Greetings, and welcome to the Core Scientific Third Quarter Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please remember that this conference is being recorded. It is now my pleasure to introduce your host, Steve Gitlin, Senior Vice President, Investor Relations. Thank you, Steve. You may begin.

Good afternoon, ladies and gentlemen, and welcome to Core Scientific’s third quarter fiscal year 2024 earnings call. This is Steven Gitlin, Senior Vice President of Investor Relations for Core Scientific. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session after management’s remarks. As a reminder, this conference is being recorded for replay purposes. Before we begin, please note that on this call, certain information presented contains forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement other than historical or current facts that predict or indicate future events or trends, forecast performance, or achievements, and may contain words such as believe, anticipate, expect, estimate, intend, project, plan, or phrases with similar meaning. Forward-looking statements are based on current expectations, forecasts, and assumptions that involve risks and uncertainties that may cause actual results to differ materially. For further information on these risks and uncertainties, we encourage you to review the risk factors discussed in the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission and the special note regarding forward-looking statements contained in the company’s current report on Form 8-K filed today and the earnings release and slide presentation contained therein. Today’s presentation is available on our website at corescientific.com in the Events and Presentations section. The content of this conference call is accurate only as of today, November 6, 2024. The company undertakes no obligation to update statements made today to reflect events or circumstances that occur after today. Joining me today from Core Scientific are CEO, Mr. Adam Sullivan; and Chief Financial Officer, Ms. Denise Sterling. We will now begin with remarks from Adam Sullivan.

Thank you, Steve, and good afternoon. Last quarter, I summarized the progress we have made during this transformational year for Core Scientific. This quarter, I'm delighted to report that our progress continues. We have substantial momentum going into the remainder of the year with our improved position for growth and value creation, and we see favorable market fundamentals driving strong demand for high-powered data center infrastructure. I'll begin today's call with a summary of our recent achievements before briefly highlighting our third quarter financial performance. Denise will then review our financials, providing more details on the significant improvement in our capital structure before I describe our plans for the balance of the year and beyond. We will then take your questions. Our progress during and after the third quarter is highlighted on Slide 4. Notably, CoreWeave exercised its final two options from additional 232 megawatts, contractually committing to all 500 megawatts of critical IT load we offered and achieving the first of our three 2024 catalysts we described last quarter. Additionally, we made meaningful progress to expand our capacity through new site acquisition and existing site expansions. With the CoreWeave commitment secured, I'm happy to announce that we have allocated an additional 100 megawatts of our infrastructure that was previously designated for Bitcoin mining to HPC, increasing our total capacity for HPC hosting to approximately 570 megawatts of critical IT load. With respect to new site acquisitions, we leased with an option to buy an existing data center in Alabama with 11 megawatts of critical IT load. This site has the potential to support an additional 55 megawatts of critical IT load. To consolidate and strengthen our Bitcoin mining business, we completed a 100-megawatt expansion at our Pecos, Texas Bitcoin mining data center to house our miners. We also completed significant miner migrations and began partial demolition at two of our data centers tapped for HPC hosting during the quarter. From a capital structure perspective, we completed a successful $460 million convertible note offering that enabled us to refinance our debt, increase cash on the balance sheet, and effectively put our Chapter 11 debt structure behind us. Slide 5 summarizes our revised allocation of infrastructure with the addition of the new Alabama data center. Slide 6 highlights our strategic operational and financial results in the third quarter. Starting with strategic updates, our $460 million convertible note offering in August enabled us to improve our capital structure significantly by paying off debt, eliminating restrictions and covenants, and reducing our interest rate. The offering also gave us the ability to add cash to our balance sheet to finance operations and support the acquisition of new sites to expand our HPC hosting capacity. On the operational front, we earned 1,115 Bitcoin in the third quarter and generated total revenue of $95 million. Our diversification into HPC hosting showed positive momentum as third quarter revenue included $10.3 million from that segment. Gross loss of $0.2 million in the quarter, and operating loss was $41 million, reflecting lower post-halving hash price and higher operating expenses. Our net loss of $455 million was driven mainly by the significant quarter-over-quarter appreciation in share and warrant prices that required us to make mark-to-market adjustments to the value of our equity, and adjusted EBITDA was $10 million in the third quarter. Denise will explain these in more detail shortly. To summarize our third quarter, we made great progress on our HPC hosting business and strengthened our balance sheet even as we faced challenging Bitcoin mining economics in the first full quarter since the April halving. We are excited to build on this momentum. We are expanding our portfolio of powered digital infrastructure as illustrated on Slide 7, which reflects our updated data centers, including our Austin and Alabama sites. We also include the contracted gross capacity of each site, which adds up to more than 1,200 megawatts. Now I'd like to turn the call over to Denise Sterling, our CFO, for more details on our financial performance and positioning.

