CleanSpark (CLSK) 15 Dec 222022 Q4 Earnings call transcript

Good afternoon. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. you. Thank Instructions] [Operator I Holyoak, to Chief time, over the to Isaac Communications would this turn like floor At Officer.

results fiscal Thanks, joining Brent. year and us for financial full today for And CleanSpark’s fourth thank call. you quarter

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about We financial non-GAAP during measures will performance call. discuss also our today’s certain

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these fiscal year of doubled, key tripled, quadrupled this Now indicators. and we've even some performance

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a XX,XXX of million, At we the a had increase. end -- XXX% year, a $XX.X was increase. XXX% EBITDA XXX% the adjusted fiscal over Our miners operational, increase

hash increase. rate our X.XX, XXX megawatts, operational XXX% was And XXX% a a increase. were megawatts Our

call, partners debt. we own for tell we production. things. in sites is. year little secret events, I our get have our XXXX, X,XXX mined owned that fiscal four with and this all of them we and when I'm I As no what the a time two XXX% at operated bitcoins, And increase asked XXX%

market would the that end. this space never lot believe entrants the bull I First, into of a thought

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tell the operational. is mining to I thing key is that Bitcoin second The people successful

in true machines. in simple believe is it have that The the differentiator bull key as Well, market. acquiring capital plugging groups and that as operational been Some now may prowess.

have Bitcoin make companies realities, ideas Despite what market. and a We makes to the use certainly during believe us most of teams, do bear This and great this to bear tools the is economic very lot bear your and up we grow, harsh to sleeves grown have this miner. work. a roll You assembled the market. markets we’ve

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our of Norcross We completed also fully campus. Phase X

the thing the Chamber of minds full Council, the is The trust made mention leaders, City Again, Norcross away all immersion in it operate way Mayor, cultivate business is I While most members that tour and of It the seeing technology. community communities place, Bitcoin is the work that reminds special new is community, the that deploying other to did we facility. including about the After has an hearts sites, Commerce We've local and Washington. invited cooling truly us a opened power really is officials, a walked this our facility to to to air last about of smallest of transparency state-of-the-art in, the facility, in people and similar want growth We for as to educating cooled recently consequence. of me purchaser work believing. the dignitaries, our mining, industry the impressed. as something people. in and do we acquiring we we the Georgia Bitcoin

for and big to to now year, cities the state us. the for one in. and one largest municipal for continue Georgia's possible highlight last was in the this communities our key operate to the a of build We largest of We we intend procure the relationships rates purchasers the power are Bitcoin play transitioned One power customer. us are to our We Georgia, association partner energy and we miner. a very pure best and of with

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requirements capital are Second, a incredibly environment. cost secures us in of impactful significant it bear in payroll and the market reduction savings that working

our save which investors know, us the in was As a longtime of high-capital will millions capital, in very this exit low-margin the tens of business, near-term.

over $XXX common sell new year continue Form S-X reasonably us the minutes selling our in at and in the filed little transition of what talk we legacy into allows with I'd a few discussion with or on. his and the process we looks up to I more business are two to assets address about one head now are three grow. next things near we market years. We like the conjunction market both to the the more public fully this future. to filing, note that and to us divest These new of bit offering there things next remaining the the of want offerings very -- to you about are might like million SEC. hope filed two filing In we to a ago, for A stock that my as expect from to and us what also

of of our basis filing which greater First, about updated on opportunistic registration secure previously give filing This additional us million. statement we The existing also refresh advantage financial capital under terms. $XXX offering, was us continue offering a million, take filed an an we only shelf down threw as which is to designed functions $XXX allowing opportunities. to of same our market to the current of to flexibility, shelf

established accretive issue Second, I moment the take while strengthening market them specific accretive concerns acquisitions a platform within CleanSpark of to to clear because choosing want the for make be expect has move a dilution. We about bear to a operations record range, to for establishing equity purposes. ROI to This a run. discuss allows a in and long shareholders we our maneuver track through to growth. us

