Earnings Call Transcript
CLEANSPARK, INC. (CLSK)
Earnings Call Transcript - CLSK Q2 2025
Operator, Operator
Good afternoon, my name is Jeanne and I will be your conference operator today. At this time, I would like to welcome everyone to the CleanSpark Fiscal Year Second Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Thank you. Harry, you may begin your conference.
Harry Sudock, Executive
Thanks, Jeanne. And thank you for joining us today for the second quarter fiscal year financial results for CleanSpark, America's Bitcoin miner, covering the three and six months ended March 31st, 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 remain 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 also available on our website. And with that, it's my pleasure to turn the call over to Zach.
Zach Bradford, CEO
Thank you, Harry. And thanks to everyone for joining us today. Our second quarter of fiscal 2025 demonstrated our ability to deliver strong, consistent results across all operating environments. Because we focused on the fundamentals, cash-on-cash returns, and managed to margin rather than any single metric, our scale, strategy, and operational excellence resulted in increased cash rates, improved efficiency, higher revenue, and laid the groundwork for continued growth. In Q2, revenue increased 12% quarter over quarter and 62.5% higher than the same period last year. Gross profit reached nearly $100 million, up almost 5% sequentially, and more than 24% year over year with a gross margin of 53%. While we reported a net loss, this was primarily driven by the quarter-end decline in Bitcoin spot price and not by changes in our mining operations. Our Bitcoin production increased slightly compared to the prior quarter, outpacing difficulty. As a result of our strong margins, our Bitcoin treasury has grown to over 12,000 as of April 30th. Average revenue per Bitcoin was up 10.5% quarter over quarter and nearly 69% year over year, while our marginal cost per coin rose, reflecting both increased network difficulty and higher nationwide power prices. We remained focused on margin and long-term performance rather than any single metric. I want to be clear on what that means. That means we do not manage the power prices, and when margins are healthy, we run through slightly elevated power prices, as long as this drives more value to the bottom line. As a result, the average power price printed higher while delivering increased gross profit. This resilience is the result of our infrastructure-first, portfolio-based strategy. By operating across four diverse states, Georgia, Tennessee, Wyoming, and Mississippi, we are able to balance regional price volatility and maintain consistent operations and production. The rise in power costs this quarter largely stemmed from higher prices in the southeast related to elevated demand charges and weather-related increases in January and February due to winter storms. Since March, we have experienced improved prices in the region. In addition, we were still implementing software to support a lower blockchain-specific tariff in Wyoming at the end of March, which is now fully implemented and we successfully moved to lower pricing in April. As we navigated the quarter, rather than curtailing operations to chase a lower per-kilowatt price, we elected to maximize production and bottom-line impact, a decision made possible by our leading fleet efficiency and strong revenue per Bitcoin. As a result, we delivered a gross margin exceeding 53%. We ended the quarter with a total liquidity position of over $1 billion. Given our scale, we have evolved from the near-100% HODL strategy adopted in late 2023 and have begun using a portion of monthly Bitcoin production to support operations. This marks a deliberate and disciplined shift in contrast to peers who continue to fund operations through equity dilution. I want to reiterate, we concluded our outstanding ATM in November last year and have since not issued a single share to capitalize the business. We have no plans to initiate an equity offering given the accretive opportunities available to a company with a strong balance sheet like ours. We remain committed to Bitcoin as a core long-term asset. We believe shareholder value is best served by balancing treasury growth with strategic monetization. To that end, we are continuing to diversify our capital structure and our strong balance sheet gives us the flexibility to act decisively. As we move beyond 50 exahash, CleanSpark is well positioned to sustain long-term growth and shareholder value through focused execution and prudent capital management. We navigated this quarter not by