Thank you, Adam. Our third quarter operational execution was strong, while our financial performance reflected a challenging post-halving hash price. Total third quarter revenue of $95.4 million consisted of $68.1 million in digital asset self-mining revenue, $16.9 million from digital asset hosted mining, and $10.3 million from HPC hosting that Adam highlighted earlier. Digital asset self-mining revenue decreased by $14.9 million or 18% year-over-year, primarily from a 62% decrease in the number of Bitcoin earned during the quarter due to the April halving and a 61% increase in the network hash rate. This was partially offset by a 117% increase in the price of Bitcoin as well as a 36% increase in our self-mining hash rate, which resulted from the deployment of approximately 31,000 additional new generation self-mining units that were completed in the first half of 2024. Digital asset self-mining cost of revenue increased by $2 million for the fiscal third quarter of 2024. This was primarily driven by an increase in depreciation expense resulting from the deployment of our new self-mining units, an increase in payroll and benefits costs associated with merit and market adjustments made during the quarter, and higher stock-based compensation, partially offset by a decrease in power costs. Segment gross margin was negative 9% in the quarter. HPC hosting revenue of $10.3 million, which includes a base license fee as well as direct pass-through of power cost to our client with no margin added, exceeded HPC hosting cost of revenue of $9 million for the fiscal third quarter of 2024 by $1.3 million, resulting in a GAAP gross margin of 13%. The non-GAAP gross margin for the fiscal third quarter of 2024, excluding the direct pass-through of power cost is 17%. During the third quarter of 2024, we continue to refine the methodology used to allocate our cost of revenue to our segments, including direct and indirect facilities operations costs. This resulted in a portion of these costs being allocated to our HPC hosting segment. We expect our margins to improve over time as we increase our critical IT load without incurring additional operating costs. It is important to remind you that the terms of our hosting contract for our Austin data center, which is leased from a third party, very significantly from those of our larger HPC hosting contracts, where we are modifying our owned infrastructure and, therefore, do not incur lease expenses. Gross margins for the quarter were negative 9%, 29%, and 13%, respectively, for digital asset self-mining, digital asset hosting, and HPC hosting. Power costs were favorable in the quarter, declining to $0.038 from $0.045 per kilowatt hour for the same period in the prior year. Operating expenses for the fiscal third quarter of 2024 totaled $40.3 million as compared to $26.8 million for the same period in the prior year. The $13.5 million increase was primarily attributable to a $4.2 million increase in personnel and related expenses, and $3.7 million of HPC hosting segment site start-up costs incurred during the period. Other contributors to the increase include stock-based compensation of $2.5 million and $1.9 million in bankruptcy advisory costs. Net loss for the fiscal third quarter of 2024 was $455.3 million compared to a net loss of $41.1 million for the same period in the prior year, primarily due to a net $408.5 million non-cash mark-to-market adjustment to our warrants and contingent value right liabilities required as a result of significant quarter-over-quarter increases in the value of our equity and also a $4.9 million increase in interest expense, partially offset by a $28.3 million decrease in reorganization items net with no comparable activity in the same period in fiscal 2024. Non-GAAP adjusted EBITDA for the fiscal third quarter of 2024 was $10.1 million or 11% of revenue, a year-over-year decrease of $18 million that included several offsetting adjustments. Our power contracts vary in pricing terms. As I mentioned previously, our fleet-wide power cost averaged $0.038 per kilowatt hour in the fiscal third quarter. We continue to expect average power cost in 2024 to be between $0.042 and $0.044 per kilowatt hour. As of September 30, 2024, we operated approximately 175,000 miners in our self-mining fleet and did not procure any new miners during the quarter. Our self-mining to hosted mining mix was 89% to 11%, respectively. As our hosted mining contracts continue to sunset this year, we expect our hosted mining percentage to decline to a single-digit percentage of our fleet, creating capacity for self-mining and for our HPC hosting business. Now I would like to discuss our balance sheet. At the beginning of the quarter, stock price appreciation triggered the mandatory conversion of our secured convertible notes, resulting in the equitization of the remaining $233.6 million. As Adam mentioned, we completed a successful $460 million convertible note offering in early August that strengthened our balance sheet. Funds raised in this offering enabled us to pay off all of the $150 million of secured notes, $49 million in minor equipment loans, and the entire $61 million exit facility plus accrued interest, all of which eliminated restrictions and covenants such as the 10-day hold on self-miner bitcoin and also reduced our interest rate from as much as 12.5% to 3% for the new notes. The new convertible note terms have a conversion price of $11, representing an additional share count of approximately 41.8 million shares at full conversion. At the end of the third quarter, our total debt was $512 million. In October, we paid off an additional $6.4 million in minor equipment financing. With the additional cash generated from our convertible notes offering, we enhanced our liquidity in the quarter, ending with $253 million in cash and cash equivalents, up from $50 million at the end of 2023. A summary of our total pro forma diluted share count can be found on slide 10. As of October 31, 2024, share count was approximately 279 million. A total of 98 million Tranche 1 Warrants, 27 million Tranche 2 Warrants, 23 million restricted stock units, and approximately 5 million other reserve shares remained unexercised. Full exercise of these items, plus the conversion of the approximately 42 million shares related to the new convertible note, would result in a total pro forma diluted share count of approximately 474 million shares. And now I'll turn to our CapEx plans. The CapEx associated with converting our infrastructure to 500 megawatts of critical IT load for HPC hosting is paid by CoreWeave. Therefore, we do not expect any out-of-pocket CapEx for these contracts. Given our focus on growing our HPC hosting business, we do not expect to increase or refresh our Bitcoin mining fleet until we procure the new block ASIC chips in the second half of 2025. Now that we have completed the 100-megawatt expansion of our Pecos, Texas Bitcoin mining data center, we anticipate no further CapEx this year associated with our Bitcoin mining business.

