CleanSpark ($CLSK) Q2 FY 2026 EARNINGS CALL

Good afternoon. My name is Krista and I will be your conference operator today. At this time, I would like to welcome everyone to CleanSpark's fiscal second quarter 2026 financial results 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. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. Harry, you may begin your conference.

Thank you, Harry. And thank you, everyone, for joining us this afternoon. This quarter represents continued meaningful progress in CleanSpark's evolution into a digital infrastructure and data center development company. One that utilizes our heritage as energy natives, builds on the strength of our mining operations, and ultimately expands the set of opportunities our portfolio can support. I'm going to take a few minutes to share what we are seeing in the market, how that informs our higher-level strategy, and then provide an update on Sandersville and the unique opportunity it represents, as well as our broader portfolio. We are in the midst of a technology wave similar to the personal computer, the internet, mobile phones, and cloud computing. Except in this case, it has a larger potential total addressable market and outsized impact on the infrastructure layer required to power it. AI is different because it is compute denominated. And compute is a function of access to energy and data center infrastructure. We've all watched the hyperscalers guide to higher CapEx this year, and the central question was if those investments would have a return profile sufficient to justify them. The revenues reported for the AI labs and the cloud service providers are proving this now in real-time. The commercial landscape for AI is converging across hyperscalers, chip manufacturers, neo clouds, and the AI labs themselves. Demand for compute continues to grow, but real-world constraints challenge their ability to secure what is required to continue scaling. Power and infrastructure are at the heart of the supply squeeze. Grids are rapidly adjusting in conjunction with their largest customers to meet the moment and deliver capacity for data centers while maintaining service reliability and price stability for households and businesses. That dynamic aligns directly with how we built CleanSpark. We've spent years operating dynamic energy-intensive infrastructure. At a high level, there are four key activities that enabled our evolution into a large-scale digital infrastructure business. These are in various stages of completion but cover the full scope of our activities. First is land and power. This has been a core of the business for years. We've cultivated a range of key relationships across the country that propelled our growth to 1.8 gigawatts of currently contracted capacity and we'll continue driving fundamental value as we add high-quality assets and projects to our portfolio. We're always striving to enhance or expand existing sites. I can proudly share that we added 25 megawatts of contracted capacity to one of our metro Atlanta locations just last month, making the existing footprint more attractive for HPC utilization. In keeping with our conservative and transparent approach, all of the megawatts are fully contracted and approved and they do not include our multi-gigawatt growth pipeline or potential expansions at our existing facilities that we're pursuing. Second is commercialization. We're focused on long-duration leases with high-quality tenants as our priority. But as the landscape for compute evolves, we will always stay nimble and aggressive. One important shift we are seeing is prospective tenants engaging with us on a portfolio basis rather than just a single site. This is reflective of their demand for capacity and of our large diverse set of assets. Third is financing. Gary will share more detail on our capital strategy, but the markets are constructive and we have a range of attractive options across the entire project life cycle. And finally, construction and delivery. We've spent a significant amount of time building out the internal talent and key relationships required to deliver projects on time and on budget. We are setting up the supply chain to create repeatable processes, allowing us to rapidly scale up and scale out. Importantly, this includes working with suppliers that have manufacturing and fabrication processes that can reduce on-site labor by up to 70% by moving production out of the field and into the factory. This business transformation is the largest endeavor CleanSpark has ever embarked on. It pulls on the threads that made us a market leader in energy development and management, and also the discipline and operational excellence that propelled us to become the largest domestic producer of hash rate. And now we have the pieces in place to execute on building the AI factories that are required for the intelligence age.