chasing headlines, but by focusing on business fundamentals and delivering results. Some key highlights include revenue increased in both Bitcoin and USD terms, while cash overhead decreased 16% quarter over quarter. Although a mark-to-market adjustment to Bitcoin price created a GAAP net loss, this has since been offset by price recovery in April, and even now Bitcoin sits above $100,000. Our scale also continues to yield competitive advantages. Fleet efficiency improved significantly from an average of 18 joules per terahash in December to less than 17 joules per terahash at the end of April, largely mitigating higher energy prices and rising network difficulty. Our power under contract is approaching 1 gigawatt, providing opportunities for future expansion. We remain on track to reach 50 exahash by mid-2025 on our position to pursue additional capacity where we see strong ROI, whether through organic growth, side expansion, or opportunistic acquisitions. Beyond our nearly 1 gigawatt of power currently under contract, we also have an extensive pipeline of additional energy opportunities that we believe will support our growth into the future. Our Bitcoin treasury now exceeds 12,100, the third largest among public miners, and every coin was mined by us here in the United States and not bought in the open market. We've begun strategically and systematically monetizing new production to fund operations and are advancing a rigorous, accretive approach to digital asset management, all while preserving our commitment to shareholder value. Our disciplined approach to capital allows us to grow without equity dilution, supported instead by tools like our expanded line of credit with Coinbase. We're especially proud of how our fundamentals held strong amid a triple challenge, rising energy prices, declining Bitcoin spot prices, and increasing mining difficulty. At quarter end, Bitcoin traded at roughly $81,000, down from $93,000 at the start of the calendar year, requiring a mark-to-market adjustment to our treasury under GAAP accounting rules. Encouragingly, these unrealized losses were reversed by price depreciation in April. Mining difficulty rose 3.6% during the quarter, while power costs increased. Yet, thanks to improved fleet efficiency, our gross margin compression nearly matched the difficulty change, demonstrating our ability to absorb external pressures through operational gains. Our approach has never been about chasing the lowest cost per kilowatt hour. Instead, we managed to margin, making deliberate decisions, including running through higher price periods when doing so generates positive cash flow. At the core of this capability is our best-in-class power management team, empowered by advanced technology, real-time analytics, and dedicated operations staff. This deep internal expertise allows us to maximize marginal profitability across our diverse portfolio. Only a flexible load like Bitcoin mining can respond with such agility, something traditional data centers simply cannot achieve. It's one of the most compelling advantages of our pure-play Bitcoin mining model. Let me now address tariffs, a topic of increased relevance across all global markets. Thanks to proactive procurement, CleanSpark is well-insulated from near-term tariff risks. The machines needed to reach our 50 exahash target are already in the U.S., giving us both certainty and flexibility as trade negotiations worldwide continue to evolve. While tariffs could create significant headwinds for less prepared operators, we have positioned ourselves ahead of the curve. Our scale, planning, and disciplined execution allow us to continue expanding towards our near-term targets without disruption. In fact, if tariffs persist, we may see opportunities to acquire smaller miners at attractive valuations, particularly those unable to afford next-generation hardware under the new cost structures. This is a clear example of how our infrastructure-first, counter-cyclical strategy continues to generate strategic advantages over peers. Now let's turn to growth, where our portfolio-based approach continues to deliver real advantages. Today, we operate 32 mining sites across four geographically diverse states. This footprint helps us mitigate weather-related risks while tapping into reliable power markets, particularly in states that are net electricity exporters. In Q2, we added more than 3 exahash of capacity in Wyoming alone. The remaining exahash needed to deliver on our mid-year target will include the completion of development in Wyoming and Tennessee, paired with the expansion and optimization of several of our operations in Georgia and