Thank you, Denise. We are applying our expertise from the data center and Bitcoin mining industries and our large asset portfolio to accelerate time to power for clients such as CoreWeave. We believe this expansion of our business will deliver more than $500 million in annual GAAP gross profit for the initial 500 megawatts of contracted critical IT load at full run rate, creating significant value for our shareholders. We are building a data center business with CoreWeave as our anchor tenant and our ambitions extend well beyond the initial 500 megawatts of critical IT load. In fact, with our recent reallocation of infrastructure to HPC and our new Alabama site with its growth plan, we now have another approximately 130 megawatts of critical IT load to offer to clients. Beyond our existing infrastructure, we plan to grow our portfolio for HPC hosting in two ways. First, we are actively pursuing the expansion of certain of our data centers by securing more power from local grid partners. We believe we can capture as much as an additional 300 megawatts of critical IT load at existing sites from our power suppliers. We believe we will secure some of this additional power allocation before the end of 2024, representing the quickest path to capacity growth. Second, we are working to secure additional sites to expand our HPC hosting capacity. These sites fall into one of the following categories: a, distressed conventional data centers that have either lost their tenants or have been pruned from larger data center company portfolios. These sites typically have backup generators and may have chillers already installed and also have options for additional power allocations from their power providers, including completed load studies; b, brownfield sites that we believe we can convert to HPC data centers; and c, greenfield sites with access to significant power allocations. Our new leased site in Alabama offers 11 megawatts of critical IT load to contract now to clients who would like to grow with this site to as much as approximately 66 megawatts of critical IT load. We are currently in discussion with potential new clients about contracting this site for HPC hosting. This is one example of how we intend to diversify our customer base by securing new customers for these new sites. As depicted on slide 13, we believe that by expanding our portfolio based on growing existing sites and securing new sites, we have line of sight to total HPC hosting capacity of more than 1 gigawatt of critical IT load by the end of 2027. Key to the success of our data center business is the conversion of existing sites to HPC hosting. This is a massive and complex project that requires considerable coordination. The area with the most potential to affect our timing remains the supply chain, and we are actively working to identify creative solutions as bottlenecks appear. These solutions include developing alternative configurations for components, working with third parties to secure supply, and securing temporary items until others are available to us. Right now, we are closely tracking switchboards, static transfer switches, and generators. At this time, we expect to begin delivery of powered infrastructure for HPC hosting by the end of the first half of 2025 as we previously communicated. Fortunately, there is no better team in the industry than ours, and we are expanding it with industry experts while also having secured some of the most experienced data center contractors to help us execute this program. When the conversion of our existing sites to support HPC hosting is complete, we will be one of the largest data center operators in the United States. With the tremendous value creation opportunity in HPC hosting, we are also focused on optimizing the operation of our Bitcoin mining business within the 400 megawatts of infrastructure now available to it. By consolidating Bitcoin mining at Pecos, Texas in one other data center, we believe we can leverage the lowest power prices and implement power strategies to enhance our financial performance. Our planned refresh next year using the new block ASIC chips represents a significant opportunity to continue improving our fleet efficiency and increase our hash rate. We believe that these actions will position our Bitcoin mining business favorably, preparing us to benefit from an increase in Bitcoin price. To summarize our revised guidance for 2024 highlighted on slide 14, we expect 16 megawatts critical IT load of revenue-generating HPC hosting infrastructure and average fleet power price for active Bitcoin mining data centers of $0.042 to $0.044 per kilowatt hour. Now I'd like to update you on our 2024 catalysts, which we introduced last quarter and are summarized on slide 15. We set out to contract all 500 megawatts of critical IT load and have now done so. We sought to secure a new site to begin expanding our capacity, and we secured a new site in Alabama, while we continue to focus on pursuing additional new site opportunities, and we seek to diversify our client base by gaining new clients for new sites. Core Scientific's transformation into a leader in digital infrastructure for next-generation compute continues to build momentum. We now have HPC hosting contracts with CoreWeave valued at up to $8.7 billion in revenue over their 12-year terms. We have an additional approximately 130 megawatts of critical IT load to contract to new clients from our existing portfolio and have the opportunity to expand our infrastructure at existing sites as well as through new site acquisitions, and our Bitcoin mining franchise is very well-positioned to benefit when hash prices rise. Our momentum and progress continue, and our positioning for growth and value creation is only improving. Thank you for your continued interest, and thank you to our clients, industry partners, and all our teammates for your ongoing efforts and support. We will now take your questions.

