Earnings Call Transcript - CLSK Q2 2021

Natasha Betancourt, Chief of Staff / Moderator

Welcome everyone. On behalf of CleanSpark, Inc., I welcome you to our Second Quarter 2021 Financial Results Conference Call. My name is Natasha Betancourt. I'm CleanSpark's Chief of Staff. With us today with prepared remarks are CleanSpark's Chief Executive Officer, Zach Bradford; and Lori Love, our Chief Financial Officer. Before beginning, I would like to remind everyone that, with the exception of historical information, the matters discussed in this presentation are forward-looking statements that involve a number of risks and uncertainties. The actual results of the company could differ significantly from those statements. Factors that can cause or contribute to such differences include, but are not limited to, continued demand for the company's products, competitive factors, the company's ability to achieve future growth, the company's ability to produce and market new products in a timely fashion, the company's ability to continue to attract and retain skilled personnel and the company's ability to sustain or improve the current levels of productivity. These forward-looking statements are subject to risks and uncertainties and actual results may differ materially. When used in this call, the words anticipate, could, estimate, intend, expect, believe, potential, will, should, project and similar expressions as they relate to CleanSpark, Inc. are forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties that may cause actual results to differ from those anticipated by CleanSpark, Inc. at this time. Further information on the company's risk factors is contained in the company's quarterly and annual reports filed with the Securities and Exchange Commission. Finally, please note that on today's call management will refer to non-GAAP financial measures in which CleanSpark excludes certain expenses from its GAAP financial results. Please refer to CleanSpark's press release for May 6, 2021 for a full reconciliation of its non-GAAP performance measures to the most comparable GAAP financial measures. On May 6, 2021, the company filed its Form 10-Q, which is available on sec.gov and the company's website. We also issued a press release announcing our financial results. Participants on this call, who may not have already done so, may wish to look at the press release as the company provides a summary of the results on this call. The press release may be found at cleanspark.com/investor-relations/news-releases. Following the prepared remarks, we will open up for a short Q&A. Please feel free to enter your questions under the ask-a-question section at the bottom of your screen. With that said, I would like to turn the call over to our CEO, Zach Bradford.

Zach Bradford, Chief Executive Officer (CEO)