Mississippi. Looking beyond mid-year, we have active projects ongoing with miners and infrastructure paid for that will push us over 57 exahash. For long-term expansion, we have already secured infrastructure in hand or under contract to support growth beyond 60 exahash. We intend to put this infrastructure into use in the lowest cost and most advantageous areas. We currently view Tennessee and Wyoming as particularly attractive places to continue to grow. Looking ahead, we intend to modify how we provide growth guidance. We will reduce the use of time-bound guidance related to hash rate expansion. Our growth will remain disciplined and opportunistic, pursued where and when we see strong ROI-positive potential, primarily funded through non-dilutive sources. This approach aligns with our proven counter-cyclical strategy and reflects our commitment to preserving shareholder value. In today's more volatile market environment, strategic flexibility is essential, and we are focused on avoiding unnecessary, time-bound commitments that could undermine long-term value creation. To be clear, CleanSpark will continue to grow, and our current projects are expected to increase hash rate towards 57 exahash, and our vendor option can support growth to 65 exahash. I look forward to providing more updates in the months and quarters to come. While we hold ourselves to high internal standards, we are also proud to be recognized externally for our growth and leadership. CleanSpark was recently ranked number 35 in the Financial Times 2025 list of the 500 fastest-growing companies in the Americas. This is a reflection of our growth over the past five years and shows the value of our strategic discipline and our team's grit and adaptability in a rapidly evolving sector. We were also added to the S&P Small Caps 600 Index, a milestone that enhances our visibility in public markets and broadens access to our business model for institutional investors. Following our inclusion, institutional ownership in our common stock increased to nearly 64%, a strong vote of confidence from some of the world's most respected asset managers. While others may focus on headlines, we remain committed to substance, building a resilient, vertically integrated Bitcoin mining company grounded in operational discipline and long-term vision. As the only remaining public pure-play vertically integrated Bitcoin mining company, we're building an enduring business, applying traditional discipline to one of the world's newest industries and most important assets. Because of the investments and decisions we have made, we are well-positioned to capitalize on the improving landscape. We've established a strong track record of market leadership. CleanSpark has consistently led with foresight. We've invested early in infrastructure. We pioneered a capital strategy that will minimize dilution. We secured ASICs through counter-cyclical buying, and now we're setting the standard for responsible digital asset management. Each of these moves has delivered real measurable value, and we are confident our latest steps now and in the future will do the same. I often use the term escape velocity to describe CleanSpark's current trajectory. In a business context, it means we've reached a critical inflection point where our scale, operational performance, and financial discipline combine to generate sustainable, positive cash flow well in excess of our costs. Our operations, anchored by market-leading data centers and energy infrastructure powered by best-in-class miners, are not only profitable but also self-funding. This marks our transition from growth-dependent on external capital to a model capable of being driven by internally generated returns. It also reflects a deeper momentum. We are expanding our lead in operational efficiency, capital stewardship, and market adaptability. And that separation from the past is accelerating. At the last pure play Bitcoin miner, we are creating a durable, competitive advantage and reinforcing strong market fit. Our role as a flexible energy load adds even more strategic value, enabling us to support power grids while scaling nationwide. Escape velocity for us means optionality, the ability to invest in ourselves, adapt to changing conditions, and compound growth without compromising our core. We are achieving disruption through discipline, and we're just getting started. Finally, I want to recognize the incredible work of the CleanSpark team across the country. Your execution, dedication, and belief in our mission continue to set us apart one block at a time. With that, I'll turn it over to Gary for a closer look at the financials.
