Cleanspark Inc Aktie

Good afternoon. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome everyone to CleanSpark's Second Quarter 2026 Financial Results Conference Call. [Operator Instructions].

Harry, you may begin your conference.

Thanks, Christa, and thank you for joining us today to review the second quarter 2026 financial results for CleanSpark. We encourage you to review our earnings results press release, which was filed today and is available on our website. A webcast replay and transcript of today's call will be added to our website as well once available.

On the call today, I'm joined by Matthew Schultz, our Chairman and Chief Executive Officer; and Gary Vecchiarelli, our President and Chief Financial Officer. Some of the statements we make today will be forward looking 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 10-K. 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 introduce Matt Schultz.

Thank you, Harry, and thank you, everyone, for joining us this afternoon. This quarter represents continued meaningful progress in CleanSpark's evolution into a digital infrastructure and data center development company. One that utilizes our heritage as energy native builds on the strength of our mining operations and ultimately expands the set of opportunities our portfolio can support.

I'm going to take a few minutes to share what we are seeing in the market, how that informs our higher-level strategy and then provide an update on Sandersville and the unique opportunity it represents as well as our broader portfolio. We are in the midst of a technology wave similar to the personal computer, the Internet, mobile phones and cloud computing.

Except in this case, it has a larger potential total addressable market and an outsized impact on the infrastructure layer required to power it. AI is different because it is compute denominated and compute is a function of access to energy and data center infrastructure. We've all watched the hyperscalers guide to higher CapEx this year and the central question was if those investments would have a return profile sufficient to justify them. The revenues reported for the AI labs and the cloud service providers are proving this now in real time. The commercial landscape for AI is converging across hyperscalers, chip manufacturers, Neo-clouds and the AI labs themselves.

Demand for compute continues to grow, but real-world constraints challenge their ability to secure what is required to continue scaling. Power and infrastructure are at the heart of the supply squeeze. Grids are rapidly adjusting in conjunction with their largest customers to meet the moment and deliver capacity for data centers. while maintaining service reliability and price stability for households and businesses. That dynamic aligns directly with how we built CleanSpark. We spend years operating dynamic, energy-intensive infrastructure.

At a high level, there are 4 key activities that enabled our evolution into a large-scale digital infrastructure business. These are in various stages of completion, but cover the full scope of our activities. First is land and power. This has been the core of the business for years. We have cultivated a range of key relationships across the country that propelled our growth to 1.8 gigawatts of currently contracted capacity and we'll continue driving fundamental value as we add high-quality assets and projects to our portfolio.

We are always striving to enhance or expand existing sites. I can probably share that we added 25 megawatts of contracted capacity to one of our Metro Atlanta locations just last month, making the existing footprint more attractive for HPC utilization.

In keeping with our conservative and transparent approach. All of the megawatts are fully contracted and approved, and they do not include our multi-gigawatt growth pipeline or potential expansions at our existing facilities that we're pursuing.

Second is commercialization. We're focused on long duration leases with high-quality tenants as our priority. But as the landscape for compute evolves, we will always stay nimble and aggressive. One important shift we are seeing prospective tenants engage with us on a portfolio basis. rather than just a single site. This is reflective of their demand for capacity and of our large diverse set of assets.

Third is financing. Gary will share more detail on our capital strategy, but the markets are constructive, and we have a range of attractive options across the entire project life cycle. And finally, construction delivery. We've spent a significant amount of time building out the internal talent and key relationships required to deliver projects on time and on budget. We are setting up the supply chain to create repeatable processes allowing us to rapidly scale up and scale out.

Importantly, this includes working with suppliers that have manufacturing and fabrication processes that can reduce on-site labor by up to 70%. And by moving production out of the field and into the factory. This business transformation is the largest endeavor CleanSpark has ever embarked on. It pulls on the threads that made us a market leader in energy development and management and also the discipline and operational excellence that propelled us to become the largest domestic producer of hash rate. And now we have the pieces in place to execute on building the AI factories that are required for the intelligence age.

As we actioned our go-to-market efforts for the portfolio, Sandersville was the natural starting point given that all 250 megawatts are live. We have a rock solid community relationship. And in January, we closed on an additional 122-acre parcel necessary to support full greenfield data center build. In marketing the site, we received a range of indications of interest with several coming from high credit quality tenants.

Among those, we are progressing with a lead prospective tenant. We understand their engineering requirements and their basis of design. In parallel, we have been negotiating the commercial relationship and the associated suite of contracts. While the process is complex, we're encouraged by the progress and confident that we can offer a compelling solution to their significant data center needs.

Ultimately, we know how valuable Sandersville is in this environment, and we're committed to providing the right shareholder value through its monetization while also building a relationship with this tenant that can extend far beyond Georgia. Our approach to counterparty selection is disciplined and prioritizes long-term risk-adjusted equity value creation. We are thinking about the potential multi-decade relationships and how to best deliver over those type of time horizons.

At the heart of everything we've done in Sandersville is a commitment to win-win outcomes. That meant a power arrangement that protected residents on reliability and affordability while securing the volume and pricing we needed. It meant adding substantially to the local tax base. It meant hiring full-time staff and contractors locally and it meant showing up, use sports, holiday events and local business patronage.

When you put down roots in the American Heartland, you joined those communities roll up your sleeves and you contribute. Our community focus is why the acquisition of the additional acreage was seamless. The local economic development authority knows what CleanSpark has built over several years and they have confidence in what comes next. We are working to replicate this model everywhere we operate. It is the right way to build infrastructure in this country because it creates structural advantages that protect and accelerate our projects for the long term.

Looking beyond Sandersville, the same principles apply across the portfolio. We are building a platform, not a single -- strategy. On our last call, I described the formation of what we see at the Houston area infrastructure hub. [ Sealy ] and Brazoria together represent nearly 900 megawatts of current potential utility capacity, strategically selected to support multiphase AI campus deployments. Sealy has 285 megawatts approved with just over 200 megawatts scheduled to come to energize in the first half of 2027. Substation construction is already underway. We have strong visibility into the energization time line and are running a parallel commercialization process.

Brazoria has 600 megawatts in 2 phases. ERCOT approval is already in hand for the first 300 megawatts, a meaningful milestone that reflects the scale of the opportunity and the coordination required to advance projects in the market. The second 300 megawatts is progressing through review, and we look forward to growing across the region.

I also want to highlight a capacity -- a capability, excuse me, that has continued to differentiate us in tenant conversations. Our ability to expand within established grid relationships. Historically, we increased at Sandersville and Washington, more recently, we added 25 megawatts to our Metro Atlanta footprint. When a prospective tenant asks what the growth path looks like, we can show them a real track record of unlocking additional scale.

We see significant expansion opportunities at several sites throughout our portfolio. Across the broader land and power portfolio, we hold 1.8 gigawatts of currently contracted capacity. Not every site will transition to HPC, and that is not the goal. The goal is optionality, aligning the right assets with the right opportunities as demand evolves, with discipline around capital allocation and shareholder returns always at the center of the analysis. Access to grid connect power at scale remains scarce, and we believe it will remain so.

The ability to find contract and develop that power is what we spent years building, and that is exactly what is most necessary to meet the market's relentless demand. As always, none of this is possible without our world-class teams working tirelessly to push the business forward. Their grit and their talent continues to inspire me every day.

And with that, I'll turn it over to Gary to walk through the numbers. Gary?

Thank you, Matt, and good afternoon, everyone. Before diving into the numbers, I'm going to briefly cover the role that mining continues to play in our operations. and how we see its evolving role in our strategy. Mining remains foundational to our business. It generates the cash flow that allows us to develop our platform deliberately. It provides operational flexibility, and it continues to give us a strategic advantage when competing for power in grid-constrained environments.

Our thesis has remained the same for years now, energy production is not coming online fast enough and our infrastructure first approach to building our almost 2 gigawatt portfolio is reflective of that strategy.

As we expand into AI and HPC, we are building on mining, not moving away from it. Both businesses share the same foundation, power, land and operations. Mining funds the platform, AI monetizes it. Together, they create a more balanced, durable business. And as we evolve, mining is the engine that funds our future growth.

Turning to the numbers. The average Bitcoin price in Q2 was approximately $76,000, which was a 24% difference from the prior quarter where the average Bitcoin price was $100,000. For the quarter, our revenue decrease compared to the immediately preceding first quarter by approximately $45 million or 25%, directly attributable to the decrease in Bitcoin price.

During the quarter, we mined 1,799 Bitcoin, which was only 22 Bitcoin less than the prior quarter, indicating network hash rate growth has flattened while our operations team has maintained its industry-leading uptime. Despite the lower revenues, we maintained a healthy gross margin of over 40% for the quarter compared to 47% for the previous quarter.

Power prices were more favorable this quarter at [ $0.052 ] per kilowatt hour compared to [ $0.056 ]. Best-in-class team continues to execute and deliver regardless of the market climate. This quarter, we recognized a net loss of approximately $378 million, which was flat compared to the net loss in the prior quarter of the same amount. The current quarter's net loss, it is important to note that it includes unfavorable noncash charges of approximately $263 million related to GAAP mark-to-market adjustments on Bitcoin balances. Our adjusted EBITDA was negative $241 million compared to negative $295 million last quarter. which is indicative of the significant drop from the Bitcoin highs of approximately $126,000 in early Q1.

Turning our attention to the performance of the second quarter versus the same quarter last year. revenues declined approximately $45 million or 25% to $136 million. Our Bitcoin production for the current quarter decreased approximately 7% year-over-year due to difficulty but we saw lower power prices of [ $0.052 ] per kilowatt hour compared to [ $0.06 ] in the same period last year, which helped margins in this lower Bitcoin in price environment.

Net income decreased year-over-year by approximately $240 million, which was almost entirely due to noncash mark-to-market adjustments. I will also point out that the average Bitcoin price in the same quarter last year was higher at approximately 94,000 and our hotel balance increased by almost 1,700 Bitcoin year-over-year, which further amplified the mark-to-market adjustment.

As of the March 31 balance sheet date, our liquidity remains strong with almost $1.2 billion of liquidity. So we had $260 million in cash and 13,561 Bitcoin were $925 million. It is worth noting that as bitcoin prices have started to recover since quarter end, the value of our had alone sits at approximately $1.1 billion as of today. Additionally, we have the entire $400 million capacity on our Bitcoin back lines of credit available to us.

The strength of our balance sheet is a key feature for CleanSpark as with sufficient capital to acquire land power while also preparing our sites for long-term tenancy. We've always taken a disciplined approach to capital stewardship. As demonstrated by the significant reduction in our share count over the last 18 months. This evolution into AI and HPC infrastructure development is exciting because it opens the door to long-term predictable and high-margin cash flows along with access to capital at much lower costs than we have seen historically in the mining business.

You have heard us use the word optionality in our prior calls, and that approach has not changed. We have designed our capital strategy to be flexible in order to take advantage of real-time opportunities in the marketplace. Multiple instruments are available for us to finance either CapEx for high credit quality tenant AI site builds or acquisition of new land and power sites. We believe we have a fundamental second-mover advantage.

For example, over the last year pricing and terms have become significantly more favorable for data center landlords. Recent financings have been priced constructively with investor demand far in excess of the offerings. Recent deals have been oversubscribed as much as 5 to 6x.

Additionally, several of these deals have priced at slightly over 6%. This is a large reason why counterparty selection is so important and why we are taking a disciplined approach to commercialization.

Next, I'd like to provide an update on our digital asset management activities, where we continue to lead and innovate in the monetization of our Bitcoin huddle balance. While Bitcoin and markets broadly experienced elevated volatility and a significant drawdown during the quarter, we were still able to drive net positive cash returns of approximately $4 million, bringing the total cash generated from -- equities to $17.2 million for the fiscal year-to-date.

I would note that these numbers are being generated while we are only activating less than 40% for Bitcoin and DM strategies. While overall cash returns were lower this quarter, we view this as validation that our approach has durability across different market environments. The considerations here: Foremost, we generated a yield on our Bitcoin balance in a down market.

Second, our active risk management and approach to trade execution allowed us to be nimble, flexible and aggressive in managing downside risk. I would also note that the investments we are making in people, process and technology and the dam team will further enhance our capabilities and drive returns going forward.

And lastly, the data and experience that we are capturing each day are enabling continued innovation across our institutional great desk. We have proven our dam strategy to produce meaningful cash flow to supplement our mining operations. During this last quarter, we saw elevated volatility in a much lower Bitcoin in price, which, while challenging, proved that our institutional grade 24/7 desk was able to both manage risk and monetize the volatility. The actions taken this past quarter will further help us refine our trade execution and risk management. And since quarter end, we have seen a resumption of returns similar to those we experienced in the first quarter.

With that, I will hand it back to Harry to lead us into Q&A.

Thanks, Gary. We'll now open the floor to questions from the analyst community. Operator, please provide instructions and manage the Q&A for the Q&A session.

[Operator Instructions]. And your first question comes from Nick Giles with B. Riley Securities.

Just thinking about your portfolio, Sandersville, Brazoria sale, those seem to be the obvious targets, but when you zoom out, which other assets could be converted that you one stop might only be for a Bitcoin. And how much expansion potential do those sites have?

Thanks for the question, Nick. This is Matt. Within our portfolio, we have a number of sites. And what we talked about was when we started Washington -- or excuse me, College Park. We have 5 megawatts of capacity. We expanded that to 50. When we started Washington, we had 36, it's now 86. We've done that. We've duplicated that process across the portfolio. So we have some phenomenal assets. Washington probably is the next highest probability in the pecking order. It's got 86 megawatts energized capacity right now but we're in the process of completing a line study with significant expansion possibility.

Additionally, we acquired 60 megawatts of capacity in Jackson, Tennessee. That also looks very promising for AI development. And last but not least, we have 110 megawatts in Cheyenne, Wyoming, and we're fence-line neighbors with another hyperscaler. So there's tremendous opportunities to convert that from an interruptible load to a firm load to accommodate the needs of potential data center clients.

Super helpful, Matt. I appreciate that. Maybe just as a follow-up. Can you just speak to how much capital you've deployed to date at Sandersville? And then what's really the threshold, the amount of capital that you're willing to deploy at any given site before lease signing?

Yes. This is Gary. I'll take that question. So we've deployed a couple of hundred million dollars, which includes the miners. And while we may be subject to some impairment like some of our peers are once we convert to AI, that's simply going to be a book adjustment. We feel pretty confident that we'll be able to move those some of that infrastructure and miners elsewhere. But until AI is up and energized, we're going to be able to monetize those megawatts at that point.

But right now, the amount that we're actually investing in the site is minimal. As you know, we acquired some additional acreage adjacent to the current Sandersville site. And really what we're doing is we're clearing those trees and moving some dirt but we're talking millions, not tens of millions of dollars that we're doing because we want to make sure that we have a lease sign before we deploy significant amounts of capital.

Your next in comes from the line of Greg Lewis with BTIG.

Matt, I was hoping you could elaborate more on the comment you made around I guess, some of the conversations are around multi an agreement or potential multi-site deployment with maybe 1 tenant. Just kind of as we think about that, is that like broad strokes in terms of the first deployment maybe to the next deployment, is there kind of a target range of power. These potential tenants they're looking for? Any kind of comments around elaborating on that, I think, would be helpful.

Yes, Greg, good to hear from you. Sounds like you're fighting the same cold I am. So I'll tell you how it got to be really interesting. Obviously, we're -- we consider ourselves to be pretty experienced in land and power. But when it comes to fit up and fit out of the data centers, obviously, there are third-party vendors that provide a significant portion of that build-out.

And what we talked about in our comments was that 60% to 70% of the data center build that we're contemplating takes place in a factory. So it short-circuits the time to market, but it also decreases the on-site the specific build. Well, in meeting with some of those vendors, they obviously have strong working relationships with the hyperscale tenants. And as a result, they understand the demand for capacity.

So it's through some of those relationships that the introductions have been made to potentially deploy a portfolio approach where we can meet the needs of a single tenant that has requirements across a diversity of geography. So we have some low latency opportunities, and then we have larger scale opportunities. And what we found is that there are single tenants that require many of those characteristics.

So while it's still early, I can tell you those conversations have been very fruitful.

Okay. Great. And then my other question was around future Power acquisition. And clearly, you already have a lot of power that we can deploy to kind of build out the APC business, but also accentuate the Bitcoin mining business. But as we sit here and I guess, what May 2026, I guess how is the company thinking about incremental power acquisitions?

So that's a fantastic question. And I want to be really clear about the way we disclose this. The 1.8 gigawatts is power that's approved and contracted and available. when we sat down earlier this year with our leadership team, and we designed OKRs, kind of a strategy for accountability going forward. we talked about the pipeline. And in our pipeline, there's greater than 5 gigawatts of capacity beyond what we shared on the call. However, that's speculative or potential. So I think there are a lot of companies that disclose maybe capacity that they've had discussions about.

We've had many of those same discussions. We're in meaningful conversations about significant additional power but we're very careful and the number that we disclose is restricted only to what is already contracted. So I would say that the future is pretty bright for us.

Everybody has seen the political headwinds on data centers. And so one of the positive comments that we received as we've put these sites available to the market is that we have manageable amounts of power and meaningful amounts of land in different jurisdictions. So it doesn't create like what we've seen with Mr. Wonderful proposed site of 9 gigawatts and whatever the case may be. It's caught some tremendous political headwinds just based on scale. So being disciplined and have a bite-sized approach with communities and utilities that actually want us there, based on prior experience with us, it's created some interesting tailwinds.

Your next question comes from the line of John Todaro with Needham & Company.

Congrats on the quarter. Matt, you mentioned earlier, progressing with a lead perspective, Tenet. Just wondering if we could get a little bit more on it. Is it still kind of the advanced conversations that was framed before as an IG hyperscale? Or is that the right way to think about it? Or has that evolved at all? And then I have a follow-up.

I think that's pretty consistent. We don't have another update beyond that, but our conversations remain consistent with the first tenants that we've been talking on.

Okay. Understood. And then I guess, just a housekeeping item, maybe for Gary, on Bitcoin mining and the hash rate, just kind of as we think about more site portfolio going towards HPC, just any kind of range we should think about on a cash rate moving forward?

Yes. Great question. So as I mentioned in my comments, look, Bitcoin mining is really our functional currency going forward, and that's what's going to pay the bills until we get a stabilized lease and I think that that's one of the benefits of having a very large fleet at scale with one of the most efficient fleets at least of the public miners or in North America. And we did see through our -- the last contracted commitment with Bitmain. And so we have some immersion miners that have landed that we're going to be deploying at various sites. And the great thing there is that, that's going to drop our efficiency even more from the 16 jewels terahash that were currently posting, which will increase margins.

And the best part is these are going to be in emergent pods that we can then up and move as part of our AI strategy. So you'll see the hash rates start to tick up. I mean, our Bitcoin production has broken 23 just recently. So obviously, some of that's going to depend on Bitcoin difficulties, network difficulty and Bitcoin price, but you'll probably start to see this trend to 55 through the end of the year.

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

Matt, maybe just on the tenant conversations and the maybe evolution of this portfolio approach. Is that the same tenant who was looking at Sandersville, who is also looking at maybe some of the other sites? And does this portfolio approach potential maybe push back when the first lease signing could be? Or do you think it doesn't change the timing from your lens?

No, I don't -- Brett, first of all, thanks for the question. It was good to connect with you at the Bitcoin conference. So it doesn't change the timing whatsoever. The assets are -- they have value individually and independent of one another. I think for us, first prize is having the right credit quality tenant that has interest across the portfolio. So it doesn't change timing. I feel really good about where we are in the cadence we've had to date. And I think the portfolio approach is more frosting on the cake.

Understood. And then, Gary, on the Bitcoin side, would you guys be looking at maybe co-locating Bitcoin mining with AI? Is that something that you've discussed with tenants? Or do you think every site is either going to be bifurcated between its AI or it's just when Bitcoin mining?

Yes. Look, I think -- we think there were innovators in the space when it comes to pairing both AI with Bitcoin Mining. And in my comments, I'm not sure if you caught what I said exactly, but I think that the Bighorn mining is actually going to allow us to land new land and power opportunities because we'll be able to monetize that energy near to 100% of that base load. So we are having conversations, and I think you can expect different flavors of AI and AI and Bitcoin mining. One of the ones that we're really looking forward to is builds right now are 18-plus months right now for AI or HPC. And if the site is energized, we can pop down some mining pods and actually monetize that energy while we're waiting for the AI side to be built.

So again, there's different flavors that this will come. And I think that because it's rather innovative and new to the market, it's going to take time and education for all parties, but it's part of our strategy, and we think it's pretty viable.

And maybe just to add a little flavor on that, Brett. We have a lot from our Bitcoin mining days. And the patent basically says that the control module has the ability to make a decision if and when to distribute power to a requesting module. So back when we were in the microgrid business, we had a controller that would allocate power as requested based on a number of criteria. So the idea is that with many of these data center loads, the peak POE, as an example, on Sandersville, the discussion surround that, the peak POE for the tenant would be in that 1.4 range. The average annual POE would be around 1.15. So that leaves a significant amount of megawatts available 93-plus percent of the year. So the challenge then becomes for the utility to have that power available to meet the [ Five9 ] requirement for a hyperscale tenant, what do they do with those non-monetized megawatts.

