Cleanspark Q3 2025 Earnings Report

Cleanspark EPS Results

• Actual EPS: $0.78
• Consensus EPS: $0.07
• Beat/Miss: Beat by +$0.71
• One Year Ago EPS: -$1.03

Cleanspark Revenue Results

• Actual Revenue: $198.64 million
• Expected Revenue: $191.33 million
• Beat/Miss: Beat by +$7.32 million
• YoY Revenue Growth: +90.80%

Cleanspark Announcement Details

• Quarter: Q3 2025
• Date: 8/7/2025
• Time: After Market Closes
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 4:30PM ET

Cleanspark (NASDAQ:CLSK) operates as a bitcoin miner in the Americas. It owns and operates data centers that primarily run on low-carbon power. Its infrastructure supports Bitcoin, a digital commodity and a tool for financial independence and inclusion. The company was formerly known as Stratean Inc. and changed its name to CleanSpark, Inc. in November 2016. CleanSpark, Inc. was incorporated in 1987 and is headquartered in Henderson, Nevada.

Cleanspark Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record Q3 revenue of ~$200 million, up 94% YoY, and EPS of $0.90 with a 54.6% gross margin, driven by production of 2,012 Bitcoin.
• Positive Sentiment: Reached operational hash rate of 50 EH/s (5.6% of global hash rate) with over 1 GW of contracted power (80% utilized, 200 MW spare) and fleet efficiency at 16 J/TH.
• Positive Sentiment: All-in cost per Bitcoin of $44,806 versus a spot price of ~$98,500, growing the treasury to 12,608 BTC (≈$1.08 B), all while self-funding operations and avoiding equity dilution.
• Neutral Sentiment: Digital Asset Management desk began writing covered calls on 40% of the treasury with a 4% target yield, reporting encouraging initial results as the program ramps.
• Negative Sentiment: Cash overhead increased 17% QoQ, driven by accruals for local property taxes and a larger insurance policy as the mining fleet’s value rose to over $1.3 B.

Presentation

[Operator]

Good afternoon. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the CleanSpark Fiscal Year Third Quarter twenty twenty five Earnings 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. Thank you. Harry, you may begin your conference.

[Harry Sudock, SVP at CleanSpark]

Thanks, Jeannie, and thank you for joining us today for the third quarter fiscal year financial results for CleanSpark, America's Bitcoin miner, covering the period 04/01/2025 through 06/30/2025. Our press release was issued about thirty minutes ago and is available on our website at www.cleanspark.com. Additionally, the 10 Q will be filed shortly. Today's call is also being webcast and a replay and transcript will be available on our website. On the call with me are Zach Bradford, our Chief Executive Officer and Gary Veccarelli, our Chief Financial Officer.

[Harry Sudock, SVP at CleanSpark]

Keep in mind that some of the statements we make today are forward looking and based on our best view of the world and our business as we see them today. The statements and information provided remain subject to the risk factors disclosed in our most recently filed annual report and 10 Q. We will also discuss certain non GAAP financial measures concerning our performance during today's call. You can find the reconciliation of non GAAP financial measures in our press release, which is available on our website. And with that, it's my pleasure to turn the call over to Zach.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Thanks, Harry, and good afternoon. I'm pleased to welcome you to our call reviewing CleanSpark's fiscal third quarter twenty twenty five performance. This quarter was our most successful to date across a multitude of metrics and reaffirms the strength of our strategy. The stage is set for continued growth, supported by world class operations, a strong balance sheet and supportive macro and policy tailwinds. While sustained Bitcoin strength was a contributing factor, our performance is grounded in strategic discipline and the tireless efforts of our entire team.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Behind our record setting revenue and earnings per share of $0.90 is billions of dollars of investment across four states, over one gigawatt of contracted power, and at today's price, approximately $1,500,000,000 worth of Bitcoin. As America's Bitcoin miner, we operate with high standards and set aggressive yet achievable targets. Our achievement of 50x a hash of operational hash rate was a key contributor to our outstanding results and a milestone made possible only through disciplined execution. Our third quarter revenue was nearly $200,000,000 up 94% compared to the same period last year and more than 9% over our prior quarter. We achieved earnings per basic share of $0.90 thanks to healthy gross margins of 54.6%.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Importantly, we produced twenty twelve Bitcoin and our treasury grew in value to approximately $1,080,000,000 by the end of the quarter, an increase of more than $100,000,000 since last quarter. This was driven by both production and Bitcoin price appreciation, all while self funding operations, further validating our prudent accumulation strategy. Our total Bitcoin and treasury stood at 12,608 at the close of the quarter, demonstrating our escape velocity, allowing us to scale without relying on a single share of equity funding since early November twenty twenty four. June 30 marked the highest quarterly close for Bitcoin in its history, driven by global adoption, rising institutional investment and the maturation of the asset class. Additionally, we remain the only large scale holder to have mined every Bitcoin we hold in treasury.