Thank you very much, Natasha. Good afternoon everyone and thank you for joining our call. As Natasha noted, I am joined today by Lori Love, our Chief Financial Officer. I will begin with our 2021 second fiscal quarter highlights and business development activities, and then I will let Lori run through our financial results before a brief Q&A. This was another record-breaking quarter for CleanSpark, including a significant milestone achievement of the company reaching its first profitable quarter. Achieving profitability has been our guiding principle since we began the company. We were pleased to continue our trend of more than doubling revenues over the comparable reporting periods of the prior year. The addition of Bitcoin mining has dramatically enhanced our business and revenue growth. We also believe that we are the only publicly traded cryptocurrency mining company in the United States that mines 95% carbon neutral, and we're on a path to improve that. Not only are we approaching carbon neutral, we are doing so at some of the lowest energy costs for Bitcoin mining in the nation. I will speak further about our ESG goals later in the call. Revenues in our Bitcoin mining and energy segments continue to show very strong growth trends. Achieving profitability for both the quarter and the fiscal year-to-date gives us even more confidence in our long-term business strategy. This growth necessitates an increase in guidance, which Lori will speak to later in the presentation. I first want to comment on our energy segment. The energy segment of our business is strong and we are seeing a rapid increase in sales. The energy industry as a whole is still encountering some global supply chain constraints specifically surrounding battery energy storage, which has temporarily impacted the timing of certain deployments. Fortunately, the flexibility of our technology as a vendor- and hardware-agnostic solution has enhanced our ability to manage these constraints, enabling us to work with multiple energy storage suppliers. We expect global supply chains to normalize near the end of 2021, but to avoid further interruption of deployments we have taken steps to secure a large supply of energy storage products for the balance of this year and we expect we will be able to meet all future demand for products through the remainder of the global shortage. The ability to secure the supply was supported by the funding the company secured in March of 2021. The total revenues in this segment were $1.1 million for the quarter and $2.3 million for the six-month period. We now have contracted backlog of executed contracts to deliver over $24.5 million in energy solutions. And with battery supplies now in position, we expect our total energy revenues to increase significantly and we anticipate delivering on approximately $14 million to $18 million of those contracts over the next two quarters. We further expect that our fiscal quarter ended December 2021 will be the strongest quarter our energy business has ever experienced. We are seeing the strongest growth in the residential sector, which accounted for approximately 40% of the total energy business revenues last quarter. We expect our residential energy revenues to increase to 60% to 70% of total revenues over the next two quarters. The growth over the next two quarters is expected to be largely connected to our mVoult product line. mVoult products are being released to customers in Southern California this summer and we expect to further expand that rollout by late summer 2021. We also expect to see demand from commercial and industrial clients continue to increase as the U.S. begins to normalize business activities post-pandemic. We are currently executing on several commercial projects scheduled to be completed this year and we also expect to close on several more that will be completed in fiscal 2022. Now onto our Bitcoin mining segment. The results we have achieved have exceeded all initial expectations and we are extremely bullish about our future. We believe that blockchain technologies are important for the future of our society and we are proud to support the blockchain and the system of trust that facilitates it. Our current production capacity now exceeds 330 petahash a second. We expect to achieve 400 petahash in production capacity within the coming month as our May shipments arrive and are installed. We also have the latest-generation Bitmain S19 and S19 Pro Antminer rigs scheduled to arrive as follows: 4,587 units coming in June, 1,150 units in July, 1,750 units coming in August and 1,600 units coming in September. In fiscal 2022, we expect to receive 1,890 units per month through July 2022 and