So the conversations that we've had contemplate utilizing Bitcoin mining to make sure they meet the minimum utilization thresholds to ensure the pricing that's so important for the hyperscale tenants but also having the ability to mine Bitcoin profitably. And even in some instances potentially subsidized using that spare capacity. So it's early in the discussion yet but it really creates a win-win scenario. So the utility doesn't have on-demand available yet underutilized power. They still have the ability to monetize that to create the revenues to invest in future CapEx. So it's a hybrid approach, but we're really excited about what the potential looks like.

Your next question comes from the line of Paul Golding with Macquarie Capital.

Just wanted to ask around the incremental capacity under review at Brazoria 300 megawatts. I was just hoping you could give some detail around how that review process is going and maybe as a foretelling of how markets may look over time in terms of incremental power acquisition you may be able to do? Is the market tightening here? Is the review process fairly stringent and scrutinizing this capacity. How should we think about this review process and the current sort of pipeline of interconnect capacity and the availability of powered land or, I should say, lack thereof impacting power land banking going forward in your view for your portfolio?

So I think that the most important piece in all of this is that our process by which we achieve contracted power, approved power starts during our site evaluation and M&A process. We have a team that has done this very, very many times across a diversity of markets. And I think we've been able to build a reputation for being an incredibly strong deal partner in the acquisition of Powered Land assets.

So the ability to work with the approval bodies, whether that's a cluster study or something else, that all begins early on in the acquisition process actually. It's a function of our diligence. It's a function of the way that we engage cross functionally throughout the full stack of not only the utility but also the regulatory body as well as the land owner as well as the adjacent parcels, should we need additional capacity as well.

So how does that relate exactly to Brazoria is that we came into that process with a very clear understanding of the Greater Houston market because if you remember, we closed on our Sealy asset just 60 days prior to that. And so we've already been in market with our -- we've already been in market with CenterPoint. We understood the nuances, the zoning, the planning, et cetera. And so we came in from a position of tremendous strength of that conversation. It's why we were able to strike such a constructive deal there. It's also why we were able to close on the 300 at the full approval status with the second 300 in a deeply progressed posture. And so ultimately, our sense of it from CenterPoint from ERCOT is that we're living in at 0 territory for the additional component, but it also signals this track record that we have, which is that we enter a market, we land there, and then we rapidly expand there.

It was the same playbook in Georgia, obviously, a very different power market, same in Tennessee, about is different from ERCOT as you can get with a fully federally regulated utility there. And now you're seeing us do that in ERCOT in the Greater Houston area. And we didn't just trip on land in the Greater Houston area for no reason. It was about the transmission availability there as well as the range of utility sophistication that we're excited to grow with.

I was also hoping that you might be able to comment on maybe incremental acreage you would need to acquire at any other sites as you think about the spec that's unfolding for Sandersville, you did the incremental acreage acquisition there. Are there -- are you looking at your portfolio right now and thinking about that spec as a blueprint for additional land you may need to acquire at other sites. And is that filtering out some of the sites from an HPC viability perspective?

Thanks, Paul, and great question. I want to tackle it in pieces by region. So in Texas, the land parcels that we've acquired as part of the Power acquisition are sufficient to build the AI campuses that we've contemplated. That's the benefit of going in on a purpose-built kind of acquisition trajectory as we did in that market. I think Sandersville looks different because we were able to land 250 megawatts of mining on 50-acre parcel, whereas the data halls and the adjacent required mechanical, electrical and plumbing are going to be a much larger physical footprint. So that's why we took down that additional acreage.

I think what's great about the way -- and you'll hear this from us many, many times is that community relationships are business tool as well as doing the right thing. And so because we've built the community relationships that we have, the ability to acquire additional land where necessary is something that is very kind of fertile ground for us and very low friction.

But ultimately, we're going to evaluate this on a site-by-site basis. I think we have sites today where there is sufficient land. I think there are others where we're going to look to get a little bit more elbow room in order to take down a full HPC deployment. But ultimately, what's important is that we have the real estate shops and the development jobs to enable to be -- in order to be able to do that in a seamless way.

And Paul, this is Matt. Just to give you a little bit of color on how that works. When we met with the Economic Development Director in Sandersville and told them what we were contemplating doing. Not only did they assist us in securing the 122 additional acres. It's not a fence line neighbor parcel. It's driver 9 -- iron away. So they then assisted us in negotiation a right of way for the easement to pull the power across.

So we still have the ability to mine Bitcoin up until the day we cut it over and then we can mine it in conjunction. But the reason that, that's important is this was the city taking the initiative to ensure that our requirements were met, and they were excited to do so based on our history. And that's consistent across our portfolio. There have been times that we show up at a little town in Tennessee or a little town in Georgia, and wearing a CleanSpark Gulf shirt, I can't pay for a cup of coffee because folks are happy about us being there, and they're excited with what we've created. So it's a wildly differentiated approach to what you're seeing in the media.

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

So earlier, you likened the AI data center build out to that of personal computing. I guess we're still in the very early stages. Maybe can you just articulate your vision for CleanSpark in, say, 2030 a few years down the road once you went up to start out on this or rather embark on the build-out?

Brian, I think what's important to understand about where AI build-outs are happening and I really differentiate it from sort of the dark fiber wave of the Internet is that, that was a opportunistic speculative build out where the fiber was laid because you were digging the trench one time, it made more sense to delay 50 strands, not 5 strands. And ultimately, the users at the other end of those strands just weren't there yet.

Not because the Internet wasn't going to become a valuable tool, but because there was a distribution curve that the Internet had to go through to get the economic purchase power into enough hands to make it the globally transformative technological platform than it is today. AI is building on the shoulders of giants because we're all walking around with laptops and mobile phones, we're all walking around with connectivity in our houses and in our cars. And so because the distribution rails were built 30 years ago, AI is able to proliferate across the user base at a much, much more accelerated fashion than with prior computing waves that were fundamentally hardware-enabled.

And so how does that read through to our portfolio and our vision for the business is that every megawatt that can be economically pushed into an intelligence posture is likely going to be over time. And so -- what does that mean in the short term? It means that we don't have enough electrons. And so the electrons that are available to be built out into infrastructure environments that are going to be very rapidly and are going to be done through a very aggressively bid process by which those tokens can get into the hands that they can do the most economic good for the most people.

And so that means, 10, 20, 50 megawatt sites out of the gate, if you look back to 2022 and '23 and then 250-plus megawatts sites, if you look '22 to today, and it's going to look like gigawatt campuses if you look out into the future. And so what's important to note is that just because the gigawatt campuses today are providing tremendous economic value.

The 250s are still producing. The 50s are still producing. The 10s are still producing across the entire spectrum of these deployed token factory environments. And so what's the next phase for this? It's going to be continued proliferation and distribution of intelligence as a fundamental economic good. And so our job in the midst of all of this is to make sure that the communities that didn't benefit from the proliferation of the smartphone and the Internet are not going to get left behind in this AI technology wave. These are the places where infrastructure is going to fundamentally change the lives of hundreds of thousands of people.

And if we can be the developer who can bring and distribute that, we're going to, we're going to do that on behalf of the places where we work and on behalf of the shareholders who supported us.

And Brian, I want to apologize for Harry's lack of enthusiasm there. One thing to note, there's a study called rethinking load growth that Duke University published. And what it discussed is the fact that as of today, right now, in the 22 largest power grids in the nation, there's between 76 and 125 gigawatts of headroom, and that is unlocked and available if it's able to be curtailed between 0.5% and 1.5% of the time.

So we hear all this about the grid is overtaxed, it's overcapacity, it's overstressed, it's overstrained. But in reality, there's 100 gigawatts of headroom that if you can curtail 115 hours a year, you really unlock that capacity. So what we found is by working in some of these smaller jurisdictions, and by discussing the ability to add Bitcoin mining, which is a rapidly interruptible load to that factor, it really changes the way that these discussions open up. So we're excited about not only the gigawatt campuses and the 250-megawatt campuses that we're working toward deployment. We're also very excited about the 20s and 50s and 60s that we have. In fact, to not go too far down the rabbit hole, we've had conversations with tenants that have specifically asked how much can I buy 60 megawatts or above between now and 2027.

So the demand is everything you have as fast as you can get it. And for us, it's become more of a sorting process to ensure that financial capability of the offtake and the financeability of the project as well as in scope.

Your next question comes from the line of Mike Colonnese with H.C. Wainwright.

First one for me. It sounds like you will be taking a pretty unique approach to data center construction with your vendor relationships and strategy here. What do you think your estimated data center deployment time lines could be once you signed your first lease and the associated expected CapEx cost per megawatt for these builds. It sounds like you guys might have a bit of an edge here. Just want to get some more information around that.

Thanks, Mike. And you'll get tired of us telling you that we're conservative in everything that we do and say, but ultimately, what we think from a build and deployment perspective is that from lease signing, you're really looking in the 14 to 18-month range for delivery. That's a function of first data hall versus last data hall. It's a function of project size and some of those pieces. But ultimately, what we're looking to do is be conservative and deliver aggressively on time and on budget out of the gate and then over time, be able to smooth and innovate across supply chain and delivery such that we're able to compress those time lines project by project because like we saw with our Bitcoin mining deployment learning curve, we were able to get a lot better by the end build, not the first build. And so we expect to be able to integrate those similar type of learnings and innovations into our deployment for this as well.

Got it. And is there any CapEx advantage using this more modular sort of factory-based data center construction approach? Or is it pretty much in line with what you've seen in other builds?

Yes. I think that these are going to be really in line from a build and deploy perspective. But what we're looking to be able to do is create an offering that's going to have the best total cost of ownership for the client over multiple refresh cycles. So there's a component of this that's fundamentally grounded in future proofing because we want to be able to meet their needs as effectively as possible. that means delivering that total cost of ownership differential, not just when they put their first GPU in, but when they refresh it again and refresh it again.

Very helpful. And second one for me. When we look at GPU ownership versus colocation opportunities, would you guys still consider pursuing GPU cloud service opportunities out there based on current economics and implied return profiles. And if that's the case, which assets in the portfolio make the most sense for you to own your own GPU versus going the colocation rev?

Yes. Look, I think that if you rewound the clock 4 or 5 years, when first [ 100 ] hit the market, nobody would have thought that they'd be renting for the prices that they're renting at today. And so that is a hugely positive sign, not only for the GPU as a service business model, but for the overall health in the demand profile for AI compute as an overall sector.

But ultimately for us, what we want to do is be able to come to market with the very high stability, high margin and long duration cash flows that colocation and tenant relationships are able to deliver. We're never going to be in the business of saying never say never. But ultimately, what we want to do is be able to put 1 foot in front of the other, look at the projects and the opportunities directly in front of us. execute aggressively against those, and then we can turn our focus to other opportunities that are further out the curve, but we have to deliver first.

Your next question comes from the line of Matthew Galinko with Maxim Group.

Firstly, how do you manage, I guess, multi-site risk across your portfolio? Or I guess, in other words, would you be comfortable with the single tenant saturating your pipeline? Or would you look to have kind of multiple of these multisite agreements? I appreciate that question.

Thank you. This is Matt. I think it really depends on the credit quality of the tenant. We've -- throughout this process, we've had a tremendous amount of inbound inquiry. And so you have to consider if we do a Neo-cloud deal, we can print a higher rent figure. But it requires a wrapper, and oftentimes, the wrapper comes at the cost and many times, it includes a significant scrape of equity. So as we look at this, it really just comes down to balancing the credit quality and risk with the ultimate value or the cost long term for our shareholders.

So I wouldn't say that we have a an aversion to concentration risk if it's the right $1 trillion tenant. But I would say that it really is on a case-by-case basis. We certainly don't want overexposure to a Neo-cloud and end up having to print a tremendous amount of warrants just to get the deal financed.

Great. All right. That makes sense. And as my follow-up, I think you mentioned in the script that you'd be able to relocate some of the Sandersville fleet on conversion. Are you looking to retire some of the fleet there? Or is it a lack of space elsewhere? I'm just curious how you envision that moving?

Matt, it's Gary. Yes, so we have XPs and the most recent S21 there in addition to the newest immersion miners. So I think naturally, as time goes on, we will retire some of those ASICs, but we'll just do what we've always done and rather than just wait for them to completely die. We'll look to monetize those while they still have some useful economic life. But ultimately, I think that I just refer to my comments about optionality and flexibility, like we can be very responsive to the market, right? If Bitcoin goes to $125,000 tomorrow, XPs are probably going to see a spike in price per terawatt or terahash areas, and we could probably move some of those and we might be opportunistic.

But ultimately, our team is evaluating in real time what the best use of those mining assets in ASICs are, including which sites to have them at. And so I think it's just going to be an ongoing part of the operations that you've seen from us over the past couple of years.

Your next question comes from the line of Jon Hickman with Ladenburg.

I'm not sure who wants to answer this question, but I'm a little confused about the ability to provide 0.95 power for and still meet the needs of a community that is used to getting all the power they want whenever you need to turn offer on your bitcoin money. How do you balance that out?

Thanks, John. So ultimately, what's great is that we work hand in glove with the utilities and the communities as we go through a transition phase for some of the power contracts that are going to go through that. I think Sandersville is really the place to start with that.

The utility goes -- thinking through how the power is procured in Georgia, utility goes out to market and procures the power over duration directly for the contracted demand that we represent at that location. And so by moving into that method of procurement, they've mitigated the community risk for any pass back of that because they're essentially procuring that power on the open market, knowing exactly where it's going to get landed, which is with us.

And on other side of the fence, we have a capacity factor obligation under that because we agree to consume a certain percentage of uptime underneath that power. And so because of the way that they go out to market and because of the way that we agree to consume on behalf of our tenant, there is no pass back into the community as it relates to that type of contract migration.

What's great about Texas is that the regulated market in ERCOT doesn't contemplate that type of interruption or expectation of interruption in the market it large. And so we went to that market explicitly for the purpose of building large-scale AI data center campuses because we know that the power market there is more than able to support it, and the tenant community is obviously very constructive about growing their footprint there as well.

So I think in Georgia, it looks a little bit different than it does in Texas, but the net result is that we're able to provide that very firm and high uptime to the tenant, and we're able to source that power in a way that is low impact to the community and the infrastructure.

So the community in Sandersville that's used to this bitcoin mining operation, they're going to be okay as you turn it into HPC? They're incredibly supportive of our business evolution.

your next question comes from the line of Michael Grondahl with Northland Securities.

just wanted to get an update on how demand has kind of evolved for some of your smaller sites. And kind of where does that demand sit today?

Yes, I appreciate the question, Mike. I can tell you, we had a standup call today with the Neo-cloud Company and their ask was, show me all your sites that have 60 megawatts of power or more available today or in the short term. So the demand is going nowhere but up. In fact, during that call, they commented that they're aggressively seeking 8 gigawatts of capacity. So we're seeing the 500 megawatts or 1 gigawatt minimum thresholds really start to drop because of a couple of factors.

First and foremost, a lot of those mega sites that are grid connected are years away or already under discussion or leasing. Secondly, there's a real risk attributed to behind-the-meter power generation. So many of the companies that have made behind-the-meter gas decisions are facing energization delays or utility costs that are double or triple what we're seeing for grid connected sites.

Now I think that there were some constructive conversations that took place at the White House with hyperscalers agreeing to generate additional power and push it back to the grid. But I think that kind of flies in the face of that Duke University study that identifies 100 gigawatts of headroom on the grid today. And I think if you can find a way to balance that with a portfolio approach using incremental components to make up that 8 gigawatts of demand, for example, from a specific client and use interruptible loads to pair with firm loads for data centers. I think you can unlock a tremendous amount of capacity that has previously gone, I think, unnoticed.

Sounds good. Nice to see it moving down to some of those smaller sites. That's for sure.

We have time for 1 more question, and that question comes from James McIlree with Chardan.

Yes. I was hoping you could address how you're looking at managing, securing talent for engineering as well as labor, particularly over the next -- after the next 12 or 18 months, the next phase of build out talent specifically for building out the next wave of data centers.

That's a fantastic question, and it's a very real concern. We've done some data center consulting and development with companies like McKinney -- and one of the things that was identified is the labor bottlenecks in markets of Texas. You look at the demand for plumbers and electricians over the next 36 to 48 months, it's terrifying.

But I think we've done the best we can to mitigate that. And I'll give you an example. Everybody has kind of heard talk about the West Texas development for a major hyperscaler that has changed direction and ownership and had some real challenges. We've all read the stories that there are 4,000 to 6,000 guys driving on the roads every day and they're bringing in fresh [ portopotties ] just to keep it roll it up.

Well, our conversations with our development partners take about 70% of that out of the way. So as an example, Sandersville, there will be a 494,000 square foot building, and it would be 400 full-time employees on the construction team rather than 4,000 to 6,000. And that comes a function of building a significant component of the data center in a factory. It's duplicatable, it's consistent. It's an assembly line process. So you can meet the specific requirements from the chip manufacturer as an example.

You build to suit that particular design, and then you duplicate that and you simply install it in the field. So the guys in the field are construction, plumbing, electrical only to the point that it feeds the MEP that we're bringing in, in a modular solution and decreasing some of that risk. So we have a pretty robust team so far. We've engaged with, as I mentioned, McKinsey and a couple of others, Accenture to assist us in that road map going forward. And we've had a tremendous amount of inbound inquiry because what we've done historically is higher locally. And there are a number of trades in a lot of the jurisdictions that we currently operate that aren't chasing data center builds around the country. They're looking for opportunities at home, and we're finding that we have a significant amount of talent locally that can help support what we need.

And that concludes our question-and-answer session. I will now turn it back over to the presenters for closing comments.

Everyone, thank you again for joining today's earnings call. We look forward to staying in touch and sharing future results with you in the coming quarters. Stay tuned for more progress and exciting achievements ahead of us at CleanSpark.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Good afternoon. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to CleanSpark's Fiscal First Quarter 2026 Financial Results Call. [Operator Instructions].

Thank you. Harry, you may begin your conference.

Thanks, Jeannie, and thank you for joining us today to review the first quarter to 2026 financial results for Queen Spark. We encourage you to review our earnings results press release, which was issued today and is available on our website. Our 10-Q will be filed shortly. A webcast replay and transcript of today's call will be added to our website once available.

On the call today, I am joined by Matt Schultz, our Chairman and Chief Executive Officer; and Gary Vecchiarelli, our President and Chief Financial Officer.

Some of the statements we make today will be forward looking 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 10-K. 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 it over to Matt.

Good afternoon, and thank you all for joining us. This quarter represents a meaningful step forward in CleanSpark's evolution into a digital infrastructure and data center development company. One that builds on the strengths of our mining operations while expanding the set of opportunities our assets can support. We continue to operate a large-scale fundamentally sound Bitcoin mining business that generates durable cash flows and balance sheet strength.

What is different today is what those cash flows now enable? CleanSpark is no longer a single track business. We are building an infrastructure platform with multiple independently valuable earning streams, all anchored by scarce utility grade power. Bitcoin mining funds the platform. AI monetizes it and digital asset management optimizes it across all cycles.

To frame how we think about AI development, we see 3 phases. First, securing scarce power and land; second, tenant-driven technical and commercial alignment; and third, structured long-term monetization. We are now firmly in the second phase across multiple assets. As a result, when we look forward, we increasingly see a company defined not just by hashrate. but by the quality, scale and flexibility of its infrastructure and by its ability to allocate capital into the highest return opportunities available at any point in the cycle.

As we evaluate the opportunities for expansion into AI, we are seeing improving economics per megawatt, driven by scale, power quality and contracting structures even as capital intensity increases. Despite this evolution, Bitcoin mining remains foundational to our business. We are fully operational, passing every day and generating strong cash flows from a scaled mining footprint of more than 50 exahash per second.

During the quarter, despite challenging Bitcoin price action and rising network difficulty, we generated more than $180 million in revenue at a gross margin exceeding 47%. Those cash flows allow us to fund growth deliberately. They give us the flexibility to hold assets in a fully monetized state while we complete diligence and commercial alignment rather than being pressured into a speculative development.

We've built this strategy to perform across a range of market conditions, including lower Bitcoin prices, slower AI deployment or tighter capital markets without forcing reactive decisions. In November 2025, we completed a $1.15 billion convertible offering as part of our strategic evolution.

Part of the use of proceeds was used to repurchase $460 million worth of shares, bringing total share repurchases to over $600 million since December 2024. We resulting in approximately 20% of our shares outstanding being repurchased because we believe dilution is not a strategy, discipline is.

Turning to our power and land strategy. Historically, we built CleanSpark by acquiring and optimizing a large number of sub-100 megawatt sites. Those assets continue to perform well and have appreciated meaningfully as energized land has become increasingly scarce and valuable. As we evaluated the AI market, we recognized an opportunity to capitalize on the demand for larger sites.

