CleanSpark Inc. (NASDAQ:CLSK) reported robust financial performance for the year, marked by significant revenue and profit increases. Following the earnings announcement, the company's stock saw a notable uptick in aftermarket trading, reflecting positive investor sentiment.
Key Takeaways
- CleanSpark's annual revenue surged by 125% to $378.9 million.
- Adjusted EBITDA grew by an impressive 882%.
- Bitcoin production slightly increased to 7,100 units.
- Stock price rose by 4.53% in aftermarket trading.
- Company targets 50 exahash per second hash rate by 2025.
Company Performance
CleanSpark demonstrated remarkable growth, with its annual revenue reaching $378.9 million, a 125% increase compared to the previous year. The company also reported a significant rise in gross profit, up 185% to $213.5 million. This growth comes amidst a consolidating Bitcoin mining industry, where scale and efficiency have become critical for success.
Financial Highlights
- Revenue: $378.9 million, up 125% year-over-year
- Gross Profit: $213.5 million, up 185% year-over-year
- Adjusted EBITDA: $245.8 million, up 882% year-over-year
- Bitcoin Production: 7,100 units, up from 6,900 units last year
- Cash Position: $121 million as of September 30
Company Outlook
Looking ahead, CleanSpark aims to achieve a hash rate of 50 exahash per second by 2025. The company plans to expand its operational power capacity to over 1 gigawatt and is focused on organic growth and selective acquisitions. CleanSpark is also exploring digital asset management strategies to enhance yield generation from its Bitcoin holdings.
Executive Commentary
Zack Bradford, CEO, emphasized the importance of scale, stating, "Scale matters," which highlights the company's strategy to expand its operations. CFO Gary Bucarelli mentioned, "We're going to pursue a strategy of crawl, walk, run," indicating a phased approach to growth and innovation. Bradford also remarked, "Our goal is to establish the CleanSpark way as the benchmark of excellence," underscoring the company's ambition to lead in the industry.
Q&A
During the earnings call, analysts inquired about the company's miner performance relative to Bitcoin prices and its ASIC purchasing strategy. CleanSpark addressed potential mergers and acquisitions, as well as its infrastructure build versus acquisition strategy, providing insights into future growth plans.
Risks and Challenges
- Regulatory Changes: Potential shifts in Bitcoin mining regulations could impact operations.
- Market Volatility: Fluctuations in Bitcoin prices may affect profitability.
- Supply Chain Constraints: Delays in miner deliveries could hinder expansion plans.
- Energy Costs: Rising power costs may affect the company's low-cost advantage.
- Competition: Increasing competition in the Bitcoin mining industry could pressure margins.
Full transcript - CleanSpark Inc (CLSK) Q4 2024:
Christa, Conference Operator: Good afternoon. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome everyone to our conference call. All lines have been placed on mute to prevent any background noise. And after the speakers' remarks, there will be a question and answer session.
Thank you. And at this time, I would like to turn the floor over to Brittney Moore, Director of Investor Relations.
Brittney Moore, Director of Investor Relations, CleanSpark: Thank you, Christa, and welcome to CleanSpark's fiscal full year financial results call covering the period October 1, 2023 through September 30, 2024. Our press release was issued about 30 minutes ago and is available on our website at cleanspark dotcom. Today's call is also being webcast and a replay and transcript will be available on our website. On the call with me are Zack Bradford, our Chief Executive Officer and Gary Bucarelli, 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 remain subject to the risk factors disclosed in our most recently filed annual report. 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 is my pleasure to turn the call over to Zach.
Zack Bradford, Chief Executive Officer, CleanSpark: Thank you, Britney, and good afternoon, everyone. We appreciate your interest in our company as we share the results of a pivotal and transformative year for CleanSpark. The year marked the culmination of several years of strategic planning, preparation and execution to fully leverage the happening events. We emerged with an optimal combination of power contracts, infrastructure, mining fleet, Bitcoin HODL and organic growth pipeline as we enter the next phase of the cycle. Our financial performance this year reflects a sustained growth trajectory with more than $378,900,000 in revenue generated.
That's a substantial increase from the $164,800,000 reported last fiscal year. This year over year growth of over 125% demonstrates our precise execution of plan before and after the halving that occurred midway through our fiscal year. Our adjusted EBITDA of $245,800,000 for the year also showed impressive growth. That's an increase of $220,800,000 or 882 percent growth over last year, underscoring the success of our infrastructure first expansion strategy and its focus on fleet efficiency and operational excellence. As a result, we produced our strongest year of financial performance to date, solidifying a track record of effective execution and keeping promises to shareholders.