Thank you. We will now be conducting a question-and-answer session. Our first question comes from John Todaro with Needham & Company.

Hey guys, thanks for taking my question. Congrats on the results here. I have one, and then I'll use one of my follow-ups, if I can. First one being to the 100 megawatts that you're going to allocate away from Bitcoin mining to HPC, are we already in conversation with potential customers there? And then I know you can't give specific CapEx, as you mentioned. But should we still be thinking that $5 million to $8 million to retrofit that site? And then I have my follow-up.

Yeah. Thanks, John. Those conversations actually began earlier in the year, looking at the site in particular. We go back to what we mentioned on the previous earnings call—it really comes down to whether a site, be it Bitcoin mining or HPC, it comes down to really power, environmentals, and latency. Based on conversations we are having with some potential clients, we went back and solved the power issue that we need to solve in order to convert that site. These conversations have been ongoing for quite some time, and it's looking like a competitive process for those 70 megawatts. Sorry, Joe, I'll just comment quickly too on your megawatt question. Yes, we're looking at really that $5 million to $8 million per megawatt for the retrofit.

Got it. Okay. And then just a follow-up. So to the HPC revenue, it looks like it came in a little bit higher than we at least expected. I think if it's just the 16 megawatts I'm seeing, that implies almost $2.5 million per megawatt annualized on a revenue basis. Not sure if we're missing something. I guess, in other words, I think we're thinking more like $5 million to $6 million, and it came in at $10 million for the quarter.