As we actioned our go-to-market efforts for the portfolio, Sandersville was the natural starting point given that all 250 MW are live. We have a rock-solid community relationship and in January, we closed on an additional 122-acre parcel necessary to support full greenfield data center build. In marketing the site, we received a range of indications of interest with several coming from high credit quality tenants. Among those, we are progressing with a lead prospective tenant. We understand their engineering requirements and their basis of design. In parallel, we have been negotiating the commercial relationship and the associated suite of contracts. While the process is complex, we're encouraged by the progress and confident that we can offer a compelling solution to their significant data center needs. Ultimately, we know how valuable Sandersville is in this environment and we're committed to providing the right shareholder value through its monetization, while also building a relationship with this tenant that can extend far beyond Georgia. Our approach to counterparty selection is disciplined and prioritizes long-term risk-adjusted equity value creation. We are thinking about the potential multi-decade relationships and how to best deliver over those type of time horizons. At the heart of everything we've done in Sandersville is a commitment to win-win outcomes. That meant a power arrangement that protected residents on reliability and affordability, while securing the volume and pricing we needed. It meant adding substantially to the local tax base. It meant hiring full-time staff and contractors locally. And it meant showing up. Youth sports, holiday events, and local business patronage. When you put down roots in the American heartland, you join those communities, roll up your sleeves, and you contribute. Our community focus is why the acquisition of the additional acreage was seamless. The local economic development authority knows what CleanSpark has built over several years and they have confidence in what comes next. We are working to replicate this model everywhere we operate. It is the right way to build infrastructure in this country because it creates structural advantages that protect and accelerate our projects for the long term. Looking beyond Sandersville, the same principles apply across the portfolio. We are building a platform, not a single site strategy. On our last call, I described the formation of what we see as a Houston area infrastructure hub. Sealy and Brazoria together represent nearly 900 MW of current potential utility capacity. Strategically selected to support multi-phase AI campus deployments. Sealy has 285 MW approved with just over 200 MW scheduled to come to energize in the first half of 2027. Substation construction is already underway. We have strong visibility into the energization timeline and are running a parallel commercialization process. Brazoria has 600 MW in two phases. ERCOT approval is already in hand for the first 300 MW. A meaningful milestone that reflects the scale of the opportunity and the coordination required to advance projects in the market. The second 300 MW is progressing through review and we look forward to growing across the region. I also want to highlight a capability that has continued to differentiate us in tenant conversations. Our ability to expand within established grid relationships. Historically, we increased at Sandersville and Washington. More recently, we added 25 MW to our Metro Atlanta footprint. When a prospective tenant asks what the growth path looks like, we can show them a real track record of unlocking additional scale. We see significant expansion opportunities at several sites throughout our portfolio. Across the broader land and power portfolio, we hold 1.8 GW of currently contracted capacity. Not every site will transition to HPC and that is not the goal. The goal is optionality, aligning the right assets with the right opportunities as demand evolves. With discipline around capital allocation and shareholder returns always at the center of the analysis. Access to grid-connected power at scale remains scarce and we believe it will remain so. The ability to find, contract, and develop that power is what we spent years building and it is exactly what is most necessary to meet the market's relentless demand. As always, none of this is possible without our world-class teams working tirelessly to push the business forward. Their grit and their talent continues to inspire me every day. And with that, I'll turn it over to Gary to walk through the numbers. Gary?