Reflecting on the past year, our growth aligns closely with the clear strategic priorities and objectives that we've articulated since our pivot to Bitcoin mining. CleanSpark has prioritized infrastructure at its core foundation, putting us in the best position to source miners to optimize fleet efficiency and deploy new Hash rate into production in the most capital efficient manner. A clear example of this strategy was the Bitmain order that we placed in January 2024. That order included 60,000 units and a strategic option to purchase another 100,000 units at the same low fixed price. This cost certainty allowed the team to focus on building and acquiring the underlying infrastructure that supported our targeted growth.
Between our delivery schedule and growth in operational hash rate, the plan worked seamlessly and allowed us to reach 27.6xahash per second at the end of September and 33.5 exahash where we stand today. This keeps us on a path to achieve our next milestone of 37 exahash per second this month. I want to discuss the way that we grew our infrastructure to support this incredible volume. There are 3 distinct infrastructure growth engines: Greenfield Development, organic expansion and opportunistic acquisitions. Each pathway presents unique opportunities and challenges, yet our team has repeatedly proven its ability to achieve or exceed our goals across this strategy.
I'd like to elaborate on these three drivers and emphasize their crucial role in advancing our strategic vision, positioning CleanSpark as the industry's leading operator. Our goal is to establish the Clean Spark way as the benchmark of excellence across every dimension: growth, scale, efficiency, capital stewardship, community engagement and employee satisfaction, uptime and more. We aim to set CleanSpark apart as a name synonymous with innovative and cutting edge performance across all measures that flow through to the bottom line. Over the past 12 months, our rapid expansion has evolved our initial footprint into a robust portfolio of geographically diverse mining assets in Georgia, Wyoming, Tennessee, Mississippi and New York. This regional structure maximizes operational efficiency, creating momentum in each local market and disperses our mining assets in such a way as to harden us against extreme weather, price volatility in energy markets and grid instability.
Moreover, we've taken the front door approach of directly engaging with the communities in which we work and live that we templated in Georgia and tailored it to other rural communities that we call home. Allow me to highlight some other milestones we've reached over the past year. We've added over 4 25 megawatts to our operational power capacity, bringing our total portfolio to over 7 26 megawatts as of today. This expansion aligns with a threefold increase in our total hash rate, which now stands at more than 33 exahash per second and putting us well on our way to achieve the goal of 37 exahash per second this month. This is a substantial leap from last year when we were celebrating surpassing just 9.6xash per second.
Our track record of execution and focus on delivering on our commitments has been instrumental in driving this performance, and we expect to repeat it in 2025 as we look to exceed 1 gigawatt of contracted capacity across our portfolio. With our infrastructure first approach to growth, we prioritize resource allocation across our 3 primary growth engines. We optimize every aspect of our operations through cutting edge technology upgrades and ensure every new facility aligns with the exacting standards of our vertically integrated business model of wholly owned self operated sites. Emblematic of this commitment, I'd like to remind everyone that our Coinmint contract is scheduled to expire shortly, making CleanSpark's operations 100% owned and operated by the end of next quarter. Our growth trajectory has been remarkable.
But what I'm most proud of is that we achieved this expansion with the highest levels of efficiency. At the core of our approach is a philosophy that extends beyond achieving the lowest tools per terahash metric for our fleet or the best kilowatt hour price. It represents a commitment to integrity, operational excellence and cost management that drives every decision. Growth is not solely about increasing capacity, but consistently optimizing our hardware, processes and infrastructure to maximize output while conserving resources, ultimately delivering higher returns on investment. Our current fleet efficiency now stands at 19 joules per terahash and is significantly lower than our fleet average of 28.4 joules per terahash from September of last year.
This efficiency continues to improve as we transition into the next more methodical phase of our expansion. For us, cost reduction goes beyond mere budgeting. It is a discipline that enables us to reinvest in growth while remaining competitive in an industry where success is designed to continually get even more difficult. Operational excellence converges with these elements, ensuring that every facet of our operations from power management to employee workflows performs to the highest standards. This commitment allows us to pursue an ambitious growth plan without compromising on efficiency or our core values, firmly establishing CleanSpark as a leader in our field.
We've achieved this level of growth through a balanced approach across our 3 growth avenues: greenfield development, organic expansion of existing sites and strategic acquisitions. While our acquisition strategy may receive more attention, we remain deeply committed to greenfield development, identifying and building new sites with the talent and expertise we've developed, particularly in our newest markets. In Wyoming, we are currently contracted at 75 megawatts in 2025 and have the potential of adding several 100 more. On the M and A front, we are realizing the rewards of our early countercyclical capital allocation. As noted, we began preparations for the halfing over 24 months ago, anticipating that less efficient operators would face stark choices about their future.