Until recently, Sandersville with approximately 250 megawatts of already live power was our only large-scale asset capable of supporting hyperscale workloads. That has changed. In October 2025, we acquired 271 acres in Austin County, Texas, along with 285 megawatts of contracted power fully approved by ERCOT with certainty on energization and the potential gas capacity for significant behind-the-meter optionality.

In January, we followed with a second development initiative in Brazoria County, Texas, supported by a transmission facilities extension agreement enabling an initial 300-megawatt demand load expandable to 600 megawatts. Together, these assets establish a Houston area infrastructure hub with almost 900 megawatts of aggregate potential utility capacity, assembled intentionally to support multiphase AI campus deployments.

As we look ahead, we expect to move from portfolio formation into commercialization milestones. Those milestones will take different forms, site-specific announcements, development partnerships and structured long-term offtake agreements, but they all reflect the same underlying reality. Our assets are being pulled into the AI market not pushed. We believe that over time, as those options convert into contracted visible cash flows, the market will increasingly recognize the embedded option value in our power and land portfolio.

At Sandersville, we further strengthened our position with the acquisition of a 122-acre parcel in direct proximity to our substation and power infrastructure. These additions were made in close consultation with a select group of potential counterparties. Importantly, these discussions are no longer theoretical. We are operating from tenant-driven specifications, not internal assumptions. We are now past initial screening and into advanced diligence across multiple sites, including power studies, cooling validation and commercial structuring. The decisions we are making today around substation design, cooling architecture and campus layout are not reversible, and they reflect confidence in where demand is heading.

What excites us about AI monetization is not just scale, but the duration, predictability and capital alignment of those cash flows relative to traditional compute. Throughout this process, we are expanding responsibly. That means being infrastructure-first aligned with customer requirements and disciplined in capital deployment. In this market, moving too fast is often riskier than moving deliberately, and we are intentionally optimizing for durability rather than velocity.

As we plan this evolution, we have established an optimized operating model that allows us to continue running our mining infrastructure right up until load transition. When that transition occurs, we expect to redeploy miners elsewhere in our portfolio where they can continue to operate profitably.

Earlier, I said that Bitcoin mining will always be core to our business. And that's because it continues to provide us with a strategic advantage and power acquisition. That advantage is now translating directly into differentiated positioning in AI infrastructure. We have seen this movie before. The discipline that allowed us to scale mining profitably across multiple cycles is the same discipline we are playing here. Only now with larger contracts, stronger counterparties and materially longer duration cash flows.

Before turning to digital asset management, I want to briefly comment on the AI lease market. We believe there are meaningful second mover advantages in AI infrastructure, similar to what we experienced in Bitcoin mining. Lease economics have continued to improve across multiple dimensions. Rates have risen, risk-sharing terms have become more balanced and credit markets supporting these projects remain deep and constructive.

When negotiating large-scale contracts, we are balancing lease rates delay provisions, capital structures and counterparty quality to optimize the holistic return profile. Our goal is not to win a single deal, but to build durable scalable relationships that monetize our growing portfolio over time.

I also want to briefly touch on digital asset management. DAM is not a trading function. It is a capital allocation and liquidity management capability with defined mandates and risk limits. During the quarter, DAM generated over $13 million in premiums and cash. That represents about 24% of normalized adjusted EBITDA and improving capital efficiency across our business. These results are process driven and fully integrated into our broader financial framework.

As we look forward, we see multiple paths to value creation unfolding in parallel, continued strength in our operations, increasing visibility into AI monetization and disciplined balance sheet management that preserves strategic flexibility.

With that, I'll turn the call over to Gary.

Thank you, Matt. The side right into the numbers for our fiscal first quarter 2026. For the quarter, our revenue grew year-over-year by approximately $19 million, an increase of almost 12%. Our Bitcoin production was relatively flat where we saw revenues of almost $100,000 per Bitcoin in the quarter compared to $84,000 in the same quarter last year. Our gross margins declined slightly from approximately 57% a year ago to 47% this quarter. This decline was mainly driven by the year-over-year increase in network difficulty.

Power prices also increased marginally to. $0.056 per kilowatt hour, up from $0.049 a year ago. However, this reflects our decision to continue hashing to higher cost higher revenue periods may be curtailing based solely on an arbitrary power price threshold.

This quarter, we recognized a net loss of approximately $379 million compared to net income of approximately $247 million a year ago. This change was driven primarily by mark-to-market adjustments to Bitcoin's fair value at the end of each respective period. Our adjusted EBITDA was negative $295 million compared to positive $322 million a year ago, also driven primarily by mark-to-market adjustments.

Turning our attention to the performance of the first quarter versus the immediately preceding fourth quarter, revenues declined approximately $43 million or 19% to $181 million. This drop was primarily due to a combination of 2 external headwinds, rising network difficulty and softer Bitcoin prices. Because of these pressures, we experienced some of the lowest cash prices in history during the quarter, underscoring the importance of having a fleet with high uptime and efficiency.

Quarter-over-quarter, our cost per kilowatt hour decreased marginally from $0.059 in Q4 to $0.056 in Q1, partially offsetting our 19% revenue decline. As a result, our gross margins remained healthy at 47%. With respect to our overhead expenses, it is important to note that the prior quarter includes approximately $25 million of expense related to separation from our prior CEO.

As mentioned on last quarter's call, we do expect that our professional fees payroll and G&A line items will increase as we execute on our AI strategy. Additionally, I want to underscore that the AI data center business comes with stable cash flows and high margins. both of which will help CleanSpark through the peaks and valleys of Bitcoin mining economics.

Our adjusted EBITDA was negative $295 million for this quarter compared to positive $182 million for the fourth quarter. It is important to note again that the difference relates to noncash mark-to-market adjustments, for which the current quarter includes approximately $350 million of these charges.

On a normalized basis, taking the mark-to-market adjustments into account, our normalized EBITDA would be $55 million or approximately 30% normalized margin for this quarter. This represents cash generated from our operations. Bitcoin value as of our September 30 balance sheet date was approximately $1.5 billion. And as of December 31, it was $1.15 billion which the difference is the noncash mark-to-market adjustment of $350 million, which I mentioned earlier.

Turning our attention to the balance sheet. You'll see our cash balance increased over $400 million compared to Q4. This is due to the $1.15 billion 0% convertible transaction we closed in November. As you know, we used a portion of the proceeds to pay off the outstanding balances on our Bitcoin back lines of credit and also repurchased $463 million of stock. This left approximately $420 million of net cash proceeds, the majority of which we will still have on our balance sheet.

In addition to our cash balance, we had approximately $1.15 billion of Bitcoin value as of the end of Q1. Our total debt is approximately $1.8 billion, which on a net debt basis is approximately a 1.1 debt to liquidity ratio. Most importantly, the converts do not come due until 2030 and 2032, and numerous options remain available to us for capital.

Also important to note is that our outstanding share count has decreased almost 20% in the last 15 months as we have not issued a single share of equity on the ATM or other offerings to Ecomat, dilution is not a strategy, discipline is.

Turning our attention to our balance of over 13,000 Bitcoin. I want to point out that we are one of the first, if not the only company, which has scaled operations that is also using Bitcoin as a productive capital asset.

On the last call, we discussed in detail our DAM strategy in its first full quarter. You may have also heard us previously talk about our crawl-walk-run approach, which I'm happy to say we're now fully in the walk phase. We're at full utilization of the portion of our Bitcoin balance we expect to use for yield generation, which is 40% or approximately 5,200 Bitcoin.

Our DAM strategy generated $13 million in cash returns on the Bitcoin model during the quarter where bicorn price was down mark-to-market. I want to highlight several key members who speak to our core DAM strategies. We overlay a covered call derivative program on our monthly production and sales of Bitcoin, which resulted in an uptick of $7,700 or 8% per Bitcoin over the average sales price of approximately 97,200. Overall, the $13 million in total premiums also represents an annualized return of 4.2% on our average total balance, which surpasses our target of 4%. We accomplished this all within 6 months of our first trade. Importantly, this is all achieved by monetizing elevated volatility, especially in October, while keeping the average delta below 20.

I also want to point out that we have added an additional tool to our treasury management to belt. The Basis Trade is a market-neutral strategy that captures the difference between the forward price of Bitcoin and the spot price. Importantly, this strategy takes no price risk and generates returns from the same types of market structure dynamics that we noted in our thesis in the first place. This basis trade allowed us to put our cash balances to work and exceed the risk-free rate by almost 200 basis points as we saw an annualized yield of over 5.5% on the cash allocated to the basis trade. While these opportunities are cyclical, we will continue to be opportunistic based on market dynamics, filling out the flywheel we initially envisioned when we launched our DAM team.

On a final note, I'd like to take some time discussing our capital strategy going forward, especially in light of our expansion into AI data centers. From a capital perspective, I'm confident the capacity and appetite for financing an AI data center with a grade A tenant is strong. We saw a high-yield deal from our friends at Cipher, which priced at an attractive [ 6% and 8% ] which is indicative of the quality of recent leases being signed and the capital available in this market.

The recent $2 billion bond had approximately $13 billion in demand an oversubscription of 6x while we have not committed to 1 specific means of financing our AI data center builds, we are focused on building a capital stack, which minimizes dilution. This continues with the sale of monthly Bitcoin production to cover our OpEx.

Between our current cash balance and capacity on the Bitcoin backed lines of credit, we have over $800 million of liquidity available without selling any of our Bitcoin hurdle. This liquidity provides us optionality, and we will continue to use the lines of credit opportunistically in the marketplace for accretive purposes.

Matt spoke about our current efforts and where we are going and we are excited to share on future calls to relationships and ecosystem we are building, one that is a more fulsome approach than exists in the market. While we are early in the innings of our AI data center journey, the market is moving quickly and CleanSpark is responding decisively. Our conversations with grade A credit quality tenants are ongoing, and it is not a matter of if, but when.

With that, I will hand it back to Harry to lead us into Q&A.

Thanks, Gary. We will now open the floor to questions from the analyst community. Operator, please provide instructions and manage the queue for the Q&A session.[Operator Instructions]. Your first question comes from the line of Mike Grondahl with Northland Securities.

I was wondering if you could talk a little bit about the demand environment you're seeing for HPC? And maybe how that's changed in the last 90 or 100 days? And kind of what attributes are you looking for most in a lease partner?

Mike, thanks for the question, and thank you for the recent initiation. We're glad to see Northland covering us. I can tell you that 6 months ago, when I reassumed the role of CEO. We entered a market where there was a lot of enthusiasm around signing a deal. And what we're now seeing is some of the punitive components of the early leases such as losing a significant amount of revenue for a day late delay on an RFS date.

And differing terms that are backstopped only at the site level rather than at the top co level. It has given us an opportunity to really sit back and evaluate what's out there. And I can tell you that We, Gary, Harry and myself and some of our team attended the Pacific Telecom Conference in Hawaii. And the feedback that we received by presenting an end-to-end solution was very overwhelmingly positive. We've been very pragmatic about the assets that we've accumulated, the location, the distance away from fiber networks, the access to behind-the-meter generation. And as a result, we've now been entertaining multiple trillion balance sheet companies that are interested in long-term leases on some of these assets. So we're seeing the demand continuing to escalate.

And I might add, we saw Amazon earlier today talk about their commitment to invest $200 billion in AI infrastructure in 2026. exceeding the $140 billion estimated by the Street. So looking at the demand behind that, we feel very solid about it. And if the inbound inquiries and conversations we're having with hyperscalers or any indication, the fear of a bubble is highly overstated.

Got it. And then maybe just as a follow-up, your 3 sites, Sealy, Sandersville and Brazil, would you say it's equal demand for all 3? Or is there one that sticks out amongst those? How would you handicap that?

I think probably the highest demand right now is Sandersville. Quite frankly, because it's 250 megawatts, we already built a substation. It's already energized. The Sealy site energization is Q1 '27 for the first 207 megawatts, so we're seeing strong demand there. And obviously, the next site has also been very appealing. But I would say that the data center environment in Georgia and the energized site are very compelling to the offtake clients.

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

So just as a quick follow-up. You mentioned there have been some really positive CapEx comments from companies like Amazon. To me, that signals rising demand for AI data centers. Would you say that that's indicative of demand, call it, across the sector from various hyperscalers that you're speaking with? Or are people getting more cautious at all?

Yes. I would say it's an emphatic yes. Just as a quick aside, Jeff Thomas, who leads our AI venture has been in the office with us this entire week, and more often than not, he's excusing himself to go into his office and close the door to field an inbound inquiry. So I would say demand is escalating rapidly.

That's certainly good news. And I know you guys mentioned that you're looking for a mix of quality and scalability among clients, given construction commitments that you've already made, how confident are you that you'll be able to, call it, sign a contract in the relatively near future?

We're very confident, Brian. I'll be honest with you the delay in -- I wouldn't even call it a delay. I mean when we did this 6 months ago and then we had our earnings call 7 or 8 weeks ago, we said that we would expect to sign a quality lease in less than a year. And I would say that, that's highly accelerated. But the discipline that we're taking, you look at some of the leases that other Bitcoin miners have put up and they're very highly redacted in the public filings. And that's a result of the punitive nature of some of the delay provisions.

So as we contemplate this, we're actually working on a basis of design with the offtake customer. We're designing it in advance and then assuring that we can meet the delivery time lines to remove that potential overhang of failure to deliver risk. So being disciplined about this and building specific to the basis of design for the offtaker, including the implementation of the approved reference architecture from the chip manufacturers will allow us to have that certainty to secure the supply chain before we enter into these commitments to ensure that we don't have that fail to deliver.

Excellent. Excellent. And then just one final one on Bitcoin mining, if I may. Given your efficiency you're better positioned than those heading into the next having, I guess, has your thought process changed at all as far as operating Bitcoin lines, call it, in tandem with your expansion into HPC.

That's a great question, Brian. And what we found is that as new energy sources are energized, some of these communities, especially the smaller communities, are incentivized to monetize those metal lots very rapidly. The challenge is to build a data center for a hyperscaler with the approved basis of design and incorporating that reference architecture is a 12-month best case 18- to 24-month kind of average case delivery time line, we can use the infrastructure that we have for Bitcoin mining, like we did in Cheyenne, Wyoming, where we secured a 100-megawatt lease over a hyperscaler.

We did that simply because we committed to start paying power bills inside of 6 months, not inside of 1.5 years, and that makes a difference to these communities. So we'll continue to use Bitcoin mining as that tool. You heard us talk about on the call, something that we haven't published it yet because it wasn't material, and that is we have 122-acre parcel adjacent to Sandersville.

What does that mean? That means I can operate 11 exahash to a profitable Bitcoin mining up until the day we cut the power over to support the data center for our end-use clients. We also on the map of our projects, something that we haven't talked about is a 15-megawatt site in South Dakota. The utility there had introduced a blockchain specific tariff that with an interruptible load it gives us the lowest cost per kilowatt hour of almost any site in our portfolio. So that flexibility allows us to migrate that mining to a profitable location once we've spun up a data center behind us. So we see it kind of as a loss leader, but it makes money.

Your next question comes from the line of Mike Colonnese with H.C. Wainwright.

Matt, first one maybe for you. I appreciate your comments on the HPC business with start being advanced discussions or diligence stages rather potential tenants here. And that you're currently looking on a basis of design. Curious what milestones should we be on the lookout for next and some of the expected time lines you see as we come across the next couple of quarters here?

So I think the process when you're dealing with a hyperscaler is we could rush in and sign a lease, so we could get a headline. And then we're facing potential losses for a failure to deliver. So as I mentioned in my prior comments, we're working towards that basis of design. And one of the things I think that is a key differentiator that's maybe gone a little bit under the radar. And that is we put out a press release announcing an MOU with Subaru.

Mike, you've been around our company long enough that we don't ever make a material disclosure unless we've got a firm contract. And we felt that, that was important as we head into some of these discussions because summer has been very successful in building a modular MEP. So mechanical, electrical and plumbing, all the fiber runs everything according to the reference architecture required by the chipset manufacturers.

So our solution will be to build the gray space to build a tilt up shell and then slot in the reference architecture. That also gives us flexibility. So if you have a hyperscaler that wants to modify from one particular type of chip to another, we have that modular approach. It also shortens the time line because we've all heard the horror stories about some of our peers that have a couple of thousand tradesmen all working at the same sites in West Texas, and they're struggling to provide housing and food and bathroom facilities. We look at this differently. We build instead of a one-off data center that's stick built. We build the shell according to the specifics required by the end customer. and then we build the MEP portion in a factory. So it's consistent and duplicatable and scalable, which is differentiated from anything else in the space. So it's important to us to establish all of those build parameters ahead of time. So when we put pen to paper, there's absolute certainty that we can deliver the product as expected on time.

Helpful color. Matt, I appreciate that. And Gary, maybe one for you. Does this recent downturn in Bitcoin prices change or huddled approach at all? I know from covering the name for a while here, you guys have historically had a very dynamic high approach, one that tended to adjust based on prevailing market conditions. So curious how you guys are thinking about the huddles back here?

Thanks, Mike. Since you've been around a while, you know we've built this business on optionality. So that option is still on the table if we wanted to dip into the hotel and part with some of those Bitcoin, I'll tell you that's not something we're planning on doing even at these levels. We think that the strategy is still intact and part of the hedge is for us really selling nearly 100% of our monthly operating production. So as of right now, there's really been no change in that strategy.

I'd also conversely say that we're not expecting to hold 100% of the operating Bitcoin production either because that would mean that we'd run through our cash a whole lot quicker and as we had mentioned, when we were raising the convert funds, we expect to use the majority of those funds to expand in AI data centers because we think that's the future of the company.

Mike, maybe that just a little -- another layer to the Bitcoin mining side. At our last disclosure, we were at 16.07 jewels per terahash and Taylor and his team are actively deploying the 13.5 jewel per terahash machines in the immersion cooled containers in 5 different locations. So we expect our fleet efficiency to continue to improve.

In the last cycles, I mean we've been through this a few times, we see the kind of wash out of the sorting process and the less efficient fleets tend to unplug. So we also believe that there is a very strong opportunity for us to organically grow a share of the network hash rate just by default as other less efficient miners or for unplug.

Your next question comes from the line of Greg Lewis with BTIG.

Just thinking about the move forward in the HPC, I know Jeff joined the team a few months ago now. Gary, you alluded to potentially higher SG&A over time as we kind of build out the team and get ready to pivot into this new business. Like how should we think about costs and processes? And where are we in terms of -- we've seen other companies go out and build teams. What we're realizing we have a lot of capable talented people already inside the company. How should we think about growth at the employee level here?

Greg. Thanks for the question. It's a great question. We get it quite often from investors. I'll tell you, it's hard to give guidance on that because while we have a plan to bring on a certain number of FTEs, the timing of when those hit is really what's going to drive what the numbers are going to be for the fiscal year.

Additionally, we have optionality to where we can rent services. So if we need services from someone we could bring in outside consultant -- contractors to help fill that void while we're waiting to bring on full-time talent. And there's -- that could be different than what it would be to bring on a burden employee. So we're not prepared to give out numbers about right now. I don't think it's anything that's material that's putting us at risk or anything. I think we've been pretty measured about bringing on people right around the time we will need them. So I think you'll see that slowly uptick throughout the remainder of the year.

Okay. Great. And then I think it's been understood that we were going to acquire more land at Sanders ville for at least a few months. How does now owning that additional land at Sandersville. Does that go at all in changing the kind of conversation that it seems like we're focusing -- it seems like part of this call is you focusing on potential terms of some of these HPC contracts. Does -- I would think earning the land matters a lot. I guess my question is, was not earning some of the land and potentially leasing it kind of a nonstarter?

Greg, it's Harry. I think you're exactly right. So we view the closing of the land expansion at Sandersville, a very orderly process in progressing the AI data center project there. It allows us to move into a very specific basis of design alignment exercise, which is underway. And it also brings a level of specificity to the compute and power ramp for the data center deployment as well because there's complexity to these projects that extend beyond standing up the data center for our state.

There's a lengthy commissioning process that the tenants typically take on in the context of the overall project life cycle and being able to map out those time lines and those work streams in detail, is critical as we move through the full commercial scope of the discussions, they are, in many cases, governed by some of those technical pieces in the ramp process.

Your next question comes from the line of Stephen Glagola with KBW.

Thanks for the question. Can you maybe provide some insight in how ERCOT's proposed large load bag study process may the energization time line for the Sealy side as well as the approval and development schedule associated with your Brazoria County, Texas project?

Stephen, yes, Harry, again. Happy to do that. So I think the first piece of it is that the study process that ERCOT is proposing to roll out has not gone final yet. They're still in a comment period where they're taking member requests for how they want to influence that process and how it's going to be brought to market. So we're waiting to see kind of the final form of that.

But given the early news there, we've had a lot of detailed discussions with a number of counterparties that we're working with there. That includes the substation developer. It includes the utility. It includes some of the political folks and obviously, some of the teams that are caught as well. And I think the assets that we have in the state are in very favorable position relative to this new piece of the process for a handful of reasons.