Yes. So thanks for the question. As we suggested in our prepared remarks, that was really driven by a one-time adjustment associated with the fact that we had actually pulled forward the delivery by 30 days. And so you are seeing an additional month of revenue, which is why there is a delta in Q3.

Our next question comes from the line of Jon Petersen with Jefferies. Please proceed.

Yeah, just a follow-up on the 100-megawatt transition. So in terms of the cost, is your plan to go ahead with construction and then try to sign a lease along the way? Or are you going to sign a lease before you start spending capital on that transition?

Yes. Thanks, Jon. Right now, the way we're viewing it is we're hopeful to get to a client and a final contract in a short enough time period where we know exactly what they want to build. We know the sizing and the requirements they're looking for. And so from our perspective, we're not looking to spend capital prior to having that contract in hand.

Got it. And then maybe I'm slightly getting ahead of myself, but I guess my follow-up is what kind of financing structures are you looking at for future deals? Is the CoreWeave model repeatable? Or would we see more of a traditional data center financing type structure with a construction loan and you guys spending all the capital upfront?

Yes. The way we see it right now and where the market is moving, clients are coming around to spending some portion of the CapEx to help buy down their rate. We are seeing higher rental rates right now. The way we are looking at it is that 20% to 30% that's generally spent by data center companies as the equity check; the rest is funded on a debt basis on a project financing level. We're looking at many of these clients covering that portion of the equity check, and we would look to project finance the rest of the build-out.

Thank you. Our next question comes from the line of Joseph Vafi with Canaccord Genuity. Please proceed.

Hey guys, good afternoon. Nice to see all the incremental progress here. Just any updates on— I know our previous discussions, you were looking to expand your power capacity at some of your existing HPC sites. Any more color to provide there on progress in going above the 500 for CoreWeave, and then I have a quick follow-up.

Yes, absolutely. Thanks for the question, Joe. We are looking at about 300 additional potentially above 300 additional megawatts across our existing HPC sites. Those conversations are still ongoing, and we really view this as our fastest path to getting additional megawatts at each of those sites. We are especially excited about that process as it could result in a significant uplift in megawatts at each of our existing sites.

Yes, that would be really good progress for sure, Adam. And then, I mean, obviously, we have a Presidential Election here and Bitcoin is up. Obviously, that's good kind of for all miners. But any other further thoughts here on the results of the election and implications broadly for the Bitcoin mining industry and maybe anything more specific for Core? Thanks a lot, guys.

Yes, of course. I think the Trump in the past has expressed strong support for both Bitcoin and energy production as well as US leadership in Artificial Intelligence. Those are strong tailwinds, and I think his three priorities there align well with our business and our future goals.

Thank you. Our next question comes from the line of Joe Flynn with Compass Point Research. Please proceed.

Hi. I was hoping you can give some more color on the potential deal structures of these new sites and just new customers in general. Should we expect kind of similar colocation range of the CoreWeave deal? Or do you see this changing on a site-by-site basis, like some being build-to-suit, some being colocation? Any color you could provide there would be great.

Yes. For the new sites, we are really focused on single-tenant buildings. We are looking at a lot of build-to-suit opportunities for potential clients. The size and scale of what clients are looking for— they're looking for as many megawatts as they can possibly get at any individual site. Each of our sites is evaluated on deep conversations between the design engineering teams of both companies to ensure we can meet exactly what they're looking for and their timelines. To finalize a contract, it requires us not only to have a finalized design but to evaluate our position in the supply chain to meet agreed-upon timelines.

Great. Thanks. And we've seen a number of new stories about CoreWeave recently. Hoping, maybe you could provide color on your recent conversations you've been speaking about diversifying. But ultimately, as companies continue to add megawatts and build out data centers, do you see an opportunity to return kind of to that cloud market? Thanks.

Yes, absolutely. We have a lot of respect for the CoreWeave team and what they've been able to accomplish. What we're seeing across the news is very impressive. We are having continued conversations with both CoreWeave and other cloud providers because we view this as a big growth vector in the market. The GPU cloud development we see ongoing is going to capture a significant amount of compute and the overall compute market over the next few years, and we look to ride the tailwinds that this provides.

