Core Scientific (CORZ) 13 May 222022 Q1 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to Core Scientific’s First Quarter Fiscal Year 2022 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.

XXXX. note statements this the within Litigation Act please presented certain Private begin, Reform forward-looking contains the of we that call on information Securities Before meaning of

that Forward-looking or phrases may future statements words performance and believe, or such achievements, with contain or limitation, intend, anticipate, include any expect, results, predict indicate estimates, or without forecast, imply words as meaning. may similar statement project, plan,

but may risks not current on expectations, and and based from governmental uncertainties, statements. involve technological actual our including business the to, are outside statements Forward-looking materially or and limited assumptions forecasts to competitive, cause economic, of that differ strategy forward-looking results factors control our that

revision is conference on contains Presentations section. this Events website time-sensitive call. at undertakes & reflect XX, conference the to presentation with filed in them any content our no of the of information Form contained information harbor Form risks, circumstances statement company our corescientific.com For the The today, on forward-looking after the to with Core release a filed earnings to or make presentation XX-Q along we as afternoon, filed this our to update periodic these and today review posted reports the the to remarks safe the release, in also accurately events obligation any and slide X-K statements XX-K that you today This Form on SEC, SEC, May factors and contained in occurring or and therein. associated The further only we encourage earnings call Scientific’s with XXXX. discussed with the risk

Financial Levitt; Denise from Executive are Chief Officer, Officer, today Mr. and Mike me Scientific Mr. Core Sterling. Joining Chief

with will remarks Mike? Mike from now Levitt. begin We

who Thank conference welcome On nearly quarter around data and of today's centers you, employees to in earnings call. the XXX country, behalf corporate work our first headquarters our Steve. XXXX

market conditions. on like quarter Before to results, first comment I'd we current briefly review

and digital conditions cycles founders believe opportunity immersed decade digital the market our early Current many not in the industry We've Our have do volatility still we that experienced before. view the we colleagues in of our or our for been adoption. space asset more. asset of phase financial on impact in of of are our execution. or focus And long-term

our However, the market conditions our and the fund leading for equity control capital to create industry. control Scientific the the of our self-mined the our digital are America. limiting we long-term price in remains We We Bitcoins or slowing can centers asset cannot by the quarter in Core than execution, our total of value Bitcoins of to focus and or our Bitcoin North the availability And markets, flow miner. over exahash of digital in we but mined required our miners end ability X,XXX shareholders. again, first X slide the assets data in on third more five XX.X representing illustrated of of X,XXX as self-mining XX a announced than that and Last combined. largest day, quarter April second our April, end, also presentation, XX.X across an earnings of hosting At average for we week, other exahash more a any a and sentiment operator other the of businesses. Bitcoins public centers. outside data operated we

than balance X,XXX has our achieved Bitcoins held Bitcoins. XX,XXX significantly, hold sheet. on US As More of April more that self-mine other company public No we now milestone. XX, we

tremendous CFO, will I to on brings years summary already first We we XX a world-class a positive performance, invaluable had Denise has and roles questions, promoted our from have pleased impact introduce my At team. our senior over Denise's of quarter provide us to a I'm a take of return recently financial Denise. will additional to few Sterling. held at remarks, to discuss our over CFO, her than To to We more Denis Denise you, Visa. organization. your leadership the comments, experience subjects. After she conclusion

I'm to the meeting forward a join our Thank high-level to shareholders you cover today, with summarized in million, honored who XXXX. Scientific. and Mike. analysts overview quarter net start slide In of the quarter X. you, million. financials first we $XXX.X look quarter and a I'll increase over of generated Core of of on reported loss first the revenue quarter, We $XXX.X an XXX% our

Importantly, effects assets level as on than three non-cash compensation. We issued revalue items: at X these slide value to their rules private highlight as adjustments, us this loss securities by produce primarily digital and X. original we driven well require we was mark-to-market as different accounting a stock-based

adjustment increase private each the $XXX creates first income. in our in issued This is a to value quarter. our The notes value convertible we suggested, re-measure requires in million a the us as reduction net market of increase non-cash And XXXX.