$XX as XX.X. combined a equity. more totaling companies. are one before earlier employing than equity. Bitcoin assets the site has growth to temporarily add month, were $XXX years, in our our about raised sold track revenue we and to second approximately us EBITDA those the we've of our around million second, purchased of daily the we Bitcoin the than the and the now out to hosting Adding translated per miners, and million, in approximately only that exahash our Over traded X facilities, hardworking two made debt respectively. being and expected. we This top adding All Over of same mining high million, infrastructure exahash hit time, moves XXX X.X into $XX was people. And have now per we off hit also years, These have to sheet. during we moved while, on balance Because end last two acquisitions, in opportunities $XXX machines added for XXX reached standards million specific that, two years Bitcoin mining are publicly adjusted million high we've that, To today, last year. production of

XXX using hash use dilute We how mined exceeded is paired reiterate Bitcoin November that our record we the even in and mine, before month. that guidance, strategy the to year-end produced. we I a Bitcoin with the of hovering price still holding the bear when market, also want support $XX,XXX was We current growth rate our equities a our shareholders around price time, and was when Bitcoin were this peers our to move. they bold to favor of the Bitcoins the operations used At choosing Bitcoin in level.

talking industry. that rate XXXX. We in Earlier so I'd call. to of deteriorated the this quickly health hash that projections has time With bold our guided XX.X our in exahash in Lancium. cost, earnings growth like to spend with by grow growth financial year, realizable our to but tough of financial us last our partnership a yes, some we believe growth. philosophy. end well, maximize value support has of for to us arms industry. prioritize that not the rewarded allowing sort as times any will these during the and to at shareholders, reserving we even continue growth This bold race mining tool a for But, we this We time At for towards about equity not growth our mind, approach the set strategy announced

let part Lancium megawatts agreed in the of Lancium As campuses spring they our West to delays agreement, were committed this that year XXXX of build 'XX. guidance. year-end to host megawatts X.X us of initial were XXX our or we megawatts August, provide next in expectations XXX first know 'XX. In exahash clean communicated the XX you they the the for early to we Originally, of calendar shifting to in of and our XX megawatts Texas and to experiencing December about machines

later. likely recently, to meet upon XXX and to facilities current these all it's affecting readiness capital even for ability market conditions, pushing of megawatts, Just XXXX, us commitments the be based they their late informed into of constraints their

While we we XX, revising difficult that year-end business which right XX intend guidance could long-term, is continue do, this to And now. being want with we incredibly XXXX for know if we to a to we're to in our calendar beat colocation exahash. Look, work Lancium reason, we all will.

we're long-term price. machines And continue in Bitcoin up instead expectations, to We a just in has proven proud chose end setting too guided operations X. right my And you I track of the exceed floor were the way, the track we contracts. I'm XX to our as all This And a same on at fund our mined spot We better and locking to could market do. so. and for continues and record sell often shareholders to certainly better guidance, to I want that exahash, and calendar If about now pride growth to that. over-delivering year, we money exahash the have of machine them. we'll our have we we've go that, the doing and about be correct. along of of to have into a X chose We execution. for this gotten team we looking We beat record do of do to damnedest that the

this we've not Bitcoin grow prices, If do point been to maximizing As cost. on focused in also I to thing increasing on producing we're development, the To production. but right profit margins. laser is a going at With current that. Bitcoin our will focused higher Bitcoin’s do, all margin we less at we're said,

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understand adoption was only When is at develop. of world. is adoption at transformational the And throughout year a This a stage versus Our the Layer is year at the internet XX% world beginning. key. is technology. beginning Adoption growing XXX% it. increasing current and to part Bitcoin just emerge was is that to about and Bitcoin’s We're technologies the continue that growing. growth, three two

you this So, us to our journey. for with thank shareholders, sticking on

shareholders. CleanSpark skilled mine our possible in invest margins in our the we are because who for You best believe team, efficient, that operators at you

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this of over loss hitting nature The see million $XXX non-cash loss Bitcoin more GAAP drivers non-cash doubling. did with prices, single Bitcoin were primary we While We items mined a significant significantly and ended continue net our the greater the reflected in more our year. year, this with P&L. than month decline every for bitcoins net revenues X,XXX of mine a year at to

to Some of as the the energy call. exiting these discussed items business, of our QX relate we on

equity instruments, significant in of years, We also instruments. the valuing which equity non-cash related stock charges have key volatility evaluation driven in is of recent put in to modification our primarily volatility for by a