Thank you. Our next question comes from the line of Brett Knoblauch with Cantor Fitzgerald. Please proceed.

Hi, guys. Thanks for taking my question and congrats on filling out the remaining capacity with the CoreWeave. Adam, it's now been, call it, five or six months since you first announced the initial CoreWeave deal. What do you think has happened to the market in terms of rental rates or lease rates or however you want to kind of quantify it? Have they gone up since that deal? Just how should we think about where the market is at now for maybe new capacity coming online?

Yes, thanks, Brett. The difference in the CoreWeave deal is 100% funding of the CapEx. They were able to significantly buy down their rates. As we look forward, what we're seeing for 2025 is frankly rather unique. If you're able to deliver capacity in 2025 and 2026 right now, we're definitely seeing those lease rates be much higher than we expected, especially given that many of these folks are willing to cover some portion of the CapEx of the build-out. So we're excited about where lease rates are going, and we believe we'll be able to extract significant value from the demand we're seeing over the next few years.

Perfect. Helpful. And then maybe just on the new site acquisitions. You outlined three different options. On the distressed side, if it's $5 million to $8 million kind of retrofit in an existing facility, what are you seeing in the market there on a megawatt basis on the distressed data center side?

Yes. What we're seeing today in the market depends on the load studies those facilities come along with. The site in Alabama, for instance, has a total of 100 gross megawatts available there. What we're seeing is somewhere in the range between $3 million to $6 million per megawatt on the existing megawatts. On a retrofit basis, that could range from $1 million to $3 million depending on the existing infrastructure and how much needs to be acquired to accommodate the newest generation GPUs.

Thank you. Our next question comes from the line of Lucas Pipes with B. Riley Securities. Please proceed.

Thank you very much, operator. Good afternoon, everyone. Following on a similar theme to the prior question on the potential additional sites. Any desire to enter exclusivity? Or has that maybe already occurred on some of these sites? And could you speak a little bit to the competitive dynamics? How many other companies might be in the room, I would appreciate your thoughts on that. Thank you.

Yes. I would say where we're at right now is there is extraordinarily strong demand. We have frequent meetings with a number of clients, and I'll outline that. We are focusing on about 10 clients where we have design engineering meetings between the teams and also hosting site tours. So, there is definitely a competitive process on both the 70-megawatt site and the new site in Alabama. We have high confidence in our ability to execute on both of those sites.

That's helpful. Thank you. And then, Adam, taking a step back, you have an HPC AI business that is growing very quickly where you have a very robust pipeline and then a BTC business. I imagine some sites overlap and do both. But does it make sense? Could it make sense to separate these businesses either now or sometime down the road? Thank you very much for your perspective.

Yes. It's really hard to speculate on the future. But what we see right now is significant crossover between our Bitcoin mining teams and our HPC teams, allowing us to operate high-power digital infrastructure. We feel strongly about our strong Bitcoin mining business. Looking towards 2025, our ability to execute on that block transaction will represent a significant increase in efficiency and continue to grow our hash rate. So, we believe we have two very strong businesses. Speculating on future scenarios is difficult today.

Thank you. Our next question comes from the line of Tyler DiMatteo with BTIG. Please proceed.

Great and thank you for the time, and appreciate you taking the question. Adam, in terms of the sourcing process of new customers on the HPC front, what do you think has changed now that you have the full CoreWeave contract? Is there anything notable on that front as you go to secure new customers now that the full 500 of capacity is contracted with CoreWeave?

Things definitely look different now. We are building out one of the largest infrastructure bases for high-performance computing over the next two years, which brings with it significant credibility. What we're seeing in conversations is we are now the thought leaders on the design and requirements necessary to operate these GPUs. That puts us in a very strong position walking into the room with hyperscalers and cloud providers. We feel we are in the driver’s seat here in these conversations and are excited about onboarding new clients into the business.