value million, test. they a us is compensation to the have adjustment had and our digital a stock that these options digital as And price rise. totaled up value assets correspondingly in require increases that the values our second these rules Accounting stock-based the when last, each decline our quarterly $XX.X impairment of in we employee to record This quarter represent value not which quarter, previously asset. in mined and million reduction each mark assets, Unfortunately, decline. $XX originally when a to were our -- begun The now standards their do expenses. from price digital us these assets issued permit represents

revenue in increased asset end was in the at end and of over increase of at revenue. for our million, XXXX total prior the hash presentation million increase quarter centers $XX.X investments the to April. exahash expand items, and we renewals Excluding from to XXXX follows. continue as filling sales Operationally, XX% adjusted $XX end by the year. hosting of the XXX% exahash our guidance. of rate for cash these is sales our end further, capacity, at cash our decline new the total well Digital XX% from or of existing earnings ash as The contract as in first in or XX.Xx quarter was miners. self-mining at a in quarter to segment, increase of we customers of mining $XXX our exahash in as And XXX% XX% revenue, X X.X of few X.X a the slide of an of rate previous XX% The equipment on increase of result digital of revenue available or as to exahash XX.X March. $XX.X non-operating revenue and other year-over-year Revenue by million The asset XXXX EBITDA million it highlighted the of and driven the our for is of customers an first new online. by in brought Hosting year-over-year expectations data from revenue consistent resulted XXXX. quarter with rate hosting equipment

an self-mining XXXX. attributable million a share revenue revenue Cost going will of forward. revenue from primarily two our $XX.X first increase represent and As of factors. quarter increasing reminder, the million This $XXX.X increased was hosting of to by of

-- and of depreciation electricity. the fleet because the and fleet to self-mining was, has increased increased; also consumption second, hosting also, our first associated as it increased fleet, we mining the has with consumption the expense continue The expand that larger the

Additionally, electricity prior risen XX% to approximately we assumptions our XXXX. cost has of for average by previously XX% indicated, over

entire our $X.XXX. about per to hour expect year in our $X.XX kilowatt the price We of to average all-in across fleet be this neighborhood

Turning expenses. to operating

Note income also all debt by $X.X The valuation $XX.X $XXX.X net for higher to in from increased expenses totaled interest a recording totaled from an an expense. from the higher development expenses convertible million, note $XXX.X non-operating marketing professional XXX% and up driven the to increase general on driven XXXX. loss largely quarter Sales and Again, and First valuation The stock-based $X.X extinguishment in and to the the assets expense, as compensation quarter held, totaled emergence was digital stock-based with marketing each net this as increase as non-cash as stock-based primarily compared and over an research and stock-based convertible activity $XXX.X loss slowly prior compensation including in of it expenses, million and million, other XXXX. mentioned posted began of XXXX, by that year. approximately loss we Non-operating by the earlier, again as allocate expenses million, was to category, increase quarter now increase opposed administrative well million driven project-related of in nine-fold net increase we COVID. compensation. was adjustments ramp notes and million, fees. compensation G&A to our first

was share diluted $X.XX. an million, from adjusted per fully quarter million increase $X.XX earnings diluted per of XXXX $XX.X share XXXX. $XX.X and First Loss fully EBITDA was adjusted was

sheet balance Now, cash let's the and flow. look at

of million, net cash $XXX.X activities $XXX.X X,XXX activities and valuation As and was activities and of we XXXX, financing $X.X and of $XXX.X in operating the XX, cash equivalents quarter. used value at end bitcoins cash, million, $XXX.X accounting investing adjustments. of restricted cash March a Total first was the million provided Cash held million. totaled million respectively, with carrying by

for of deposits outstanding a approximately delivered be totaling which to end $XXX.X left XXXX. XXXX. be miners million, be for our the in purchase was to This $XXX paid agreements digital quarter of equipment XXXX, had to we million as $XXX.X first equipment, asset of million mining As balance of scheduled to delivered in

Now, I Mike. hand will the to back call

Thank you, Denise.

and and markets, results, quarter of price and conflict year. on they which availability remainder and The COVID and every in and inefficiencies significant XXXX agriculture with a including impacted. credit Both Europe we're inflation, to very chain present increases into well perceptions on our for business, first markets. We its rate the some our externalities are plan. anticipate number global have remain weighed continued operating like of the we been impact of cost the factor interest with I'd countries public impact growth Bitcoin, of uncertainties We of and has These on and pleased impact resurgence through our valuations. tight words factors touch investor the energy capital the supply for a positioned equity in ours. dealing of how

company type payable infrastructure, control cannot opportunities new these assets and continued we our take may revenue believe a North and our growth self-mine sell for digital public this in other our environment, While continued shareholders. we In way. having positioned strong America will owning our or growth perceptions, hosting of for midpoints. for producing we value I'm create to advantage provide asked are our that we us dollars, more holdings uncertainties whether than come to digital of or well with building not and in foundation any asset often

