Core Scientific, Inc./tx Q2 FY2024 earnings call

Key Milestones - Announced a contract with CoreWeave to lease a 16-megawatt data center in Austin for HPC hosting and delivered it over 30 days ahead of schedule, generating revenue in Q2. - Signed HPC hosting contracts with CoreWeave for a total of 382 megawatts with aggregate total potential revenue of $6.7 billion over 12 years. - Completed 72 megawatts of partially built infrastructure at Denton, Texas site, bringing total operational infrastructure to about 830 megawatts. - Began build-out of a partially completed 100-megawatt facility in Pecos, Texas. - Stock price appreciation led to elimination of $260 million in debt and ability to exercise warrants. - Signed an agreement with Block to procure 15 exahash of their new 3-nanometer ASIC chip. ### Financials - Total Q2 revenue was $141 million, including $5.5 million in HPC hosting revenue. - Gross profit was $39 million, up 5%, but operating income was $7 million, down 31%. - Adjusted EBITDA was $46 million, reflecting strong cash generation from core business. ### Balance Sheet - Ended Q2 with $96 million in cash and cash equivalents, up from $50 million at end of 2023. - Debt decreased by $56 million during Q2, and further decreased by $233.6 million due to mandatory conversion of secured convertible notes, leaving debt at $318 million. ### CapEx Plans - Plan to acquire 10,000 to 15,000 bitcoin miners in 2024, with CapEx ranging $13 million to $19 million. - Anticipate investing $13 million on 100-megawatt expansion of Pecos, Texas site. - HPC hosting contracts' CapEx funded by existing clients, not included in plan.

In the second quarter, total revenue was $141 million. Digital asset self-mining contributed $111 million in revenue with a 28% gross margin. Digital asset hosting generated $25 million in revenue with a 30% gross margin. HPC hosting brought in $5.5 million in revenue with an 11% gross margin. Gross profit was $39 million, operating income was $7 million, net loss was $804.9 million, and adjusted EBITDA was $46 million, which increased by 2% year-over-year.

Forward-Looking Statements - Expect 21.8 exahash self-mining hash rate in 2024. - Anticipate approximately 800 megawatts of total operational infrastructure, with variation due to HPC conversion and bitcoin mining power upsides. - Expect 16 megawatts of revenue-generating HPC hosting infrastructure in 2024. - Project average bitcoin mining fleet power price of $0.042 to $0.044 per kilowatt hour in 2024. - Aim to deliver HPC hosting infrastructure for first 200 megawatts in first half of 2025, next 70 megawatts in second half of 2025, and latest 112 megawatts in first half of 2026.

Risks - Potential slippage in HPC conversion timelines and associated execution risks. - Supply chain risks related to delivery of equipment like black well pods. - Market conditions and competition in the data center and bitcoin mining industries could impact execution of growth plans. - Credit and financing risks related to managing debt and accessing capital markets.

Q: Greg Lewis with BTIG asked about funding for site and source new locations for HPC or bitcoin mining and if there's an opportunity to use CoreWeave contracts to finance growth.

A: Adam Sullivan said the credit story is improving, focus is on site selection targeting 25 megawatts to a few hundred megawatts, and they plan to fund purchases from operational cash flow, balance sheet cash, and capital markets.

Q: Lucas Pipes with B. Riley Securities asked about competitive dynamics in HPC site selection and leverage.

A: Adam Sullivan said they compete with Equinix, Digital Realty, etc., focus on brownfield and greenfield opportunities, and on leverage, the objective is to balance risk and growth, with credit improving and no urgent need to change balance sheet immediately.

Q: Joe Flynn with Compass Point Research asked about remaining options for 112 megawatts of data center capacity and client diversification.

A: Adam Sullivan said they're in discussions with CoreWeave on finalizing designs for the 112 megawatts, and they're aggressively pursuing sites to diversify the client base.

Q: Brett Knoblauch with Cantor Fitzgerald asked about supply and demand imbalances for energy and location focus for HPC.

A: Adam Sullivan said the market is tight, they use similar criteria for HPC and bitcoin mining sites, and focus on low latency sites with optionality for training and inference.

Q: Joseph Vafi with Canaccord Genuity asked about learnings from Austin HPC facility and attractiveness of block 3-nanometer chips.

A: Adam Sullivan said they have familiarity with the Austin site, learned from new GPUs' cooling and latency requirements, and the 3-nanometer chips are attractive for lower CapEx and maintenance costs, and unique insight from operating multiple manufacturers' machines.

Q: Darren Aftahi with Roth Capital Partners asked about site selection sources and timeline slippage penalties.

A: Adam Sullivan said they work with local governments and utilities, and they share execution risk with CoreWeave, with no penalties but focus on ensuring supply chain.

Q: Rosemarie Sison with Odeon Capital asked about international expansion and team expertise.

A: Adam Sullivan said they're looking at international markets, and they've been able to attract talent due to their growth story.

Q: Kevin Dede with H.C. Wainwright asked about locations of HPC conversions and power requirements for additional contracts.

A: Adam Sullivan said they're working with utilities and existing relationships, and power required is about 1.35 to 1.4 POE above GPU megawatts.

Q: Jack Chan with Imperial Capital asked about contract structures for future customers.

A: Adam Sullivan said they're working through contract structures based on credit risk and contract length, using the CoreWeave deal as a starting point but expecting variations.

Q: Lucas Pipes with B. Riley Securities asked about ASDC locations on Slide 15.

A: Adam Sullivan said ASDCs are on a facility level, potentially across different facilities at specific sites.