then 290 units per month August through October of 2022. These deliveries are expected to increase our hash rate upon installation to over 1.2 exahash by September and to over 3.2 exahash in 2022. In addition to the S19s, we expect to receive 1,000 Avalon 1246 rigs in June of 2021. To put this in perspective at current difficulty rates, 1.2 exahash would result in seven to nine Bitcoins per day, which at a Bitcoin price of $57,000, which was the price at the time this presentation was prepared, would result in $400,000 to $510,000 per day in revenue or $145 million to $185 million in annualized revenue. Further, at current difficulty rates again, 3.2 exahash that we would achieve by September of 2022 would result in 18 to 20 Bitcoins per day, which at a Bitcoin price of $57,000 would result in $1.02 million to $1.14 million per day or $370 million to $415 million in annualized revenue. We continue to work on expanding the company's total energy capacity at our facilities to allow us to increase our Bitcoin mining capacity further. We currently expect to have the power capacity increase completed this summer and anticipate bringing additional mining equipment online in parallel with that available power. We have further increased our commitment to mining with the lowest carbon footprint possible. Again, today, we believe we are the only public company in the United States that is mining using 95% carbon-free energy. Again, we intend to improve that to become carbon neutral. With this, our goal is also to mine Bitcoin at the lowest energy costs nationwide. Our intention is to prove that Bitcoin mining can be done sustainably, responsibly and at a substantial profit. Our first onsite microgrid project at our Atlanta facilities is also expected to be completed later this year. Our plan is to install a microgrid that will provide resilient backup power to our network switches. This is important because the microgrid will keep the systems live during power blips, which are caused when the local utility or substation has momentary outages. These outages, often just a second or two, can cause significant disruptions if the network switches drop power. Even a momentary outage can cause mining rigs to lose their connection with the mining pool and that resulting reboot and reconnection may take more than an hour for some rigs. For large operators like us, these outages can be costly and a microgrid solution like this may pay for itself within the first few utility outages. Overall, we believe that our combined energy and Bitcoin strategy will continue to result in increasing profitability as we focus on increasing our energy solutions and Bitcoin mining activities. Overall, this certainly was an excellent quarter and I want to mention a few additional operational highlights before I turn it over to Lori. In March of 2021, the company closed an underwritten public offering and received gross proceeds of $200 million before deducting underwriting expenses and fees. This funding has been a catalyst and created significant growth. We have now deployed a large portion of the capital to expand our Bitcoin mining operations, in the purchase of mining rigs, to support our expanded sales and marketing initiatives, along with securing critical supply chains for energy products. We've also seen rapid growth in our electric vehicle charging initiative. We now have 11 companies that are using our OpenADR software solutions to aid in load management and grid services for their EV charging station companies. Also, our team has now grown to 74 employees as of today. Finally, as mentioned, we've stepped up our marketing and brand activity significantly during 2021. We've added exceptional marketing and sales talent, expanding our efforts across all platforms. These investments and business development activities are key to what we believe will be a record year and will continue to be important assets in the future as our business expands. We continue to believe that the long-term winners in this industry will be the high-quality, high-integrity and respected leaders such as CleanSpark. We will continue leading the way for the industry as we create long-term value for our shareholders. All of us at CleanSpark pride ourselves in our ability to solve modern energy challenges. We have a recognized and respected brand. We have a flexible and cutting-edge product line, capable of delivering sustainable and intelligent solutions to the market, and we have a highly profitable Bitcoin mining facility that is 95% carbon neutral. These advantages position CleanSpark extremely well for the future. Now let me turn it over to our CFO, Lori Love, to run through our financials.