Thank you, Matt, and good afternoon, everyone. Before diving into the numbers, I'm going to briefly cover the role that mining continues to play in our operations and how we see its evolving role in our strategy. Mining remains foundational to our business. It generates the cash flow that allows us to develop our platform deliberately. It provides operational flexibility and it continues to give us a strategic advantage when competing for power in grid-constrained environments. Our thesis has remained the same for years now. Energy production is not coming online fast enough and our infrastructure-first approach to building our almost 2 GW portfolio is reflective of that strategy. As we expand into AI and HPC, we are building on mining, not moving away from it. Both businesses share the same foundation, power, land, and operations. Mining funds the platform. AI monetizes it. Together, they create a more balanced, durable business and as we evolve, mining is the engine that funds our future growth. Turning to the numbers, the average Bitcoin price in Q2 was approximately $76,000, which was a 24% difference from the prior quarter where the average Bitcoin price was $100,000. For the quarter, our revenue decreased compared to the immediately preceding first quarter by approximately 45 million or 25% directly attributable to the decrease in Bitcoin price. During the quarter we mined 1,799 Bitcoin, which was only 22 Bitcoin less than the prior quarter indicating network hash rate growth has flattened while our operations team has maintained its industry-leading uptime. Despite the lower revenues, we maintained a healthy gross margin of over 40% for the quarter compared to 47% for the previous quarter. Power prices were more favorable this quarter at 5.2 cents per kilowatt-hour compared to 5.6 cents. Our best-in-class team continues to execute and deliver regardless of the market climate. This quarter, we recognized a net loss of approximately 378 million, which was flat compared to the net loss in the prior quarter of the same amount. The current quarter's net loss, it is important to note that it includes unfavorable non-cash charges of approximately 263 million related to GAAP mark-to-market adjustments on Bitcoin balances. Our adjusted EBITDA was negative 241 million compared to negative 295 million last quarter, which is indicative of the significant drop from the Bitcoin highs of approximately 126,000 in early Q1. Turning our attention to the performance of the second quarter versus the same quarter last year, revenues declined approximately 45 million or 25% to 136 million. Our Bitcoin production for the current quarter decreased approximately 7% year-over-year due to difficulty. But we saw lower power prices of 5.2 cents per kilowatt hour compared to 6 cents in the same period last year, which helped margins in this lower Bitcoin price environment. Net income decreased year-over-year by approximately 240 million, which was almost entirely due to non-cash mark-to-market adjustments. I will also point out that the average Bitcoin price in the same quarter last year was higher at approximately 94,000, and our hodl balance increased by almost 1,700 Bitcoin year-over-year, which further amplified the mark-to-market adjustment. As of the March 31st balance sheet date, our liquidity remains strong with almost 1.2 billion of liquidity. So, we had 260 million in cash and 13,561 Bitcoin worth 925 million. It's worth noting that as Bitcoin prices have started to recover since quarter end, the value of our hodl alone sits at approximately 1.1 billion as of today. Additionally, we have the entire 400 million-dollar capacity on our Bitcoin-backed lines of credit available to us. The strength of our balance sheet is a key feature for CleanSpark, as we have sufficient capital to acquire land and power while also preparing our sites for long-term tenancy. We've always taken a disciplined approach to capital stewardship, as demonstrated by the significant reduction in our share count over the last 18 months. This evolution into AI and HPC infrastructure development is exciting because it opens the door to long-term, predictable, and high-margin cash flows along access to capital at much lower costs than we have seen historically in the mining business. You have heard us use the word optionality in our prior calls, and that approach has not changed. We have designed our capital strategy to be flexible in order to take advantage of real-time opportunities in the marketplace. Multiple instruments are available for us to finance either CapEx for high credit quality tenant AI site builds or acquisition of new land and power sites. We believe we have a fundamental second mover advantage. For example, over the last year pricing and terms have become significantly more favorable for data center landlords. Recent financings have been priced constructively with investor demand far in excess of the offerings. Recent deals have been oversubscribed as much as five to six X. Additionally, several of these deals have priced at slightly over 6%. This is a large reason why counterparty selection is so important and why we're taking a disciplined approach to commercialization. Next, I'd like to provide an update on our digital asset management activities where we continue to lead and innovate in the monetization of our Bitcoin huddle balance. While Bitcoin and markets broadly experienced elevated volatility and a significant drawdown during the quarter, we were still able to drive net positive cash returns approximately $4 million bringing the total cash generated from DAM activities to $17.2 million for the fiscal year to date. I would note that these numbers are being generated while we were only activating less than 40% of our Bitcoin DAM strategies. While overall cash returns were lower this quarter, we view this as validation that our approach has durability across different market environments. Three considerations here. Foremost, we generated a yield on our Bitcoin balance in a down market. Second, our active risk management and approach to trade execution allowed us to be nimble, flexible, and aggressive in managing downside risk. I would also note that the investments we are making in people, process, and technology in the DAM team will further enhance our capabilities and drive returns going forward. And lastly, the data and experience that we are capturing each day are enabling continued innovation across our institutional grade desk. We have proven our DAM strategies produce meaningful cash flow to supplement our mining operations. During this last quarter, we saw elevated volatility and a much lower Bitcoin price, which, while challenging, proved that our institutional grade 24/7 desk was able to both manage risk and monetize the volatility. The actions taken this past quarter will further help us refine our trade execution and risk management. And since quarter end, we have already seen a resumption of returns similar to those we experienced in the first quarter. With that, I'll hand it back to Harry to lead us into Q&A.