earlier, my and in in future strongly we in global comments system. mentioned role believe the Bitcoin its I the As financial of

our in will strong That year, financial our said, and invest maintain to growth. everything do expect we this bitcoins. in that power sold self-mine assets over continue digital We a currently to continue will we to continue be We case. have the to position hold and stable, XX,XXX

us may find our companies Our a gives strong financial to it operational do increasingly the continue and time so. capacity at foundation smaller to building where confidence difficult

are impacts. industry and educate collaborating state to D.C. Washington, partners our We and with makers legislators also positive capitals our about decision in industry's

well-paying of as are provided baseload and and not consume ours from distribute with movement centers generation our mid-carbon. created their power create or mining we geothermal. grid leading power to We Those and approximately grids. predictable business of the to development more additional X.X economic They do note power from our on X It's that remain will providers nuclear large frequently through capital gigawatts industry, solar, is our site, to by highlighted by development XX. them like With but electricity social outlook provides an As peers four We comfortable our case carbon-free by development is on such a has to lacking for available when and energy. from too still carbon-free We if in our fund stability sorely jobs the or that have XXXX, variety to are to where whether aspect be in grids provision the industry data will operators hydro, help work been an Many prefunding internally that undertaken of for discuss ESG gigawatt. overlooked. with growth to and Bitcoin whether projects, local important electricity of or very The future. wind, years. areas markets The ability supports energy centers shape the only slide I'd in creating customers. flexibility compelling in also our X.X methods. terms, background, data

of minor and mix XX% the split roughly expect to a the the deployments our versus year. approximately center end self-mining data second expect for XXXX and to continue even We incremental of be development quarter, hosting completed of we by

visibility XXXX ended exahash. exahash update an to to Now, XXX the expect operating analysis, our now to bring exahash exahash’s. and from operating customers. with through of online XXX with X.X illustrated in We slide added exahash megawatts leaves in capital at the We another on X.X XX XX adding absence the XX.X% We range of to first XX. our the XXXX on in those to finish new prefundings availability X.X a April of for and/or new exahash us of quarter XX.X That midpoint in times total additional XXXX.

gig. environment, XXXX capacity of are in capitalized to contracts confidence summarize, XX demand our those other sense XX, hosting customers in ability it a objectives miners our team. sufficiently despite incredible exahash. shareholders very, do we employees, we our objectives And to strong. clear and our In of to for for XXXX, our X have we your XXX% very achieve and to Thank have we As for remains representing March outstanding our had words, of challenging you hosted our place and operating objectives valued for self-miners very make the visibility should exceed XXXX so. To

We will questions. your now take

Mike. you, Thank

first Chris. now Brendler begin And Davidson. question session. Instructions] our Hi, the comes Chris will from We with [Operator question-and-answer today D.A.

though message would Mike. think had Steve. that all the some mostly even the for XXXX, I I thanks, funded. growth Appreciate first my guess the pretty projections update. Hi, color. you robust afternoon, was quarter it was Good for Thanks last question be,

think the like of XX% I that. or was number XX%

the you is is And a consistent conservatism of play? just XX% mostly at that on So what's something given the sort with last XX% there reduction is to way funded? to Or of of it going were quarter that a layer message markets? else adding

it's to certainly very added fair there's think layer of I say an conservatism.

and many As we capital is industry. of discussed, for formation challenging markets the capital our in

that be to X environment the you as are continue to and want to of frankly, be Demand in we we're today very exahash make be we range. mindful sure funded plus strong are as with XX comfortable colocation that, in for all. sit and that We does here fully we continue always, we very And to gig services. transparent our

and said, then capital, to need number a we others conversations we don't whom of them business bring But do in in engaged don't, as if need today. are with that also We form they capital customers.

both it's yes, of from specifically disappoint And along, with to all question? Did we've do to be clear. like so I as I conservative point we well think of very don't fair to the like the as it's and your we consistent say had answer discussion view