Okay, great. And then my follow-up here, I know you laid out some of the power cost forecast. But more broadly speaking, as you look to next year and on bringing on more HPC capacity and having some of the new sites, how do you think about the power strategy as you're building custom-built facilities for HPC customers? What does that look like across the footprint as you look to bring more capacity online?

The power expectations we laid forward are just on the Bitcoin mining part of the business. One unique part about our business and our data center operations is that we have a dedicated power team in-house that has a close relationship with utilities. This assists us significantly in our negotiations with potential clients, allowing us to introduce them to the utilities excited about bringing new capacity online. We are optimistic about the additional potential megawatts at many of our sites, and both Core and other potential clients are very interested in that power.

Thank you. Our next question comes from the line of Paul Golding with Macquarie Capital. Please proceed.

Thanks so much. My first question is around the block chip delivery. Given the timing and how that aligns with your progress around the HPC infrastructure rollout and your conversion of 100 megawatts from BTC to HPC, I was just wondering if those block chips, if you envision they will be predominantly net new capacity that you're going to find and build out or if it's going to be in part fleet upgrade.

Those new block chips will focus primarily on refreshing the existing fleet. This will enable us not only to increase exahash but also to enhance efficiency. We are looking forward to getting these chips up and running in our facilities.

Thanks, Adam. And then a quick follow-up around power. With this conversion and maybe other conversations you're having to expand site capacity from a power perspective, how are your conversations going with the utilities that you may have demand response enrollment with, and are you un-enrolling? As you approach these conversations, is it non-interruptible capacity? How has the tone of those conversations evolved, and what impact might that have on spot rates you're discussing with these utilities?

That's really a bifurcated question between regulated and non-regulated markets. In regulated markets, those were voluntary programs we were participating in to reduce power costs. Those are programs we will exit as these sites convert to high-performance computing. In deregulated markets, those are new PPAs we will sign that will have a different rate structure than what we are on for Bitcoin mining. This is a well-trodden process, and we feel strongly about our ability to execute here with our utilities.

Thank you. Our next question comes from Kevin Dede with H.C. Wainwright. Please proceed.

Thanks. Hi, Adam. Thanks for having me on. You mentioned three components that you see locked in supply issues. I was wondering if you could just add a little more color to that. You said that you thought you could find workarounds. I don't see that happening with gensets. How do you size that up against meeting your, I think, end of first half target for the CoreWeave deal, which appears to be static? Just relieve some of the unknowns around the supply chain.

Yes. As we look at 2025, we have high confidence in the supply chain locked up for those deliveries. Parts of 2026, we're still working on, but even on gensets, we're evaluating different sizes to help alleviate traditional design choices that the industry has used over the past 10 to 20 years. We're coming up with methods and even exploring equipment rentals to help bridge gaps where needed. We have high confidence in our ability to execute on the supply chain despite the complexities of high demand.

Okay. With regard to the block machines, do you imagine those are water-cooled or immersion? And would you have to retrofit existing Bitcoin mining facilities to manage those?

If you look across our infrastructure base today, we've become the leading experts in air-cooled facilities. The block chips will be designed in a new form factor that is focused on air-cooling. We can maximize production from these chips even at high temperature ranges. So, no significant refresh is required in our Bitcoin mining facilities. We believe the installation process will be strong and efficient.

Thank you. Our next question comes from the line of Rosemarie Sison with Odeon. Please proceed.

Yes. Good afternoon, everyone. Thank you for taking the call. The 100 megawatts that you've identified to convert from Bitcoin to HPC that you hadn't identified prior to this. What changed? Did your view change about what you could do? How did that thought process evolve? Could that thought process apply to other megawatts currently employed in Bitcoin?

Yes. It circles back to the three points I laid out: power, environmentals, and latency. The site was something we focused on, ensuring we could create a contract with our utility favorable to both sides. We've reached that point today. This led to the conversion of what was thought to be specifically utilized for Bitcoin mining to now HPC. As we evaluate the rest of our sites, we must continue to consider power, environmentals, and latency. It's tough to speculate on where we'll end up in each of those processes, but we feel confident in acquiring sites and bringing more megawatts to market.

Okay, thank you. The new site in Alabama currently powered at 11 megawatts, but can go to 66. What must happen for that to expand to 66, and what would the timeframe be?