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the mined year. lower the a story. an We fourth directly quarter more third XXXX, margins XX% price were $X.X XX%, it's more quarter Bitcoin Bitcoin quarter and see preceding on same gross mined same revenue. the much quarter, almost producing we $XX most our compared compared more the twice in yet profit the Bitcoin, in at saw XX% year, similar specifically, Bitcoin in last which of to in you the as We mined can same recent only the gross increase fourth effects affected Since Comparing Compared third the profit. quarter than had fourth last energy, of revenue. recognized to only quarter. XX% the million our more Looking used to quarter period decline to quarter, million gross than

margins Bitcoin Looking in prior pricing. cut quarter immediate third due in at the were half the to the quarter, fourth compared our decline to

the Moving next to slide.

reasons. loss the $X.X fourth net You fourth the of in on year. experienced of We $XX will to had several over GAAP the prior losses significant quarter a basis in we million million see quarter for a compared

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periods alone. equity $XX higher compensation prior almost were of items gap items. represented note base both $XX stock-based loss the modification million instruments. is of two these significant noncash these to of than certain charges which important was the Our almost million, due to It's And that

a fourth $X.X expect in in zero we And number Additionally, exit discontinued operations decreased and to from $X.X of we any business. This the quarter. did is this sale see loss from the the the drastically be third complete effect in the energy business quarter to of assets. of million million eventually our XXXX direct as energy we remaining decrease

our operations. the see adjusted shows side This our non-GAAP has effect from right of this low the Bitcoin a you to a price EBITDA, cash management the uses of will flow fourth On cash slide, quarter evaluate metric flow. also

EBITDA adjusted you saw XX%, what about a at both of As year. EBITDA margins the were preceding 'XX QX margins third of quarter adjusted and quarter the this decreased

million Sandersville over for However, year-end. our to us breakeven pricing This incorporating a Bitmain you'll from XXth, September was the as our at is XX,XXX sheet, of hourly SXXJ $XX current operations I an want had rate. to that the allows our total profitable achieved cash. to subsequent excellent models, our our over liquidity global of This power been adjusted EBITDA and as Pro also Taking basis, percentage This only and hash point our machines of on of an cash operations in purchase continues $XX million on of but basis. balance out team assessment primarily constant note mine by compressed, to Bitcoin million flows basis. liquidity not acquisition, look current recognize on profitable a monitoring margins Bitcoin a with and that Georgia GAAP prices, $XX Bitcoin a we while used prices, rate hash have

sale also business. had our related value for energy market We fair of million $X a assets for held to

in of in the business energy XX-K, The sold sold these in assets As to November. you be remaining Form near portion read we assets a expected are future. our

approximately we is out leverage we million we of closed primarily and had a loan continued in our if not the have of expect short the back notes Trinity balance our term sheet to August, of seller million industry. of coming outstanding. In $XX.X that mining growth we balance very year. site. the have payable with one I assumed Georgia in Washington This utilize loan the the the We mortgages believe early amount pointed a As year. previously, for best, on sheet we related sheets carry And in the $X best, little to the acquisition balance

see snapshot our CapEx. On current slide, of the you'll next a

X,XXX to X,XXX with We to ready deployed delivered have XX,XXX deployed and be be miners in over January. another

expect point testament team also the hash by commitments surpassed data as provides a out want current that we have and I it miner Zach point mentioned, as it Our nimble rate that spot the and so be outstanding important Georgia. at are ability on if X we quickly the to market exahash we assets This XXst, to exahash, CapEx. in ground have for we on to be X.X numbers choose. have acquire the expectations is to December and current us no is an operational

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which has future, processing talking X strategy, next we get see us which also early our on exahash slide, us our peers. them near that really of have the that set the exahash XX,XXX my to would additional to amongst something represents about apart quarter. X power, want you miners in over end I comments energize close we an As capital

first for debt our applied balance our pull Our three the of a discussed amount business. and capital sheet, has quarter we could low service allowed us levers on having We've call, in minimal we the flexibility sheet conversation grow While mining position. to currently because tough lenders, during these are financial balance most times we companies, to for positive closed of debt continue have and our with markets debt primarily