The first is that the large load studies that have been done. Its Sealy, it's complete. And at the second location, it's in a deeply progressed state. And we've received the notice to proceed language at both of them. So that's kind of .1 and 2. The next is that the interconnect and the FDA pieces are executed. And the third at Brazoria is that the CAIC has been funded. And at the Sealy location substation is already under construction. So these are significantly progressed projects.

And what we've seen is that the view of the batching and the study rollout is largely being informed by project maturity as well as location. And what we've gotten feedback from the utility of both of those locations of -- is that the location that we selected is that a point in the overall ERCOT transmission system that's going to be the least impacted by this type of reevaluation process. So we feel very, very positively about where these 2 assets sit within the system and how they're going to be treated. But until ERCOT comes out with final language, we can't have 100% visibility into that yet.

Your next question comes from the line of John Todaro with Needham & Company.

Two here, I guess, we'll start with the one that kind of comes off the ERCOT question. Are there -- as you think about just kind of longer-term pipeline, adding more power, are there other power markets that are now starting to look maybe a little bit more attractive relative to Texas and where could we see that? And then I have a follow-up on the HPC tenant side.

Thanks, John. I think that we have always had a strong heritage of diverse portfolio construction. We see it in the way that we enter into power agreements today. We've got a significant footprint deployed and operating in Georgia. We've got significant presence in Tennessee. Wyoming and Mississippi as well are the smallest 2, but they're by no means small.

So I think that what we're going to be able to accomplish is a continued expansion in those markets because of the relationship and community quality that we've engaged in to date. But additionally, I think that the other side of the question that you're asking is do large-scale data centers skew towards in front of the meter power or behind the meter power.

And we're asking these questions internally along both vectors. So we think that there's a huge amount of opportunity inside of Texas and outside on the in front of the meter profile. We have a team that's become exceedingly expert in sourcing, negotiating and closing on that power.

And then we are also strongly evaluating the capacity for behind-the-meter power as well in places where we're either able to get a smaller in front of the meter load or there's a particularly rich commodity environment by which we could power behind-the-meter generation and then the associated data center.

So we're people for its business fundamentally, and our power and land teams are prepared to expand the portfolio very, very broadly in a diversified way, but also add that potential for behind the meter to the repertoire as well.

Great. And then just on the HPC 10 discussion. I guess just trying to gauge kind of how far advanced we are in the positioning. Is it -- are we kind of down to 1 potential tenant that seems much further along? Or is there kind of 3 that are in final competition stages? Just a little bit more color there?

Ask me a question that I can answer. What I would say, John, to be honest with you, is there are multiple potential offtake tenants for Sandersville to begin with. I would say there is a specific front runner by an order of magnitude to the extent that our team is collaborating with their team on the site placement. You may have seen a slide in our deck that had a mockup of the layout of the data center. So we've advanced it significantly with a particular offtake, but by no means is it committed elsewhere. I mean there -- the competition for megawatts and land right now is stronger than it was when we announced this strategy to expand into AI. So we're not closing any doors, but I would say there's a clear frontrunner there.

Your next question comes from the line of Brent Noble with Cantor Fitzgerald.

This is Gareth on for Brett. I was just hoping you could go into detail on the 2 new sites in Texas. When are you guys expecting to have power available on those sites. And what do you think the time lines are kind of going forward there?

Yes, absolutely. So let's tackle the Sealy project first. The land secured is 271 acres. The gross power is 285 megawatts. The first 207 to 209 is coming first half of '27. And then it's about 40 in '28 and 40 in '29. And that's driven by the transmission agreement by which we secure the power.

The second project is in Brazoria County. Larger footprint with up to 477 acres at that location. And the way that it's structured is that we've signed for that agreement, but we're not closed yet, and there's some closing conditions associated with it, that we expect to wrap up here. The time line for the energization is a function of some of those closing conditions. And so we don't have the type of line in the sand clarity that we have at Sealy. But I think that Q4 '27, Q1 '28 is a range that is all reasonable and everybody internally is working to bring that energization date as close to the inside as possible.

Your next question comes from the line of Paul Golding with Macquarie.

Congrats on all the progress. Gary, you referenced a peers recent capital raise. And I just wanted to ask, as we think about the liquidity you have, but also you have substantial capacity going forward that you'll hopefully be growing into with leases. Should we take that to be -- that comment to be indicative at all of how you hope to essentially face a counterparty in terms of counterparty type face-to-face with hyperscaler able to do high yield raises where the counterparty credit quality could yield that, I guess, how should we think about how you're selecting your counterparties given the context given around capital raising and cost of capital.

Thanks, Paul. I'll tell you that it's very important to us to have that grade A credit quality tenants because we think that's the most financeable and the best cost of capital. So that's what we're focused on. In terms of the vehicle, I quote the recent Cipher deal because the high yield seems to be a playbook that a number of our peers have started to go down that path. We're open to that. We're happy to see that the terms are getting better both with that and the contracts and leases that are backed by that bond.

There's some other options as well. obviously, a little higher cost of capital. But at the end of the day, what's great about this is, and you've heard this word from us for quarters or years now is optionality, right? We have a lot of options on the table. But I think it's safe to say we're going to follow a playbook right now that's probably proven in the capital markets, and it all starts with a grade A tenant.

And then maybe a follow-up. I believe, Matt, you mentioned when speaking about the Sandersville work and the 122 acres with tenant-driven specs in mind. How should we think about what that means for terms? You also noted that terms in discussion were seemingly more positive across the conversations you're having. Is there any kind of prepayment or deposit discussion involved in the conversations you're having, given that you are proactively using tenant-driven specs to set up the sites for HPC?

It's -- thanks for the question, Paul. It's a bit -- it's a little early in the discussions to comment on that. directly. But I can tell you that we're -- obviously, there are a number of different leases that have been put up. You've seen modified gross. You've seen triple net. You've seen posted agreements. You've seen miners that have committed to buy the chips themselves. So I can tell you that our focus initially, and I'm not -- I don't mean to downplay the quality of any other transaction.

But as we look at the financing options, I think it's important to us to have a significantly better deal than I think the market would have otherwise expected. I think we're interested in putting a deal together directly with the hyperscaler, not necessarily with the Neo cloud backed by a hyperscaler. And we believe that we'll set the standard for the quality of the agreement and the, I guess, win-win is a term we use in the company a lot.

There will certainly be expectations our feet will be held to the fire, so to speak, to deliver, but it's not at the risk of an existential threat on a fail to deliver. So we're negotiating all those terms. And I think what you'll see when we announced the first lease is a basis or a model for what you can expect going forward.

Your next question comes from the line of Jim Milre with Chardan.

At the current Bitcoin prices, let's call it, $63,000 or so. How much of your minor fleet is economic to operate? Or another way to ask it is how much of the minor fleet is -- meets the hurdle rate in order to operate.

Great question, Jim. Thank you for that. So our fleet efficiency improved and then it got a bit worse. And it got worse by design, because as mining economics improved, we actually started to scale up some less efficient equipment in our fleet. What I can tell you is that Taylor and his team are constantly running real-time analysis based on utility prices, network difficulty and the price of Bitcoin. And they brought me in to Gary and myself this morning as we were working on this presentation today. They brought us in a list. And I would say less than 10% of our fleet at the current half price is not profitable. So the vast majority of it is and the small portion that is at or below the breakeven threshold our machines that we brought on to take advantage of $125,000 Bitcoin 1.5 quarters ago. So it's not punitive to us to unplug those. Having said that, as we unplug those less efficient machines or scale them down or under clock them, it increases the overall efficiency of our fleet.

Got it. That's helpful. And can you discuss CapEx plans for this year and next, both in from a dollar basis as well as an allocation between Bitcoin and HPC.

Jim, it's Gary. I'll tell you that our focus is going to be on deploying capital towards AI. That's in the range of $9 million to $11 million a megawatt which, as you probably know, has been reported by most of our peers in the space right now, and that's the range that we're seeing. So what is deployed is really going to depend on -- that amount is going to depend on the design to build and the customers and when we sign those respective leases. But I'll tell you that the overwhelming percentage majority percentage of that is related to HPC.

With respect to Bitcoin mining, I think that the investment, particularly at these levels doesn't make a whole lot of sense from the sticker prices that we're seeing from the major manufacturers. If you look at our balance sheet as of 12/31, we had about $130 million of prepaid deposits on Bitcoin mining equipment and miners. And about $112 million of that was through September.

So we're still deploying some infrastructure, mainly emerging cooling and miners that will help drive down that efficiency. But we don't plan on spending a significant portion of our cash on mining, unless economics change. We need to keep in mind that we are about 2 years off to the next having. And in any cycle, as you get closer to having that ROI window closes rapidly. And right now, it doesn't make sense. So we want to be redirecting every dollar possible towards CapEx.

Your next question comes from the line of Matthew Capitalo with Maxim Group.

I'm filling for Mac right now. I was just wondering if you guys have any insight or I guess, predictions on how we should be thinking about network difficulty in response to the current Bitcoin prices.

Yes, absolutely. So I think that what we've seen over the last weeks and the difficulty adjustment that's coming on Saturday is important to know is the largest difficulty adjustment to the downside since the China mining ban in 2020. And that's a combination of 2 factors. The first is that there have been significant weather events across the entire country during that period of time. where you're seeing either the demand response programs get engaged or you're seeing power prices move past the breakeven point of economics. And so that's certainly a contributor to this difficulty adjustment.

The second piece is clearly Bitcoin price is off considerably. And so that next coming difficulty adjustment is going to be a significant one. And then I think given the price action that we've seen in the latter part of the difficulty adjustment period that we're in the middle of right now, we could see additional downward pressure on difficulty in addition to that.

So I think that ultimately, this is the self-healing nature of the proof-of-work and Bitcoin mining system. And as you see these types of market forces, the network adjusts to be able to create that security model that's supposed to keep producing blocks and processing transactions.

I just want to add one thing because if you look at this historically, when Bitcoin runs and hash price gets better, the global hash rate laps right? You'll have a period of time, usually weeks, maybe a month or whatever, for miners to find a way to get plugged in because miners just don't sit around waiting for hash price to sit typically, they're just not on racks just waiting for Bitcoin price at a certain price.

It's the opposite on the way down because most miners, not all, but most miners know what their breakeven is because that's a real punitive cash penalty because they have to pay their power deals. And so as Bitcoin mining economics go down, what we've seen at least historically, is that cash rate comes off pretty quickly, pretty close to that. And that's because miners say, well, hey, why am I going to take a lot of X amount of dollars when I could just go buy Bitcoin, and I have more Bitcoin than if I actually mined it.

So I think that given that routed in the fact that we have a decreasing a fleet with decreasing jewels per terahash, meaning our efficiency is going up. and we're more efficient and we're producing more Bitcoin for every watt that we're putting through these machines. We will be one of the last ones theoretically to turn off, and we'll mine more Bitcoin in terms of quantity as that global half decreases.

And I guess as a follow-up on the Texas opportunities. Do you guys have a time line on executing behind the meter opportunity into your portfolio?

Yes, I appreciate the question. I think it's too early to have a view on the exact timing for that type of opportunity. What I can say is that we're evaluating a number of different behind-the-meter deployment types. Some of those energization schedules are longer. Some of them are much faster to market. And so ultimately, those types of decisions will be made in concert with the tenant community, and we're really looking to be able to meet their need and satisfy impute demand, whether that's through one form or behind the meter generation or another.

There are no further questions currently. Harry, I turn the call back over to you.

Thank you, and thank you, everyone, again, for joining today's earnings call. We look forward to staying in touch and sharing future results with you in the coming quarters. Stay tuned for more progress and exciting achievements ahead from us at CleanSpark.

This concludes today's conference. You may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is Colby, and I'll be your conference operator today. At this time, I'd like to welcome you to the CleanSpark's Fiscal Full Year 2025 earnings results. [Operator Instructions]. Harry, you may begin your conference.

Thanks, Colby, and thank you for joining us today to review the fourth quarter and full fiscal year 2025 financial results for CleanSpark. We encourage you to review our earnings results press release, which was issued today and is available on our website. Our 10-K will be filed shortly. A webcast replay and transcript of today's call will be added to our website once available.

On the call today, I am joined by Matt Schultz, our Chairman and Chief Executive Officer; and Gary Vecchiarelli, our President and Chief Financial Officer.

Some of the statements we make today will be forward looking 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 10-K. We will also discuss certain non-GAAP financial measures concerning our performance during today's call. You can find a reconciliation of non-GAAP financial measures in our press release, which is available on our website.

And with that, it's my pleasure to introduce Matt Schultz.

Thanks, Harry. Good afternoon, everyone, and thank you for joining us. I'm so excited to have stepped back into the role of CEO of CleanSpark this past August after serving as Executive Chairman for the past 5 years. In my first 100 days, the team has been relentlessly cementing our current leadership position in Bitcoin mining, while simultaneously positioning us to evolve our portfolio. We've also set a strategic direction for CleanSpark going forward as a digital infrastructure platform serving a wide range of compute opportunities.

These opportunities include, but are not limited to, generative AI workloads, grid balancing through Bitcoin mining and high-performance computing broadly. I've also had the opportunity to meet with many of you listening to today's call. Your enthusiasm for the future of CleanSpark's business means the world to us and we're excited to execute our strategic plan and extend our track record of operational excellence into AI factories.

As the company has matured, I'm inspired by a world-class team and operating business. Our strong balance sheet and most excitingly, our growing power and land portfolio across the U.S. and the optionality it represents. Together, all of these elements are evolving into a diversified compute platform to serve the needs of the next digital age.

I've taken stock of what we built. And I want to share with you just how well prepared the company is for this moment in time. While Bitcoin mining remains foundational to our business, we recognize that our expertise in securing power, developing infrastructure and deploying at scale uniquely positions us to support the fast-growing demand for AI compute, a blended approach to growing and monetizing our portfolio serves to diversify revenue, enhance margin and build long-term shareholder value.

2025 was a year Clean Spark achieved escape velocity, reaching 50 exahash per second in operational hash rate with 100% U.S.-based infrastructure and run by our operations and technology teams. We delivered record revenues and demonstrated capital stewardship by not issuing a single share through an equity offering throughout this calendar year, all without slowing down our growth. I'm proud to share a few financial highlights from our 2025 fiscal year.

We achieved record revenues of $766 million our gross margin was 55%. Now that's a 1% decrease year-over-year. This small decrease is actually impressive due to this being the first full year post having when the Bitcoin Block rewards were reduced by 50%. Our Bitcoin Treasury grew by nearly 62% to over 13,000 generated entirely from our wholly owned operated hash rate. This puts us in a fundamentally different position relative to treasury companies purchasing spot Bitcoin since we mine it at greater than a 55% gross margin, and we're actively monetizing our holdings.

We now have a sustainable self-funded mining business, thanks to our industry-leading mining team. and they're backed by an innovative digital asset management operation that's generating meaningful premiums and leveraging our treasury balance as a truly productive asset. We're in the process of deploying the 19,000 S21 XP immersion units that have an industry-leading 13.5 jewels per terahash. It's beginning this quarter, and we expect that process to be complete in calendar Q1 of '26.

Now while this time line is a bit longer than we had initially contemplated, our priority was a comprehensive portfolio review to ensure that we would not consume any AI applicable megawatts with this deployment. We have always had an infrastructure first thesis we avoided the asset-light strategies of past cycles, and we prioritized control of power and infrastructure given the fundamental scarcity we're now seeing borne out in the market.

Scaling our mining business required securing and developing a world-class power and land portfolio and growing significant supply chain, engineering, construction and operational capabilities. all highly relevant as we evolve into AI data center development.

Today, we have more than 1 gigawatt of power under contract live in our data centers and infrastructure. Additionally, we have nearly 300 megawatts in Texas, fully contracted and scheduled to begin energization in early 2027, coupled with a multi-gigawatt pipeline of additional near-term opportunities.

Importantly, many of these locations are excellent candidates for AI campuses while others are best positioned for Bitcoin mining, load balancing and securing the grid. Our objective is clear. to deliver each megawatt to its optimal use case.

We have always had an internal philosophy of people first. As we look to expand our business, that was true in the earliest days of microgrid development. It was true as we grew into a Bitcoin mining company. It was clearly a winning strategy when we hired Taylor Monnig to lead us to the forefront of immersion cooling. And most recently, it remains true as we added Jeff Thomas to lead our AI data center initiatives following his successful tenure as President at Humane.

We've accomplished 3 key initial steps in our business evolution thus far with Jeff on board. The first thing is we reviewed our diverse portfolio to identify the most productive use of every single megawatt Second, we secured a 285-megawatt site in Texas with the explicit intent of building an AI factory for a high-quality tenant. And three, we are aligning and expanding our internal team in conjunction with market-leading partners, to deliver projects on time and on budget that meet the exacting needs of offtake customers.

When we took a close look at our facilities, it became clear that our 250-megawatt site in Sandersville, Georgia, provides an immediate opportunity to host a large-scale tenant. Other sites surrounding the Atlanta Hartsfield Airport, totaling over 100 megawatts with ready access to fiber are already in extremely high demand.

In Texas, the site we recently acquired just outside of Houston will be the location of our first exclusive exclusively purpose-built AI factory. We hold 271 contiguous acres of land located on a regional fiber backbone and have executed 285 megawatts in long-term power supply agreements that have already been fully approved by ERCOT. Better still, the site is located near several high-capacity natural gas pipelines, which are being evaluated for industrial scale behind the meter generation opportunities.

This purchase positions us to deliver scalable, resilient and energy-efficient capacity to meet demand from AI, cloud and enterprise workload and represents a key step in our long-term strategy to leverage our vertically integrated infrastructure first model. While this may be our first purpose-built facility, it certainly won't be our last.

The entire team is focused on first securing tenants for [ Santillan ] Houston, which will then drive efforts to take the projects from commercialization to commissioning. Long-term tenants represent a superior risk-adjusted profile return profile, pardon me, for these assets rather than direct GPU exposure initially.

Similar to past industrial revolutions, AI represents a new ecosystem. Power companies, chip companies, hyperscalers, infrastructure technology providers and others are all collaborating, and we're in direct discussions at every level to deliver maximum value for our customers and our shareholders.

Jeff has been building the full life cycle playbook for AI campus development and operations that best serve this ecosystem. Together, his growing team is already vetting potential tenants building high-quality site commercialization plans for our pipeline and defining our project delivery road map.

As part of those efforts, we entered into a memorandum of understanding with Submer, a global pioneer in liquid cooled and prefabricated data center solutions. Its end-to-end capabilities spanning from liquid cooling systems and mechanical, electrical and plumbing modules to full facility builds set new benchmarks in energy efficiency, density and sustainability, making them an ideal partner for CleanSpark's growth strategy.

This relationship is our first step in taking elements of the construction process away from the data center and putting them into the factory with approved reference architecture designs to support a broad range of tenant requirements. Together, we're working on an infrastructure platform that integrates power generation, data center development and AI service delivery.

Under this framework, CleanSpark focuses on selecting developing, building and operating AI-focused campuses while Summer will offer its technology and expertise as a strategic vendor in delivering sustainable modular data center systems. Meanwhile, we completed our largest financing ever with a $1.15 billion upsized 0% convertible note. Gary, our President and CFO, will discuss the finer details and numbers momentarily. But before I pass it over to him, there are some elements I'd like to highlight.

The terms are even better than our prior rates in December 2024, with the same 0% interest rate, a higher 27.5% conversion premium and a 6.25-year term. This financing provides the resources to expand our power and land portfolio, exceed our first AI deployments and continue investing in strategic growth opportunities. And as part of this transaction, we bought back $460 million worth of our own stock, more than a 10% reduction in outstanding shares. We've once again bet on ourselves and we will succeed the Clean Spark way.

With that, I'll hand it over to Gary to take you through the financial results, both for the quarter and the full year. Over to you, Gary.

Thank you, Matt. I'd like to start by reviewing the numbers for the entire 12-month fiscal period, which was a landmark year for CleanSpark. Our revenue grew more than 100% year-over-year to [ $766.3 million ] with almost 8,000 Bitcoin produced. The major driver of this increase was due to a combination for our growth in exahash and Bitcoin price. Our full year gross margin was 55%, which we're particularly proud of, given that this was the first full year post having. These margins remained relatively in line with the prior year which is attributed to the significant increases in efficiency our fleet had over the last 12 months.

Also contributing to our gross margin consistency is our average marginal cost per bitcoin, which was slightly below $43,000 for the fiscal year, while our average revenue per bitcoin was approximately $98,000. Our margins and cost per bitcoin represents the strength of our infrastructure quality, our world-class teams and commitment to managing our business to profitability and margin rather than any single operating metric. Our high margins translated to an adjusted EBITDA of over $800 million, which I must point out, does not adjust for certain noncash items such as the mark-to-market on fair value of Bitcoin. When normalized by excluding our gain on the fair value of Bitcoin, the adjusted EBITDA from operations would be approximately $305 million, which represents a net margin of approximately 40%. Additionally, the combination of increases in margins and fair value of the 13,000-plus Bitcoin we have on the balance sheet contributed to a significant positive net income of about $365 million.