This site depends on distressed data centers coming with load studies and additional approved power. The 11 megawatts is significant in traditional data center terms, but given the potential to expand capacity and bring on capacity in 2025 is extremely attractive to potential clients. This is one of our target areas for finding new capacity.

Thank you. Our next question comes from the line of Darren Aftahi with Roth MKM. Please proceed.

Thanks for taking my question. First, on the process for securing additional power with the 300 megawatts at your existing sites. What is that process like? Is it weeks, months, years, and how concentrated is it by site? Regarding additional expansion on HPC, how do you balance customer concentration versus economics? If CoreWeave wanted to strike a similar deal, would you favor that economics over diversifying into an additional customer?

For the additional power at existing sites, the process differs by utility. Some require additional load studies, while others negotiate ramp-up timings in megawatts. Our ability to capture additional megawatts really hinges on our proof of execution. With the move to HPC, utilities are excited to grow their relationship with us, and we could see some approvals by the end of 2024. Regarding customer concentration, the CoreWeave deal is extraordinarily attractive with the potential to be the best data center deal ever signed. We want to expand our relationship with CoreWeave, but it's also necessary to diversify our client base and bring other large tech companies into the fold.

Thank you. Our next question comes from the line of Lucas Pipes with B. Riley Securities. Please proceed.

Thank you so much for taking my follow-up question. I just wanted to revisit the Alabama opportunity. Adam, could you speak about the time frame from when you first recognized that site to today? How long does that take, and any indication on consideration for this asset? Is it cash? How much is an earnout, profit share? Any details would be helpful. Thank you.

It takes probably low to mid-single-digit months to get to a finalized deal, as we've had significant time to perform our due diligence, which includes spending a lot of time with utilities to ensure a strong working relationship and a pathway to growth. The 100 megawatts is fantastic, and we want to continue growing with utilities. This is a lease site that we have the option to buy. We want to secure ourselves so we don’t have to buy it immediately, but the option to buy provides us with a lot of optionality at a fixed price, ensuring that any upgrade we do and any additional power that accrues to the site adds value.

And just to add, Lucas, this is Steve. There is an additional description of that deal in our 10-Q that should be filed later today or tomorrow.

Really appreciated it. Super helpful. Adam to you and the team: continue best of luck.

Thanks, Lucas.

Thank you. Our next question comes from the line of Kevin Dede with H.C. Wainwright. Please proceed.

Hey, Adam. You clearly delivered on adding new sites, and you did highlight three avenues to continue to expand your portfolio. Can you provide more insight into that pipeline specifically? You outlined some pretty large numbers, and I'm curious how you see that market and Core's ability to compete given the huge demand for power and access.

There are many sites outstanding right now, and a lot of power available in the United States right now. We find the most attractive sites are not being run through broker processes. We're actively pursuing sites by speaking with utilities and landowners to find more unique offers. We have evaluated over 15-gigawatts worth of sites over the past six to eight months, which puts us in a strong position to find unique deals in the market. Alabama is really just the first one that we've executed on, and we look forward to 2025 and 2026 to continue growing our critical IT load megawatts.

Thanks, Adam. While you're still there, could you speak a bit to the block chip deployment timeline? I know you mentioned the second half of next year. Was that what you originally expected, or was there wiggle room, and do you suspect you'll get all the components you need to make the full unit?

This is something our research and development team has been working closely on with the Block team for a long period. We have our manufacturing set up and our rollout plan in place. So, this timeline aligns perfectly with our expectations, and we're excited about getting them up and running to enhance our efficiency and increase our exahash exposure.

Thank you. That concludes our question-and-answer session. I would like to pass the call back over to Steve for any closing remarks.

Thank you very much, Alicia. With no further questions at this time, we thank you for your attention and your interest in Core Scientific. An archived version of this call, all SEC filings, and relevant company and industry news can be found on our website, corescientific.com. We wish you a good day and a joyful holiday season, and we look forward to speaking with you again following next quarter's results.

Thank you. This does conclude today's teleconference. We thank you for participating. You may disconnect your lines at this time.