Thank you. At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. If you'd like to withdraw your question, again, press star one. We also ask that you limit yourself to one question and one follow-up. For any additional questions, please re-queue. And your first question comes from Nick Giles with B. Riley Security. Please go ahead.

Yeah, thank you, operator. Good afternoon, guys. You know, just thinking about your portfolio, Sandersville, Brazoria, Sealy. Those seem to be the obvious targets, but when you zoom out, you know, which other assets could be converted that you once thought might only be for Bitcoin, and how much expansion potential do those sites have? Thank you.

Hey, thanks for the question, Nick. This is Matt. Within our portfolio, we have a number of sites. And what we talked about was, you know, when we started College Park with 5 MW of capacity, we expanded that to 50. When we started Washington, we had 36, it's now 86. We've duplicated that process across the portfolio. So, we have some phenomenal assets. Washington probably is the next highest probability in the pecking order. It's got 86 MW energized capacity right now, but we're in the process of completing a line study with significant expansion possibility. Additionally, we acquired 60 MW of capacity in Jackson, Tennessee, that also looks very promising for AI development. And last but not least, we have 110 MW in Cheyenne, Wyoming, and we're fence-line neighbors with another hyperscaler. So, there's tremendous opportunities to come convert that from an interruptible load to a firm load to accommodate the needs of potential data center client.

Super helpful, Matt. I appreciate that. Maybe just as a follow-up, can you just speak to how much capital you've deployed to date at Sandersville? And then what's really the threshold, you know, the amount of capital that you're willing to deploy at any given site before lease signing? Thank you.

Yeah, hey, this is Gary. I'll take the question. So, we've deployed a couple hundred million dollars, which includes the miners. And while we may be subject to some impairment like some of our peers are once we convert to AI, that's simply going to be a book adjustment. We feel pretty confident that we'll be able to move some of that infrastructure and miners elsewhere. But until AI is up and energized, we're going to be able to monetize those megawatts at that point. But, right now, the amount that we're actually investing in the site is minimal. You know, as you know, we acquired some additional acreage adjacent to the current Sandersville site. And really what we're doing is we're clearing those trees and moving some dirt, but you know, we're talking millions, not tens of millions of dollars that we're doing because we want to make sure that we have a lease signed before we deploy significant amounts of capital.

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

Yes, thank you and good afternoon and thanks for taking my question. You know, Matt, I was hoping you could elaborate more on the comment you made around, you know, I guess some of the conversations around an agreement or potential multi-site deployment with maybe one tenant. Just kind of as we think about that, is that like broad strokes in terms of, you know, the first deployment maybe to the next deployment, is there kind of a target range of power these potential tenants are looking for? Any kind of comments around elaborating on that I think would be helpful.

Yeah, Greg, good to hear from you. Sounds like you're fighting the same cold I am. So, I'll tell you how it got to be really interesting. You know, obviously we consider ourselves to be pretty experienced in land and power. But, when it comes to fit up and fit out of the data centers, obviously there are third-party vendors that provide a significant portion of that build-out. And what we talked about in our comments was that 60 to 70% of the data center build that we're contemplating takes place in a factory. So, it short circuits the time to market, but it also decreases the onsite specific build. Well, in meeting with some of those vendors, they obviously have strong working relationships with the hyperscale tenants, and as a result, they understand the demand for capacity. So, it's through some of those relationships that the introductions have been made to potentially deploy a portfolio approach where we can meet the needs of a single tenant that has requirements across a diversity of geography. So, we have some low latency opportunities, and then we have larger scale opportunities. And what we found is that there are single tenants that require many of those characteristics. So, while it's still early, I can tell you those conversations have been very fruitful.