Lori Love, Chief Financial Officer (CFO)

Thank you, Zach, and good morning, everybody. Let me make a few brief comments specific to our operating segments and growth. For the quarter ended March 31, 2021 our revenue was derived from three business segments that I will discuss individually. The first segment I want to discuss is our Energy segment, which provides software including our most recently launched and built residential sales solution—switch solutions, switch gear equipment, and services. For further detail on our product offerings in the segment, I encourage you to review the MD&A section of our recently filed 10-Q or visit our website. This segment produced $2.3 million in revenue for the six months ended March 31, 2021 compared to $4.4 million for the six months ended March 31, 2020. This decrease is attributable to the reduction of commercial projects, which we attribute to the pandemic. For the three months ended March 31, our revenues from this segment were $1.1 million, compared to $3.4 million in 2020 for the same period. As discussed earlier the reason for the decrease was our commercial line of business. We expect commercial projects in our backlog that were delayed to largely resume in the coming quarter. The company's wholly owned subsidiary, p2klabs, is our Digital Agency segment. They provide design, software development and other technology-based consulting services with internal design and marketing services to all CleanSpark companies. Revenues associated with this segment for the six months ended were $800,000 compared to $300,000 for the six months ended March 31, 2020. For the three months ended March 31, 2021 revenue was $426,000 compared to $296,000 for March 31, 2020. We expect to only see moderate growth in this segment, as we continue to focus on the utilization of the resources of p2k internally. Finally, our Digital Currency Mining segment produced $7.4 million in revenue, which made up 72% of our total revenue for the six-month period. For the three months ended March 31 our mining revenue was $6.7 million, which was 82% of our revenue for the quarter. Due to this being a new segment for CleanSpark there are no comparable revenues for the previous three and six months ended March 31, 2020. Holistically, the company achieved $10.4 million in consolidated revenue for the six months ended March 31, which exceeds our entire fiscal year ended September 30, 2020. Comparatively the company more than doubled its year-to-date revenue for the same period last year and we expect that trend to continue as CleanSpark begins to deliver on its significant contracted backlog in the energy segment of our business and further deployment of its mining capabilities. Our cost of revenues and associated margins dramatically improved as we continue to focus our efforts on high-margin revenue streams. The results of such efforts are evident with an nearly $1 million reduction in our cost of revenues, while increasing revenue by more than double for the six months ended March 31 compared to March 31, 2020. For the three months ended, our cost of revenues were $1.5 million compared to $2.9 million representing a $1.4 million decrease. We experienced an increase in professional fees of $1.6 million for the six months ended March 31, 2021 compared to March 31, 2020. For the three months ended March 31 our legal fees increased by approximately $1.4 million compared to March 31, 2020. The increase in the three- and six-month periods ending March 31, 2021 is mostly attributable to legal fees. We actually expect these fees to decrease in the coming quarter as we resolve certain pending legal matters. Our payroll expenses increased by $4.8 million for the six months ended March 31 compared to March 31, 2020, and increased by $2.3 million for the three months ended March 31 compared to March 31, 2020. This is due to the significant increase in employees and associated costs and an increase in stock-based compensation. Our employee headcount now stands at 74 spanning all entities. Additionally, for the six months ended March 31, the organization reported $8.9 million in other income primarily driven by the unrealized gains on securities of $7.6 million. Also included in this figure is gains on sales of Bitcoin of $635,000. For the three months ended, other income was $9.9 million with the bulk of that made up of unrealized gains on securities of $8.7 million and a realized gain on sale of Bitcoin of $585,000. For the first time in the company's history, CleanSpark reported net income for not only the quarter, but also for the year-to-date. We posted year-to-date net income of $232,000 compared to a net loss of $7.7 million, which represents an improvement of nearly $8 million. For the three months ended March 31 we posted net income of $7.4 million compared to a net loss of $5.8 million for the three months ended March 31, 2020, which is an improvement of nearly $13 million. For the quarter ended March 31, 2021 we reported earnings per basic share of $0.28 from a loss per share of $1.13 just one short year ago. Our balance sheet has continued to grow stronger with cash in excess of $157 million and working capital of over $171 million. The company has limited debt with only $8.9 million in total liabilities and net assets of $283 million. We also have $856,000 in inventory that will be installed and converted into revenue in the current quarter, along with deposits of $45.5 million for mining equipment. Since April 1, the company has received and deployed 900 S19 Pro units with more deliveries expected in the coming weeks. For further context on my commentary today on our reported numbers, please feel free to refer to our Form 10-Q. I now want to speak to our financial outlook and expectations. As a result of our strong trends we are updating and increasing our revenue expectations for the 2021 fiscal year. We continue to expect our energy business to achieve between $16 million and $20 million in revenues in fiscal 2021 and our digital agency business is expected to achieve $1 million in fiscal 2021. We expect to achieve between $30 million and $40 million in Bitcoin mining revenues this year, which is an increase in expectations of $20 million to $30 million overall since our most recent guidance. As a result we expect to achieve between $47 million and $67 million in combined revenues in fiscal 2021. We intend to remain as conservative in our projections as possible while still providing quality data points to our shareholders. Bitcoin is extremely volatile, and as a result it is difficult to forecast future performance. These future forecasts are based off an average Bitcoin price of $50,000 and fluctuations from that point will affect the final revenues actually recognized by the company. We have included the potential for shipment delays in mining equipment in our forecast. If there are no delays, our results could be significantly better; if delays do occur and are longer than we have anticipated, it could negatively affect our forecast. Our backlog for the non-Bitcoin mining segments remained strong at approximately $24.5 million as of the date of this call, an increase of $18 million from our $6.5 million guidance as of December 2020. This increase is directly attributable to our newly expanded sales team and our focus to aggressively increase our sales of all of our energy offerings. We believe our increase in contracted backlog demonstrates the pent-up demand for resilient, distributed energy solutions as the pandemic begins to improve and also as the new administration has executed on their green initiatives. We also intend to continue with a strategy of holding the Bitcoin we mined as we believe that Bitcoin will continue to increase in value over time. As a result, we are pursuing methods to generate yield from the Bitcoins we hold on our balance sheet. Let me conclude by reiterating Zach's confidence in our long-term business outlook. We have continued to execute through a pandemic, while navigating supply chain constraints, and yet quarter-over-quarter we are delivering record-breaking results. With that I would like to turn the call over to Natasha who will be moderating the Q&A.

Natasha Betancourt, Chief of Staff / Moderator

Thank you, Lori. I would like to initially open up questions from our analysts and then open up to our audience.

