Core Scientific, Inc. Q1 FY2024 earnings call

• Core Scientific operates the largest owned bitcoin mining infrastructure in terms of operating megawatts, with 745 megawatts of operational power and contracts for up to 1.2 gigawatts. • First quarter saw earning 2,825 bitcoin, generating $150 million in digital asset mining revenue and $29 million in hosting revenue, total revenue $179 million, up 49% year-over-year. • Gross margin was 43%, operating margin 31%, net income $211 million, adjusted EBITDA $88 million, up 118% year-over-year. • Continued to refresh self-mining fleet with new S21, completed deployment of 2.5 exahash in April, improving average miner efficiency. • Delivered 16-megawatt data center to CoreWeave 30 days ahead of schedule. • Plan to build out owned infrastructure, expand hashrate through fleet refresh, and leverage HPC hosting.

In the first quarter of Fiscal Year 2024, Core Scientific's total revenue was $179.3 million. The Digital Asset Mining segment generated $150 million in revenue, with a cost of revenue of $81.6 million, resulting in a gross margin of 46%. In the prior year's first quarter, Digital Asset Mining revenue was $98 million, cost of revenue was $72.7 million, and gross margin was 26%. The Hosting segment had revenue of $29.3 million in Q1 2024, with cost of revenue $20.1 million, giving a gross margin of 32%. In the prior year's corresponding period, Hosting revenue was $22.6 million, cost of revenue was $16.2 million, and gross margin was 28%.

• Expect average power cost in 2024 to be between $0.045 and $0.047 per kilowatt hour. • Anticipate purchasing additional miners in 2024 to complete refresh and achieve 21.8 exahash self-mining hashrate goal. • Aim to energize 72 megawatts in Denton by end of fiscal second quarter. • Target Tier 1 HPC hosting revenue of $1.4 million to $1.6 million per megawatt per year with gross margin of 75% to 80%.

• Market volatility in bitcoin pricing. • Potential increase in U.S. power prices. • Competition from scale miners investing in CapEx to increase hashrates. • Dependence on successful execution of HPC hosting strategy.

Q: On the HPC front, what kind of customers are you currently having conversations with?

A: Our target base right now is mainly around large tech companies with a focus on AI, where the demands are for application-specific infrastructure and having prepaid revenue as part of the contract.

Q: Why haven't we seen M&A yet in the industry?

A: Morgan Stanley report highlights the 36-month lead time for traditional data centers, and data center capacity is set to double in 6 years. We're in early stages, and traditional data centers are trying to find ways to bring power online more quickly, but we're focused on executing our growth plan.

Q: At what point would you consider developing fresh megawatts to address the HPC market versus conversion?

A: We're in a unique position with infrastructure supporting both. Focus is on customers able to prepay for CapEx. Allocation of capital depends on month-by-month, quarter-by-quarter basis. Bitcoin mining is the platform to expand into new markets.

Q: Could we take a step back and think about retiring debt given cash generation and favorable mining economics?

A: We believe it's better to put capital towards growth than paying down debt at this point, as we focus on continuing to fund the growth of the business.

Q: On the HPC, curious to know if potential clients reached out to you directly or did you reach out to them?

A: It's a mix of both. People recognize our platform, locations, and experienced team. Our goal is to repurpose about 500 megawatts to HPC and will update the market as negotiations evolve.