Okay, great. And then my other question was around, you know, future power acquisition. And clearly, you already have a lot of power that we can deploy to kind of build out the HPC business, but also accentuate the Bitcoin mining business. But, you know, as we sit here in May 2026, you know, how is the company thinking about incremental power acquisitions?

So, that's a fantastic question, and I want to be really clear about the way we disclose this. The 1.8 gigawatts is power that's approved and contracted and available. When we sat down earlier this year with our leadership team, and we designed OKRs, you know, kind of a strategy for accountability going forward, we talked about the pipeline. And in our pipeline, there's greater than 5 gigawatts of capacity beyond what we shared on the call. However, that's speculative or potential. So, I think there are a lot of companies that disclose maybe capacity that they've had discussions about. We've had many of those same discussions. We're in meaningful conversations about significant additional power, but we're very careful in the number that we disclose is restricted only to what is already contracted. So, I would say that the future is pretty bright for us. You know, everybody's seen the political headwinds on data centers. And so, one of the positive comments that we've received as we've put these sites available to the market is that we have manageable amounts of power and meaningful amounts of land in different jurisdictions, so it doesn't create, you know, like what we've seen with Mr. Wonderful's proposed site of 9 gigawatts and whatever the case may be. It's got some tremendous political headwinds just based on scale. So, being disciplined and have a bite-sized approach with communities and utilities that actually want us there based on prior experience with us, it's created some interesting tailwinds.

Okay. This is super helpful. Thanks for all the detail, guys.

Your next question comes from the line of John Todaro with Needham & Company. Please go ahead.

Hey guys, thanks for taking my question. Congrats on the quarter. You mentioned earlier progressing with a lead prospective candidate. Just wondering if we could get a little bit more on it. Is it still kind of the advanced conversations that it was framed before as an IG hyperscaler? Is that the right way to think about it or has that evolved at all? And then I have a follow-up.

I think that's pretty consistent. We don't have another update beyond that, but our conversations remain consistent with the first tenants that we've been talking with.

Okay, understood. Thank you for that. And then I guess just a housekeeping item maybe for Gary on Bitcoin mining and the hash rate. You know, just kind of as we think about more site portfolio going toward HPC, just any kind of range we should think about on hash rate moving forward.

Yeah, great question. So, as I mentioned in my comments, look, the Bitcoin mining is really our functional currency going forward and that's what's going to pay the bills until we get a stabilized lease. And I think that, you know, that's the benefits of having a very large fleet at scale with one of the most efficient fleets, at least of the public miners in North America. And we did see through our last contracted with Bitmain. And so we have some immersion miners that have landed that we're going to be deploying at various sites. And the great thing there is that's going to drop our efficiency even more from the 16 joules terahash that we're currently posting, which will increase margins. And the best part is these are going to be in immersion pods that we can then up and move as part of our AI strategy. So, I think you'll see the hash rate start to tick up. I mean, our Bitcoin production has broken 23 just recently. So, you know, obviously some of that's going to depend on Bitcoin difficulty, you know, network difficulty and Bitcoin price. But you'll probably start to see this trend to 55 through the end of the year.

Got it. Understood. Thank you for that. Appreciate it.

Your next question comes from the line of Brett Blaublack with Cantor Fitzgerald. Please go ahead.

Hi guys, thank you for taking my question. Matt, maybe just on the tenant conversations and the maybe evolution of this portfolio approach. Is that the same tenant who was looking at Sandersville, who was also looking at maybe some of the other sites and does this portfolio approach potential maybe push back when first we sign it?

Could be, or do you think it doesn't change the timing from your lens?

Understood. And then Gary, on the Bitcoin side, would you guys be looking at maybe co-locating Bitcoin mining with AI? Is that something that you have discussed with tenants, or do you think every site is either going to be bifurcated between just the AI or just the Bitcoin mining?