Looking at the most recent quarter-over-quarter performance, we also saw significant gains between the third and fourth quarters. Our revenue increased by approximately $25 million or 13% in Q4 versus Q3 and our margins increased 2 points to 56.5%. It is important to note that we achieved 50 exahash in June. And while that remained our operational high for the fourth quarter, we still experienced increases in revenues and margins because of favorable mining economics during the quarter.

Our high uptime also allowed us to capture periods of significant appreciation in Bitcoin price. In the fourth quarter, we recognized a slight net loss compared to the third quarter. This was due to a much larger gain on fair value of Bitcoin during the third quarter and noncash tax adjustments recorded at our fiscal year-end.

Our adjusted EBITDA margins also saw similar changes which is inclusive of the noncash mark-to-market adjustment on fair value of Bitcoin. However, when adjusting any noncash mark-to-market effect, our normalized adjusted EBITDA was $97 million for the fourth quarter, a 25% increase over the $78 million normalized in the third quarter. This translates to margins of 43% and 39%, respectively.

Going forward, we do expect that our professional fees payroll and G&A line items will increase as we execute on our AI strategy. Additionally, I will point out that the AI data center business comes with stable cash flows and high margins, both of which will help CleanSpark. Through the peaks and valleys of Bitcoin mining economics.

Our escape velocity translates to operating leverage. We have developed scaled data center infrastructure that is delivering revenue and margin necessary to self-sustain and further support incremental investment in AI data center capabilities as we evolve into our power, land and compute platform.

Turning our attention to the balance sheet. I want to point out that we are one of the first, if not the only company which has a scaled cash flowing business that is also using Bitcoin as a productive capital asset. The utilization of our Bitcoin stack resides and the team we refer to as digital asset management or DAM. The fourth quarter was the first full quarter of dam activity, and we are extremely excited to share in more detail the steps we have taken in our crawl phase.

Two initial strategies rolled out by DAM are our spots and yield strategies, both utilize covered calls, but spots is designed to optimize for the cash needs of the business. while yield is designed to generate go-forward risk adjusted output from our treasury holdings. Given that we are monetizing a significant portion of our monthly Bitcoin production, the spots strategy delivers a tactical uplift to cash generated on a weekly, monthly and quarterly basis. This program functions smoothly because of the consistent output from our world-class operations and strong uptime.

We are able to utilize this approach because of the investment we have made in making DAM a true institutional grade platform. It began with a comprehensive RFP for a range of products that you have heard us discuss on prior calls and executing these option overlays requires a disciplined approach to risk management.

Rather than selling bitcoin through the Spark, we utilize at or near the money covered calls to generate both option premium and realized proceeds. If and when we ultimately get called away on these contracts. Our yield strategy utilizes covered calls as well, but instead of high delta short duration, we shift Delta and extend or ladder turn to reduce the likelihood of exercise.

Under our yield program, we saw an annualized yield of approximately 12% on a blended basis. In addition, as we scale our strategy and increase the volume, we believe there is room to incrementally increase the annualized yield and cash generated, potentially significantly.

While the fourth quarter represents a period when we're still in the crawl phase of the strategy, we were nonetheless able to generate a total of $9.3 million in premiums. To illustrate what that represents, our average spot Bitcoin sales price for the quarter was $111,721. However, when considering additional premiums generated for Bitcoin, of $4,184, the all-in effective cash generated for Bitcoin was almost $116,000, a material uplift.

One of the early wins for the DAM team was the successful monetization of costless Bitcoin repurchase options received as part of a Bitcoin minor procurement contract from the third quarter. This was an excellent example of how our investment in the asset management function can help us to complete the arc of opportunities driven by our world-class mining operations.

While our mining operations drove large and preferential terms to obtain mining rigs, DAM was able to monetize that option, which would have otherwise expired worthless, driving $7 million of additional cash to the balance sheet. Due to the performance of DAM to date, we have increased the volume of transactions subsequent to our fiscal year-end. In October alone, we traded more contracts than the total number of contracts traded during the entire fourth quarter. Additionally, we generated over $5 million in cash premiums for the month of October alone.

The last leg of our current strategy in bolster writing puts. The put transactions we entered into are cash secured primarily using the premiums previously generated under the spots and yield programs. While this cash corpus is still growing, we saw analyzed returns at 8% on the put strategy.

These 3 strategies do 2 things: First, they integrate in our operating business with the enhanced sale of production; and second, creating capital flywheel as they relate to our balance sheet.

I would also like to add that the results we are seeing in DAM do not necessarily translate directly to telling the story via U.S. GAAP accounting. While all pieces are reflected across the income statement and balance sheet, there are certain punitive treatments of noncash mark-to-market valuations at contract expiry.

What we think is important about these tables that once again, CleanSpark is at the cutting edge of real non-hyperbolic strategies, paired with full market-leading transparency. These tables can be found in the Management's Discussion and Analysis section of our Form 10-K.

I want to note that U.S. GAAP rules separate the accounting for cover call exercises into 2 different line items for what is in substance a single transaction. These 2 line items on the income statement are loss on derivative contracts and gain on fair value of billing. This is important because there are 2 sides of the same transaction. For example, the difference between the spot price at expiry and the strike price is shown as a loss on derivative contracts. While the corresponding markup in Bitcoin value to the spot price is recorded separately as a gain on fair value of Bitcoin, offsetting that noncash loss with a noncash gain.

Taken together, they reflect economic gain outcome of our covered call program, which continue to generate attractive risk-adjusted returns. I also want to point out that the binding option was effectively costly to us. However, GAAP required us to bifurcate a portion of the ASIC contract to the option value, even though the contract didn't explicitly state a value. That value of $6.8 million was recorded at contract inception in the third quarter. As the option ultimately expired out of the money, had we not taken steps to monetize the option, we would have had a noncash write-off of that $6.8 million or instead, we generated almost $7 million of cash on that option, which under GAAP considered it to be a net gain of approximately $200,000 even though we ended up with 7 million more cash -- bank at the end of the day.

The overall takeaway is that the digital asset management strategy has met and, in fact, exceeded our expectations this and become a second source of cash generation to the business. We are looking to increase -- the team to allow for greater volume and more complex derivative trades which we believe will not only grow the total cash generated from premiums, but also maintain attractive yields.

On a final note, I'd like to take some time discussing our capital strategy. Our focus is on building a capital stack, which minimizes dilution. This starts with the sale of monthly Bitcoin production to cover a monthly OpEx. We also have Bitcoin back lines of credit with a total capacity of $400 million, we will continue to use the lines of credit opportunistically in the marketplace for accretive acquisitions. And as we previously mentioned, we issued a $1.15 billion convertible note with a coupon of 0% and a conversion premium of 27.5%. Proceeds from this transaction were used for several purposes.

First, we bought back [ $260 million ] of our stock which represents a reduction in our outstanding shares of 10.9%. The stock buyback not only helped facilitate the convert, and we saw this as a bet on ourselves as we are evaluating increasing given the opportunities in front of us.

Second, we used over $200 million from hash rate to pay off our lines of credit. It's important to note that we have access to the full $400 million line available to draw down any time on terms we continue to believe our market leading. The remaining net proceeds from the transaction will be used to do what we have a prudent track record of doing, and that is hunting for power and land.

The acquisitions of Power and land, such as the most recently announced transaction in -- Texas are expected to be primary used for our AI data center strategy. While we are in the early innings of our AI data center journey, the market is moving quickly and so is CleanSpark. Our conversations with offtakers are ongoing, and it is not a matter of if but when we will have our first customer.

Details regarding financing of our data centers will be coming in future periods. However, I will tell you this. There is an abundant amount of capital at a much lower cost of capital than previously available to our mining business. Our venture in AI data centers will open new pools of capital, allowing us to benefit from the significant levered rates of return the market is providing.

To close out another strong and defining quarter for CleanSpark and to discuss how these results position us for what's next, let's return to our Chairman and CEO, Bet Schultz.

Thanks, Gary. As I listen to those results, I can't help but think back to the earliest days of this company and the journey we've all been on together. Our fundamental thesis on being infrastructure focused and people first has served us incredibly well.

They are 2 of the reasons we have such a meaningful opportunity in front of us today to grow into an infrastructure and compute platform that maximizes the value of every megawatt. The task in front of us is clear. We're working to secure tenants at our 2 initial flagship AI-ready locations while simultaneously expanding our land and power footprint to meet the market's insatiable demand.

These efforts are made possible by our strength as a scaled Bitcoin Miner, our capital markets rigor and critically, our company's cultural focus on operational excellence. This past summer, our operations team coined -- Amato, be the standard.

I have the pleasure of having them present to me what that phrase meant all of them. And I commit to you that in each of our endeavors, you can count on Clean Spark to continue to be the standard. I want to take a moment to thank our entire team for their tireless work. I'm beyond grateful to our shareholders for their trust and I truly appreciate all of you for joining us today.

With that, I'll hand it back to Harry to lead us into Q&A.

Thanks, Matt. We will now open up the floor to questions from the analyst community. Operator, please provide instructions and manage the queue for the Q&A session.

[Operator Instructions]. Your first question comes from the line of Brian Dobson with Clear Street.

Just a quick question. There's been a considerable amount volatility in the stocks as of late. Perhaps you could take this opportunity to -- so give us a little bit of color on the types of conversations you're having with potential clients and your outlook for demand in the HPC AI space over the course of the next 2 years.

Yes, absolutely. Brian, thanks for calling in, and thank you for the question. I can tell you that we've had extensive conversations. Now I posted on my social media. Our whole team was invited to Northern California to spend some time with the team at NVIDIA.

From that meeting, we've had subsequent follow-ups. And I can tell you that there is I don't want to say a bidding war, but strong multiple layer inquiries about Sandersville specifically, and we're starting to gain additional traction on the Sealy Texas site. So we feel like the demand is there. Obviously, there have been some delivery challenges and credit risk on some of the other peers that maybe haven't been able to perform to the expectations. But we're based on the fact that we're running a company with nearly an $800 million annual run rate at 55% gross margins, we have the cash necessary to get us to that next level. So we actually feel very optimistic about it.

Yes, outstanding. And as you're thinking about various campuses, what do you think about hearing Bitcoin mining with HPC campuses to provide, call it, power usage versatility or do you think that they'll be separate to start?

That's a really thoughtful question. We were invited by Jack Dorsey and his team to go to Dalton, Georgia and spend some time as they launch their new domestic manufactured ASIC, the Proto rig that's built by block. And it was a fascinating event but leaving the event, the CEO of the utility there in Georgia, grabbed Gary, Harry and myself and ask us to go to lunch. And he shared that there's about 120 hours a year that really causes problems for the utility. And he said, historically, they love Bitcoin miners because of the interruptible load. Now we've experienced providing that service in load balancing in many of our jurisdictions.

I mean you've heard the stories about redirecting power in Georgia to a hospital when the hurricane hit or whatever the case may be. But the takeaway from the utility was they're interested and the fear that came from them was because Core Scientific is a big consumer of power there in Dalton, and it's historically been a flexible load. And the concern is that extra 120 hours a year when they need somebody to be able to give back. So what they specifically the request from us was to consider blending AI, HPC and Bitcoin mining. So a component of those loads remain interruptible. So we see it as a dual-pronged strategy. And I think you'll see a lot of our sites will serve both loads.

Your next question comes from the line of Mike Colonnese with H.C. Wainwright.

Congrats on the strong fiscal year here. First one for me on the HCC side. curious, what are some of the key development milestones that investors should be on a lookout for as it relates to the HPC strategy. It sounds like the near-term focus will be on deployments at your Texas and Sandersville sites. So if you get some more color there.

Yes, you nailed it, Mike. I can tell you I had a conversation not with a neo cloud or anybody like that. But actually, with the Senior Director of site development for a global hyperscaler last night on my way leaving here. And what he shared with us is their 2026 forecasts are so constrained that they're looking at alternative types of builds just to facilitate the needs for '26.

The takeaway from the conversation was Sandersville and Sealy because both of them can be energized, Sandersville is live and active right now powering 11 exahash Bitcoin miners. But it could switch to a 200-megawatt critical IT load and be online in a reasonable period of time. And I think kind of a cool thing that maybe has gone unnoticed and that is this MOU summer.

We don't historically -- I mean if you look at CleanSpark's pass, we don't announce MOU or LOI or anything that isn't definitive or concrete. It was really important to ink that with summer because of the way that they approach the business. Submer has approved reference architecture for AMD for NVIDIA and they build the entire MEP solution. So mechanical, electrical and plumbing with all the fiber runs, they take that out of the field, put it into the factory. So a company like CleanSpark builds the powered grayshell, we contract with Submer in the MEP solution for -- specifically to the reference architecture of the end user requirements. So speed to market is really, really critical right now. And having that modular approach, I think, is going to be a massive differentiator for us.

That's helpful color, Matt. I appreciate that. And then the second one is on the Bitcoin mining side. I know you mentioned some of these near-term deployments you guys are looking to install in the first quarter. Just reminded us of what your near-term expansion plans will look like for the Bitcoin mining business and existing site expansions versus any sort of new development opportunities on the greenfield side or mergers and acquisitions at this stage?

Yes. So I think what you're going to see is a migration of our Bitcoin mining away from areas that are closer to major metropolitan areas that are maybe more sensitive to utility rates and into more remote locations. There are a number of utilities that have either recently passed or are discussing the blockchain specific tariffs.

To my point on the last question, that interruptible component of the load is in such demand that they give us favorable rates whether it's TBA or Wyoming or any of a number of different jurisdictions to have the offtake that allows us to flex and to assist the utility.

So I think what you'll see is locations like Sandersville, locations like the Metro Atlanta sites in North Cross in College Park, et cetera. those will probably be prioritized for HPC AI because of the quick access to fiber, the low latency loads that they can serve, et cetera. And then the Bitcoin mining from those facilities will likely migrate out to some of the other locations.

So to answer your question directly about scale, we're at 50 exahash per second right now. We have 6 exahash of the S21 XP Immersion miners. We had slotted out a deployment strategy. Now we use modular emergent cool data centers for the vast majority of those. When we secured the 100 megawatts in Wyoming, we actually beat out a hyperscaler because of the fact that Wyoming wanted to energize those megawatts today and not in 3 years.

So we have the infrastructure purchase, delivered on hand, ready to roll to deploy these in short order. So I think what you'll see is between now and towards the end of Q1 '26, calendar Q1, you'll see that additional 6 exahash come online.

Above that, what you'll see is as we do fleet upgrades, not in the $250 million capacity that we've historically done, but in a more disciplined, more thoughtful manner to ensure that we're protecting our share of the hash rate and supporting what we believe to be a national security issue, and that is ensuring that there's Bitcoin mining hash rate domestically.

So we're going to take a real balanced approach at that. But you'll see us continue to grow. And really, the differentiator is just in the fact that we have right now one of the most efficient fleets in the world. And with the deployment of this 6 exahash of 13.5 jewel machines will have hands down the most efficient fleet around.

Your next question comes from the line of Paul Golding with Macquire Capital.

Congrats on a strong finish to the year. I wanted to ask with the 13,000 Bitcoin on the balance sheet around $1.2 billion at fiscal year-end. And with the recent financings that you've done, how should we think about the total operation to build this powdered land bank as you think about the opportunity to bring tenants in for HPC or to simultaneously grow your Bitcoin mining fleet as you were just discussing? And then I have a follow-up. Thanks for the question, Paul.

Around the Bitcoin stack really hasn't changed, right? To give you context, we consciously have stacked Bitcoin quite rapidly over an 18-month period, and that brought us about 13,000 Bitcoin on the balance sheet. And we believe that we're one of the only companies using it in the strategic ways that it should be used as a capital asset. So I think going forward, what you can count on from us is a few things.

One, we'll continue to monetize the Bitcoin stack through yield strategies to generate some cash. Two, we'll continue to borrow against it to be opportunistic to draw down on cash to make sure that we're nimble in the marketplace and take advantage of accretive acquisitions. And we've always said that we're not ideological about the bitcoin balance. We're very strategic. And so if there comes a point in time where we needed to or we felt that the right thing to do is to part with a Bitcoin balance through sales, we most certainly would do that, and we were open to do that.

Because, again, we've built this entire company and given the financial wherewithal on optionality. But I'll tell you that with those sales comes to punitive tax treatment because we have MIMO at such a low basis. we'll have to pay -- will be a cash paying taxpayer on those items. So we take those into account when we're looking at the stack. But overall, we'll continue to use this as a form of nondilutive capital.

Got it. And then turning to the MOU with Submer and at the explanation you were just giving on how you might break out the shell development versus the MEP componentry. How should we think about the potential economic impact of that? If you can give any color, just thinking about how pricing on some colocation deals involve yield on cost and, of course, still to suit can involve more capital but with a partner just looking for any additional color you could provide?

Yes. Great question, Paul. Thank you for joining. So the summer relationship really was born out of a prior relationship between Humane and Submer. And Jeff had a working relationship with Patrick, the CEO of summer. And we've also got summer infrastructure deployed in our Bitcoin mining side. So we're very comfortable with them.

And I can tell you that the quality of the product that they deliver, it's much simpler in the Bitcoin mining side than some of the other modular immersion cool type companies. But because we haven't done a deployment domestically and they're just spinning up a manufacturing facility in Houston, I don't want to comment too much on what the cost per megawatt is, but I can tell you, in general terms, that the cost to build out a megawatt of mining infrastructure is about $1 million to do the same for AI and HPC according to the reference architecture required by the major chip manufacturers, it's closer to $10 million.

We also know that the mechanical, electrical and plumbing, the MEP solution, is a pretty extensive, pretty robust build-out because you've got all those trades working inside a facility at the same time. Building these in a factory increases the speed to market by an order of magnitude and the initial representations are that it saves us anywhere from 10% to 15% over a stick built in the field deployment. So we believe there's cost savings and speed to market that give us a very unique competitive advantage.

Your next question comes from the line of Greg Lewis with BTIG.

I guess, Gary or Matt, I was hoping you could talk a little bit more about the Texas facility and just kind of -- you mentioned that it starts to energize in 2027. Is that energization? Is there steps along the way? And then longer term, as we think about that site, is there the ability to expand at that site or potentially grow with the customer?

Greg, it's Gary. I want to give you the rundown on Texas because I think it's a really exciting project for us, and it's the beginning of what you've seen from us across the Georgia, Tennessee and Wyoming markets, which we take a fundamental land-and-expand approach, which is we get a foothold, and then we know that once we have that toehold in the market, the opportunity to significantly extend our footprint is available to us.

The energization schedule there is that the first 200 and change megawatts scheduled to come online first half 2027. And then there's 240-megawatt tranches in '28 and '29. But what's critical is that the counterparty that we purchased, the land and the contracted power from is also among the largest substation developers in the state. And so what we were able to step into are the long lead time items and the placeholders that they had on those components, giving us a high degree of build certainty to land the power on the site.

The second piece is that, that site is fully accrued. And so when we look at the amortization schedule, we've already passed all of the regulatory hurdles that would typically be associated with a project in the state.

The final piece of what you asked that I want to touch on is about expansion. And the ERCOT approval status wouldn't come with the expansion on grid that we're looking to accomplish there. But one of the parts that was most attractive not only to the power contract at that particular location and the service point from the utility that's going to be delivering to us, but it's also the parcel that's there. We have significant land capabilities to be able to digest more power in the same type of AI-based center footprint. That's going to be represented by the 285. And so we're excited about the scalability. Matt touched on in his comments, the behind-the-meter gas generation opportunity, but this is where we find ourselves at our true core competency which is being an opportunistic acquirer of land and power. Not only because we're able to locate high-quality assets for our portfolio today, but also for what those assets can represent to our business going into the future.

Okay. 100%. That was super helpful. I have a great Thanksgiving and talk to you soon.

Your next question comes from the line of John Todaro with Needham & Company.

Congrats guys on the progress here. First question here, as it relates to the AI readiness at Sandersville, just remind us if that site had for curtailment. And then if so, really kind of how much should we earmark for HPC versus mining if you intend to kind of have both at that site?

Yes. Thanks, John. So what's important to understand about the Georgia and the -- power specifically, is that it is not subject to forced certain at that location. It's part of why we didn't just -- we didn't just trip all and land with an AI thesis around the Sandersville assets. Those were also inbound because of the highly attractive nature of the Georgia Power markets more broadly.

And so we feel great about the applicability of that location to the ultimate AI campus use case and how we balance that versus the Bitcoin mining is going to be the way we do everything, which is a fundamental return on investment profile. We take a measured approach. We're data-driven. And the early indication is that every one of those megawatts highly applicable for AI as its highest and best use. But we're going to remain data-driven across the analysis period for the asset.

Great. That's helpful. And then just as it relates to credit becoming a little bit of a concern out there, especially as it relates to Neo cloud customers. Just walk us through how you are thinking about the customer profile, if there's maybe bigger parts than hyperscalers now than maybe a couple of months ago when you guys were initially thinking about it? And then also hyperscaleresult backstops, is that starting to become a necessity? Would love to get some color on that.