This foresight allowed us to position ourselves to capitalize on acquisition opportunities, consolidating over 178 megawatts in private asset acquisitions, including 9 sites acquired in September alone. Notably, after the end of the year in October, we closed the GRID acquisition, which included 68 megawatts of developed infrastructure in Tennessee and over 400 megawatts of identified upside expansion opportunity. As we move forward, we are more committed than ever to our focus on Bitcoin mining and setting industry benchmarks in this rapidly evolving sector. Through deliberate prioritization, efficient infrastructure acquisition and a reliable pipeline of state of the art equipment through our purchase agreements, we've established a process that has paved a path to reach our target of achieving 37 exahash per second by year end. With access to both power and hardware secured and a rigorously vetted growth strategy, we have a strong track record of execution that aligns seamlessly with our vision for 2025 and beyond.
This strategy grounded in countercyclical investment and the use of multiple avenues for efficient growth depending on current market conditions has laid the foundation for our next milestone of 50xahash per second in 2025 while insulating our growth plans from the cyclical nature of the industry. Having overcome the challenges of finding the right approach and developing a winning formula, we stand ready to sustain our growth even as we've entered a bull market, which will have the potential to inflate industry asset prices and may lead our competitors to make decisions that could ultimately prove to be capital destructive. As a result, we may turn our focus away from additional consolidation and towards maximizing the organic growth potential within our existing portfolio, providing us with great confidence and visibility on our journey to 50xahash per second and beyond. Our decision making process will be guided by delivering ROI to shareholders as we evaluate the options available. Before I finish, I'll comment on the recent trends and dominant conversations about our sector.
While some competitors have diversified into AI and high performance computing, we remain committed to Bitcoin mining as a vertically integrated pure play operation. As we stay focused on mining Bitcoin, we start generating revenue at Greenfield sites in as little as 6 months. By contrast, a move into the AI or HPC space could extend that timeline significantly, potentially up to 3 to 4 years before our investors would see comparable high margin revenue. This shorter payback period to revenue at Bitcoin Mining underlines the value in our commitment as we deliver returns to our shareholders above all else. We will evaluate new opportunities on a case by case basis, but we believe in remaining focused on our core strength, at least for now.
This conviction stems from the fact of Bitcoin's finite supply, which we see as a long term support for our disciplined approach. In our view, each dollar invested in non core areas represents a potential distraction at this phase in our growth. As we rinse and repeat our playbook into the future, we strengthen our path towards a dominant position in the mining space. In summary, we are extremely pleased with the results achieved this quarter and fiscal year. As we look ahead, we are confident in our path to growth.
We are on a track to surpass 50 exahash in 2025 with plans to continue growing and expanding our operations. Our vision goes beyond reaching this milestone. It encompasses building a business that is scalable, resilient and repeatable. Our growth strategy is rooted in operational efficiency, driving strong margins and consistent performance. We've successfully delivered similar results before and we are committed to achieving sustainable growth again.
In 2025, we will focus on increasing our installed Hash rate and boosting our monthly Bitcoin production and always look for any opportunities to drive revenue and margin expansion. As we look ahead, timing is everything and we positioned ourselves to fully capitalize on the current bull market. We're uniquely positioned with our power assets and mining Bitcoin represents the best way to monetize them, especially in favorable market conditions like we see today. During this time, we'll continue to optimize cash flow and explore diverse sources of new capital to deliver value for our shareholders, but never at the expense of our core operations. Finally, I'd like to extend my heartfelt appreciation to team at CleanSpark.
Their relentless effort, creativity and commitment are the engines behind all we achieve. Each success we celebrate is a direct result of their dedication, and it's a privilege to work alongside such inspiring professionals. With that, I'd now like to turn the time over to Gary to review the quarter and fiscal full year financial results in greater detail.
Gary Bucarelli, Chief Financial Officer, CleanSpark: Thank you, Zach, and good afternoon, everyone. It's my pleasure to review the detailed results for the full 2024 fiscal year. Hopefully, you've had a chance to see the earnings release, which has been posted to our website. We anticipate our Form 10 ks will be posted before market open tomorrow. As Zach said, it's been a pivotal and transformative year and our financial results reflect this.
The central fact of fiscal year 2024 is that Q4 was the 1st full quarter following the most recent halving event. Warren Buffett has famously said, when the tide goes out, you find out who has been swimming naked. While I differ with him when it comes to the prospect for Bitcoin, Mr. Buffett's quip is a perfect metaphor for the impact of the having event on the weakest operators in our space. When the tide came in this time, CleanSpark had nothing to be embarrassed about.
And in fact, we're downright proud of our performance, one that fully justifies the pivot to Bitcoin mining we made several years ago. Our revenues for the year were $378,900,000 an increase of approximately $210,600,000 or 125 percent. This increase was primarily driven by the increase in our Bitcoin production as well as a steady rise in its price. For reference, we produced approximately 7,100 Bitcoin for the fiscal year compared to approximately 6,900 Bitcoin for fiscal year 2023, which shows we have managed to outpace the significant increase in difficulty in the pre program having event in April. Gross profit for the year was $213,500,000 an increase in approximately $138,600,000 or 185 percent over the prior year.