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proved strategy for as Bitcoin Our year effective sold XXXX. fiscal at average of price we $XX,XXX the over an again

of easy that Bitcoin production to prices address is we means use liquidity. a now, our functional continue And but considering Bitcoin last as to do Now, to I our believe it's want use this currency morning Monday Bitcoin where as and we'll then, we our equity. are of now, quarterbacks

facility in we not of just refresh facility one $XXX have do but tool million. a our As in to ATM use can the toolbox, our Zach tools another discussed of see several have in for we use. as equity filed I earlier,

year, and has few as increased rate in the have levers hash Bitcoin months. over get off equity paid and last the We us both this used exponentially it’s to last our the point to especially

will capital be increase unencumbered where to our When that to be for will is as continue we we rising have have we encumbrances and increase. for accretive produce shareholders. return helps all use on ships. price, I where for it flow will in assets we stock free important no said use is prepared sit, But price. want the investment cash an will lifts machines intend having to terrahash expenditures result which the to tide we We cash margins infrastructure, equity to and I and meaningful flow appropriate. as want before or And equity Furthermore, next to our growth allow expect price acquire greatly equity, debt produce and use very in increases there Bitcoin a company service. allow to would a That means clear. using assets, us our our with From increase price would Bitcoin rising too. in the corresponding hopefully per of free be This

also higher we the However, economics acquisitions. expect that would a for also reducing and miners, increase priced essential opportunities low Bitcoin price of number

see much seeing and in rebound to the to the Therefore, In you. currently historically a marketplace. opportunity fact, your were price we're what might Bitcoin Isaac, make acquisitions prices. low for time. short the Thank acquisition we if limited significantly, opportunities accretive actually midterm for at call of to in back premium you opposite

to open remarks. our analysts. from concludes prepared questions this the like Operator, We line Gary. for Thanks, would now

with Wainwright. H.C. question Our Colonnese Mike line Instructions] first the [Operator of from comes

is line Your open.

afternoon, we see. over how roadmap able expansion this little despite on on you’ve been and buildout of if past more at market, bear much really the congratulations My over to how provide bit capacity really -- to accomplish expect the you I the a and sites, for so course had know additional about in should just layer additional of mentioned curious XXX that two those the deployment at guys, color months, Washington could megawatts Good XXXX. you and first impressive Sandersville. timeline few to question, you

that. address I'll Zach. is This Yes.

about So more our minors. site shelfing is still actually exciting Sandersville something are we

almost fully some have actually by So, online, we will capacity come to billed, likely the for. yet paid end fully January, XX of online, megawatts come that

as for owner that mentioned earlier there hosted call, temporarily the prior machines we part the of the were off are exit of As in just waiting we come being to shelf.

So, see term bit bump Sandersville. in the of very near a you're a going in to

to another we Now, XXX intend Sandersville after megawatts. that, expand

XXXX. Washington, of are and a to and buildout XX that it's going the megawatts, significant construction so expect while. begun. take to complete end actually It's has But a functional, fairly going adding be We we near to process, be likely that

expect to will year, I April give XX,XXX this energized and We ready by of that think machines. be which room about us for

the how look Appreciate there. when the on negotiate at blended Park, you’ve what prices provide to costs visibility great. out? contracts additional you for any we to secured and color quarter, might expect That's College power have we as any trended since, And can similar you power

Yes, absolutely.

pressures to are related in our average I also over What of quarter, as access, just pricing. seeing power we the see for market on Hub. fourth in panels some over pressures weighted on great Amsterdam. was the following last U.S., a basis, here like place not our to point part the spent use as And predictions $X.XX. they So, and of -- seeing is result are in a looked speaking the can pressures And a is And in pricing. what different time we Henry our landed as that worldwide. quarter, on is it's people I sites would Europe. at anybody we power prices interesting. are We the I

off basis macroeconomic as to drop the also events, of on come we predicting starting but are are prices see we an quickly to come a So, in those elevated result power fairly spring.

