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.

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 call.

I want to pause a moment here to underscore how important our growth has been. We've had a lot of talk lately about the program halving and its impact on minor revenue. What ran under the radar is the fact that we experienced a halving of source already with global hashrates dramatic rise and even given that rise, we still have grown our production, outpacing global hashrate, while some of our peers have languished.

We expect to do the same with the programmed halving that recently occurred. Among the evidence for this claim is that, we've achieved a significant milestone, securing our position as the second largest vertically integrated publicly traded Bitcoin mining company in North America. Our current total capacity stands at over 17 exahash per second, distributed across eight owned and operated data centers in Georgia and Mississippi and co-location facilities in upstate New York and we are not resting on our laurels.

Our efficiency is amongst the best globally, emphasizing our commitment to innovation and operational excellence. Efficiency is a crucial metric in every aspect of our business, including our fleet, operations, and capital allocation. With capital on hand, we have fully funded all machine purchases. This positions us to continue to thrive post-having and be highly active in the coming months. We expect to be one of the most measured and active acquirers in the industry.

Speaking of machine purchases, we aggressively pursued machine purchases and upgrades, notably the acquisition of the S21 Pro miners, enhancing our mining capabilities significantly. We recently took advantage of an opportunity to upgrade our purchase of the already efficient S21 to the new, even more efficient S21 Pro's at the same industry low cost per terahash. The effect of this upgrade is a 17% increase in our total purchased hashrate, adding 3.4 exahash per second.

These machines are so efficient that we don't need to add more infrastructure to achieve and recognize these hashrate gains. These new rigs represents the latest advancements in mining technology, setting the stage for our continued success. Our shareholder returns this quarter have been impressive, reflecting our strong financial health and our commitment to shareholder value. Year-to-date, we have outpaced all our publicly held peers to become the second largest miner by market cap listed on the Nasdaq.

Many of these achievements can be tied back to the benefits of scale. I want to drive this home as I think the benefits of scale are grossly overlooked. Many try and find a single metric that levels the playing field between small and large miners. But the playing field isn't level. A company that has scale can achieve escape velocity with much lower incremental inputs. Consider this. Because we have our scale, we can cover all of our overhead costs with the margins from our Bitcoin production and as a result, all new capacity we add and the resulting Bitcoin goes directly to our bottom line.

No matter how you slice it, no argument about unit economics matters until scale and the resulting escape velocity is reached. You pair the scale with our solid cash balance, minimal debt, and our significant cash flows, we are set to grow at a lower cost of capital, faster, and stronger than many of our peers. I continue to believe that we will have fewer public miners at the end of this year than we started with. The miners that have not reached the escape velocity of scale lacking the ability to cover all their overhead costs by Bitcoin production will be pulled back down to earth.

Now this also creates opportunities for CleanSpark which we intend to continue to capitalize on in our journey to 50 exahash per second and beyond. Building upon our scale, our unique advantage also lies in our deep understanding of infrastructure needs and the ability to control our own destiny. Being a vertically integrated company. Or said in another way, asset heavy, from the outset. We have always recognized the value that this control provides us as we navigate halving and other market events.

There are a lot of variables out of our control, such as Bitcoin price, global hashrate, machine prices, and ultimately energy prices. Our strategic approach sets us apart in an industry where variables are constantly changing, allowing us to produce the best results. I also want to mention the value of holding Bitcoin. Our operations produce strong positive cash flows, and we've been using those cash flows over the past several months to hold Bitcoin.

Or said another way, we have used it to buy Bitcoin at a price less than spot. We view our cost of production as a measure equal to a purchase price. And our low cost of production has allowed us to not only grow our treasury dramatically, but also benefit our shareholders through the recent and future price appreciation. We believe setting ourselves up to benefit from the future appreciation is an important strategy as it's the easiest way to pave the way towards a large amount of non-dilutive capital for our shareholders in the future.

To do this, we have prioritized the use of equity in our growth, because it's the right way to build long-term value. We've successfully turned equity capital into assets that have provided our long-term shareholders with a significant return on capital. We also believe that Bitcoin will play an important role on not just our balance sheet, but the growing of adoption of Bitcoin on others balance sheets will continue to lead to increased value in the future.