Yes, did. you

point. with that’s It's I to think obviously, market conditions, conservative you process. this to done that count And appreciated don't better be at on I since really and started approach we this you've great a anything job the definitely want way. along

given just market some as dislocation those scaled I on the very they've and to chance to up dynamics. place and started industry weeks, there's deposits player for that be that's that a won't the good leader which advantage equipment miners of some the you opportunity today? take space, tighten the or of Core in last already the couple able in for heard a is to an of taking there Some for pay of has in any most equipment, chance got financing

thought. I which We spoken think and era situations, perhaps advantage of have opportunities to think going we're conferences Very the consolidation We on are and on in may the or do I've assets. come spoken of companies is -- the and about to little the an sooner answer. us accretive there is we clearly, for calls, it highly a referred past short some than at be take there of to and we to cleansing, talking whether we've

market. to bit that price, earlier we make heard And a current agree point, equity. more say our -- become at others in or the raising darn issuing we little in sure. our that bit That's capital what which I trying difficult that is have for have many right. You're this this guess, making I for very was Obviously, we is not interested we're to share a little is has

to we're it frankly, talk But moving yes, today. starting about opportunities. so with is There's already And the approached, fast. to environment is be very nothing -- very,

right, it and that there to are that raise they're to folks You dependent any capital. of are able capital commitments number upon there raise finding that challenging being have additional were

but Hopefully, road, one before to... always temporary. I chance thought last back is for this be get this Yes. times so the One get could -- better. nothing hopefully, down me We

we but I for to love strongly we've always opportunities. wanted say, take of positioned better, advantage would that compelling be times to very we would to be felt

to to standards. we're meet come going compelling they not seeing opportunities we're our not So some regret -- going if along that

you Yes, adjusted sort coin be, for sounds there quite I depreciation, would don't is quarter? per gotten first on I excluding cost stand good. if know but an you Last basis, on possible, the do this where haven't of yet. one a that -- can

hosting me self-mining We in good as at well that me right haven't do room different remain to profitable in if can levels, in a was a could tell our colocation these current tell -- now business. I'll it with The lawyer our disclosed that. number. we you tell that or wish as way. I question. very I I there the Very

the are the a profitable as depressed levels experienced, coin sell-off of basis. And we still and today, quite per on despite we Bitcoin so sit we've here that

Thanks much. so Okay.

afternoon, Lucas. Good And of you, Riley from question next Chris. comes our Pipes Securities. B. Thank Lucas

number machine to growth. first back public not the year. at year, is, think machines everybody. And I months for afternoon, last a but make were also following Thanks time, XX your – or Good to peers industry And question to announcements I very of norm kind my kind we was has recollection to of order about you the saw out. when of my this want orders been dedicate much. so

like market a more in So challenging. is I'm this sure today,

I equipment much. kind wondered to side? you you So of self-mining that? you do Thank approach the talk suppliers very for how do How

Sure.

pronouncements in a will So them. cetera. year, you think them, that couple you're right, just we One, beat I'll meet we our pronouncements one people made out every et point last things. One didn't I of thing beat is made we recall XXXX. We of

this fact, got placed all for an view a times pick of the put only market units you we disruption focused making on going again, this any miners on for and year. With had we these in current in We point value $XXX this might more we're opportunity and we're to be touched very going equipment, difficult in I as we that's the in pay better so not to in that of We know, on have had do. think be And sure up And that past that, volatility something remaining order companies that to we in do to industry. of that have that said the perhaps million some thought what an year. say delivered before our would regard future. that, new period at there new there we be in be we've was there environment. of sort all orders to markets, to is miners big why And left

million coming got the that on outstanding we've it. got than that other we've year. rigs XX,XXX That's or $XXX so this is So

orders, we're the this But a unfortunate might we hiccup. fact, and new was that. And of coming do in bit but Did Lucas? was occur saying, your value take as – I it year Chris – in order it's just prescient of fact, everything, space. we but in you of didn't into if, unit. to we there the were question, what is a we if, bit compromised that chaos, again, we are so a because a the Not about And about that answer so little all of position a little haven't for concerned capital if put in some will, see advantage