Again, the largest contributor here was the average Bitcoin price, which was significantly higher than last fiscal year. We also saw lower energy prices on a per kilowatt hour basis in fiscal 2024. Looking at our GAAP net loss, we saw a loss of approximately $145,800,000 for the fiscal year 2024. I want to point out that a large part of our net loss is due to a non cash impairment expense of 197,000,000
Reggie Smith, Analyst, JPMorgan: most
Gary Bucarelli, Chief Financial Officer, CleanSpark: of which was recorded as our last quarterly report. Finally, with respect to adjusted EBITDA, this non GAAP financial metric increased $245,800,000 compared to approximately $25,000,000 in 2023. The largest contributor to this increase was due to the increase in value of Bitcoin as the company adopted new accounting standard allowing it to mark to market its Bitcoin balance at each balance sheet date. I want to take a moment to discuss our power costs in the entire year. All in power costs at our wholly owned sites for fiscal year 2024 were $0.046 per kilowatt hour, which is lower than our all in power costs in fiscal 2023 of $0.048 per kilowatt hour.
Our wholesale electricity costs in 2024 averaged $0.031 per kilowatt hour with prices as low as 0 $0.012 at points during the year. Included in our all in power cost is an additional $0.015 per kilowatt hour of costs related to transmission and distribution, profit margins to the cities we operate in and taxes. Management considers its all in power cost, which include these fees and costs on top of wholesale electricity numbers when analyzing its operations. We believe that we have one of the lowest all in power cost amongst miners in the industry. And when combined with our uptime, CleanSpark is one of the top performers.
I also want to point out our cost to mine a Bitcoin. Our average cost for 2024 was approximately $21,400 for our wholly owned facilities. Looking at the Q4 specifically, our cost to mine a Bitcoin was approximately 36,250, which is an increase of 35% over the 3rd quarter's cost to mine of approximately 26,950. As a reminder, rewards were cut in half 20 days into the 3rd quarter. As Zach mentioned earlier, October marked the closing of our deal to acquire Grid Infrastructure, a Bitcoin miner with operations primarily in Tennessee.
Grid boasts 53 megawatts installed capacity and we've already begun greenfield development of another 80 megawatts, fully building out a location in Eastern Tennessee while also breaking ground in Jackson in the central part of the state. GRID's footprint in the rural Southeast is one that we're familiar with and we're already porting best practices in community relations that we developed in Georgia to the cities and towns in Tennessee that we now call home. Better still, Grid developed a deep partnership with the Tennessee Valley Authority, one of the nation's premier providers of reliable and affordable power. Thanks in large part to Grid's efforts, TBA's senior management understands the benefits Bitcoin miners bring to the TBA system, while also providing desperately needed revenue to local power providers with excess capacity, but little hope of attracting large industrial customers to their communities. One of the challenges of the quarter came in September when Hurricane Helene made landfall in the Southeastern U.
S. And disrupted operations at our facilities in Georgia. We suffered a partial outage for 2 to 3 days that reduced revenues by approximately $1,000,000 per day. However, we suffered no property losses and made no insurance claims, a testament to the build quality of our facilities and the effort of our team to harden the sites against damage ahead of 1 of the worst storms to strike the U. S.
In recent memory. The controlling insurance cost means more than limiting claims. It also means working with their insurance company to craft the best coverage at the best price. We've also made significant progress, obtaining costs for property and casualty insurance. Insurance expense for the year was approximately $5,000,000 and is one of our larger G and A expenses.
While we expect insurance expense to grow due to large dollar value of our assets in operation, In November, we renewed our policy and cut our comparable rate by 25% going forward, owed in large part to the growing scale, quality and diverse geography of our operations. On final note, I want to talk about our balance sheet and our liquidity position. As I previously mentioned, we've increased our Bitcoin holdings almost 260% in the year and that number as of today is rapidly approaching 10,000 Bitcoin, which would represent almost $1,000,000,000 at current Bitcoin prices. We also had approximately $121,000,000 in cash as of September 30, which represents a significant liquidity position going forward. From my perspective, we have set the stage for a successful fiscal 2025 after navigating the having and better shape than the rest of the industry.
Not only do we have significant liquidity, but we have one of the industry's most efficient fleets at an average of 19 jewels of Terahash. We have a low cost to mine Bitcoin and industry leading uptime. Bitcoin Mining is a capital intensive business that requires prudent growth and sufficient scale to succeed over the long term. Our company wide commitment to this principle allows us to drive value through countercyclical investment opportunistic growth and increased operating leverage through continued scale. In August, we used a portion of our Bitcoin holdings to secure a $50,000,000 line of credit with Coinbase (NASDAQ:COIN), something that helped us take advantage of opportunities in the marketplace at a low cost of capital, which currently sits at an annual rate of 8.5%.
