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01/12 05:54
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call shows a mixed sentiment. Strong positive indicators include higher than expected HPC revenue and ongoing expansion plans, which suggest growth potential. However, uncertainties in financing structures, unclear management responses, and potential supply chain issues for 2026 components create concerns. The lack of clarity on the separation of business segments and Alabama site specifics further adds to the uncertainty. These mixed signals indicate a neutral sentiment, suggesting the stock price may remain stable in the short term, with potential for both positive and negative fluctuations.
Total Revenue $95 million, a decrease of 18% year-over-year, primarily due to a 62% decrease in the number of Bitcoin earned and a 61% increase in the network hash rate, partially offset by a 117% increase in the price of Bitcoin.
Digital Asset Self-Mining Revenue $68.1 million, a decrease of $14.9 million or 18% year-over-year, primarily from a 62% decrease in the number of Bitcoin earned due to the April halving.
HPC Hosting Revenue $10.3 million, which exceeded HPC hosting cost of revenue of $9 million, resulting in a GAAP gross margin of 13%.
Gross Loss $0.2 million, reflecting lower post-halving hash price and higher operating expenses.
Operating Loss $41 million, reflecting lower post-halving hash price and higher operating expenses.
Net Loss $455 million, an increase of $414.1 million year-over-year, primarily due to a net $408.5 million non-cash mark-to-market adjustment to equity value.
Adjusted EBITDA $10 million, a year-over-year decrease of $18 million.
Operating Expenses $40.3 million, an increase of $13.5 million year-over-year, primarily due to a $4.2 million increase in personnel and related expenses and $3.7 million of HPC hosting segment site start-up costs.
Cash Cost to Mine a Bitcoin $42,351, an increase of $24,314 year-over-year, driven primarily by a 62% decrease in the number of Bitcoin earned and a 61% increase in the network hash rate.
Power Costs $0.038 per kilowatt hour, down from $0.045 per kilowatt hour year-over-year.
Total Debt $512 million at the end of the third quarter.
Cash and Cash Equivalents $253 million, up from $50 million at the end of 2023.
Total Pro Forma Diluted Share Count Approximately 279 million shares as of October 31, 2024.
Direct Cash Cost to Mine a Bitcoin $42,351, consisting of power cost of $33,946 and direct cash-based facilities operations cost of $8,405.
HPC Hosting Non-GAAP Gross Margin 27%, excluding direct pass-through of power costs and non-cash expenses.
Segment Gross Margins Negative 9% for digital asset self-mining, 29% for digital asset hosting, and 13% for HPC hosting.
Interest Expense Increased by $4.9 million year-over-year.
Reorganization Items Net Decreased by $28.3 million year-over-year.
Potential Revenue from CoreWeave Contract Approximately $8.7 billion over 12 years, with average annual revenue of $725 million and non-GAAP profit margin of 75% to 80%.
HPC Hosting Revenue: Generated $10.3 million in revenue from HPC hosting in Q3 2024.
Bitcoin Mining Expansion: Completed a 100-megawatt expansion at the Pecos, Texas Bitcoin mining data center.
New Data Center Acquisition: Leased an existing data center in Alabama with 11 megawatts of critical IT load, with potential to expand to 66 megawatts.
CoreWeave Contract: Secured a contract with CoreWeave for 500 megawatts of critical IT load, valued at approximately $8.7 billion over 12 years.
Market Demand: Favorable market fundamentals driving strong demand for high-powered data center infrastructure.
Debt Refinancing: Completed a $460 million convertible note offering to refinance debt and improve capital structure.
Operational Efficiency: Achieved a 36% increase in self-mining hash rate due to deployment of new generation self-mining units.
Strategic Shift to HPC: Reallocated 100 megawatts from Bitcoin mining to HPC hosting, increasing total HPC capacity to approximately 570 megawatts.
Future Growth Plans: Plans to secure an additional 300 megawatts of critical IT load from existing sites and pursue new site acquisitions.
Competitive Pressures: The company faces competitive pressures in securing new clients for its HPC hosting services, particularly as it transitions from Bitcoin mining to HPC. The market is seeing increased demand for high-performance computing, which may lead to competitive bidding for contracts.