Gary Vecchiarelli, CFO
Thank you, Zach. As mentioned, our second fiscal quarter was strong for CleanSpark, despite facing some challenges. Let's review the numbers. Our revenues for the quarter were $181.7 million, up by $69.9 million, or 62.5%, compared to the same quarter last year. We produced 1,957 Bitcoin this quarter, which is 74 less than the same quarter last year, representing only a 3.6% decrease even with the block rewards being halved in late April 2024. We are close to matching our pre-halving production numbers due to our increasing Exahash and enhanced fleet efficiency from our top-tier miners. Additionally, our average revenue per Bitcoin produced in Q2 was $92,811, an increase of about $38,000, or 69%, compared to last year. Compared to the first quarter, our revenues rose by 12%. This increase is mainly due to the rise in average revenue per Bitcoin and a growing hash rate. Our gross profit increased by $18.8 million year-over-year, resulting in a profit margin of 53% for this quarter. When compared to the previous first quarter, our gross profit grew by $4.3 million, or 5%. This quarter, we reported a net loss of $138.8 million, primarily influenced by the decrease in marked market adjustments in Bitcoin value from December 31st to March 31st. Our adjusted EBITDA was a negative $57.8 million for the quarter, also impacted by the marked market adjustment. However, I want to stress that when normalized for the marked market item, our operations generated approximately $70 million of positive EBITDA. On a normalized basis, this $70 million translates to 39% net margins, reflecting the cash-on-cash returns we aim for. Notably, our marginal cost per coin was about $42,600, a 26% increase from the first quarter, attributed to rising mining difficulty and increasing power prices. Our average cost per kilowatt-hour rose this quarter to $0.06, a result of intentionally managing for margin rather than a specific cost per kilowatt-hour. I want to highlight that we manage our operations focusing on margin instead of strictly targeting a unit price of energy. We concluded the quarter with $97 million in cash and 11,869 Bitcoin, which has a fair value of around $980 million. Overall, the company had nearly $1.1 billion in liquidity at the end of Q2. Regarding our Bitcoin treasury, there’s a change on our balance sheet. For the quarter ending March 31st, our Bitcoin value is categorized between short-term and long-term classifications. This classification aligns with accounting requirements as we plan to keep at least 15% of our treasury in deep cold storage for at least the next 12 months. The short-term portions will be used for growth and strategic purposes. It's crucial to emphasize that all Bitcoin on the balance sheet as of the quarter-end remains liquid and available for use. Total debt at the end of the quarter stands at $641.7 million, net of debt issuance costs of around $16 million incurred during our $650 million convertible transaction in December. This issuance carries a 0% coupon and has an effective conversion price of $24.66 per share. Delving deeper into the balance sheet, our capital strategy has significantly matured, allowing us to pursue non-dilutive funding options that support both operations and long-term growth. CleanSpark has achieved escape velocity, enabling us to self-fund operations and increase our Bitcoin reserves while creating shareholder value. In April, we expanded our relationship with Coinbase to utilize their Bitcoin-collateralized lending program as part of our broader strategic capital management efforts, increasing our line of credit with Coinbase Prime to $200 million. Our Bitcoin holdings of 12,101 at the end of April equate to over $1.2 billion at today’s prices, reversing the previous quarter's unrealized losses. We believe it’s an opportune time to transition from a nearly 100% HODL strategy adopted in late 2023 to using some of our monthly production to support operations. This marks a significant strategic distinction from many peers who rely on equity dilution to cover operating costs or on leverage to expand their Bitcoin holdings. Our approach is intentionally strategic rather than purely ideological, especially now that we’ve reached our current scale. While we remain committed to Bitcoin as a long-term asset, we see a balanced approach between monetizing new production and managing our treasury as a more effective way to enhance shareholder value. As part of this strategy, we plan to further diversify our capital stack. Consistently, we focus on ROI and making timely decisions in the market. Given the current market landscape, we view our revolving line of credit as the most efficient means to support growth, and our robust balance sheet positions us to fully capitalize on this opportunity. We plan to use proceeds from this credit line for beneficial capital