Looking forward to fiscal 2025, we'll look to find ways to monetize or leverage Bitcoin on our balance sheet as we establish a digital asset management group within the company. Working with staff, we have joined CleanSpark as part of the acquisition of Grid Infrastructure. We'll look to more actively manage the Bitcoin on our balance sheet with an eye toward capital preservation, generating yield on our Bitcoin and protecting against price volatility. Heading into this New Year, we have significant scale and size, a healthy balance sheet, industry leading operations and a strong liquidity position. We are well positioned to pursue diverse capital raising strategies.
With that, I'll turn the call back over to Britney to open the floor for questions.
Brittney Moore, Director of Investor Relations, CleanSpark: 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 and A session.
Christa, Conference Operator: Thank you. Ladies and gentlemen, at this point, we will begin the question and answer session. Your first question comes from Mike Colonese with H. C. Wainwright.
Please go ahead.
Mike Colonese, Analyst, H.C. Wainwright: Hi, good afternoon guys and congrats on a very strong fiscal year here. Just a couple for me. First, it would be great to get your perspective as to why you believe the miners have lagged Bitcoin this year, especially considering that at least historically speaking, CleanSpark and some of the other top tier miners in the space have actually outperformed Bitcoin during this stage of the cycle. It'd be great to get your views there.
Zack Bradford, Chief Executive Officer, CleanSpark: Hey, Mike. Thanks for joining the call. I think the key with this is you have to zoom out a little bit. If you zoom out a little bit over this, call it, a 2 year period, the miners, Queen, Spark included, have meaningfully continued to outperform Bitcoin. I look at this as Bitcoin is catching its breath and catching up.
But I think it's positioned us incredibly well for what is optimally going to be a slingshot in value as the market begins to better understand what the miners can do and how the yields continue to be generated. So hopefully, I see this as just a plateau point right before we see another upswing.
Mike Colonese, Analyst, H.C. Wainwright: That's great to get your perspective, Zach. And I'm curious if you could provide some more insight in terms of how you're thinking about the current market environment for ASICs. I know you're looking at 50x of Hash by the end of next year. But how should we expect Cranespark to approach the ASIC market? How are you thinking about pricing in future repurchases here?
Zack Bradford, Chief Executive Officer, CleanSpark: Yes. The key for us is we've already locked in price certainty. I mentioned during the call the S-twenty one Pro purchase, which was 160,000 minuteers, but we also have the XP (NASDAQ:XP) purchase, which is a meaningful option for us. So in addition to the miners we've committed to that essentially get us just about to 50, we have the ability to take down even more. So there's another 50,000 units with price certainty on them.
So we don't have to worry as much about that swing in whatever the market does. Again, certainty is what we created. We actually have price certainty through 63 exahash on the ASIC market. With that said, regardless of where the ASICs are at on the go forward and in the future, beyond that, we've proven that we have a great track record of having a best in class purchasing. So wherever the market lands, we will make the right capital decision on timing of investment, when to add more to those options, when to take down the option and how we deploy that.
So again, I think we've handled it really well as a track record base. We have enough optionality ahead of us over the next, I'll call it, 6 months. But definitely, our relationships are strong. So I expect regardless, we'll get best in class pricing.
Mike Colonese, Analyst, H.C. Wainwright: Thank you for taking my questions.
Christa, Conference Operator: Your next question comes from the line of Brian Dobson with ClearStreet. Please go
Brian Dobson, Analyst, ClearStreet: ahead. Good evening. I want to talk about this digital asset management initiative that you highlighted. I suppose what are some of the paths you can take to generate yield on your huddle and what level of yield do you think might be possible?
Gary Bucarelli, Chief Financial Officer, CleanSpark: Yes. Hey, thanks for the question, Brian. Look, we're quite excited about pursuing this digital asset management strategy as well. But I'll say that we're going to pursue a strategy of crawl, walk, run. And really that's going to be rooted in a first focus and making sure that we preserve the capital, right?
Because when you have the Bitcoin huddle balance that we have, want to make sure that we really protect that. When it comes to finding those opportunities to generate the yield, we're looking at various strategies right now. We just closed the grid transaction here end of October. So the team is just getting up to speed and really looking at who those partners are. But ultimately, it could take various forms of providing covered calls, lending the Bitcoin.
There's even some talk about providing liquidity to ETFs in the marketplace. So, but you'll expect to hear more information from us as fiscal year 2025 goes on and we'll really be focused on getting a healthy return on those assets as the year goes on.
Brian Dobson, Analyst, ClearStreet: Great to hear. That's very exciting stuff. And then I guess just stepping back, maybe you can look at the big picture of the industry. What trends do you expect to drive mining in 2025? And how has the recent presidential election impacted your outlook for doing business in the United States?