Regulatory Issues: The company operates in a regulated market where it must navigate utility regulations and power agreements. Changes in regulations could impact the cost and availability of power for its data centers.
Supply Chain Challenges: The company is experiencing supply chain challenges, particularly with critical components such as switchboards, static transfer switches, and generators. These bottlenecks could delay the rollout of HPC infrastructure.
Economic Factors: The company is affected by economic factors such as the fluctuating price of Bitcoin, which impacts its mining revenue. Additionally, the overall economic environment may influence demand for its services.
Operational Costs: The company has seen an increase in operational costs, including higher payroll and benefits expenses, which could affect profitability.
Debt and Financial Structure: The company has a significant debt load of $512 million, which poses a financial risk. Although it has improved its capital structure through a convertible note offering, ongoing debt management remains a challenge.
Market Demand: While there is strong demand for HPC hosting, the company must ensure it can meet this demand without overextending its resources or capabilities.
HPC Hosting Capacity Expansion: Allocated an additional 100 megawatts of infrastructure previously designated for Bitcoin mining to HPC, increasing total capacity for HPC hosting to approximately 570 megawatts.
New Site Acquisition: Leased an existing data center in Alabama with 11 megawatts of critical IT load, with potential to support an additional 55 megawatts.
Debt Refinancing: Completed a $460 million convertible note offering to refinance debt, increase cash on the balance sheet, and eliminate restrictions and covenants.
HPC Hosting Contracts: Secured HPC hosting contracts with CoreWeave valued at up to $8.7 billion over 12 years.
Future Capacity Growth: Plans to expand HPC hosting capacity by securing additional power from local grid partners and acquiring new sites.
Revenue Expectations: Projected average annual revenue of $725 million from HPC hosting contracts with CoreWeave.
Power Cost Forecast: Expect average power cost in 2024 to be between $0.042 and $0.044 per kilowatt hour.
Operating Expenses: Expect operating expenses to increase only slightly as HPC hosting business grows.
Bitcoin Mining Economics: Positioned to benefit from an increase in Bitcoin price with a planned refresh of the mining fleet in 2025.
2024 Catalysts: Achieved contracting of all 500 megawatts of critical IT load and secured a new site in Alabama.
Convertible Note Offering: Completed a successful $460 million convertible note offering that enabled refinancing of debt, increased cash on the balance sheet, and eliminated restrictions and covenants.
HPC Hosting Revenue: HPC hosting revenue of $10.3 million in Q3, driven by a one-time adjustment for early delivery of data center capacity.
CoreWeave Contract: HPC hosting contracts with CoreWeave valued at up to $8.7 billion over 12 years, with average annual revenue projected at $725 million.
Power Cost Forecast: Expected average power cost in 2024 to be between $0.042 and $0.044 per kilowatt hour.
Future CapEx Plans: No expected out-of-pocket CapEx for HPC hosting contracts as costs are covered by CoreWeave.
Share Count: As of October 31, 2024, total pro forma diluted share count was approximately 474 million shares.
The earnings call reveals several negative aspects: a sequential revenue decline, negative EBITDA, and reduced Bitcoin production. Despite a strong liquidity position and potential growth opportunities, concerns about supply chain disruptions, economic factors, and competitive pressures persist. The Q&A highlights unclear responses on critical issues like credit enhancements and CapEx changes. The lack of a share repurchase program and a negative trend in financial performance overshadow the optimistic guidance, leading to a likely negative market reaction.
The earnings call revealed mixed signals: a significant partnership expansion with CoreWeave and strong cash position were positive, but declining revenue and increased net losses were concerning. Q&A highlighted management's confidence in overcoming permitting and design challenges, yet some responses lacked clarity, raising uncertainties. Despite positive long-term contracts, immediate financial performance and operational hurdles suggest a neutral impact on stock price.
The earnings call shows a mixed sentiment. Strong positive indicators include higher than expected HPC revenue and ongoing expansion plans, which suggest growth potential. However, uncertainties in financing structures, unclear management responses, and potential supply chain issues for 2026 components create concerns. The lack of clarity on the separation of business segments and Alabama site specifics further adds to the uncertainty. These mixed signals indicate a neutral sentiment, suggesting the stock price may remain stable in the short term, with potential for both positive and negative fluctuations.
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