John, thanks for the question. I'll tell you this about the financing. And I mentioned in my prepared remarks is that there's new pools of capital that are going to be available to us at much lower cost of capital. So we feel really good about that. We know we're going to introduce at some point, secured debt into the capital act. So we're closely monitoring the deals that are going on and the debt markets.

But I'll tell you, the focus really first is to get that high credit quality tenant in there to make sure that we can get the best deal possible because, as you know, levered IRR is significantly higher, the more -- the higher the loan to value is. But I'll also tell you that while we might expect to get debt at about 80%, 85% LTV over time. We have no problem also being live bit more equity to the table, maybe at a 60% to 70% LTV for the first project or 2.

Yes, that will decrease our levered IRR just a bit, but it also produce cash flows in the -- arm, which would also be helpful. But ultimately, to us, it's really going to come down to execution for which we still think that the industry hasn't proven but we're going to see that over the next 12 to 18 months, particularly as we bring our land and power to market. So I don't have the specific answer for you right now, but I'd tell you that we are confident that there's a number of options for us to get financing and attract prices and get the levered IRR that this market is offering.

Your question comes from the line of Reggie Smith with JPMorgan.

Congrats on growth in the quarter and on the pivot. I just had a question on the Sandersville side as well. I'm not sure if you guys talked about what type of CapEx would be required to operate at HPC if it's ready, like kind of moving ready now. And then I'm curious, I know it's early, maybe thought about the use cases, whether it would be used for training or entrance and whether that all plays any role in the price that you'd be able to get to kind of lease that space out. So like does inference pay more or generate more revenue per megawatt than training. Any insights you can provide at least around how you're thinking about kind of self appraisal of the site and what it could be worth?

Reggie, thanks for joining, and thanks for the call. You've been to that Sandersville site, I believe, on some of our show and tell journeys. And I think what's important to note is the facility, as you saw it, would not be a conversion to HPC AI. We have a phenomenal relationship with the Economic Development Director in the county. And so we secured an additional plot of hundreds of acres of land that's immediately adjacent. So what you would see would be construction that is parallel with Bitcoin mining continuing and when we're ready to energize, we literally flip the switch, de-energize the Bitcoin mining and migrate that out and go to compute.

Now specific types of compute. Jeff has built a model. Obviously, you have the Giga campus, which is large-scale training, those are generally close to 1 gigawatt and above. Then you have the mega campus, which is that kind of sweet spot 200 to 800 megawatts. And that's generally perceived to be kind of a combo site where it's inference and training or primarily inference depending on the offtake client.

The last mile or the low latency, real -- critical sites like what you've seen in and around Metro Atlanta would be kind of the exception to that rule. And those would obviously be low latency inference-type operations. So this is going to be -- I think Sandersville going to be an interesting case study because, quite frankly, the demand that we're seeing is for multiple 190 to 200-megawatt critical IT loads and the off-takers are asking for 2026 delivery.

So there's some real challenges in getting that tipped up in time. But as we saw, even with companies like Meta, for example, they're putting tents up and using behind-the-meter gas at $0.12 a kilowatt hour because the demand is such that there is no sensitivity to those utility rates. So we really feel like we're uniquely positioned in this Reggie.

And you -- when you first launched coverage on CleanSpark, we talked about the fact that when Clean Spark entered the space, there were a handful of household names that were the standard from Bitcoin mining. We mined our first Bitcoin in December of 2020. And as of today, we have more hash rate in the United States of America than anybody else or of time is second to none. And I think you can see, you can count on seeing that same type of operational excellence and efficiency rolled into our next strategy. And Jeff is just the perfect guy to lead those initiatives.

And if I can get 1 more in. I'm not trying to nail you down to a time line, but I kind of read between the line but I think about cipher and they purchased a property in Texas a year ago and kind of just now announced a deal. And obviously, it takes a while to spot these types of things out. But I'm curious like how you're thinking about it, if it took you a year to sign a deal, would that be your satisfactory or kind of disappointing based on which you're seeing from a demand perspective now like you just should we think of something much sooner than that? Like any color you can help on how you're thinking about that internal personally, that would be great.

Yes. So that's a phenomenal question. And I can tell you that you called me, I was at my kid's basketball game, you called me when Corsico, we've announced their deal. And we talked about what the demand portfolio or the demand profile looked like back then. And at that point, it was we're going to convert these megawatts and we're going to identify a customer. I think there's been a complete paradigm shift in the space. And now you have customers knocking at the door because they have loads that need to be served very rapidly.

So what I can tell you with -- I would say, a strong amount of certainty is you'll see a lease executed much quicker than what you've seen in the space. and the flexibility that's now come, I mean, we look at some of our peers that have extended their energization schedules because they're falling behind on construction, et cetera. The hyperscalers and the end users that we're having conversations with.

We've made it abundantly clear. We're constrained like anyone else for the MEP side, but we have a distinct advantage. So I think what's likely to happen, and Reggie, quite frankly, there are 2 different off-takers that want to sign lease agreements by year-end. Is that going to happen? It's hard to say. But the demand is there. It's real. And as I mentioned in earlier comments, we were working on the script in the slide deck that we showed today, and I left here at 8:00 last night and the Global Director of site selection for a hyperscaler was calling me wanting to confirm that they were still in the running. So I don't think there's any question that you're going to see a lease much quicker than a year.

Your next question comes from Brett Knoblauch with Cantor Fitzgerald.

Maybe, Matt, just on the land and power side of the equation. Could you comment on what you had to pay for the new site in Texas that you guys just announced -- and I think you guys one out there that are looking to go out and find additional land that is energized soon. I think all of your peers need to hyperscalers probably looking to do it themselves. Like I guess how hard is it, how expensive is it? And how much is there out there that you think you can go out and buy that is kind of turnkey ready similar to the site that you guys announced it?

So yes, I could say what we paid for it, but I'm not going to. And I'll tell you why. There are some very fertile hunting grounds in the ERCOT region, and we don't want to price ourselves out of the market. What I can tell you is that the acquisition cost was a combination of equity and cash. We obviously filed the proper -- the appropriate filings for the share issuance.

But the purchase price of that land and power came in line with what you're seeing in the market towards the low end of that range. Our advantage, I think, in securing land and power and speed to market is really because we've continued to state that Bitcoin mining is going to be a part of what we do going forward. And 18 months ago, when we were invited to sit down at Maralago with Donald Trump during his candidacy, he brought in Senator Hagerty from Tennessee. And because the question that came was, can Bitcoin miners actually plow the road, so to speak, can Bitcoin miners go in and monetize megawatts for a utility that needs to generate revenues now or for an energy developer that needs to monetize their power while they're waiting for an intercept agreement.

And so Mr. Trump asked Bill Hagerty, can Bitcoin miners do that and what he said is, unequivocally, they not only can they but they do in TVA and CleanSpark is one of them.

And so when we talk about Cheyenne, we're driver 9 iron across the street there from Warren Air Force Base, and there's another $1 trillion company, trillion market cap company that's in our in neighborhood. They were bidding for those megawatts. And we won -- we didn't win because the utility thought that our balance sheet was prettier or we were a better credit risk. We won because we said if you sell us those megawatts, we'll start buying them in 6 months, not 1.5 years or 2 years.

So I think long answer your question. I think being a Bitcoin Miner with diverse mining portfolio and the flexibility of the modular deployments that we've done, some of the sites that you've actually seen. It gives us an advantage to jump in, monetize those megawatts on a small portion of the campus while we're tilting up the powered shell in the background. So I think our speed to market is complemented not only by the modular approach with the Submer partnership to a signing to go in and buy the power today.

Your next question comes from Jim Missouri with Chardan Capital.

Is Sandersville the only existing mining site you've identified for critical IT applications or the first one and there's going to be others?

Yes. Jim, thanks for the question. The answer to your question is B, it's the first one. the inbound inquiries we've had for the 100 megawatts surrounding the Atlanta Airport are second in urgency only to Sandersville. And Sandersville is because it's 250 megawatts energized operating today. the demand for College Park and Norcross is because it's low latency in the most dense compute environment in North America outside of Northern Virginia.

So there's a tremendous amount of demand there as well as some of our sites in Tennessee. So it's really just a sorting process. And as we mentioned in our prepared remarks, we've done a portfolio analysis to kind of determine we don't want to move Bitcoin mining infrastructure into a facility that's going to be rapidly pivoted to AI HPC deployment.

So I think the answer is Sanders Village is the low-hanging fruit that everybody wants. The Metro Atlanta stuff is second, and then we've got a whole bunch of third place sites.

And the way you described it, it sounds like that flipping of the switch from mining to AI can take place before the Sealy facility is energized. Am I understanding that correctly?

Yes. So think about it this way, Jim. We're -- our facility in Sandersville is purpose-built Bitcoin mining. We have a couple of hundred acres adjacent. We're going to build on that land, while we're still mining. Now the speed to market, really the summer is a big differentiator. As I mentioned before, there are hyperscalers that are popping up tents because they need access so quickly. So I think it's a relative question.

The Sealy part, the Sealy project is very appealing because we've done all the analysis, all the engineering is done. We've gone to the levels of completing the survey and finding where there are easements for the gas lines on site, et cetera. So we can configure the footprint based on the needs of an end-use customer. So we spent a great deal of time in NVIDIA with some of their teams, and they have a giga site. They have all the reference architecture for a GB300 deployment for a gigawatt of power and everything is detailed down to the inch of fiber runs.

So that type of build is obviously much more detailed and going to take a longer period of time than tilting up a powered shell and slotting in a modular solution like you'd see from a sub or like you'd see from a company like Integra out of Houston. There are a number of these companies that provide that full MEP turnkey solution. So I think what is likely to happen is we'll probably execute on both simultaneously. The delay on Sealy, and it's not really a delay. It's just the inertization schedule on ERCOT is fixed.

The cool thing about that is the large load studies are done. There's no it's -- just when. And the first 207 megawatts energized is the first half of '27. Their commitment is April, but they have flexibility for the first half. So I think the conversations we've had with offtakers for Sandersville, they're looking to get something in the book fast with Sealy, it's also high demand and with the understanding that by Q2 '27, it's energized and you can build in the meantime.

Understood. And just 1 more, if I might. You talked about increased expenses and given that as well as the recent prices of Bitcoin, will you need to sell the entirety of your Bitcoin production in order to cover your expenses?

Not at all. We're generating 600, 700 bitcoin a month, and we're doing sort of 54%, 55% gross margin. So the expenses we talked about and as we're building, I think it really depends on the lease we put together and the ability to leverage that lease for financing. But what we're seeing is that the -- depending on the credit quality of the end-use tenant, the LTVs are anywhere from 15% to 30%, having just put up the inverse of that, I'm sorry, 70% to 85%.

Having just put up that $1.15 billion 0% bond, we're sitting on a pretty healthy stock of cash. And then as Gary mentioned in his prepared comments, we have $400 million in low single-digit interest unused capacity on Bitcoin back to credit facilities. So I think you'll see us take more of a hybrid approach rather than sell the stack.

And then the last thing, with regard to the compressed margins in the environment, having the highest uptime and the most efficient fleet in the nation means that as energy prices press up margin compression happens to everybody. We just happen to make more money out of the same megawatts because of fleet efficiency and uptime.

So I tell the story, it's like when my grandfather told me when 2 guys are camping in a tent and a bare walks into the camp site and the 1 guy puts on his shoes and the guy says, why are you putting on your shoes, you can't outrun a bar and he said, I don't have to run the bear. I just have to outrun you. And that's really what we see as our Bitcoin mining advantage.

They're still industrial scale miners operating fleets greater than 20 jewels per terahash with not significantly better power pricing than we do. So we have a ton of flexibility and I really like the position that we're in to continue using Bitcoin Mining.

Your next question comes from the line of Jon Hickman with Ladenburg.

As you might imagine, most of my questions have been answered. But I was just wondering if you could maybe opine about there are others in the space that are trying to do the same thing that you're doing, take taking Bitcoin sites. And moving them over to HPC and AI and they've been telling us they're going to do this, and it's been a year has gone by and there's no like lease. Why would -- could you opine as to why it would be taking so long when there is so much demand?

I'll tell you from my perspective, and then I'd certainly invite either of my colleagues to chime in on it. What we learned when we spent some time with NVIDIA and AMD, there's -- there are very specific reference architecture that is required for specific clusters. And I think that the challenge that we're seeing, and I'm certainly not casting aspersions on any one strategy.

But I think if there is so much demand for hyperscaler but they want a specific cluster, be that the new Google chips or AMD or NVIDIA. The site needs to be specifically designed for those clusters. And I think building a site and then suggesting that it's flexible for somebody else to reconfigure or modify it, it could be useful, I think, is a little bit of a challenge.

So to have it purpose built to the specific architecture of the offtaker, I believe, is a real advantage. And having all these sites that are already energized that we're currently using those megawatts to mine Bitcoin, give us that flexibility. I'm not in a rush. I don't have to do anything, quite frankly, until we have a lease I don't even have to start construction because I want to make sure that it's built to suit for the offtake customer.

So I guess my perspective, John, and again, I invite Harry or Gary to comment. I think that build and they will come mentality doesn't apply if it's not to the specific architecture requirements of the end user.

I'll just add one, Jon, which is just that the market today is different than the market a year ago. The demand profile has accelerated. The crunch for power is tighter than it was. And so we're seeing some of the hesitation that some of these offtakers might have had 12 months ago. The sense of urgency is just more significant, and that's going to represent a difference in execution time line today than they would have looked like back then.

Okay. And then I just have 1 question. On Sandersville, when you get the AI part build and you want a static the switch, what happens to the Bitcoin mining site? Would they have more power -- would you?

Yes. No, a couple of opportunities there. First and foremost, the ASICs would be migrated to a facility that needs them right now, and there's always plenty of demand for that. the facilities that we built. And Jon, I don't remember if you visited -- on our Analyst Day -- the facilities standards. Okay. So they're identical to what we built in Jackson, Tennessee as an example. So the cool thing is we build all the foundational stuff and then what goes vertical is basically bolt together. So we have the ability to repurpose those buildings based on any number of different factors. But no, it wouldn't be a write-off in mothball it. It would be repurposing those assets for deployment elsewhere.

But will you need more power?

Yes, for sure. That's why we would move it somewhere else like, for example, Wyoming or Tennessee or even other sites in Georgia, we would, for sure. Now Sandersville is a bit of an anomaly because there are some opportunities for power expansion there. And that's something that's still out for discussion, but the demand is significant.

And with your last question, it comes from Nick Giles from B. Riley Securities.

Great. You spoke to a 1 gigawatt pipeline. And I was hoping you could break that down a bit. I mean, how many of these opportunities would you describe this late stage? Or how soon could we see those drop down? And then which of your existing power markets do you see most of these opportunities?

Yes, Nick. Great question. And I want to give you a historical example to kind of illustrate why we don't always give direct pipeline granularity as our business. So if you look back to the prior quarter's call, we talked about pipeline and it was contemplated in that environment.

What wasn't contemplated in either of those numbers was the 285 megawatts that we purchased in Texas. And that's because the relationships that we have across the utility and infrastructure space are diverse, and they're all very warm and deep. And so there are opportunities that come out of the woodwork along the way that leapfrog to the front of lists that we fold very set.

And so it's part of our capital strategy to have dynamic flexibility and execution with speed. And it's also part of the pipeline and relationship management that we do work on across the infrastructure and utility partners that we have. And so that type of dynamic flexibility is why we've been successful acquiring power and land and developing it with the quality that we have.

And so when we look at that multi-gigawatt pipeline, a lot of those regions where we see expansion opportunities are places where we have deep relationships, the Georgias, Tennessees, Wyomings and now Texas is of the world.

But some of the utilities that serve those regions, I'll use TVA as an example because I'm a homer, Tennessee Valley Authority serves 7 different states. And so while it's the same utility partner, it bleeds outside the lines of the great State of Tennessee. And so those are the types of dynamics that we see replicated across those relationships and part of why we feel so good about the pipeline growth opportunities and why we capitalize the business to hunt power and land just like Gary said.

Understood. Well, I appreciate the update and have a good health.

Nick, happy Thanksgiving.

And with no further questions in queue, I'd like to turn the call back over to Harry for any closing remarks.

Everyone, thank you again for joining today's earnings call. We look forward to being in touch and sharing future results with you in the coming quarters. Stay tuned for more progress and exciting achievements ahead of us at CleanSpark, America's Bitcoin Miner.

This concludes today's conference call. You may now disconnect.

Good afternoon. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the CleanSpark Fiscal Year Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Thank you.

Harry, you may begin your conference.

Thanks, Jeannie, and thank you for joining us today for the Third Quarter Fiscal Year Financial Results for CleanSpark, America's Bitcoin Miner, covering the period April 1, 2025, through June 30, 2025. Our press release was issued about 30 minutes ago and is available on our website at 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 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 remains 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 Zach.

Thanks, Harry, and good afternoon. I'm pleased to welcome you to our call reviewing CleanSpark's fiscal third quarter 2025 performance. This quarter was our most successful to-date across a multitude of metrics and reaffirms the strength of our strategy. The stage is set for continued growth, supported by world-class operations, a strong balance sheet and supportive macro and policy tailwinds.

While sustained Bitcoin strength was a contributing factor, our performance is grounded in strategic discipline and the tireless efforts of our entire team. Behind our record-setting revenue and earnings per share of $0.90 is billions of dollars of investments across 4 states, over 1 gigawatt of contracted power and at today's price, approximately $1.5 billion worth of Bitcoin.

As America's Bitcoin miner, we operate with high standards and set aggressive yet achievable targets. Our achievement of 50 exahash of operational hash rate was a key contributor to our outstanding results and a milestone made possible only through disciplined execution.

Our third quarter revenue was nearly $200 million, up 94% compared to the same period last year and more than 9% over our prior quarter. We achieved earnings per basic share of $0.90, thanks to healthy gross margins of 54.6%. Importantly, we produced 2,012 Bitcoin and our treasury grew in value to approximately $1.08 billion by the end of the quarter, an increase of more than $100 million since last quarter. This was driven by both production and Bitcoin price appreciation, all while self-funding operations, further validating our prudent accumulation strategy.

Our total Bitcoin in treasury stood at 12,608 at the close of the quarter, demonstrating our escape velocity, allowing us to scale without relying on a single share of equity funding since early November 2024. June 30 marked the highest quarterly close for Bitcoin in its history, driven by global adoption, rising institutional investment and the maturation of the asset class.

Additionally, we remain the only large-scale holder to have mined every Bitcoin we hold in treasury. We do this because we can generate Bitcoin below spot market rates. Our cost per Bitcoin in the third quarter was $44,806, which was far below the average spot price of approximately $98,500 during the same period.

Turning to our fully self-operated infrastructure. Our team met our 50 exahash target on June 24. We were the first publicly-traded company to reach that milestone exclusively with American infrastructure. Our fleet's average power efficiency was just over 16 joules per terahash at quarter's end, and we have continued to improve that figure. This further cements our fleet as one of the most efficient in the world. When our scale and fleet efficiency are paired with our flexible operating model, this enables us to manage towards profitability, not arbitrary power costs.

Our fully contracted power portfolio comprises over 1 gigawatt. Importantly, we are currently utilizing about 80% of that total, leaving over 200 megawatts available for immediate expansion. In fiscal third quarter, our all-in cost per kilowatt hour was $0.056, nearly $0.005 lower than in the second quarter. This decrease reflects an easing of seasonal power prices as we transition from winter to spring. We also energized additional sites in our power portfolio, further improving our average power cost and demonstrating the benefits of our diversified and flexible energy strategy.

Just as our fleet efficiencies improved over time, our goal remains to reduce power costs across the portfolio and growth pipeline, always with an eye towards profitability. As I mentioned, we reached 50 exahash in June, a major milestone in the history of our company. It reflects years of focused strategy, disciplined execution and a relentless commitment to doing things the CleanSpark way.

This growth wasn't accidental. It's the result of building and operating our own infrastructure from the ground up, giving us the control, resilience and scalability to lead the industry. But we have never pursued growth for its own sake. Every new megawatt and every additional exahash has been developed with the intention of delivering long-term shareholder value and advancing our vision of becoming the global leader in Bitcoin mining, built, owned and operated in rural America.

Consider the speed at which we achieve this goal. At the end of fiscal 2024, our operational hash rate stood at 27.6 exahash. In just 9 months, we nearly doubled that figure to 50, while improving fleet efficiency and the overall operational performance.

Here's how we did it. Tennessee became our second largest source of hash rates, thanks to 2 acquisitions and a 60-megawatt greenfield development. It was the fastest state-level ramp-up in our history. Our growth in the state demonstrates our land and expand strategy in action. We also launched 2 sites in Wyoming, a state with low-cost, reliable energy and supportive leadership at the local, state and federal levels. Leaders who understand the value of our business can deliver to their communities.