Zack Bradford, Chief Executive Officer, CleanSpark: Yes. So from a trend point of view, I think that we have a lot of tailwinds right now. And that has to your second point on the political side, I think we're going to see a lot of opportunities in the capital market further open as we see a change, really on the SEC side. It's been a tough couple of years for anybody involved in this sector, based on how the regime was previously run. So I think capital is going to open up even more than it already has in ways that will be very positive.
In addition to that, I think we're going to end up with regulatory certainty, but just generally a friendlier regulatory environment. So we're incredibly excited about how things go. Now from an industry trend point of view, I'm going to go back to something that I've kind of been beating the drum on and that is scale matters. And so the bigger miners like ourselves are going to continue to get the best access and the best pricing to capital, which is going to create the best access and pricing for opportunities. I do think that acquisitions are going to look differently.
Private miners are still in the same situation. Just because capital opened up to the publics doesn't mean it's necessarily going to open up to the private miners. So there's still going to be opportunities there. But how we view them is going to really come down to valuation. We've seen people that are very reasonable, they come in at the same valuations.
We've also seen private miners that want substantially higher valuations. This comes down to my comment where I said, we're going to avoid making the wrong decision, but we do think miners that have fallen behind may be put in a position where they may choose capital destructive activities as we view them. So there may be some headlines on opportunities that we pass on. And we pass on because it doesn't create the ROI that we want to have. Just because Bitcoin's up, we still have to measure timing to ROI for any investments we make and that's incredibly important to us.
So again, a ton of opportunity in the future, but we're going to approach it with a very measured approach. The great thing is we have several 100 megawatts of opportunities for organic growth and we've proven that we have a track record of being able to build sites. And so we're going to focus probably in 2025 more on building than on buying.
Brian Dobson, Analyst, ClearStreet: Yes, excellent. Thanks for that color. And I suppose just as a final question, have your thoughts on HPC opportunities changed at all since your last call?
Zack Bradford, Chief Executive Officer, CleanSpark: No. We still think that a very focused approach in what we have. As Gary mentioned, we had a great cost of production of Bitcoin and with Bitcoin going up that even further enhances what was very healthy margins. And so when you look at margins that we can produce essentially tomorrow, right, on any opportunity we look at, The path to high margin revenue is quickest for Bitcoin mining as compared to HPC, and it's not even close. So, until such a time as that changes, we are going to stay very focused on what we do what we're doing and what we do best, which is Bitcoin mining.
Brian Dobson, Analyst, ClearStreet: Excellent. Great to hear. Thanks very much.
Christa, Conference Operator: Your next question comes from the line of Tyler DiMaggio with BTIG. Please go ahead.
Tyler DiMaggio, Analyst, BTIG: Hi guys and thanks for taking the question. Zach, I wanted to follow-up on your comments there in terms of the buy versus build decision and how you're kind of prioritizing maybe the build decision in 2025.
Zack Bradford, Chief Executive Officer, CleanSpark: I guess where do you
Tyler DiMaggio, Analyst, BTIG: kind of see the opportunity in terms of the current footprint? I know you have Wyoming, which is some incremental couple of 100 megawatts. I guess just how do you kind of think about the footprint here more broadly? And what's the most readily available as you look out to next year broadly speaking?
Zack Bradford, Chief Executive Officer, CleanSpark: Yes. I'm going to speak broadly about we see the U. S. Still as a very ripe opportunity. And it's because we understand power markets here, but we think that based on the changes in the administration that the power markets will just continue to get better.
The U. S. Is full of abundant low cost power if you know where to find it. And we focus heavily on rural areas that are being overlooked as an opportunity. So that's where we see the opportunity being the best in the U.
S. Is in rural U. S. A. And as we go to these towns, we find that I look at it this way, if we're going to build something, the best opportunity is to build hardened immersion cooled infrastructure.
And if we're going to go buy something, there's a lot of air cooled infrastructure readily available. So that's really going to be how we look at this. It's 1st rural America. 2nd, the majority of our builds are going to be immersion based. And if to the extent we do, do M and A, which I'm sure there'll still be some, it'll probably be air cooled.
But it's going to be in areas where the advantages to air cooled are going to be that we can turn it on immediately. It's that turnkey walk in generate revenue. And again, we've built our immersion and air cooled systems in a way that we can now build for essentially the same cost. And so that's how we're viewing how we're going to build and how we're going to buy and where we're going to do it.
Tyler DiMaggio, Analyst, BTIG: Got it. Okay. Thankful. And then my follow-up here, I just wanted to talk a little bit about fleet efficiently. You guys have done a nice job over the last year improving that.
I guess how do you kind of think about that going through the next 12 months here? And more broadly as an industry in terms of newer generation of rigs, how do you kind of think about the step function of fleet efficiency and kind of where that improvement can really end up over time as we're kind of sitting in this high teens joules per terahash, but potentially other rigs coming down into the low double digits?