Gary will speak more about this later. Of course a lot has happened since the quarter ended. Principally, Bitcoin's price action as well as the halving. The recent Bitcoin halving is a pivotal event for the entire industry. For those unfamiliar, Bitcoin halving is a scheduled reduction in the reward that Bitcoin miners receive for adding new blocks to their blockchain. It occurs approximately every four years, effectively halving the number of new bitcoins created and earned by miners before transaction fees.

It's crucial to understand what that means for CleanSpark. Halving has the impact of compressing margins, which means, only the most efficient miners can support profitable operations after the halving and prior to any meaningful price appreciation of Bitcoin. For some miners, it is a halving. For some miners, it's an offing. And for other miners, miners like CleanSpark, it's an opportunity. It is an opportunity because the reduction of Bitcoin rewards is partially offset by changes in the hashrate across the network, which takes time, but we've begun to see decreases.

Miners with efficient and profitable operations can take advantage of this decrease in hashrate as they organically grow their market share. Then as Bitcoin's price appreciates, this halving adjustment can benefit those who are efficient enough to operate through the difficult times. But I want to zoom in a little on that. The opportunity for CleanSpark isn't just in the amount of hashrate that drops off, but in the data centers that become available as a result.

It's easy to get lost thinking about the sheer size of global hash rate. But consider this, we're about 3% of the global network. That means that the most recent decreases in the network hashrate of about 15% means data center space equal to approximately 5 times the size of our company has become available. That we can then optimize and upgrade at a multiple with our superior operations if we choose to acquire it. This represents the potential size of the opportunity for turnkey growth in addition to the organic growth plans we already have.

At CleanSpark, we are navigating this new era with our characteristic discipline and focus on returning value to our shareholders. We built and maintained our strength through advanced strategic planning and active power management at our operations. For example, in addition to actively managing our power, we continually optimize our operations through hardware and software improvements to keep the cost of mining or hash cost below the revenue generated per hash or hash price, ensuring profitability, despite market fluctuations.

We see hash costs becoming an increasingly important and easy to digest variable for shareholders to use when they are evaluating publicly traded miners. Hash cost considers primarily fleet efficiency and power cost to deliver a more standardized metric. And of course, the best power prices and the most efficient fleets are meaningless if the operator cannot maintain exceptional uptime across their portfolio. Our existing data centers have performed exceptionally well, each designed to maximize output and efficiency.

What that means is that, we have an industry-leading hash cost and a track record of effectively managing that cost. Our internal analysis places our current hash cost around $32. We're not just expanding our fleet with additional machines, we're also upgrading existing equipment. Our recent exercise of the option for 100,000 S21 Pro miners is a testament to this approach and aligns with our long-term strategic goals.

Importantly, it will exert significant downward pressure on our hash cost, giving us an expected hash cost as low as just under $28 once the S21 Pro’s we have ordered have arrived and are deployed. Compare that to the hash price, which, as of this call is around $50. We expect to see continued hash price improvement, but in the interim, we see current hash price as a meaningful correction in a very crowded market while we wait for the continued price appreciation.

Although hash price is a good measure, we think it's ever more important to consider the all-in hash cost, or said another way, the all-in cash cost to operate the business, including overhead, to produce hash rate. I'll repeat what I said earlier. A company must be capable of covering its cost with its production post-having to achieve escape velocity. And miners lacking scale or with less efficient corporate overhead practices will never beat miners operating at large scale that cover these costs without requiring outside capital inputs.

In summary, as we move forward in this new phase of Bitcoin's life cycle, CleanSpark is exceptionally well positioned to continue thriving. Our proactive strategies and relentless pursuit of operational excellence are key differentiators that set us apart in this competitive landscape. We've grown tremendously over the quarter and over the last year, and we plan to continue to grow. As of this time last year, we were operating at 6.7 exahash per second, meaning, we've grown at an annual rate of over 150% and we have no intention of slowing down as evidenced by the announcement we just made.

I'm particularly pleased to discuss in greater detail our expansion into Wyoming. With this acquisition our geographic footprint is expanded and it's the next step to meet our growth targets. We announced definitive agreements for two sites just outside of Cheyenne, Wyoming. The first site will provide 45 megawatts, and the second site will provide 30 megawatts. Upon completion, this is expected to support a total of approximately 4.2 exahash per second.