While our operations in Wyoming are currently smaller than Georgia and Tennessee, we have the opportunity to evaluate hundreds of additional megawatts in the region. We also continue to optimize and expand our operations in Mississippi and Georgia, with Georgia contributing significantly to reaching our 50 exahash milestone.

I want to take the time to spotlight an example of rapid execution. We closed on a new plot of land in rural Georgia in mid-May. And just 5 weeks later, we had immersion-cooled mining live and hashing at the site. That kind of speed to revenue is made possible by tight collaboration across our construction, deployment, operations and growth teams. This project exemplifies our relentless focus on speed to revenue. This is just one example of how we set the industry standard every day and embody the values and mission of CleanSpark. This is CleanSpark at its best, disciplined, fast and unified.

Our team is our greatest asset. And when they execute our battle-tested playbook, we're nearly unstoppable. Looking forward, we will apply our years of experience to drive our next phase of mining and power expansion. As we shared on our last call, we moved away from time-based exahash guidance. Instead, we're focused on capturing a greater share of global hash rate as a key metric, which we believe is a more meaningful measure of our market competitiveness.

At the end of fiscal 2024, we held 4.3% of global hash rate with 27.6 exahash. When we hit 50 in June, our share rose to 5.6%, reflecting our ability to outpace the broader mining landscape and earn more Bitcoin over time. And we are not slowing down. We are taking steps to rapidly deliver an additional 10 exahash of operational hash rate on a cost-effective timeline. All miners required for this growth have already been secured, nearly half of the necessary infrastructure is in place, and we are finalizing plans for the remainder. At today's difficulty, this expansion would represent approximately a 1% increase in global hash rate, further expanding our competitive position and demonstrating continued execution at scale.

Now a core tenet of Bitcoin is its decentralized nature. Mining is broadly distributed by design, ensuring no single participant dominates the network's hash rate. With 5.8% global hash rate of 50 exahash, CleanSpark is amongst the largest miners in the world, an excellent position for us and a healthy signal for the Bitcoin ecosystem overall. We have ample room to grow while remaining responsibly sized within the decentralized landscape.

The scarcity of Bitcoin is also by design, and there are a limited amount of Bitcoin available to miners each day. This is why we are laser-focused on responsibly delivering the proof of work required to grow our share of the network, supporting the world's hardest money on behalf of our shareholders.

We have multiple proven pathways to capture additional market share, develop new power pipeline capacity to expand our infrastructure portfolio, optimize our mining fleet to extract more hash rate from existing resources, build new sites through greenfield development and acquire capacity through opportunistic M&A. These strategies are not theoretical. We have executed each of them at scale. Together, they form the foundation of our growth playbook as we continue driving long-term value.

We have consistently focused on being the best pure-play vertically-integrated Bitcoin mining company in the industry by design. While alternative compute models like AI and HPC have drawn attention, repurposing a mining infrastructure for these applications is far more complex than it may appear. Operators must navigate higher capital intensity, customer uncertainty and a rapidly evolving hardware environment that can threaten project ROI.

By contrast, Bitcoin mining remains a proven and scalable business model, especially in today's constructive market environment that we have optimized unlike any other company. Thanks to this focus, CleanSpark stands apart as the only large-scale pure-play Bitcoin miner with wholly self-operated infrastructure, a position earned through deliberate strategy, not rigid ideology.

We have followed this course because up to this point, we have determined that our power contracts and land assets are being put to their optimal use in our mining operations. That said, we have always understood that power has value, no matter how it's used. We have always viewed our real estate portfolio, power contracts and geographic positioning as assets that hold significant value independent of their utilization for Bitcoin mining.

Some sites both in our current operational footprint and in our pipeline have potential alternative value through other use cases. To that extent -- to the extent that certain sites due to location, infrastructure or proximity to metro centers can return superior value, we remain flexible and open to evaluating monetization options that enhance shareholder value.

Today, CleanSpark has a significant power pipeline that can fuel continued growth. We are currently evaluating approximately 1.2 gigawatts of potential near-term power opportunities, primarily in areas where we have already operate or with proven partners we have successfully scaled with in the past. The value proposition for utilities in these areas is clear. In tight power markets, flexible customers like us help balance demand and improve grid resiliency.

In addition to our near-term pipeline, we are also exploring an additional 1.7 gigawatts of long-term power opportunities. These longer horizon projects would require utility-level infrastructure investments. This layered pipeline ensures we have a long-term access to scalable, low-cost power and gives us the opportunity to execute with precision, speed and capital efficiency when the time is right.

As our pipeline moves from evaluation to project implementation, we will execute our growth plans to best utilize these opportunities to continue delivering operational excellence at every point of the growth cycle. Our track record speaks for itself. We know how and when to pull the trigger on high-return opportunities. This discipline allows us to grow with speed and efficiency while keeping capital stewardship at the heart of every decision.

The good news for us and for the broader Bitcoin ecosystem is that we are now enjoying significant regulatory tailwinds, both in Washington, D.C. and in state capitals across the country. On July 18, I was honored to attend a White House ceremony where President Trump signed the GENIUS Act into law. This legislation championed in the U.S. Senate by Senator Bill Hagerty of Tennessee, establishes a clear regulatory framework for U.S. dollar-backed stablecoins. That clarity is expected to drive increased demand for both U.S. treasuries and Bitcoin.

Earlier that same week, the U.S. House of Representatives passed another milestone bill, the Clarity Act. This bipartisan legislation would establish a comprehensive federal framework for non-stablecoin digital assets like Bitcoin. It further solidifies Bitcoin's treatment as a commodity, potentially unlocking trillions in capital flows and paving the way for deeper integration with mainstream financial markets.

Beyond Washington, momentum is building at the state level as well. Senator Cynthia Lummis of Wyoming continues to be one of our industry's strongest champions, advocating for the creation of a federal strategic Bitcoin reserve. Both Texas and New Hampshire have already taken steps to establish similar reserves at the state level. And just today, we saw a new executive order on the President's desk making Bitcoin a qualified asset in 401(k) accounts. Together, these developments reflect the growing recognition of Bitcoin's role in U.S. innovation, energy policy and monetary resilience, and they represent real tailwinds for CleanSpark's continued growth.

Progress in this sector isn't limited to Washington. Wall Street and capital markets are increasingly providing tailwinds for Bitcoin adoption. One emerging trend we're watching closely is the rise of Bitcoin treasury companies, public companies that accumulate Bitcoin on the balance sheet for direct purchases rather than production. These entities represent a growing cohort of capital activity competing for a scarce resource and their participation is helping drive spot prices higher. As this dynamic unfolds, CleanSpark's business model becomes even more valuable.

We generate Bitcoin below market rates through our mining operations. And unlike treasury companies, we don't have to compete for coins in the open market. We produce them ourselves efficiently at lower cost than spot prices and at scale. In a market where the race to accumulate Bitcoin is accelerating, we believe that mining remains the most strategic and scalable path to long-term value.

And Bitcoin is not a passive asset on our balance sheet. We have a dedicated digital asset management team operating an institutional-grade trading desk to support our operations and generate responsible risk-adjusted yield. Since inception, our approach has been measured and disciplined. In late May, the team executed our first derivatives trade.

June marked the first full month of trading activity, and we treated it as a proof of concept focused on execution quality, counterparty betting and operational security. This crawl, walk, run approach is designed to build a sustainable strategy that responsibly harnesses Bitcoin's natural volatility while preserving our capital and protecting shareholder value. While the program is still in its early stages, I'm pleased to report that our initial results were strong and aligned with our expectations. We will measure success over quarters and cycles, not single month, while maintaining tight feedback loops to ensure continuous learning and improvement.

Before I hand the call over to Gary, I want to highlight a few foundational concepts that continue to drive our performance and define who we are. Our 4 strategic pillars, energy, Bitcoin, operational excellence and capital stewardship anchor everything we do. We focus on the KPIs that matter most, percentage of global hash rate, operational hash rate, fleet efficiency, marginal cost to mine, uptime and Bitcoin and treasury. These are the real drivers of scale, performance and long-term business health.

We call this disciplined approach the CleanSpark Way, which is executed through the everyday grit of our team. It's more than a philosophy. It's embedded in how we work and how we win. This quarter, that combination of strategy, execution and culture came together to deliver record-setting results, our strongest quarter in company history.

I want to thank every member of our team for embracing this vision and driving CleanSpark to its position as the leading publicly traded Bitcoin miner in the world.

With that, I'll now turn the call over to our CFO, Gary Vecchiarelli, for a closer look at the financials. Gary, over to you.

Thank you, Zach. As we've mentioned, our fiscal third quarter was record-setting in so many ways. But as we dive into the numbers, please keep in mind that our success this quarter has been the logical result of our focus on bringing traditional bottom line business discipline to one of the newest and most innovative industries in the world.

Our revenues for the third quarter were approximately $199 million, an increase of $95 million or 91% over the same quarter last year. We produced 2,012 Bitcoin for the quarter, 436 more than the same quarter last year or an increase of 28%. Notably, this was also a few Bitcoins shy of our all-time high production of 2,031 Bitcoin in fiscal Q2 '24, which immediately preceded the halving event. This is representative of the significant growth we've achieved in a short 15-month time frame and especially impressive given the impact of the mid-April 2024 halving.

Our average revenue recognized per Bitcoin produced in Q3 was approximately $99,000 each, which is an increase of approximately $33,000 or 50% over the same quarter last year. Looking at our margins, our gross profit increased by approximately $50 million year-over-year with a profit margin of 55% for this quarter. When compared to the immediately preceding second quarter, our gross profit increased $12 million or 13% during the period. This quarter's increase in gross profit was primarily due to the combination of greater Bitcoin production at higher Bitcoin prices and lower energy costs, significantly outpacing difficulty.

This quarter, we recognized net income of approximately $257 million. Our adjusted EBITDA was $378 million for the quarter. On a normalized basis, when taking out noncash items, it was $78 million, which represents the cash generated from our mining operations net all cash expenses.

Notably, our marginal cost per coin was $44,806, which represents an increase of only 5% over the immediately preceding second quarter. The slight increase in our marginal cost per coin is primarily attributed to an increase in mining difficulty. However, it is important to note that we have made investments in acquiring and maintaining one of the world's most efficient mining fleets, for which we have seen an increase in efficiency and corresponding decrease in energy usage per terahash.

Prioritizing fleet efficiency has always been a core strategic theme for CleanSpark, and it is one of the reasons why we have been so successful at driving shareholder value through countercyclical investment. Our all-in cost per kilowatt hour decreased during the quarter to $0.056. As we have mentioned on prior calls, we intentionally manage to profitability rather than to a specific cost per kilowatt hour. This maximizes our Bitcoin production numbers and may result in us occasionally mining Bitcoin at higher prices per kilowatt hour.

Looking at our overhead and expenses, our total cash overhead, which we consider to be professional fees, salaries and wages and G&A expenses less stock-based compensation, increased approximately $4.6 million or 17% over Q2. This was primarily driven by an accrual due to a true-up on our local property taxes and property and casualty insurance policy. I've spoken on prior calls about our risk-adverse approach to safeguarding our assets.

As a result, ensuring our top-of-the-line fleet comes at a cost. And since we have significantly grown the value of our miners, mining equipment and infrastructure by approximately $420 million since last fiscal year-end, we have chosen to also rightsize the insurance policy to protect our investment in miners and infrastructure, which now stands at well over $1.3 billion in fair value. We are taking steps to minimize costs related to our insurance program, which I expect to be realized in the coming quarters. The other increases were largely seasonal or related to growth.

We ended the quarter with $35 million in cash and over 12,600 Bitcoin representing a fair value of approximately $1 billion. In total, the company had more than $1 billion of liquidity at the end of Q3. I'll have more to share about our Bitcoin treasury activities in a few moments.

Total debt as of the end of the quarter stands at approximately $820 million. Note that this amount is net debt issuance costs of approximately $16 million, which were incurred as part of the company's $650 million convertible transaction in December. As a reminder, this issuance has a 0% coupon and an effective conversion price of $24.66 per share.

When it comes to our Bitcoin treasury, you've heard us talk about our efforts, which internally we refer to as the digital asset management team. I am pleased to report that in the third quarter, we onboarded several high-quality counterparties and completed our first derivative transaction at the end of May.

We have previously discussed our conservative approach and strategy to monetizing our HODL balance, which we describe as a crawl, walk, run strategy. We're currently in the crawl phase. And while the volume of the derivative transactions is still ramping up, we are happy to see the proof of concept come to life. These results are just as good, if not better, than what we had initially projected.

We completed a number of derivative transactions through our selected partners, solely comprising the writing of covered calls. While the total dollar value of these premiums aren't large enough to separately present on the income statement, I will tell you, on a risk-adjusted basis, the cash-on-cash returns look quite promising. For example, we have written and we will continue to write short-term calls slightly out of the money. If these get called away, great. We use the proceeds to fund our operating expenses, and we likely sold at amounts greater than what we would have sold at spot at the time we wrote the calls. They expire out of the money, we keep the premium and roll the strategy forward.

Additionally, we are writing low delta calls also on a short or midterm basis, which have a low likelihood of expiring in the money. These premiums are used to generate the yield we set out to achieve. We expect to use approximately 40% of our HODL balance to generate a target yield of 4% on the entire Bitcoin treasury. We also expect the volume and complexity of our strategies to increase as time goes on.

I also want to point out that we feel very comfortable with the risk-reward relationship of our derivative strategies. However, we are not comfortable with lending out our Bitcoin, a practice some of our peers engage in. We find that lending out Bitcoin is typically on an unsecured basis and often only borrowed for speculative purposes. We have internalized the lessons learned from stories such as FTX, Three Arrows and Celsius and have incorporated risk management best practices as part of our institutional-grade efforts.

More importantly, the yield generated from derivative strategies appears to be greater than lending activities and on a risk-adjusted basis, performs far better. We will continue to have a conservative yet opportunistic approach for our Bitcoin treasury and believe our strategy will generate appropriate returns for the risk we take.

Bringing my comments regarding our treasury function to a close, I want to drive home an important point. We have a structural advantage due to 2 factors: One, we have a reliable Bitcoin production operations; and two, our capital strategy, which includes funding operational expenditures with production. This gives us a unique strategic advantage amongst our peers, where we can achieve -- where we can achieve a better risk-adjusted portfolio yield while transferring fewer Bitcoin to counterparties using derivative products versus lending.

Looking deeper into our balance sheet, there are some other deals I would like to highlight. We have the ability to self-fund operations and grow our Bitcoin balance while enhancing shareholder value. In April, we were proud to expand our relationship with Coinbase through their Bitcoin collateralized lending program as part of our broader strategic approach to capital management and increasing our line of credit with Coinbase Prime to $200 million.

Given our clean balance sheet and conservative approach to debt, we have significant additional capacity to raise cost-effective and nondilutive capital. Our current Bitcoin holdings of over 12,700 are valued at approximately $1.5 billion at today's spot price, representing a source of liquidity and opportunity. And we believe this quarter was the right time to evolve from a nearly 100% HODL strategy. We have been long on the record that the 100% HODL strategy was not sustainable for the long term, and our current capital strategy is rooted in business fundamentals and with the intention of limiting dilution as much as possible. We view our approach as deliberately strategic rather than ideological, particularly now that we've reached our current scale and escape velocity.

While we remain committed to Bitcoin as a long-term hardened asset, we believe a more effective way to increase shareholder value is through a balanced approach between monetizing new production and growing and monetizing our treasury. As a part of this strategy, we intend to further diversify our capital stack. As we have consistently emphasized, our focus is on ROI and our ability to make real-time decisions in the market.

Given today's market environment, we view the revolving line of credit as the most efficient and responsible path to supporting accretive growth. Our strong balance sheet positions us to take full advantage of that opportunity and others. It's our intention to continue to use proceeds from the revolver for accretive CapEx purposes and intend to manage the business on a net debt basis to ensure proper liquidity to cover all debt obligations.

I want to take a moment to discuss our investment in growth past 50 exahash. We have approximately 20,000 of the latest generation immersion units paid for and in hand, which represents 6 exahash of compute. We have over 1 gigawatt under contract and a little over 800 megawatts currently operational, which equates to over 200 megawatts contracted and not yet energized or operating. For these 200 megawatts, as of today, we have approximately $75 million of CapEx cash needs left to build out all 200 megawatts, which we expect could come over the next 6 months.

Additionally, as we have discussed on prior calls, we have historically been successful in rolling our contracted options for machines with Bitmain into the latest generation machines. We have approximately $17 million on deposit with Bitmain as of today and have received an extension on the option as we negotiate what the size and terms of the next order are.

Looking ahead, we remain confident in CleanSpark's ability to lead through innovation, discipline and scale. As we chart our path forward, we are energized by the opportunities in front of us and remain committed to creating lasting value for our shareholders, our partners and the communities we serve.

With that, I'll turn the call back over to Harry to open the floor for questions. Harry?

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

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

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?

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.

Great. Appreciate the color there, Zach. And obviously, some really good organic growth opportunities over the near term here. But just curious to get your views on the current M&A landscape and your appetite for potential deals here.

Yes. We're still seeing a very robust pipeline in the private space in particular. And frankly, we think that there's opportunity elsewhere, too, as miners rotate out of mining into HPC and they evaluate the assets they have on hand. Many miners are going to be faced with the decision of going all in one direction or the other. And we are ready and willing to be the first call that comes in. So I'd say it's very robust. There's great opportunity in the M&A landscape, and we look forward to hopefully taking advantage of some of that in the future.

Your next question comes from the line of Nick Giles with B. Riley Securities.

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.

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.

Got it. That's helpful. My next question was just on the growth pipeline. And you guys have relied on building strong relationships with your utility partners. And so I was wondering if you could speak to -- what are those conversations looking like today? Have you seen lead times for interconnect shift at all? Or are you competing with HPC sites to any extent? Just any color there would be great.

Yes, great question. I think it's important in the context to look at it. When we approach a utility, we approach them with a flexible load in mind. And the flexibility is an asset in that portfolio. There's a very small number of hours every year that utilities reach peak capacity and risks needing to require curtailments. And for us to be early in line to be that curtailable party puts us in a different class when it comes to data centers who want mega sites that are very large and that require firm load.

Data centers, the way they're structured and the way the business really runs is it's not advantageous to raise your hand and say that you're willing to be the flexible load. You want to run flat out all the time as much as you can. And so as much as there are absolutely conversations where between capacity and availability, there is competition in the space. We are a friendly face in that scene of players. And so we see abundant opportunity.

I mentioned the pipeline, which is multiple gigawatts. That pipeline is with utilities that we feel comfortable that there's an opportunity to meaningfully and actively move forward rather quickly. And for -- I would -- a large portion of that, our flexible nature creates that opportunity.

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

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?

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.

Yes. Excellent. So at the beginning of your prepared remarks, you also kind of opened the door for selling power assets. Are you encouraged by recent M&A that we've seen? And I know it's early days, but how do you view demand for those assets?

Yes. So maybe I'll step back and also add some clarity there. So the underlying assets that we own and the ability to have land with the power contract gives us control that has value regardless of whether you're using it for Bitcoin or not. We are always open to evaluating the use cases. It wouldn't mean that we would sell it or not sell it. It means that we are always evaluating optionality.

Now we firmly and strongly believe, and the numbers continue to prove themselves, that the returns we're generating taking that infrastructure paired with power and generating returns in Bitcoin mining is outpacing and outperforming any of the available alternative uses. When and if there's a point in time that, that flips, we are open to that.

Now I will say that the geographic location of many of our sites adds quite an advantageous position for us in that situation, but we would still hold firm to -- it's really about the cash-on-cash returns that those assets can generate in whatever form. So we're not really looking to downsize, exit, trade or transition. We are just looking to always maximize the use cases of our assets.

If I could add one more thing. I think the point to drive home here is that the value of our assets on our balance sheet is not reflective of fair value. The fair value of those assets and access to energy is far greater than that. And I think that's something that may not be accounted for in the current valuation.

Yes. That's very helpful. And then just one last comment on the treasury models. You called them out as a macro positive. I agree. Do you see these companies as an accelerant in bringing more Bitcoin-related ownership into portfolio management and also, call it, wealthy individual portfolios?

Yes, I'll take that one first. Look, the more people buying Bitcoin, the merrier. I think that anything that leads to greater adoption of Bitcoin is good for the Bitcoin ecosystem and really the whole TradFi system.

What we're seeing now is that there's a number of these treasury companies that are coming to market or looking to come to market, and there's billions of dollars locked up waiting for their SEC statements to go effective. And we think that, that type of buying power is only going to push Bitcoin prices higher.

But ultimately, I mean, just as we saw today with executive order crossing President's desk, Bitcoin is going to start to infiltrate other areas of the traditional financial networks such as 401(k)s, pensions and all of that. And we've been waiting really for this moment, and we're here to really capture those tailwinds and upside.

Yes. And in addition to that, the upside kind of trends further. Not only are these treasury companies existing, but with how SAB121 and the changes that were around the repeal of it are taking place, it creates massive additional opportunities.