Zack Bradford, Chief Executive Officer, CleanSpark: We're adding latest generation. So we're adding the latest generation rigs that are in the 13s already. But what we're not doing is we're not retiring things without need. So yes, we still have some XPs online because they are generating meaningful capital and it's not capital that we're going to throw out baby with the bathwater just to chase a number. That's one of the key things that we want to drive home is it takes balance when you're talking about capital allocation.
So we're not going to chase the lowest number at the cost of spending capital for ways that's essentially unnecessary. And so we do expect to move from 2019 to 2018 to 2017 and so forth all the way down. It's going to
Gary Bucarelli, Chief Financial Officer, CleanSpark: be an
Zack Bradford, Chief Executive Officer, CleanSpark: incremental path that's going to be very measured about return to capital to our shareholders. Now where do I think that we're going to go from a Moore's Law point of view? I think we're going to continue to approach that 10 or 9 level. And then I do think that's where technology changes are going to be required. The chips are going to be able to do it, but what about the heat extraction?
This is part of the reason we're going to build more immersion into the future. I think that air cooled heat extraction will get more difficult over the next 4 years. And so it will be more valuable to invest in Immersion (NASDAQ:IMMR). Do I think that we'll get into the single digits and continue to go? Moore's Law says absolutely we're going to do that.
But it's about having the infrastructure ready and available to accept the newest technologies as we progress because this is not a measurement of where we're at today or where we're at tomorrow. This is a measurement about how are we going to use capital efficiently to have the right mix of efficiency and power price generate yield not now, but also at the 20 28 halving. So we're going to look at this really over the entire cycle, but we do think that Immersion is going to be a key role in kind of keeping up with that efficiency.
Tyler DiMaggio, Analyst, BTIG: Thanks for the color there, Zach. I'll turn it back to the queue.
Christa, Conference Operator: Your next question comes from the line of Brett Knoblauch with Cantor Fitzgerald. Please go ahead.
Brett Knoblauch, Analyst, Cantor Fitzgerald: Hi, guys. Congrats on the quarter and thanks for taking my question. Maybe just touching on the CapEx for a minute. I know you guys have kind of pre fixed prices on the miner side, but on the infrastructure side, the build out in Wyoming and likely other locations, I guess, what should we be expecting for next year? And in terms of liquidity, would you tap into the Bitcoin position?
Or would you rely just more on the equity markets for funding the remaining build out in mining purchases?
Zack Bradford, Chief Executive Officer, CleanSpark: So we think that the markets are going to be a lot more open to diverse options. So I'm not going to commit to any one type of capital at this point in time. We think that there's plenty of room to expand our ability to leverage our Bitcoin further. But there's also other there's the equity markets, there's non dilutive access to capital we can do. There's just opportunity.
That's the great thing about being a Bitcoin miner right now is capital markets are open for business. And so how we do that is going to be whatever is going to generate the best term to our shareholders. From an infrastructure side, kind of to your point, between here and $63,000,000 is about roughly a $200,000,000 investment. And then the miners on top of it, which we've secured at very advantageous prices. So there's not a huge barrier between here and getting to beyond $50,000,000
Brett Knoblauch, Analyst, Cantor Fitzgerald: Perfect. Thank you. And then maybe just on the M and A landscape, I guess post having I thought it would be there would be a lot more deals than we saw and I know you guys have been aggressive. Do you think the reason for maybe not seeing more deals in the space is that a lot of maybe the subscale miners were looking into alternative use cases for their facilities like AI HPC and maybe they're evaluating that before they kind of consider selling or we see another wave of consolidation?
Zack Bradford, Chief Executive Officer, CleanSpark: I think it just depends on where you're at. We've obviously took advantage of a lot of private opportunities that existed. I think that there's still a lot of people that believe in Bitcoin and want to continue to mine privately. And so I think that that's where we're going to see some additional opportunities come is the private miners that wanted to see the other side of the happening. You remember, Bitcoin has proven itself to be very cyclical.
And there was generally in past cycles, it took 180 days plus for Bitcoin price to really adjust. We saw that happen this time around. So there's also the reality where some private miners, they basically just held off. They didn't run anything and they waited for the 180 days to go by to turn back on. I think that we're going to see some of them, I'll call it exhaust themselves as the whatever fleet they had that they just kind of held on and waited to turn back on until Bitcoin broke, for example, $75,000 They're going to have a real decision to make whether they upgrade their fleets or whether they put the facility up for sale.
And I think we're going to see quite a few facilities come up for sale after they get one more bite of the apple from ROI on machines that they maybe bought 4 years ago. And so I think that there's a second wave of private acquisitions to go on. And I think on the public side, it's just it's complicated to do any sort of public deal and it rarely makes sense to pay the premiums that a public to public transaction would require. And so you really have to find the diamond in the rough that makes sense. And that's why I think there wasn't more public to public consolidation also.