Amit Dayal, Analyst, H.C. Wainwright

How does the company plan to use the balance sheet? Will you continue to pursue M&A, and if so, will those be mostly targeted to the microgrid side of the business or the Bitcoin side?

Zach Bradford, Chief Executive Officer (CEO)

Thanks, Natasha. I'll go ahead and take that question. Great question, Amit. We definitely are interested in pursuing additional M&A. We're always looking for creative opportunities, and there are certain times when there is no quicker way to grow than through M&A. We are interested actually in both sides from an M&A perspective. We like to see where we can have an impact on an M&A strategy that affects both the energy and the Bitcoin sides. The acquisition we did in December, which led to us entering the Bitcoin space, is a perfect example. A facility that has an energy need is where we can make an impact whether it's through utility negotiations or through our microgrid services. So absolutely we're keeping an eye on M&A. We're being very conscious in our evaluations and seeking value. As things develop and as we have the ability to report those developments to the market, we will do so. But absolutely we're interested in using our balance sheet for M&A purposes.

Amit Dayal, Analyst, H.C. Wainwright

What will operating expenses be once all planned equipment expansion is deployed?

Zach Bradford, Chief Executive Officer (CEO)

That's a great question. We expect operating expenses to remain fairly flat with the exception of energy costs. The number one cost of Bitcoin mining is energy. As we plug more miners in and make more active, we will absolutely incur more energy expense. Otherwise, the best thing about Bitcoin mining is that rigs operate 24/7 and do not require proportional increases in other operating expenses. The personnel we have already work across shifts and we do not expect significant additional operating expenses beyond energy as we expand mining capacity.

Shawn, Analyst, Water Tower Research

Are you actively looking for additional mining sites? And what do the energy profiles look like at these facilities?

Zach Bradford, Chief Executive Officer (CEO)

Absolutely. We are very active in the space and looking for additional facilities. The energy profiles we're paying attention to have everything to do with cost and carbon impact of the energy sources. Each site is evaluated case-by-case and every site looks a little different, but those are the two main factors we judge sites on. Some sites will not be immediately 95% carbon neutral, but we need a path to get them close to full carbon neutrality. On the cost per power side, we use certain internal benchmarks that we will keep confidential for competitive reasons, but they focus on low energy costs.

Shawn, Analyst, Water Tower Research

How quickly do you think the difficulty will increase in Bitcoin mining? And how do you foresee it impacting yields?

Zach Bradford, Chief Executive Officer (CEO)

None of us can truly predict exactly how quickly Bitcoin difficulty will change, but difficulty is always being adjusted by design to seek out efficiencies and lower costs. We expect a decent increase over the next 12 months; if I had to estimate I'd say 20% to 40%. When difficulty increases, higher-cost participants will likely exit the market because the same profits won't be there. Participants using the latest, most efficient equipment and with the lowest energy costs—like ours—are positioned to succeed long-term. Even though difficulty may increase, we expect offsets as some operators exit the market. We think in terms of years and decades, not months, and that long-term focus, including ESG and regulatory responsibility, positions us well.

Natasha Betancourt, Chief of Staff / Moderator

We have another few questions from analysts. Our next set is from Greg Lewis at BTIG. His first question is: what is the market opportunity for buying mining equipment with near-term deliveries?

Zach Bradford, Chief Executive Officer (CEO)

We did a lot of purchases in the secondary and dealer markets, and that's how we acquired many of the mining machines that will be delivered. Getting the newest machines directly from manufacturers is very difficult and commands high premiums. We entered the secondary market at a time we felt was favorable and were able to acquire miners, although at a premium relative to direct manufacturer pricing. Market premiums have increased since then; for example, pricing now might be roughly double what it was two months ago. It's important we've secured what we need to outfit our current facility and more. We have key strategic dealer partners and have made moves to obtain preferential pricing through bulk agreements. Those dealers will give us better pricing in return for bulk purchases. Although supply is constrained, we have secured long-term supply and are not encountering the same constraints as some other participants.