expenditures. Moreover, we are mindful of adding leverage to our balance sheet and expect to quickly pay down the line of credit, avoiding carrying high balances for extended periods. We aim to manage the business on a net-debt basis to guarantee adequate liquidity for all debt obligations. Concerning capital expenditures, all necessary infrastructure and equipment to reach 50 Exahash are fully funded. I’d like to touch on our investment in growth beyond 50 Exahash. We have committed roughly $100 million for additional infrastructure supporting nearly 200 megawatts. We’ve also invested about $135 million in state-of-the-art ASICs, which represent about 7 Exahash beyond our 50 Exahash target, with most already based in the U.S. Regarding tariffs, I’d like to mention a unique transaction we completed recently. In April, we executed part of our option with our vendor for 13,200 of the latest generation miners, totaling approximately $76.6 million. We negotiated a beneficial payment plan using Bitcoin, where the vendor accepted Bitcoin at an exchange rate of 150% of the spot price on the payment date. This resulted in us transferring 691 Bitcoin valued at roughly $66.7 million at a spot rate of $96,600 per Bitcoin, saving us about $10 million as the vendor applied a Bitcoin price of $110,941, or 15% higher than the spot price, toward the purchase. Additionally, as part of this deal, we received an option to repurchase 691 Bitcoin at $110,000 on a later date this fall. We plan to exercise this option if the fair value of Bitcoin exceeds this amount. If the fair value is lower, we have effectively locked in our miners at a lower price, counterbalancing any potential tariff impacts. Now, I’d like to provide an update on our Bitcoin treasury efforts. In our past two calls, we shared insights into building an institutional-grade digital asset management function. Currently, we are in the final stages of finalizing agreements to govern trade settlements and collateral requirements. We have also identified strategies that align with our operations and capital strategy for the initial phase we refer to as the crawl, walk, run process. We are still in the crawl phase but will soon implement strategies to advance to the walk phase and continue scaling from there. While it may seem like this has taken time, it has indeed been a deliberate process. We have conducted thorough evaluations of treasury strategies and potential counterparties. We remain cautious regarding collateral requirements to optimize returns and reduce counterparty risk. Despite our measured approach, we have taken the lead in establishing this function within the industry, conducting proper diligence, and are now ready to maximize the performance of our Bitcoin treasury. Throughout discussions with potential counterparts, the consistent feedback has been that we are the first public miner to have a comprehensive RFP and due diligence process. We appreciate the partnerships we've established and the commitment to this thorough diligence process, which is crucial for reducing counterparty risk in the industry as a whole. We look forward to collaborating with our selected partners as we move into the next phase of growth beyond 50 Exahash, believing CleanSpark is uniquely positioned to create lasting shareholder value while executing our strategic vision.
Harry Sudock, Executive
Thanks, 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, Operator
Your first question comes from the line of Mike Colonnese with H.C. Wainwright. Your line is open.
Mike Colonnese, Analyst
Good afternoon and great quarter from an operating standpoint, guys. First one for me, maybe to Zach. It'd be great to get your outlook for the growth in the network cash rate in 2025 and how you're thinking about CleanSpark's market share within that context, especially now with the tariffs and some of your peers pivoting over to HPC AI.
Zach Bradford, CEO
Hey, Mike, great question. Thanks for joining the call today. We've seen, I think, is a little bit of a plateau effect that's kind of interspersed with some growth. And so I think that the limited growth we've seen on the network is likely due to upgrade cycles that are naturally occurring in this space. But I don't know that we're seeing a lot of meaningful new investments, which is a great thing for us. We're sitting at about 5% of market share and growing. And our intention is to maintain and grow that market share. And we think all things considered with how we're monitoring kind of global movement going, that we're incredibly well-positioned to do so.
Mike Colonnese, Analyst
Great. Appreciate some of those, Zach. And maybe one for you, Gary, if you could just talk about how you envision the digital asset management team generating shareholder value over time and how that treasury approach differentiates you from some of your peers out there.
