 and beyond?

Yes. Thanks for the follow-up, Brett. I think ultimately, we just built this foundation of just indirect expenses, right? And we just have a very strict budgeting process to watch every dollar that goes out. And really, what we're investing is on the operational side. And given the fact that our cost of CapEx, one of the lowest in the industry. I mean I'll remind you that we have contracts out there for $21.50 a terahash right now, which is or at least 30% lower than what the fair value of those machines. Having that focus really on operations really allows us to have every exahash comes online, almost dropped from the online because we don't need that incremental corporate overhead to support $1 of additional revenue. That's why I feel comfortable the interacts being relatively flat for the remainder of the year. And really, the only wild card is in the professional fees and that depends on the activity of the M&A landscape.

And Brett, I'm going to add one more thing because I think it's part of our manage strategy is we think big about what we do. We have a portfolio of properties. But in building a portfolio, we had to solve unique problems that we prepared for. And basically, we built on our ability to expand early on. So we're leveraging technologies such as remote management and other things that are the same types of technologies that are in your hyperscale data centers are utilizing to keep their head count down and reasonable. And so we do that across the entirety of what we do, whether it's per head side, whether it's on the operational side, we've always been in an expansion state, but we wanted to plan that expansion for the future. So truly feel that we have built a scalable business at the current size on the operations, but it's because of the thought process that occurred 2 and 3 years ago.

Your next question comes to the line of Tyler DiMatteo with BTIG.

I appreciate the time here. Zack, I'm curious. You guys have done a really nice job kind of growing exahash over time, getting to the 40 exahash mark. But as you think about going to 50 exahash and then ultimately to 60, if you exercise the option, does going from, say, 40 to 50 to, say, 60, is the implementation different? Or how could it be different given that you now have a bigger scale and you look to put those rigs? I'm curious just maybe how you think about the actual execution and implementation of that note you have 4x exahash online?

Yes. I'm going to point to a phrase we have continued to use and that's repeatable. So everything we've done is to basically build a blueprint that can be stamped out on a repeat basis. And our goal, just like all things done at scale is as the process becomes more and more repeatable that we find every opportunity to fight costs down while increasing quality. And so that's been our goal. We're incredibly excited, and we've mentioned this multiple times the last few earnings calls about the technology the immersion cooling side. We are seeing immense operational efficiencies and a lot of operational leverage around the way that we are deploying those. And we see it as the right work to step back. So as we march from 40 to 50 to beyond, we see us using a successful proven blueprint that we're able to restand on a repeat basis.

Yes. I just want to add to that as well. I mean we have a track record of growing exahash, right? A year ago, the last January 2024, we're just a little over 10 exahash, as we sit today, we're 40. So we have that prudent excellence to be able to execute on this, and we're very confident we'll be able there.

Okay. Great. And then my follow-up here, realizing that you have the fixed price option at the $21.50 for the next level of growth in rigs. I'm curious, though, how would you describe kind of the rig market dynamics? I know you pointed to, I think it was 37% higher potentially for some of the rig pricing. I guess just broadly, Zach, how would you describe some of those dynamics? And really, what are you seeing as you kind of look to keep an open mind in terms of the growth profile of the business?

Yes. I think that as we see, it's all about relationships. We've got deep vendor relationships, not just for the single vendor, but across multiple parties that we believe will allow us to always maintain the competitive pricing. As Gary talked about track record just a moment ago, but our track record is to, on a repeat basis set the floor price of the rigs as new units come out, but it's also to not jump just because something of which you saw in our activity 2 and 3 years ago when rig prices weren't where we thought they should be. So the benefit of the scale we have and frankly, how far ahead we've gotten the majority of this industry on exahash basis means that we have the opportunity that time presents where we can be select about our timing. I think it's one of the things that we've done of the best in the entire industry is not trying to dollar cost average into our equipment, but instead is to relentlessly drive to the low-cost, high-quality model, and we just intend to do it to get to some of the market shifts and moves to. We've got through -- beyond 60, our price certainty is already that. Everything beyond that is somewhat speculative other than we would just look to continue to leverage our relationships to always be best-in-class.

[Operator Instructions] Your next question comes from the line of Stephen Glagola with Jones Trading.

You highlighted the benefits of increasing scale to your margins long term in your prepared remarks. And as you approach 50 exahash, is there a point where you think increased scale becomes less of a focus for the business versus looking to maybe increase the free cash flow generation and productivity of the assets you currently have and also potentially returning capital back to shareholders?

Yes. I think that I'm going to use the phrase again, on having achieved this scale velocity. That's where we are at right now in the business is for every exahash we add, it does produce free cash flow that does flow to the bottom line, what does benefit the shareholders. I would -- to make a comparison, if you look at most of the industry, based on our math, there's less than 5 companies that even have the opportunity to achieve the same scale, which will ultimately result in positive cash flows. The balance have a lot to do to catch up. So again, I'm going to point back to what I said earlier, where time there is going to be time to push the gas pedal all the way down and there's going to be a time to let the car coast. And frankly, it's likely going to be driven by input costs. Input cost of materials, whether that's the servers, whether it's the infrastructure. And rather than speculate about timing right now, it's about how well are we positioned to react to market dynamics. And I would say we're positioned amongst the very best. And so -- and I think that comes in multiple forms. Again, I'm going to point to vendor relationships, the cost certainty that we marked into place, but also the fact that we don't have to push to catch up because there's a point that we've arrived at where the cash flows are already flowing in a way that's benefiting the shareholders but also allows us to continue to grow through those cash flows. I'm going to turn to Gary if he has any thing to add on that.