Brett Knoblauch, Analyst, Cantor Fitzgerald: I guess, as you look at the public miners, I think the top 10 largest have kind of owned, call it, 25% of network cash for the last like 18 months. Do you think that changes over the next 4 years? I guess talk about yourself and just the industry as a whole? Or do you think other nation state backed entities are going to increase Hash maybe faster than public entities are? Or how should we think about just kind of like your share of rewards going forward?
Zack Bradford, Chief Executive Officer, CleanSpark: I think that we will see some nation state mining, of course, but I don't think it will overtake kind of a public market side of mining. And the reason is we just have different reasons to mine. Nation states are going to want to mine just as to kind of pad the balance sheet on one side or to just add to their own treasuries on another. Whereas as a public company, we are incentivized to really maximize and build on our percentage of market share or global Hash rate. And so I think that's going to continue to drive miners to either increase or at least stay where we're at as a percentage of global Hash.
So I think that if you think about it a different way, we may be competing a little bit, but we're incentivized to keep up.
Brett Knoblauch, Analyst, Cantor Fitzgerald: Great. Thank you, guys. Really appreciate it.
Christa, Conference Operator: Your next question comes from the line of Reggie Smith with JPMorgan. Please go ahead.
Reggie Smith, Analyst, JPMorgan: Hey, guys. Thanks for taking the question. I wanted to follow-up. I know you talked about locking down or guaranteeing your price on devices. I was curious what if any impact tariffs could have on that?
I'm not sure the relevancy to the space. And then I have a follow-up. Thank you.
Zack Bradford, Chief Executive Officer, CleanSpark: Yes, it definitely could. Now the units we're buying are coming not coming directly out of China. They're coming out of other Asian markets. But what we've also seen and I think it's been an anticipation of this happening is we've seen most of the major manufacturers build out their production capabilities to include Mexico, which again is still another place that may or may not have tariffs on the next upcoming future, but also domestic. I think that as we see some of the foundries that are starting to get built under the CHIPS Act actually come into reality over the next couple of years, we're going to see a lot of them having domestic capabilities.
So I think that there's at least some tariffs tariff risk on that, that no one can protect against because it just depends on when you bring it in and where you bring it in from. But that's also the benefit of having a very large fleet stateside. One way to look at it is if we're at 50 and somebody else is at 20 and they want to catch up, they now have to pay the tariffs on everything that in the gap to catch up. So I think there's going to be a potential barrier to growth for some of the smaller scale miners. And of course, the smaller you are, the more expensive your capital is.
So again, I think scale matters in a lot of different ways when you look at that. But we'll see what happens with the tariffs and we'll react accordingly. Got it. That makes a lot of sense.
Reggie Smith, Analyst, JPMorgan: I hadn't thought about it as a barrier to entry for smaller guys to renew or refresh their fleet. So that's a good point. So another question, we've talked about this kind of build versus buy. And obviously, the discussion thus far has been mostly around like building your own sites versus acquiring a site. Curious your thinking on just buying Bitcoin outright and what may what could happen that may change your view on that?
I bring that up because obviously there are 2 big players in the space that have been pretty aggressively buying Bitcoin. I was curious where you shook out on that. Thank you.
Zack Bradford, Chief Executive Officer, CleanSpark: So how we look at this issue is it's the right time, right place. It's a never say never as part of our strategy to continue to manage our HODL balance. There's going to be times we're going to buy and sell Bitcoin in certain transactions. In addition to just kind of buying to add to the HODL, one of the things we pay close attention to is basically the average value of what makes up our cost basis for our HODL, which we believe to be amongst the lowest because, of course, we're producing it at very healthy margins. So really the way we look at it is you're faced with the decision, do you buy assets to produce Bitcoin on a reoccurring basis at what right now is better than 50% margins to spot price or do you go buy Bitcoin?
And again, it takes a lot more long term view on that when you're buying assets to produce Bitcoin than just buying Bitcoin tomorrow. But again, I think that for the right strategic reasons, we're absolutely not opposed to it. We just feel that the best use and the highest return of capital to our shareholders has really been either buying or building facilities that produce Bitcoin. Now we are amongst one of the top 10 corporate holders of Bitcoin and we do monitor that and plan to of course increase our standing on that list. And some of the miners that are buying are also the same ones that are mining as a loss or a very small margin.
So they have less advantages than we have.
Reggie Smith, Analyst, JPMorgan: Nice. And I appreciate that. Thanks for the insight and
Zack Bradford, Chief Executive Officer, CleanSpark: the color as always, guys. Great quarter. Congrats. Thank you. Appreciate it.
Christa, Conference Operator: And that concludes our question and answer session. And I will now turn the conference over to Britney Moore.
Brittney Moore, Director of Investor Relations, CleanSpark: Thank you for joining us today. We appreciate your interest in CleanSpark and we look forward to speaking with you again next quarter.
Christa, Conference Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.
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