Gary Vecchiarelli, CFO
Thank you for the question, Mike. As I mentioned earlier, we have been diligently selecting the right counterparties and partners on this journey, and we are confident that we have chosen the best ones. There are several strategies we are exploring; one that I've discussed over the past couple of years is our approach to covered calls. I pulled some information this morning, as we monitor this in real time, and I must say, the premiums are quite appealing. While it can be challenging to model appealing returns, let me share why we find this exciting. Bitcoin is currently trading around $101,000. If we were to issue covered calls at this price, one week out, the premium would be a little over $2,400, or 2.4%. Analyzing that shows a return of 97%. We wouldn't put our entire Bitcoin balance at risk at this price, but a covered call at this level would help us stay ahead of spot prices. Given our current position as sellers of Bitcoin to cover our operating expenses, it’s vital for us to remain ahead of the market. Moreover, if we consider a two-week strike at $101,000, the premium increases to around 3.4%, while a strike at $102,000, or $1,000 out of the money, delivers about 3%. These premiums are quite attractive for such short-dated options. This is just one example of our approach, and ultimately, we are creating what we refer to as a flywheel effect in our treasury management. This will allow us to generate cash and provide us with the flexibility to reduce our dependence on selling production for operating costs, pay down debt, or invest in other instruments, potentially even Bitcoin.
Mike Colonnese, Analyst
Thank you for taking my questions.
Operator, Operator
Your next question comes from the line of Greg Lewis with BTIG. Your line is open.
Greg Lewis, Analyst
Thank you, and good afternoon. I wanted to follow up on Mike's comment from a different angle. CleanSpark has remained committed to Bitcoin mining while other companies are looking into different opportunities. Has this shift from larger players, who are less interested in mining rigs, affected the pricing of these rigs? Given CleanSpark's focus on Bitcoin mining, I would assume that rig manufacturers are eager to strengthen their relationships with you. Can you share what is currently happening with rig pricing in light of the reduced purchasing activity from your larger competitors? Has there been any noticeable impact?
Zach Bradford, CEO
Yeah, hey, great question. I appreciate you joining the call. It has. I think it's what created the opportunity for that unique transaction that led to a 15% decrease into what was already an industry-leading best price. And so we've always prided ourselves for the capital that we're deploying, especially to rigs, as being market-leading. So we've always attempted to have the very best price that rigs are being purchased at. But I think what we're seeing now is because there are less buyers in certain pockets of the market, it's a supply and demand question that we have the answer to. And so it does give us a great opportunity to acquire more rigs at a lower cost. So we are seeing some. I think that, the 15% discount down is probably step one of many because I think if you think of how this market really works, they have to print chips six to nine months in advance, then assemble it into the final units that ultimately then get delivered to customers. So this slowdown in buying that's happened, I believe the shock to the minor and ASIC market has not yet been felt. And I think we'll continue to see prices pushing down even on, you know, potentially even the next generation beyond this one. I would expect to see price improvement that we would stand to benefit from greatly.
Greg Lewis, Analyst
Thank you, Zach, that was very helpful. Gary, I’m aware of the announcement regarding covering our expenses through Bitcoin mining sales. Looking at Q1, it seems your operating expenses, including SG&A and services, are in the low $30 million range. In April, you sold approximately $35 million worth of Bitcoin. Without putting you on the spot, can we say that the sales from April effectively covered the capital expenditures for the quarter? Would that be a fair assessment, Gary?
Gary Vecchiarelli, CFO
Yeah, this is how I would think about it. You essentially take the inverse of our margin and that's ultimately what we have to pay, obviously plus overhead. But that nut is monthly about $35 million, give or take, right, because you have some payables that come and go. But on average it's about $35 million a month. Anything that we raise above that could go towards CapEx or servicing the line of credit. As you may have noticed, at least on the April monthly production, we drawn down a little over $100 million for the line of credit, 100% of which is being used for accretive CapEx. And obviously we'll have to pay down, we'll have to sell some Bitcoin to service that. But with Bitcoin price rising and the fact that we have more cash coming online, that just means that we have to sell less Bitcoin every month just to cover the month of nuts.
Greg Lewis, Analyst
Yeah, no doubt. All right, super helpful. Thank you very much.
Gary Vecchiarelli, CFO
Thank you.
Operator, Operator
Your next question comes from the line of Brian Dobson with Clear Street. Your line is open.
Brian Dobson, Analyst
Yeah, thanks very much for taking my question. I think avoiding dilutive capital raises is pretty impressive and given where the shares are, probably a smart thing. As you think about the valuation of your public equity, would you ever consider using some of your HODL to repo the shares?