Everything from not only just banks holding it, but you now see institutions allowing leverage against Bitcoin-based assets, such as treasury companies, such as ETFs and things like that. And so all of these changes coming together creates more capital in the space, which we see as nothing but positive tailwinds.

Your next question comes from the line of Greg Lewis with BTIG.

Gary, realizing there's probably only so much you want to say, you kind of laid out clearly how you're thinking about the ability to be opportunistic with the HODL strategy. And then, of course, you overlaid it with the derivative strategy. But I guess more -- not as much about Q2, but in July, it looked like there were a decent amount of the production was sold.

And I guess you could say, well, we were selling the Bitcoin that we produced. Or really, what I'm wondering is, there was a sharp run-up in in Bitcoin price in July. What I'm wondering is, did that maybe trigger some of those covered calls to be exercised? And is that maybe why we saw more Bitcoin sold in July than, say, what it looked like was averaging in Q2?

Yes. Thanks for the question. I'll tell you foremost that with this new capital strategy, our focus is on no dilution, right? And so we're willing to sell the entire month's production if need be. But I think we've hit a sort of a Goldilocks zone where not only do we get to sell to cover operational expenditures, cover some CapEx and/or service the line of credit, but we also added to the HODL, right? So we didn't sell everything. If you see we've increased it by, I don't know, 90 to 100. I'd like to continue to stair step that. But at the end of the day, we really see this as an area of nondilutive capital, and we would rather sell the production than issue equity or take on additional debt or whatnot. But for right now, I think that we could hit the trifecta in terms of all 3 areas.

Okay. That's great to hear. And then just on the pipeline, the 1.7 gigawatts of potential out there. I guess a couple of questions around that. Just given the lead times that we're hearing multiyear, some states 3, some places we're hearing 4 or even longer. Realizing you might not want to get too specific, but as we think about that 1.7 gigawatts, any kind of structure in terms of how we should be thinking about maybe in baskets, when some of that could potentially come online maybe in '26, '27 or '28?

The way I would think about that is it's all optionality. I want to stress that first and foremost. The second, I think I want to point to our strategy versus some of the other strategies that exist, not only in the data center space -- or not only in the Bitcoin mining space, but also the data center space.

A lot of the parties that are searching for power are looking for in very large chunks in single locations for their purposes. We have a lot of flexibility in coming in, let's say, between 20 megawatts and 50 megawatts, plus some of these are even bigger than that. But a large portion, I'd even say 30% to 40% of that in our pipeline is power that if we were to choose to take it, we could take very quickly without the need for long-term infrastructure investment.

Now the balance of it absolutely needs infrastructure investment. But we're also choosing where we're investing. Rural areas, we're seeing -- some of these areas have lower lead times and what -- and the time it's going to take them to get things because they've already been planning for years to ramp up their distribution because there's lots of these net export states that are trying to find ways to keep it inside.

So are there lead times? Yes. Most of our lead times are measured in months. I would say, for when it's a big investment, it's going to be between 12 and 24 months. We don't really look at anything beyond that. And that's just the pockets of the areas that we're looking at. So I think we have a strategic advantage. If we wanted to go build a very large amount of megawatts just outside of Chicago, let's say, we would be having a completely different conversation with that utility around lead times.

Your next question comes from the line of Paul Golding with Macquarie Group.

I wanted to ask, given the recent deal with Canaan for more Avalon immersion miners that was announced. I wanted to ask how you're thinking about price of hash rate. You have this 10 exahash prepurchase. And just trying to think through how you're approaching the hash rate price dynamics in the context of so many institutional miners pausing and pivoting to HPC/AI and just thinking about opportunistic deals going forward or backwards looking given this 10 exahash to come.

Appreciate the question. Thanks for joining the call. We said over a year ago, we welcome when we see miners exit the space to pursue other avenues because it creates countercyclical opportunities.

So the benefit we're seeing as we get into the tail end of this year and we optimally see the trend continue into 2026 is a softening of demand for those miners. And that softening creates opportunities for us as one of the largest buyer for the majority of the manufacturers to strike a deal, to push power prices in our favor because there's just not as many customers as maybe they expected there would be this time of the year or there was the year before.

So we're seeing really great movement in the pricing that we think will benefit us over the next 12 months, in particular, due to that softening. So we're pretty enthusiastic about what we see.

I'd also add that with the increase in competition because you now have more miners, more manufacturers in the space that also helps contribute to the softening. So you have an increase in in supply and reduction in demand, and we know what that does with prices.

I guess, is there a scenario where you could foresee maybe proactively placing deposits or engaging capacity even if that optionality isn't something where the power -- you have line of sight to the power, but simply to take advantage of what might be this countercyclical pricing dynamic, and then find the power later or potentially maybe resell or just run ahead of what the capacity pipeline looks like?

Yes. We've done that in the past. I think any mining company or -- and if you look at how we've done it over the cycles, you're either long infrastructure and power or you're long miners. And it's kind of this ebb and flow that goes through. So when it's advantageous, just like we did last year, we executed a very large option order that put us in a position to lock in pricing when we thought it was the right time to lock in pricing.

So we would potentially look to do that again, when we find timing where we think pricing is at the right place, we would look to lock in long-term optionality to acquire large amounts of miners and work on the infrastructure on the back end, depending on if we were long or short at that point in time. So absolutely, when the timing is right, that's always been part of our strategy.

Your next question comes from the line of Bill Papanastasiou with Keefe, Bruyette, & Woods.

Maybe for the first one, perhaps you can give us an update on how you're weighing the existing tariff environment today when it comes to future fleet expansion? And hoping you could walk us through some of your options to prevent or mitigate these impacts? And how might that change your strategy going forward? I think we heard from a peer of yours today that secondary market purchases of hardware are being more heavily considered this day. So just curious to hear your thoughts as well.

Yes. The secondary market purchases are always an option because ultimately, you're looking at net-net pricing by the time you get it in your hands. The tariff environments are unfortunately clear as mud as it seems on a day-to-day basis. We've seen them improve. We've seen them ebb and flow. But it is absolutely part of our calculus. Our goal and intention is always to acquire miners at a best-in-class pricing at the lowest cost possible.

The other good thing we're seeing is almost every manufacturer has now announced that they will -- they either do or will have North American production capabilities. So for better or worse, if you're a manufacturer, it is pushing things onshore. We do expect that to ultimately benefit us as large-scale buyers, because as they make these large investments in factories and production here, they need anchor clients to be purchasers of U.S.-made equipment, and we are ready to buy U.S. made. That is the easiest way to navigate tariffs in this environment is just to go direct where it can be done.

Appreciate that color, Zach. And then maybe just speaking to the Bitcoin treasury strategy. It appears that CleanSpark was selling at peak, I think, this last quarter, 85% of monthly production, while still funding obviously all of the OpEx. Maybe you can give us like a little bit of a scenario analysis on how that could change depending on upward or downward price movements to Bitcoin and whether the thought that we might be in the tail end of a crypto cycle may adjust any of your strategy?

Yes, Bill. So look, we -- in the case where Bitcoin price increases, we just sell less Bitcoin, right? Because our costs aren't directly attributable to Bitcoin price going up and down, right? They're relatively fixed. Power prices don't change necessarily because Bitcoin price goes up 10% overnight. So I think that we definitely welcome additional increased Bitcoin prices because it means that we could sell less.

And then we have a choice to either have the HODL balance or wrap [ the line of ] credit, which is a priority of ours. In the event that Bitcoin price decreases, we'd obviously have to sell more than we would in the other scenario. But at the end of the day, we feel very comfortable, obviously selling up to the production. And that's where digital asset management comes in because if we can monetize this volatility up and down, we could use those premiums to offset the OpEx and ultimately have some amount of Bitcoin that we're able to add to the HODL balance.

And I believe that over time, as we get a little bit longer in the tooth in the cycle, which I don't necessarily believe that we're late in the cycle by any means right now. But when we do get maybe a little frothy later on down the road, the digital asset management efforts will not only generate premiums and cash-on-cash returns, but we'll be able to use a portion of that premium to add some downside protection on the entire HODL balance.

Your next question comes from the line of Brent Knoblauch (sic) [ Brett Knoblauch ] with Cantor Fitzgerald.

Kind of on a similar topic here with selling some of the Bitcoin production. At what point -- I guess, is it a function of scale that allows you to sell Bitcoin to cover cash costs? And with greater scale, would you be able to sell less Bitcoin to cover the same cash cost? And how are you thinking about that dynamic? Because I think if investors we speak to get more comfortable with the ability for you guys to sell Bitcoin and accrue Bitcoin to the balance sheet at the same time, it kind of becomes a whole different story.

Great question. I'll tell you that, that's one of our distinct competitive advantages is the operating leverage we have, right? So every new exahash that we bring online, the majority of that is dropping to the bottom line, which means that we have to sell less Bitcoin to cover that monthly nut. I think that's the best way I could put it.

Yes. No, that helps. And then on maybe the pace of growth, I know you guys talked about wanting to outperform or outgrow network hash, which as I'm sure you guys know, is quite volatile from day-to-day and month-to-month. So how are you -- I guess, what are your expectations for network hash growth maybe over the rest of the year or maybe over the next year? Maybe that will help us frame how we should be modeling your mining hash growth?

It's always a guess with network hash rate. The good thing is I think we're seeing a general slowing as -- the public miners were a very large driver of hash rate growth historically over the last 3 to 5 years. As capital -- miners like us continue to deploy capital in this space, but there's a subset of our peers that are deploying either less or not at all. And so I think that's a contributing factor to hash rate growth slowing.

What we're also seeing is the upgrade cycle as miners get more efficient as they get replaced, the same amount of power produces the same -- or sorry, significantly larger amounts of hash rate. We think that's actually going to be a larger driver over the next year of global hash rate growth than potentially new build-outs of Bitcoin mining data centers.

Interestingly, we saw at the end of last quarter where the -- if you looked at the entire quarter, it kind of canceled itself out. It grew 8%. It went down 8%. It was flat, right? We're expecting a little bit more of that, a flattening of what it's going to be, but it's still going to stair step up. We're going to be making improvements to our facilities. We're going to continue to grow. But we feel -- long story short, without making any direct predictions, we feel very comfortable on our ability to outpace the global hash rate growth.

And we also see, something we didn't get into, but one benefit of M&A in this space is instead of building and adding to the global hash rate in total when you acquire a piece of existing global hash rate, it's a direct add without diluting yourself. So all of these things are options. But again, we're -- I think it's positive that we're seeing investment occur in other forms of compute, because it is slowing down global hash rate growth.

Your next question comes from the line of John Todaro with Needham & Company.

[ Gary, the first. ] Can you just help me understand the risks in the yield-generating strategy? Just kind of where could the model break down just given it is a large portion of the stack, right, it's 40%. So just help me frame that up a little bit better.

Right, right. So like with any other option, like let's just take covered calls, right? You have several variables you look at, right? You have duration, you have strike price, right? Those will translate to some volatility and/or delta. And I'll tell you that we take greater risks on the short end, such as writing a 1- or 2- or 5-day call that might have a higher delta and you can look at delta is probably the percentage that it's going to get called away. The higher the delta, the higher the premium.

And so since -- and we call that internally our Spot Plus program, right? So technically, instead of just selling at spot, we should be selling at a strike price the same as spot for tomorrow, for example, and that will effectively mean that we'll always be able to stay ahead of the spot market because of the premiums. So the risk is, in the short term, I don't think it's very, very high because we know what our cash needs are on a week-by-week basis and that we write calls -- high delta calls not in excess of that.

On the longer term, low delta calls, 10, 15 deltas, we're not really writing calls too far out, but maybe 4 to 6 weeks currently. Those deltas will generate a small amount of premium, and we'll just increase the kind of volume and close those calls out if we need to, if they're at -- if there's an opportunity to close them out, in terms of -- they're profitable.

I will tell you, going back to my comments about versus lending; in lending, you're lending out, let's say, 100 Bitcoin out to someone, right, on an unsecured basis. What's great about the derivative strategy is that we have negotiated these [ instant ] agreements where we only have to post a percentage of the collateral, right? So the collateral is only a percentage of what the total contracts are. So if we write 100 contracts for Bitcoin or 100 Bitcoin contracts, we only need to post 30% to 45% collateral and then have margin calls as you get closer to the strike date.

And so that means that it reduces our counterparty risk. And our counterparty risk is further reduced by the fact that we do robust due diligence on our counterparties to make sure that they have the financial wherewithal to really responsibly maintain that collateral. And oftentimes, it means that they have licensing or registration with government regulators.

Got it. Okay. That's very helpful. I appreciate that. And then just one quick one, on M&A. I think from where we're all sitting on the sell side, it seems like these opportunities would be coming up here in the next couple of quarters. But just kind of any sense on timeline of these opportunities? Like are you already looking at some pretty closely? And are the assets looking fairly attractive out there now versus some of these opportunities that presented themselves a couple of years ago?

Yes. I can't really comment on time lines, of course, by any means. I can just say that there's a robust pipeline of opportunities. And just like all things, some are looking better than others. We say no to 9 deals out of 10. That's what we've always done from a historical basis because capital is always finite. And our goal to have the best capital stewardship to generate the best ROI means that we only want to take the best deals that are out there. So again, as much as there's a very robust pipeline, it's about finding the best ones, and that's going to happen in the right time, right place concept.

If I could really add one other thing based on -- I mean, Zach is exactly right. ROI is the top of our list on any acquisition we look at. But I will say that we're not interested in paying the premium that's required to take out another public company because that's premium that we can put into other infrastructure machines, upgrading our fleet and get a better ROI. So I think you're going to see less public to public. And if there's acquisitions like -- it's probably going to be in the private space or greenfield.

Your next question comes from the line of Stephen Glagola with JonesTrading.

Zach, I wanted to dig into more on your prepared and Q&A remarks around the potential flexibility of certain sites for alternative uses. I mean, I think it's clear that CleanSpark has consistently shown its prowess in mining as an operator and strong long-term commitment to Bitcoin mining.

At the same time, your hybrid peers are seeing higher valuation multiples by pivoting toward AI/HPC. So are there specific sites you view as particularly well suited for non-mining applications such as AI/HPC? And additionally, have you engaged any preliminary discussions with potential partners in these areas so far? I'm just trying to gauge what would have to change in your calculus or the company's calculus for any strategic shifts here. Appreciate it.

Yes. It would have to be -- quite simply, we have 55% returns that are consistent based on the types of investments we have to make, which the capital outlay is very predictable, significantly less than a lot of these alternative compute spaces. What I will say from a geographic point of view, the closer we are to a major area, whether that's Atlanta, Georgia or Cheyenne, Wyoming or places like that, it's always more valuable. And so again, I don't think that's any secret that data centers want to be in areas with low latency opportunities. So I'd call it 100 miles from a major metro area creates significant value for our power assets.

But it's not just alternative forms of compute. Anything that where power is the ultimate source of the value is how we're looking at this. Areas with lower cost power than others obviously creates its own calculus in the portfolio. So I think you asked a little bit more specific. I obviously can't comment on more specific about any ongoing discussions, whether they're happening or not. But that's how we look at it.

Geography plays a very important role, but it has to be able to produce great -- even better returns than we're already producing. We also have our view on where Bitcoin is going. And so if you look at the direction and -- our directional view of Bitcoin and the returns we think it's not only generating now, but can generate in the near term, that's something else that also has to be contended with before we would consider a change.

And would you...

I'm going to add one more thing. I don't think it can ever be underestimated. The fact that if you -- if we were to take down any one of our sites, major metro or not for 2 or 3 years to do a full rebuild, how much revenue we're going to miss out on? That is also something I just want to call out is very important to us is what is that revenue cost going to be to us. It's an opportunity cost that goes away. And so there's always an uphill battle for any other opportunity.

And Zach, I appreciate all that. That was really helpful. And just like to clarify, too, on -- it sounds like you might be maybe looking into this to some extent. If something were to materialize or you were to go more in this direction with maybe something closer in Georgia sites or so forth, would that be telegraphed on an earnings call or something beforehand? Or would this just be something like might get announced one day and you did a deal for some alternative purpose? I'm just curious if you can add any color there.

Yes. I'm going to say what I've always said, we -- we're not in the business of saying we're going to do something that we're still trying to figure out. We're in the business of doing what we say we're going to do. And so, we would announce it when and if there is a real deal and opportunity because we don't need our shareholders to wonder if there is or isn't a customer that exists.

Your next question comes from the line of Jon Hickman with Ladenburg.

As you might imagine, most of my questions have been answered. I was just wondering what you're seeing as far as transaction costs -- or not transaction costs, but transaction fees for each award. What's happening there?

Jon, I'll take that. So those have been relatively low. So I think they've been between 1% to 3% of the block size. I'd point you to a website that we use, it's mempool.space/mining. It's a great reliable place. You could see even what the last block was and what the reward was, knowing that every block right now is 3.125 Bitcoin. If you see something that's greater than that, the delta obviously is going to be transaction fees.

With transaction fees, there's going to be an ebb and a flow. It's really hard to predict those. I think that when you look at the theory of hyper Bitcoinization and really the life cycle of Bitcoin, the miners in coming decades, right, I think it's going to be a while until we get there. But in coming years, the miners are going to flip from actually being paid by the subsidy to the transaction fee. And I think we got ways to go there. But with Bitcoin adoption increasing in greater volumes, we'll see that tick up.

But it is hard to really forecast that because when you look at the halving, I mean, there were some transaction fees that were in excess of what was it like 4x, 5x or 10x, whatever the subsidy was. But the great thing about mining is that if and when that uptick in transaction fees does come, there is no incremental cost to us. So that's just additional gravy.

Okay. Then one last question. As you kind of upgrade your fleet to the latest miners, what do you -- is there a market for the older stuff still like do you have to just write that off? Or can you sell it? What's the strategy there?

No, there's a very robust market, in fact, that's always existed. And actually, these tariffs as was mentioned earlier, potentially make it more robust. So we are seeing some of the older generation miners continuing to have a more long-term, I'll call it, terminal value as they're sold to third parties because there's a lot of groups that don't want to deal with either whether it's shipping timing or the tariffs or the unknowns around that, you can get certainty by buying it, [ pay ] essentially from your neighbor. And so it's a very, very robust. And so we absolutely expect to extract value and have each and every quarter over the past couple of years as we rotate out of miners, we definitely pull dollars out of the market.

Which I'll add really helps us with the ROI calculation for future investments, too. So that's why keeping our finger on the pulse of the secondary market is very important because that's part of our calculus.

Your next question comes from the line of Jim McIlree with Chardan Capital.

Yes. Gary, you talked about 40% of your HODL balance used for asset management. And I'm wondering if that is limited by the 40%, if that's limited by your risk tolerance or the market depth or liquidity or your internal expertise? If you can just comment on that, please?

Yes. Great question. I think through all of our comments, regardless whether it's digital asset management or how we run the business, there's a certain prudence and conservatism that we take in all regards. So the 40% is just what we would allocate the greatest amount of the HODL balance that we would put at some risk.

And remember, I had answered this actually in a prior question. Only a percentage of that gets posted as collateral. So the amount that, that's actually at risk is less than that. But again, with low delta options and derivatives, we're able to get some additional juice and continue that low risk. We're always able to take out derivatives with cash if we need to close out this position, because we don't want them to get called because maybe it has a low tax basis, things like that.

But at the end of the day, that's really meant more for risk management, and that's going to increase and decrease as we see opportunities and as our experience in this area kind of tracks on.

Great. That's very helpful. And Zach, you've talked a lot about energy this afternoon. But the current administration has made significant changes in the nation's energy strategy. I'm wondering if you have any comments on how that might impact your short-term or long-term expansion activities?

Yes. I think it's more -- the way that the policies are changing, I think it's going to be more of a medium- and long-term thought process because what the administration is really focusing on is largely with generation. There's a little bit, yes, on a natural gas basis, there's a production mindset, which should hopefully drive down natural gas prices. But really, it's about building production because with additional generation being produced, obviously, there's more power to be had by the markets in general.

We are not going to see the impact of that for the most part for 3 to 10 years. And different fuel sources, whether it's nuclear, that's probably the furthest out; and then, of course, you see things such as natural gas that I think will be sooner on the list. So again, on a medium- to long-term basis, what it does is it makes us more confident in where the U.S. is going to be from a strategic positioning for keeping cost in control for power, just further solidifying that the U.S. is a great place to grow.

Now do I think that the administration is going to solve all the problems inside the next short term? No. But we are incredibly well positioned and really strategically positioned as miners with our flexible load where we can handle any of the short-term volatility in pricing that comes. But again, by the time you get to the back end of that short-term, I'll call it, pressure at this point in time, we think that the policies are setting the U.S. up to be very solid on an energy basis long term.

There are no further questions at this time. Harry, I turn the call back over to you.

Thank you again for joining today's earnings call. We look forward to staying in touch and sharing future results with you in the coming quarters. Stay tuned for more groundbreaking achievements from CleanSpark, America's Bitcoin miner.

This concludes today's conference call. You may now disconnect.