Yeah, look, I think we think that we're innovators in the space when it comes to pairing both AI with Bitcoin mining. In my comments, I'm not sure if you caught what I said exactly, but I think that the Bitcoin mining is actually going to allow us to land new land and power opportunities because we'll be able to monetize that energy near to 100% of that base load. So, we are having conversations and I think you can expect different flavors of AI and Bitcoin mining. One of the ones that we're really looking forward to is that builds right now are 18 plus months for AI or HPC, and if the site is energized, we can pop down some mining pods and actually monetize that energy while we're waiting for the AI site to be built. So, again, there's different flavors that this will come in and I think that because it's rather innovative and new to the market, it's going to take some time and education for all parties, but that's part of our strategy and we think it's pretty viable.

And maybe just to add a little flavor on that, Brett. We have a patent from our Bitcoin mining days. And the patent basically says that the control module has the ability to make a decision if and when to distribute power to a requesting module. So, back when we were in the microgrid business, we had a controller that would allocate power as requested based on a number of criteria. So, the idea is that with many of these data center loads, the peak PUE, as an example on Sandersville, the discussion surrounding that the peak PUE for the tenant would be in that 1.4 range. The average annual PUE would be around 1.15. So, that leaves a significant amount of megawatts available 93 plus percent of the year. So, the challenge then becomes for the utility to have that power available to meet the five nines requirement for a hyperscale tenant, what do they do with those non-monetized megawatts? So, the conversations that we've had contemplate utilizing Bitcoin mining to make sure they meet the minimum utilization thresholds to ensure the pricing that's so important for the hyperscale tenants, but also having the ability to mine Bitcoin profitably and even in some instances potentially subsidized using that spare capacity. So, it's early in the discussion yet, but it really creates a win-win scenario. So, the utility doesn't have on-demand available yet underutilized power. They still have the ability to monetize that to create the revenues to invest in future CapEx. So, it's a hybrid approach, but we're really excited about what the potential looks like.

Awesome. Thanks, Matt. Very well articulated. Appreciate it.

Thank you.

Your next question comes from the line of Paul Golding with Macquarie Capital. Please go ahead.

Thanks so much for taking the question. Just wanted to ask around the incremental capacity under review at Brazoria at 300 MW. I was just hoping you could give some detail around how that review process is going and maybe as a foretelling of how markets may look over time in terms of incremental power acquisition you may be able to do. Is the market tightening here? Is the review process fairly stringent in scrutinizing this capacity? How should we think about this review process and the current sort of pipeline of interconnected capacity and the availability of powered land, or I should say lack thereof, impacting powered land banking going forward in your review for your portfolio? Thanks so much.

Thanks so much for that, Harry. I was also hoping that you might be able to comment on maybe incremental acreage you would need to acquire at any other sites as you think about the specs that's unfolding for Sandersville. You did the incremental acreage acquisition there. Are you looking at your portfolio right now and thinking about that spec as a blueprint for additional land you may need to acquire at other sites, and is that filtering out some of the sites from an HPC viability perspective? Thanks so much.

And you know, Paul, this is Matt. Just to give you a little bit of color on how that works. When we met with the economic development director in Sandersville and told them what we were contemplating doing, not only did they assist us in securing the 122 additional acres, it's not a fence line neighbor parcel. It's driver nine iron away. So, they then assisted us in negotiating a right of way for the easement to pull the power across. So, we still have the ability to mine Bitcoin up until the day we cut it over and then we can mine it in conjunction. But the reason that that's important is this was the city taking the initiative to ensure that our requirements were met and they were excited to do so based on our history. And that's consistent across our portfolio. You know, there have been times that we show up at a little town in Tennessee or a little town in Georgia and wearing a CleanSpark golf shirt, I can't pay for a cup of coffee because folks are happy about us being there and they're excited with what we've created. So, it's a wildly differentiated approach to what you're seeing in the media.

Awesome. Thanks so much.

Your next question comes from the line of Brian Dobson with Clear Street. Please go ahead.

Hey, good evening, guys. So, you know, earlier you likened the AI data center buildout to that of personal computing. I guess we're still in the very early stages. Maybe can you just articulate your vision for CleanSpark in say 2030 if years down the road once you've been up to start out on this or rather embark on the buildout.