Gary Vecchiarelli, CFO
I'll take that one. Zach, feel free to add your thoughts. We consider all options available to us because that's the benefit of being a public company. As we evolve and expand our financial structure, we gain access to new instruments. Currently, since our book value exceeds our market capitalization, we are inclined to avoid using equity. Given that we have over $1 billion in Bitcoin on our balance sheet, we view that as an easier and more cost-effective source of capital. If we could secure a premium on the equity, we'd think about it, but ultimately, enhancing shareholder value is our primary focus. We're achieving this by reducing debt and increasing our Bitcoin holdings.
Zach Bradford, CEO
And Brian, to add to that, at the end of the comment was about buying back shares. From our perspective, with a 53% margin to produce Bitcoin, which we believe is current, the way we think about Bitcoin is that in three years, the amount of Bitcoin produced daily will be halved. Therefore, now is the best time to acquire Bitcoin. We are prioritizing this, and while we are putting some back into the market, we truly believe that investing in Bitcoin is the right approach. As we reinvest in Bitcoin through CapEx, it will enable us to accumulate even more Bitcoin, which is our current strategy. Given the market price of Bitcoin, we will continue investing in initiatives that allow us to gain more Bitcoin. Flexibility and optionality are key aspects of our strategy, and there’s nothing preventing us from doing this. This is our current perspective.
Brian Dobson, Analyst
Yeah, very good. And just as a follow up to some of the comments that you made on that facility. Do you think we'll see more Bitcoin-backed facilities in the future? And as mining operations proceed to the next halving, do you think this is called the way forward for the business, not just your business, but the sector in general?
Zach Bradford, CEO
Yeah. Look, we had a market clearing exercise when we went out and looked at really upsizing the Coinbase line of credit. They had really the best cost of capital. And we received a lot of inbounds after our press release. So I would tell you that, yes, that there's a lot of capital that wants to be deployed out there using Bitcoin as collateral.
Brian Dobson, Analyst
Great. And just one final one, if I may. As you look out in the market, there are many of your competitors that are trying to pivot to HPC. What does the market look like for bolt-on acquisitions and M&A in general for mining operations? Is that something that would interest you?
Zach Bradford, CEO
We have been the most active acquirer over the past couple of years, focusing primarily on private companies last year. While we did acquire one public company, we also completed six private acquisitions in addition to that. We are always open to bolt-on acquisitions, particularly when valuations are favorable. Depending on market conditions and potential tariffs affecting mining rig costs, we believe there are great opportunities for us to capture market share. As mentioned earlier, we have already brought over seven exahash of rigs to the U.S. Our top priority remains high-quality infrastructure. We anticipate further opportunities, especially as some of our peers exit the market, and we are always ready to engage in potential discussions.
Operator, Operator
Your next question comes from the line of Paul Golding with Macquarie Capital. Your line is open.
Paul Golding, Analyst
Thanks so much for Zach or Gary. I just wanted to drill down a little bit more on the incremental capacity that you paid for ahead of or past the 50 exahash goal. How much of that capacity is liquid cooled versus air cooled? And are you making new or different determinations as to the type of infrastructure and cooling that you're rolling out because of the tariff dynamics, not to say that that is a hindrance to deploying the capacity, but just how you're thinking about that. And whether that might have an impact on efficiency going forward or any other impact operationally. Congrats on the quarter, otherwise. Thanks.
Zach Bradford, CEO
Hey, thank you, Paul, for joining. I would say when you look at the prepaid amount on the infrastructure, it really all relates to immersion cooling. We think that it is still the best path forward. The majority of the rigs that we've also brought in country related to that are also immersion cool. Now we have brought over a portion of latest gen also air cooled to fit into tuck in acquisitions and other similar opportunities. Because that's often what is readily available on the market. But on our round up builds, we are committed, you know, into the future into immersion cools, because we think it provides the optionality that will be necessary in the next three to five years in particular and into the next half.