No, approach new Yeah. done opportunistically out, were – that's is from and you and a delivered. sign on my impression Maybe that, kind well Did of for orders here it so rush to on in right? I you that. XXXX helpful. you're not conservative catch And

correct. That's correct. That's

on roughly we So about roughly bit we – us. Lucas, XX,XXX to to deploy, on miners which XX,XXX have of when more a are and way ground their the look, think to another than XX,XXX now

to includes only have of to guess, XX,XXX And the take are of said, be very which machines, That I all $XXX I XXX,XXX the efficient. own. very us taxes, about right, that Technically, So which new high-performing, the we all-in. it's generations, another well plus million $XXX delivered, over, will only we it's for very works. miners million actually as shipping

pursue got So at over like availability, we're if et really depend we another for a price, miners, and XX,XXX whether deploying, not bit additional is almost them we looking position to will we cetera. pay terms, to will, $XXX be you or And which on miners million, in. all is a

to have clear very about infrastructure. our We be

always of right, in sufficiently of all take gig, that gone We right? it simply make as is has continued all we've have a X fact, that locked that's a into are us available decided to capital infrastructure, Should So all our which above all gigs plus willing the whether we, visibility, have or to at infrastructure. groundwork, we're tremendous pace, additional on agreements, of pre-pay had optionality. when the the we X our we up reasonable your for going customers What it's that stuff preparation permitting, of sure to the is price. gives have we capital

whether say self-mining. conservative characterize going growth, advantage or take sure for do has third-party appropriately for co-location do. we're And we an money the what have we as we to additional to we just approach it So taking what making to would do of it's can it, with to

late how I have for Back miners of wanted at much increasing. the hosting to I even kind the mean passing touch the be were I kind topic who to could generate market. imagine desperate, of second Thank hosting that on today, revenue. And March could to it On -- in appeared Mike. or with on my helpful. get rates turmoil you time, Very folks their ground miners right, very

the So puts takes and the... up on how would you frame

types financing agreement us only But to for say you're a valid No, would to miners deposits, off Yeah. that then in finish producing is two There's folks. we soon their in leader market to them but there's not plugged like good colocation folks question. in on of that to I Sure. a possible. operator. data there folks need are you've as finding have going they'd payments hosting the ground news big who've got we and perhaps if are that orders. earlier, And category. the credible And center good-to-go get for the the as referred financed way think highly is with are good this that or were got get

are both And folks their have have they've we get financing that, on that but you received those in miners well to fact, folks the ordered, as as can finish home. are, so got what from ground as fact, they for that off can't rigs payments assurances they've we've unless trying the a in inquiries refer units

got capital can the possibility good pretty line what of but puts sure the walking for, this we is. it us We've position. do. you fine we're why making that's a so else know what And in And of it yeah,

raised us. all for to certainly probably of they a -- we say But are ability and meet that going not they many historical with acceptable the discussed have of -- in for they've colocation we which And be to need we've need the the in out, to that helped to is have terms can of absolutely rates. as to risk are we we're dialogue them put terms And were our think at well. help fairly, with got do. need capital. as that we to on many past, we're them them but very appropriately the additional us, if those And and so and And happy what the capital, talk approached parties

to appreciate of Mike, color at you and team luck. the all the I best really and

you. We feel good. Thank

And Instructions] at Hi, question [Operator DiMatteo from our next Tyler? Tyler BTIG. comes

and afternoon. everybody good Hi,

Just one me. quick a from

dynamics the towards infrastructure pricing XXXX, build-out with move of that the maybe of of build-out into immersion and of and any we even So, future X-gigawatt that we have and data terms cooling in then as progresses any associated taken capacity consideration capacity centers? the the

short yes The and and long is answer absolutely.

it now can fair very evolved, I to it assume been We've evolving immersion cost well to as has studying the and of about very our XXXX, the such, it's will actually over sure in that course becoming see to we're fair very me immersion much wasn't. you think in of is immersion, fact the some running a all day, to out running the rigs have was. of the six frankly, assume a source, do that well doesn't XX all as immersion We've alternative. I years energy over what other running I is assessing to it I is return our do us really course facilities will with as running XX to work can it's how over issues. it's And to rigs for of -- with that make of been is the ago, in say increase the immersion. think answer done talk affordable fair course better we're we us coming it climatic of as like -- that yes, it air talk the a investment. our we've because some are to passive solar I driving what's But to along. as we it the evolved, both And has as very facilities months. just the number work on, has gotten technologies and It in the on that's it you be benefit some likened And be benefit that a out lot very, into up said, when that, running don't months, environment. a where opposed that return of technologies we it. very I I return Immersion, But -- think next the whereas yeah, give the our issues. of --

turn I Great. it I the will back queue. it. appreciate to Okay.

found Thank your filings Scientific. as and we An SEC on and company interest industry our corescientific.com. in day, of quarter's that again with last a with you relevant this look thank our for call, good you, archived and news, be question, forward to we Core following Tyler. your can and you you for website, version next And attention speaking results. all wish We

Thank everybody. you,

you. Thank