Natasha Betancourt, Chief of Staff / Moderator

Another question from Greg at BTIG. On the cost side, you changed the reporting structure a little bit. Is there any breakout you can provide in terms of the cost on the mining side versus the microgrid side for the quarter?

Zach Bradford, Chief Executive Officer (CEO)

Yes. We'll provide more detailed breakouts in future reports. To give insight on the recent changes, we aligned our reporting with how the industry reports cost of goods. In general, we're still mining at over 85% gross margins, and we're actually doing better—this is a conservative estimate because Bitcoin fluctuates and margins are measured against the Bitcoin price on the day mined. Our all-in costs are below $6,000 per Bitcoin. Our energy costs are below $4,500 to $6,000 per Bitcoin, and we believe we can push those down further. We're taking steps to improve operational efficiency and will discuss those more broadly in the coming months. As it relates to the energy side, our blended margin target is around 30%, and we are seeing margin improvements across the energy business. By our next earnings call, we'll break those out more explicitly.

Natasha Betancourt, Chief of Staff / Moderator

We will now be moving on to questions from the audience.

Audience Member, Audience (Unidentified)

What is the competitive advantage over other Bitcoin miners?

Zach Bradford, Chief Executive Officer (CEO)

That's an interesting question. Our competitive advantage against other Bitcoin miners is found in two main areas. First is our all-in costs: we have low energy costs and run very efficiently. Our disclosed energy cost is $0.0285 per kilowatt-hour, and we manage other costs tightly. Second is our ESG management. Regulatory scrutiny is increasing; for example, proposals have appeared that would require environmental reviews for miners in certain jurisdictions. Our approach has been to self-govern and be responsible, which puts us in a favorable position relative to potential regulatory actions. Companies that are proactive and responsible from an environmental and regulatory perspective will have an advantage. We don't face the same carbon-related risks that some miners do, and that gives us a meaningful competitive advantage.

Audience Member, Audience (Unidentified)

How is the cost per Bitcoin being forecasted in the guidance? Are there opportunities to improve? What's the risk for higher cost?

Zach Bradford, Chief Executive Officer (CEO)

We're using $6,000 per Bitcoin as a kind of baseline cost in our internal modeling. We expect energy costs to go down for two main reasons: long-term impacts from our energy solutions and the deployment of more efficient miners like the S19 Pro. We may sell lower-performing miners and replace them with higher-efficiency units; newer generation miners have better energy efficiency, which reduces cost per coin. There are risks that could increase costs—for example, future energy price changes or different cost metrics at new facilities. We have a five-year contract in place at our current facility, so near-term risk is limited. We're conscientious about evaluating power purchase agreements for any new sites, and being an energy company helps us avoid surprises in power contracts. While risks exist, we're actively managing them and expect cost improvements over time.

Audience Member, Audience (Unidentified)

If you lose power for one hour, how much Bitcoin income do you lose for that hour?

Zach Bradford, Chief Executive Officer (CEO)

It depends on the facility size and daily revenue. For a simple comparison, if someone was producing $24,000 a day in revenue and they were down for one hour, they would lose $1,000. For a facility like ours, which may be around 4.5 times that example, an hour outage could cost approximately $4,500. As we grow, that number increases. For example, at $400,000 per day revenue, an hour outage could cost $10,000 to $15,000 or more. That's why we chose to focus on backing up switches first: it's a relatively low-cost area to provide resiliency that prevents longer reconnection times and significant revenue losses. We'll continue to address other resiliency elements that provide the best cost-to-benefit for miners.

Audience Member, Audience (Unidentified)

Is a long-term goal to use the Bitcoin revenue to help fund the microgrid side of the business?

Zach Bradford, Chief Executive Officer (CEO)

Absolutely. We intend to grow two very large businesses side-by-side. We consider ourselves a true dual threat. We have seen delays and pandemic impacts on energy deployments, but we expect that to pick back up. I mentioned earlier that we expect to deploy $14 million to $18 million of projects over the next quarter or two. We expect the energy business to reach profitability on its own within a quarter or two. Having two profitable businesses allows us to leverage the balance sheet to grow the energy business when appropriate. The capital and Bitcoin on our balance sheet position us differently and more strongly in the market. We have access to secure larger energy storage contracts because of the balance sheet. All of this means the Bitcoin and energy sides will go hand-in-hand as we grow.