we're in of absolutely I power. power effort on a of we we and is MEAG, the with They have call, we largest so, the provider. and lot things, yes, key the cities one as But in. result, the operate partner pressures. And we've and have mentioned this, spent a And of for purchasing a time lot largest seen that which these our purchaser

from power with what to in a to time bring through to three actively lower that's same long-term right So of rates best lock be is And agreements of MEAG. start operate in, this our securing four cities being to the the table on we rates out the view all in we lock to point we our the And going the sites. that want see working purchasing across process we in the expect time declines. through, to of is are combined we

some to our make mining a wherever picked may aiming that we're from cost But view. point Georgia of and for a of those said, to I moves. still direct we're in because So for we to be a rates manage and want of emphasize to comfortable profitably reason run manage ability period they kind with effectively springtime

we're ‘XX, where to really with moves bring to blended at, cost expect to improvements long-term. but So, we're early make our do we happy power ‘XX mid significant

is Your the line Siegler question Fitzgerald. from with Cantor of Josh next

you Thank confidence in you your was what as the now? to for rigs can commentary XX,XXX off to secondary as hit prices if acquire ability of the you. going. you're pricing far What make or so currently I in XX the on is rigs right exahash based curious, gives seeing market some target your

plenty price everybody's months. have chosen is its they're the path why we're that view. and of stay end, depending we're Bitcoin With down to $XX on next XXs. the prices Hey, we're worry anywhere not. be most XXs. than terrahash is seems to view available, fundamental point little the we largely are persist eye the teens. of Josh. of from to things of opportunities move in. said, low long-term do what I from point going more is state anticipating because that dollars to rig a listening a the few and up, though, in in of the close teens, inventory does now anticipation one quicker is suppressed machines a the in do the rear What prices for think months we're of the cost average I we dollar moving view We've especially or think seeing the expect a in that keeping it's are and low that side that a anticipating pricing buying which and per Thanks strategically least of at the in seeing probably units we right in -- seeing will if is over $XX that when acquired that What And teens. from is first to way We've in the there on rigs machines very mean We mirror, six we acquired Bitcoin continue move for are up value the on year.

low are confident the anything XXs absolutely can is But a at thing. the see acquire that below So, good prices. we really we we rigs those

obviously a rigs everything Bitmain. out We've cost. We've inventory lot brick bankrupt been things. new to privy a there, asset seen from we've different coming So, of from directly seen lot of

there's XX,XXX rigs definitely So, out there us for to acquire.

doing There's but Bitmain chosen we and out We, and, manufacturer really technology moves some traditional back work with way again, could, Canaan. out and with evaluate also is MicroBT what particular. watch there. And seeing the of only mostly to in of not That's the MicroBT to course, closest, have Bitmain. we're great course, of whatsminers the contracts Bitmain. We future

plenty to suffice So, rigs. great it of prices, say,

was Thank Great. I to the significant the wondering investors we rig as new tactically That's as in provide or how you to And help especially, you with miner Bitcoin your that your around can update on with balance, is if, selling about feel your the Thanks. helpful auto comfortable of site color. extremely kind decline think this October. purchases? saw Is you. [ph] it well both, expansions level more fund

we're we Bitcoin. the if by to that's into investors as cash -- we're is to the selling rigs, operations real and How is we reason Auto our paying whatever see Bitcoin our our how flow lunch it. using move. own [ph] it account. can in a from It's simply the right not cash that expansion, for time same Bitcoin be, And to it that the those about shareholders. Bitcoin bank get that's Yes. want essentially into our think support one really may balance we is use But the having more want to putting

grow should selling shareholders that the the our we're to debt lever that pulling means our know lever whenever we're not or Bitcoin, equity So, business.

Your next Capital Jardine question is with line Brian from Dobson of Markets.

Your is line open.

for question. my much so Thanks taking Hi.

clue that how really on evolve if you're might over your and remain but pricing given global us levels? hash you some how current could months near a outlook, about was about You've to good hash thinking in color little bit Bitcoin maybe us XX the next

Yes.

The saw, in few little -- it bit, difficulty, mining to fairly averaging Bitcoin ago, and rate. then move climb it but growth I was up fact off a also month to we with that hash see looking taper think now moving, a global back in and with the saw last start how global remain another we if weeks into right to current hash we'd it a near rate just levels, XXth. muted moves decrease Bitcoin back quickly the $X,XXX as dollars what was

to a and dollars at fairly think where really way to unplug. or miners efficient we've Bitcoin I pain a levels in, cost going point price bring even muted them these it's think I lot higher to goes So, them having thousand more are back be because of either less a found for a online. And in few the long having

see overall, it where slightly stay kind mostly if think up, trend was it to but is, flat. So I we of it

