CleanSpark, Inc. Q3 FY2025 earnings call

• Strategic pillars: energy, Bitcoin, operational excellence, capital stewardship drive performance.
• Reached 50 exahash operational hash rate, up from 27.6 exahash in FY 2024. Expanded operations in Tennessee, Wyoming, Mississippi, Georgia.
• Launched new sites quickly, e.g., 5 weeks from land acquisition to live mining in Georgia. Secured over 1 gigawatt of contracted power, currently utilizing ~80% with over 200 MW available for expansion.
• Focus on global hash rate share; at FY 2024 end, held 4.3% of global hash rate, which rose to 5.6% with 50 exahash. Plan to add 10 exahash of operational hash rate with secured miners and infrastructure in place.
• Bitcoin treasury management: Started derivative trading in May, with a crawl-walk-run approach to generate risk-adjusted yield, aiming to use 40% of HODL balance for target 4% yield.

CleanSpark's fiscal third quarter 2025 was highly successful. Revenue was nearly $200 million, up 94% year-over-year and over 9% from prior quarter. Earnings per basic share were $0.90 with a gross margin of 54.6%. Produced 2,012 Bitcoin. Operational hash rate reached 50 exahash. Treasury value was approximately $1.08 billion by quarter end, with Bitcoin in treasury at 12,608. Revenue contribution is primarily from Bitcoin mining operations.

• Focus on global hash rate share as key metric. Plan to add 10 exahash of operational hash rate with secured miners and infrastructure in place.
• Evaluating ~1.2 GW of near-term power opportunities and 1.7 GW of long-term power opportunities.
• Digital asset management strategy to ramp in coming quarters, with a measured approach considering financial reporting, control, and tax considerations.

• Volatility in Bitcoin price affecting mining margins.
• Counterparty risk in derivative trading due to potential margin calls and counterparty financial health.
• Uncertainty in power tariff environments and lead times for power interconnect with utilities.
• Competition with other industries (e.g., HPC) for utility partnerships, potentially affecting power availability and costs.

Q: Congrats on a really strong quarter here. First one for me, Zach, you mentioned that you have over 200 megawatts of additional contracted power available in the existing pipeline. Could you just unpack that a bit and speak to how you envision bringing those megawatts online over the coming quarters?

A: Yes, absolutely. Mike, thanks again for joining the call. Appreciate your support. Yes, that 200 megawatts is in areas that we operate in. Some of these contracts come as a result of expanding on existing operations or getting something nearby. How we're looking at that from a rollout is, our first focus is going to be on that 10 exahash. We have some optionality beyond that. So we really only require a portion of the 200 megawatts to roll out this next piece of infrastructure, leaving 100 megawatts of optionality in addition to the pipeline. We are still really building on what that's going to look like after that. Again, the focus is on maintaining and outpacing difficulty while acquiring additional market share from a percentage of global hash rate. So I do expect the next 10 exahash to come up quickly, and we will have more news on the balance of that in the near term.

Q: Nicholas Giles: Nice job here. My first question was just on the Digital Asset Management side. I mean, when would you expect to reach targeted run rates? Or maybe in your words, Gary, when would you expect to be kind of fully running here? I just want to kind of make sure I understand the cadence of this new strategy.

A: Nick, thanks for the question. So we expect it's going to ramp in the coming quarters. As you can probably respect, there's a lot to consider when you're establishing an institutional grade desks such as what we're doing, right? And we want to make sure that the trades that we're doing, not only the strategies are coming out the way we expect, but there's a lot of financial reporting, internal control, tax considerations as well. And so far, everything is going just as good, if not better, than what we expected. So for us, we, again, are taking a very measured approach to this. And as we start to onboard additional counterparties and look at more complex strategies, I'd expect that we'll probably ramp to that really over the next year.

Q: Brian H. Dobson: So you spoke in pretty great detail about yield generation. Just a follow-up question there. So 4% on your HODL would do a lot to cover operating expense. Would you give us just a little bit of color on what percentage of your HODL you're thinking about putting to work? And the time frame that, that percentage of the HODL might be out so we can kind of back into what types of returns you're looking at on a short-term basis?

A: Brian, thanks for the question. So in my comments, I specifically called out actually that we plan on using 40% of the HODL balance for yield generation, okay? And so if you extrapolate that based on a 4% return on the entire HODL balance, it's probably closer to 10%, which we believe is very reasonable and achievable, if not a number that we can exceed, at least based on the small sample size that we have in June. So in terms of the ramp, again, we're going to grow the team. We're going to grow the complexity and volume of those transactions, and we think we'll grow it within the next year, grow it [ 2% to ] 4% target within the next year.