One thing to note, there's a study called Rethinking Load Growth that Duke University published. And what it discusses is the fact that as of today, right now in the 22 largest power grids in the nation, there's between 76 and 125 gigawatts of headroom that is unlocked and available if it's able to be curtailed between 0.5 and 1.5% of the time. So, we hear all this about the grid is overtaxed, it's overcapacity, it's overstressed, it's overstrained, but in reality, there's 100 gigawatts of headroom that if you can curtail 115 hours a year, you really unlock that capacity. So, what we found is by working in some of these smaller jurisdictions, and by discussing the ability to add Bitcoin mining, which is a rapidly interruptible load to that factor, it really changes the way that these discussions open up. So, we're excited about not only the gigawatt campuses and the 250 megawatt campuses that we're working toward deployment. We're also very excited about the 20s and 50s and 60s that we have. In fact, to not go too far down the rabbit hole, we've had conversations with tenants that have specifically asked, 'How much can I buy 60 MW or above between now and 2027?' So, the demand is everything you have as fast as you can get it and for us it's become more of a sorting process to ensure that the financial capability of the off-take and the financeability of the project is well within scope.

Excellent. Thanks very much.

Your next question comes from the line of Mike Colonnese with HC Wainwright. Please go ahead.

Good afternoon, you guys. Thanks for taking my questions. First one for me, it sounds like you'd be taking a pretty unique approach to data center construction with your vendor relationships and strategy here. What do you think your estimated data center deployment timelines could be once you sign your first lease and the associated expected CAPEX cost per megawatt for these builds? It sounds like you guys might have a bit of an edge here. Just want to get some more information on that.

Got it. And is there any capex advantage to using this more modular sort of factory based data center construction approach or is it pretty much in line with what you've seen in other builds?

Very helpful. Thank you for that Harry. And second one for me when we look at GPU ownership versus co-location opportunities would you guys still consider pursuing GPU cloud service opportunities out there based on current economics and implied return profiles? And if that's the case which assets in the portfolio make the most sense for you to own your own GPUs versus going the co-location route?

Great. All the best with your ongoing negotiations.

Your next question comes from the line of Matthew Galinko with Maxim Group. Please go ahead.

Hey, thanks for taking my questions. Firstly, how do you manage multi-site risk across your portfolio? Or, in other words, would you be comfortable with a single tenant saturating your pipeline, or would you look to have kind of multiple of these multi-site agreements?

Hey, I appreciate that question. Thank you. This is Matt. I think it really depends on the credit quality of the tenant. You know, throughout this process, we've had a tremendous amount of inbound inquiry. And so, you have to consider if we do a NeoCloud deal, we can print a higher rent figure. But, it requires a wrapper, and often times the wrapper comes with the cost, and many times it includes a significant scrape of equity. So, as we look at this, it really just comes down to balancing the credit quality and risk with the ultimate value or the cost long-term for our shareholders. So, I wouldn't say that we have an aversion to concentration risk if it's the right trillion-dollar tenant. But, I would say that it really is on a case-by-case basis. We certainly don't want overexposure to a Neo Cloud and end up having to print a tremendous amount of warrants just to get the deal financed.

Great. All right, that makes sense. Then as my follow-up, I think you mentioned in the script that you'd be able to relocate some of the standard until we, on the conversion. Are you looking to retire some of the fleet there or is it a lack of space elsewhere? I'm just curious how you envision that moving.

Hey, it's Gary. Yeah, so we have XPs and the most recent S21s there in addition to the newest immersion miners. So I think naturally as time goes on, we will retire some of those A6, but you know, we'll just do what we've always done and rather than just wait for them to completely die, we'll look to monetize those while they still have some useful economic life. But ultimately, I think that I just refer to my comments about optionality and flexibility. Like we can be very responsive to the market, right? If Bitcoin goes to $125,000 tomorrow, XPs are probably going to see a spike in price per terahash and we could probably move some of those and we might be opportunistic. But ultimately, our team is evaluating in real time what the best use of those mining assets and A6 are, including which sites to have them at. And so I think it's just going to be an ongoing part of the operations that you've seen from us over the past couple years.