Paul Golding, Analyst
Thanks. And I guess this is just a quick follow-up. Are you seeing any impact to pricing on that as maybe not the emerging tanks given more directed chip liquid cooling for AI, but some of the infrastructure around heat exchanging, and pumps, are you seeing any price impact from the demand that we're seeing in HPC and how that might be pressuring the products to enable this functionality in the space?
Zach Bradford, CEO
What I can say is in our supply chain, we are still the largest buyer because of our growth. A lot of, you know, if you're an HPC group that wants to announce something you're going to do tomorrow. While you're probably not purchasing still for a while as you work on your permits, your designs, your plans, as we all know, most HPC data centers take three to five years to build. So we are still well ahead of the curve and we do buy our supply chain in advance that has given us an advantageous place in line is probably the way to say it. As we have demand for infrastructure.
Operator, Operator
Your next question comes from the line of John Todaro with Needham & Company. Your line is open.
John Todaro, Analyst
Hey guys, thanks for taking my question. And I appreciate the commitment to limiting dilution. First question, just going back to Gary, some of your comments on the yield you could generate on Bitcoin, the treasury strategy. I mean, do you think we're getting to a point where it's fair for us to start forecasting out a yield on that? Any kind of guardrails? I know you laid out some, but it seems like it's still kind of up in the air. And then my next question is, and I guess I'll frame it almost the opposite way than other peers have asked it, but do you actually think we keep hearing that major hyperscalers like Microsoft are actually kind of pulling back spend. Have you noticed it might be actually getting easier to find power in sites now, whether that's kind of a weekly or month over month basis, any commentary that would be appreciated?
Gary Vecchiarelli, CFO
Thank you for the question. I'll address the first part. Regarding the yield, we are not ready to provide any guidance at this time. We are still in the initial phase of the process. However, during our last call, we mentioned that we are aiming for mid-single digits on an annualized basis for the total Bitcoin balance. I believe this is a reasonable yield to expect on an annualized basis since we aim to maintain a well-balanced risk-reward relationship, avoiding unnecessary risks without sufficient rewards. Our approach is focused on being strategic, precise, and conservative, and we are currently looking at a range of 4% to 6%.
Zach Bradford, CEO
I want to sort of address the access to power and HPC. I think it's important when you read in between the lines of what those headlines actually say, the hyperscalers are still committed to investing and building in that space. What they're spending less on is in co-location contracts, which is why we see it as incredibly dangerous for anybody and frankly reckless for anyone that goes out there and plans to build it without a customer that is ready to take that rack space. Because they're already canceling the soft commitments they have. And again, it's because they're doubling down on their bills. This is important to know because Nvidia for example has come forward and they've been very clear that the data center of yesterday is not a data center that works tomorrow. And I think that's what's driving the cancellations is the hyperscalers are well positioned to make the right investments and the right technology to build in what is going to be a new normal for data centers into the future. Density is getting to a point where there’s going to be hundreds of thousands and even millions of square feet of empty data centers because the density can be tucked off into the corner. And if you built a data center five years ago, it's already obsolete. That is the reason why hyperscalers we believe are canceling their spend in co-location. So again, I don't think it's the power demand is going to go away. It's just where and how that demand comes to the market. Now what we are seeing is in the areas we're operating, we are still finding access to power readily available and prevalent. And it's because how we find power in rural America in the areas that the freeway went around and the rest of America forgot about, that is what makes our strategy successful.
John Todaro, Analyst
Great. Thank you guys. Appreciate it.
Operator, Operator
There are no further questions at this time, Harry, I turn the call back over to you.
Harry Sudock, Executive
Thank you again, Jeannie. And thanks to everybody 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 the CleanSpark team, America's Bitcoin miner.
Operator, Operator
This concludes today's conference call. You may now disconnect.