We will promptly break ground on infrastructure with the target of having the sites operational in the second half of 2024. In addition to the megawatts already in place, we are working with the utility on a load study that is already underway that we believe will allow us to expand the sites by an additional 55 megawatts for a total of 130 megawatts and an expected 7.4 exahash per second of operational hashrate in Wyoming. Our approach to acquiring rack space and deploying machines is meticulous and strategic.

The upcoming expansion in Wyoming exemplifies our ability to identify and capitalize on opportunities that meet our stringent criteria for efficiency and scalability. Once we close the Wyoming deal, assuming we obtain the megawatts under the expansion, we expect our capacity under management to be over 550 megawatts. This new low-cost capacity will continue to support our mission to have a portfolio that ranks amongst the lowest average cost of energy in the entire industry.

We have a solid track record of buying quality sites and then expanding them and expect Wyoming to be no different. For example, Washington, Sandersville, and Dalton are the most recent examples of successful expansion, and we plan to do the same with Wyoming. Before transitioning to how we see the next few quarters developing, I'd like to provide an update on Sandersville. As you are aware, the facility is operating at 180 megawatts of the 230 megawatts that we expected.

The utility's 50 megawatt transformer has not yet passed the required test before it can be shipped to the newly built substation next to our operations. While we do not have a specific time estimate for energization, the City of Sandersville is working in earnest to ensure the work needed is completed as promptly as possible and we will share more updates as soon as we receive them. As we look ahead, the dynamics within the Bitcoin mining industry are shifting.

We anticipate significant consolidation in the coming years, a trend that will likely widen the performance gap between the top tier miners and the rest of the field. This shift isn't only about scale. It's about strategic positioning and operational efficiency, which are areas where CleanSpark continues to excel. The ongoing consolidation in our industry is necessary. It's akin to a market bloodletting. While this process won't occur overnight, it's an inevitable step towards a more mature and economically sustainable sector.

As less equipped miners struggle to keep pace, well-positioned companies like ours will thrive. At CleanSpark, we favor growth through targeted acquisitions over mergers. Our approach allows us to integrate operations seamlessly and leveraging our existing efficiencies. A prime example of this strategy is our recent acquisition in Wyoming, which not only expanded our operational footprint, but did so under favorable economic terms, reflecting our commitment to smart growth.

Our M&A strategy, the CleanSpark way, is rigorous. We review dozens of opportunities but choose only those that meet our strict criteria. Efficiency, valuation, power accessibility and community engagement. Allow me to spend a moment addressing each of them. Efficiency. Our operations are designed to maximize output with our watts producing in some cases as much as twice the Bitcoin as some competitors. Valuation. We pursue acquisitions to offer substantial value, not just on paper, but in real operational terms.

Power accessibility. Access to current and future low-cost power resources is crucial, ensuring sustainability and scalability. Community engagement. We prioritize acquisitions that allow us to maintain and enhance relationships within local communities, allowing our growth with broader social values. With that in mind, we are reaffirming our path to 50 exahash per second in 2025 and continue to target 32 exahash per second coming online at the end of this year.

We expect to reach those goals through the acquisition of facilities that we can then put our machines in. I'd like to conclude by thanking our teams for their incredible work over the quarter. I believe our teams set records for the fastest deployment time in our industry at Sandersville, racking and energizing machines with an expediency that showed the type of grit and resiliency that has become central to our culture.

In line with that grit and resolve, I'm especially pleased to welcome two key colleagues to the executive management team. As announced yesterday, we promoted Scott Garrison to Chief Operations Officer and Taylor Monnig to Chief Technology Officer. Scott and Taylor are examples of CleanSpark's commitment to excellence and the CleanSpark way. Their leadership and grit have been instrumental in positioning CleanSpark as a top operator at scale in the industry.

I speak often about our best-in-class teams and Scott and Taylor have both helped build and lead these teams to great heights. They are instrumental in our continued success as our teams grow and gain even greater expertise to match the task ahead of us on our path to 50 exahashes and beyond. I greatly look forward to this next phase in CleanSpark's journey as we work together to continue delivering value to our shareholders and the greater Bitcoin ecosystem. With that, I'd now like to turn the time over to Gary to review the quarter's financial results in greater detail.

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.

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.

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.

Absolutely.

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

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.

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.

Thanks, Brian.

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

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.

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.

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.

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