Audience Member, Audience (Unidentified)

Do you anticipate installing microgrids for other crypto miners and/or providing consulting services? Is this included in the revenue guidance and would it fall under digital currency revenue or other energy revenue?

Zach Bradford, Chief Executive Officer (CEO)

Absolutely. We plan to offer services to other mining companies, whether for microgrids, energy consulting, or other services. Regarding guidance, there are many variables so I won't dive into how much of our guidance it may affect, but we do intend to offer energy services to other miners. Any such revenue would fall under the energy revenue bucket—digital currency revenues are reserved for mining revenues only.

Audience Member, Audience (Unidentified)

Can you speak to the Russell 2000 inclusion process?

Zach Bradford, Chief Executive Officer (CEO)

I can speak a little to it. My understanding is that the cutoff from a market cap point of view is measured at the end of the day today as a preliminary cutoff. There will be different timings and public announcements in June and associated buy-in requirements. From my point of view and understanding, I anticipate that we will be included in the Russell 2000. If that occurs, it could have a very positive effect on the company. Outside of that, I can't comment too much because we don't control the process and the full public results don't get published for about a month.

Audience Member, Audience (Unidentified)

Could you provide some color around the microgrid deployment at your facility in Atlanta? Is this a multi-phase process and how should we think about the microgrid CapEx buildout at this location?

Zach Bradford, Chief Executive Officer (CEO)

Great question. It's absolutely going to be a multi-stage process for a variety of reasons including permitting and utility interconnections. Our intention with the switches and the microgrid is to complete that close to the completion of our current energy expansion. We're trying to get it done as part of the build. Depending on permits, that first microgrid could be complete by the end of this summer. From that point, we intend to add additional solar throughout the facility. Our real intention, subject to design and implementation, is that once the local utility shuts off one of the coal-fired power plants we are working with them on, we expect to be at about 98% carbon free. We'd like to add solar that offsets approximately the remaining 2% of our power so we become truly carbon neutral. We estimate we'd need at least a megawatt of solar and we have about 44,000 square feet of roof space suitable for it. So phase one is a smaller microgrid and switch backups. Phase two is adding solar and additional energy backup to reach carbon neutrality. After that, we'll focus on designing the microgrid to interact for cost savings. We're still testing designs, so I won't comment on more specifics now, but expect a two- to three-stage phased approach at our Atlanta facilities.

Natasha Betancourt, Chief of Staff / Moderator

Thank you, Zach, and thank you everyone for your participation in our Q&A. I would like to now pass the mic to our CEO, Zach, for closing remarks.

Zach Bradford, Chief Executive Officer (CEO)

Thank you. To close, let me reiterate our focus on profitability and growth while being disruptive to both the energy and Bitcoin industries as we seek out best-in-class solutions. As the microgrid and distributed energy industry further develops, we expect there to be significant industry-wide growth post-pandemic and the quality market participants and the trusted companies such as CleanSpark will be positioned to lead this wave of growth. We again want to express our commitment to our ESG strategy of responsible profits in cryptocurrency mining. We remain confident in our long-term growth strategy as we continue to focus on building the business to capitalize on our opportunities while being good corporate citizens. We remain deeply grateful for the continued support of all stakeholders of CleanSpark, most importantly, the investors that have entrusted us with their investment dollars. On behalf of our entire organization, we thank you for your support and appreciate you being on the call with us today.

Natasha Betancourt, Chief of Staff / Moderator

Thank you, Zach. That concludes the Q&A portion of our call. Before we end today's earnings call, I would like to remind everyone that this call will be available for replay later today. Please refer to today's press release for dial-in and replay instructions available via the company's website. You can find this at www.cleanspark.com/investor-relations. Thank you for joining us today. This concludes our earnings call. You may now disconnect.