Your next question comes from the line of John Hickman with Ladenburg. Please go ahead.

Hi. I'm not sure who wants to answer this question, but I'm a little confused about the ability to provide .95 power for a hyperscaler and still meet the needs of a community that is used to getting all the power they want whenever you need to turn off or on your Bitcoin mining. How do you balance that out?

So, the community in Sandersville that chose this Bitcoin mining operation, they're going to be okay if you turn it into HPC? They're incredibly supportive of our business evolution?

Thanks. That's it for me. All everybody else's questions have been very helpful.

Your next question comes from the line of Michael Grondahl with Northland Securities. Please go ahead.

Hey guys and thank you for taking the question. I just wanted to get an update on how demand has kind of evolved for some of your smaller sites and kind of where does that demand sit today?

Yeah, I appreciate the question, Mike. I can tell you we had a stand-up call today with a new cloud company and their ask was show me all your sites that have 60 MW of power or more available today or in the short term. So, the demand is going nowhere but up. In fact, during that call they commented that they're aggressively seeking 8 GW of capacity. So, we're seeing the 500 MW or 1 GW minimum thresholds really start to drop because of a couple of factors. First and foremost, a lot of those mega sites that are grid connected are years away or already under discussion or leasing. Secondly, there's a real risk attributed to behind the meter power generation. So, many of the companies that have made behind the meter gas decisions are facing energization delays or utility costs that are double or triple what we're seeing for grid connected sites. Now, I think that there were some constructive conversations that took place at the White House with hyperscalers agreeing to generate additional power and push it back to the grid, but I think that kind of flies in the face of that Duke University study that identifies 100 gigawatts of headroom on the grid today. And I think if you can find a way to balance that with a portfolio approach using incremental components to make up that 8 gigawatts of demand, for example, from a specific client, and use interruptible loads to pair with firm loads for data centers, I think you can unlock a tremendous amount of capacity that has previously gone unnoticed.

Sounds good. Nice to see it moving down to some of those smaller sites, that's for sure. Thank you, guys.

Absolutely, thank you.

We have time for one more question, and that question comes from James McLeary with Sheridan. Please go ahead.

Yeah, thanks a lot. I was hoping you could address how you're looking at managing, securing talent for engineering as well as labor, particularly over the next after the next 12 or 18 months at the next phase of build-out. And talent specifically for building out the next wave of data centers.

That's a fantastic question and it's a very real concern. We've done some data center consulting and development with companies like McKinsey and one of the things that was identified as the labor bottlenecks in markets like Texas. You look at the demand for plumbers and electricians over the next 36 to 48 months and it's terrifying. But I think we've done the best we can to mitigate that. You know, I'll give you an example. Everybody's kind of heard talk about the West Texas development for a major hyperscaler that has changed direction and ownership and had some real challenges. You know, we've all read the stories that there are 4 to 6,000 guys driving on dirt roads every day and they're bringing in fresh port-a-potties just to keep it rolling up. Well, our conversations with our development partners take about 70% of that out of the way. So, as an example, Sandersville would be a 494,000 square foot building and it would be 400 full-time employees on the construction team rather than 4 to 6,000. And that comes as a function of building a significant component of the data center in a factory. So, it's duplicatable, it's consistent, it's an assembly line process. So, you can meet the specific requirements from the chip manufacturers as an example. You build to suit that particular design and then you duplicate that and you simply install it in the field. So, the guys in the field are construction, plumbing, and electrical only to the point that it feeds the MEP that we're bringing in in a modular solution and decreasing some of that risk. So, we have a pretty robust team so far. We've engaged with, as I mentioned, McKinsey and a couple of others, Accenture, to assist us in that road map going forward. And we've had a tremendous amount of inbound inquiry because what we've done historically is hire locally. And there are a number of trades in a lot of the jurisdictions that we currently operate that aren't chasing data center builds around the country. They're looking for opportunities at home, and we're finding that we have a significant amount of talent locally that can help support what we need.

And that concludes our question and answer session. I will now turn it back over to the presenters for closing comments.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.