Yes, I would just reiterate comments on optionality, right? That's how we built the business. And I think that we'd love to look to return capital to shareholders. But most importantly, we've got to shore up the balance sheet, which, again, is extremely healthy, right? And as we increase our cash flows, it's just going to provide us more optionality as to whether we reinvest in the business because the ROIs are there or if that means that we need to return capital to shareholders through a stock buyback or some other means, and that's the best use of the capital. We've said that probably been a while since we talked about it on a call, but we absolutely would put that. But again, we can't do that unless we have significant margins and a healthy balance sheet. And I'll tell you that, that's why the sleep upgrades are so important because the efficiency increased favorably by 20% between the 2 quarters. And our total cost -- or cost to mine, direct cost to mine for Bitcoin dropped by $2,000 a Bitcoin, which only adds to our cash flow. So it's those types of investments that we think are not only going to be off in the short term but long term. And again, ultimately -- once we have that fortified balance sheet, when we've taken advantage of as many opportunities, media opportunities we can, we will find other ways to return capital to shareholders. And the last point, we bought back almost 12 million shares as part of the convert. And big reason for doing that was to really invest in ourselves because we have this clear path to 50 and even lot beyond. And we feel good about where we're going. So we really betting ourselves at this point. We think that's going to translate to shareholder returns.

Your next question comes from the line of Bill Papanastasiou with KBW.

Congrats on the quarter. For my question, we're just hoping you could add some color on how you're aiming the growth strategy beyond 50 exahash. The quarter clearly demonstrated an attractive operating profile. And where you guys stand today at 40 exahash or not very far from being the leader in the space in terms of scale. So how important is it in the road ahead to scale just given that all your peers are moving to AI, HPC? Seems like it could be a low-hanging fruit opportunity for investors that are looking for a high beta play on Bitcoin?

Yes. Appreciate you joining the call. Good question. We love when we hear someone pivoting to HPC because it means global -- And so as we continue to scale in that environment, it just means the piece of the pie that we're getting daily Bitcoin rewards, which again, are scarce for every 4 years. Now it's the best time to acquire it. It means our piece of the pie gets bigger. So yes, continuing to scale is important, but it's not an end all be all, right? Again, we don't grow to grow. We grow because it's strategic to do so, and it means that we have more to gain. Again, at the point we're at, every exahash we add is dropping Bitcoin or dollars to the bottom line. And so as long as that continues to improve, we will continue to grow responsibly in the ways we do.

Your final question comes from Greg Lewis with BTIG.

I apologize if this has been asked. I've been some issues this afternoon. Zach, you touched on it on the Capital Markets Day, really around your ability to create partnerships in the community. And just as we think about what's happened over the last couple of years in companies like CleanSpark really building and helping communities across Georgia and beyond and the success that we've seen with other miners in Texas at Has there been any shift or maybe not that there's inquiries now for CleanSpark delaying Bitcoin mining solutions in some of these rural areas that you're looking at target? But has the tenor from potential small utilities or customers or municipalities, how has that kind of shifted? And as you look out over the next 12 months, I have to believe with the current administration that that's a huge tailwind as you look to kind of continue to expand your infrastructure footprint. Can you kind of talk a little to that?

Yes. We've shifted into an environment where instead of people being worried about the big bad Bitcoin mine that's going to come to town, we get inbound in where cities now understand the economic benefit that we can bring, whether that's through the tax base or whether it's through an employee base, there's different parts of the countries that are frankly looking for different things in that. So -- and what I will say specifically commenting on small utilities, that's where also we're seeing a lot of benefit because these utilities they made 50- and 100-year long investments over the past several decades. And when they have idle assets that are no longer producing revenue, they start to lack the ability to continue to upgrade their equipment. And so we can be the answer to that. We can come in. We can use idle assets in communities where the freeway didn't go through and everything went around, we can make a real impact in rural America. So I would say that when our name goes into these communities, and I think I'm proud that it is our name going in, we're getting welcome to open arms because these communities are ready to reap the benefits of what Bitcoin mining really can bring to rural America. It's one of the things we're currently proud of. And partnering with utilities is a big part in the education. Having a large load can be scary to the utility their willingness to listen and understand interruptibility of that so they can continue to serve all their citizens while driving down their costs and increasing their revenue is the key message we're driving forward. So I'm incredibly happy and optimistic about what I expect to see really in the heartland of the U.S., we continue to grow.

We have no further questions in our queue at this time. Barbara, I'll turn the call back over to you.

Thanks again to everybody for joining today's earnings call, and we'll look forward to staying in touch with you and sharing future results with you in the coming quarters. Stay tuned for more achievements from CleanSpark, America's Bitcoin Miner.

Ladies and gentlemen, this concludes today's conference call. Thanks for your participation, and you may now disconnect.