we I course, in to Now, go hash we that up to amount we'll are feel believers online. Bitcoin confident going is do But, also a of healthy both rate of that up, scenarios. so keep see think come

given us acquisitions the some hurdle Yes, great your consider. thanks. for And also appetite color rates on that and you you've

type the that disciplined do are view and industry, suppose, as competitors entire are, of think would back I expect? your consolidation what you step you you as and As you

consolidation Yes. I'll the on to that. speak

think is more we come. how consolidation to example be set can think consolidation done responsibly. good there have I of a that I still

for also from opportunities. There build create Some creating needs some be pain sites. is infrastructure is that miners that of other there finished out that's there off that of private infrastructure come players to opportunities that also interesting will going great players, to new are other but

in just companies do yes, underutilized, like we see in that's very to we And, happy with the are -- we direction ours to opportunities really going. have the I consolidate also public, to that infrastructure going So, great are that think near-term. continue private it and

question line Lewis next comes of from Your BTIG. with the Greg

Your line is open.

there kind you and I is market. in a Zach, acquiring little rig you over there was wondering a that market. afternoon, currently about you kind everybody, as few stress next if rigs lot really think the any Thank market could the for good rig just of Clearly bit of Gary. quarters, of about And been finance curious Gary, talk more has financings?

question. Great Yes.

been don't market -- market. -- financing up, it's recent recent typically and has they So, And XX%, for interest with to hikes, primarily mid-teens. has that's teens The the XX%. rigs high work before like the were really it's just gone the low hikes, rate just the secondary rig the right? at financing And economics dried it to XX%,

XX% mean, that as out there I XX%, reward. there anyone is at As money else, there be good loaned to XX%, is risk because

of capital, ROI go our doesn't fit but cost that could calculation. get wanted we into it, -- if So, not we that's

And it to being just so, much are more-choosy we comes when debt.

margin of want traditional that, are -- markets are forward, the debt, XX%, Looking capital. be to think going really after be to I expansion, we we to going up for that XX% which just open to to means we we that more because cost service going wait be not able comfortable to and that debt for more

just be financing. And going keep as on so, think money so that that's I eye improve, to there going it. to -- things are going And more forward, I we for is think our just I available

now on your lot -- competitors a from, where guys rigs rigs? to hash, you'd some about then, were Okay, and -- forward mean, And to your is think that highlighted have entertaining what Clearly, achieve done. I i.e., that financing say, guess, able into of I traditional Zach, those there started actually for been what ability Have any a that is CleanSpark I owners I is guess kind of just a about And of conventional see haven't path like infrastructure -- the that hosting more you looking given the in great. would other to is really, grow gone wondering to I'm you've CleanSpark you’ve deploy something XXXX, new market you done I'm do miners, kind what you something there to asking side, discussions of that rigs. financiers providing maybe execute lot rigs these guess miners? come is, of do is Bitcoin

volatile, business and try that'd compressed, a and of us, when but to have and answer for multiple you those not. chop where easy amongst margins I The highly that not absolutely time only business an take strain are be have that's get think a to in to is you highly colocation players.

else. the You your rig of own from try back only money to anybody definitely then We the make there's margin, want not then has into have and avoid a to way to to, cover beginning. that. go hosting chose specifically but to the all bill, and make that they of the owner we something your plus course, dollar pay wouldn't And

the you been think pain has colocation the at in over months, it find I most this industry look you're space. going in to nine experienced last the if where

risk, and of site, And we are run one So, that comes those strain biggest to CleanSpark would that's power standard colocation colocation also rigs have going buy manage the businesses means a in And it's too, we the it that we have. And the -- we to actively. to standard. points means, that just don't take way. wouldn't client the opportunities also our that CleanSpark when when we evaluate meet to other that from we much it rather players. got -- And

an a right choice may manage not guarantee able power in to without with If uptime make you the be way the client, agreement. right a to lot have complications you of an

what doing run self to our to and best going we stick own we're So, sites mine. do and

questions further back this There now to turn at Mr. the over call Holyoak. Isaac will time. no are I

you Thank you. good for joined We wish I'd good your afternoon, evening, thank everyone holidays. to who's happy everyone a like questions and and today. a us

attending. with We thank Ladies we'll conclude gentlemen, today's for you that, and conference.

disconnect now may You lines. your