[Zachary Bradford, President, CEO & Director at CleanSpark]

We do this because we can generate Bitcoin below spot market rates. Our cost per Bitcoin in the third quarter was 44,806, which was far below the average spot price of approximately $98,500 during the same period. Turning to our fully self operated infrastructure, our team met our 50 exahash target on June 24. We were the first publicly traded company to reach that milestone exclusively with American infrastructure. Our fleet's average power efficiency was just over 16 joules per terahash at quarter's end, and we have continued to improve that figure.

[Zachary Bradford, President, CEO & Director at CleanSpark]

This further cements our fleet as one of the most efficient in the world. When our scale and fleet efficiency are paired with our flexible operating model, this enables us to manage towards profitability, not arbitrary power costs. Our fully contracted power portfolio comprises over one gigawatt. Importantly, we are currently utilizing about 80% of that total, leaving over 200 megawatts available for immediate expansion. In fiscal third quarter, our all in cost per kilowatt hour was $0.56 nearly $0 lower than in the second quarter.

[Zachary Bradford, President, CEO & Director at CleanSpark]

This decrease reflects an easing of seasonal power prices as we transition from winter to spring. We also energized additional sites in our power portfolio, further improving our average power cost and demonstrating diversified and flexible energy strategy. Just as our fleet efficiencies improved over time, our goal remains to reduce power costs across the portfolio and growth pipeline, always with an eye towards profitability. As I mentioned, we reached 50 Exahash in June, a major milestone in the history of our company. It reflects years of focused strategy, disciplined execution and a relentless commitment to doing things the clean Spark way.

[Zachary Bradford, President, CEO & Director at CleanSpark]

This growth wasn't accidental. It's the result of building and operating our own infrastructure from the ground up, giving us the control, resilience and scalability to lead the industry. But we have never pursued growth for its own sake. Every new megawatt and every additional exahash has been developed with the intention of delivering long term shareholder value and advancing our vision of becoming the global leader in Bitcoin mining, built, owned and operated in rural America. Consider the speed at which we achieve this goal.

[Zachary Bradford, President, CEO & Director at CleanSpark]

At the end of fiscal twenty twenty four, our operational Hash rate stood at 27.6x Hash. In just nine months, we nearly doubled that figure to 50, while improving fleet efficiency and the overall operational performance. Here's how we did it. Tennessee became our second largest source of Hash rate, thanks to two acquisitions and a 60 megawatt greenfield development. It was the fastest state level ramp up in our history.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Our growth in the state demonstrates our land and expand strategy in action. We also launched two sites in Wyoming, a state with low cost, reliable energy and supportive leadership at the local, state and federal levels. Leaders who understand the value of our business and deliver to their communities. While our operations in Wyoming are currently smaller than Georgia and Tennessee, we have the opportunity to evaluate hundreds of additional megawatts in the region. We also continue to optimize and expand our operations in Mississippi and Georgia, with Georgia contributing significantly to reaching our 50 exahash milestone.

[Zachary Bradford, President, CEO & Director at CleanSpark]

I want to take the time to spotlight an example of rapid execution. We closed on a new plot of land in rural Georgia in mid May, and just five weeks later, we had immersion cooled mining live and hashing at the site. That kind of speed to revenue is made possible by tight collaboration across our construction, deployment, operations and growth teams. This project exemplifies our relentless focus on speed to revenue. This is just one example of how we set the industry standard every day and embodies the values and mission of CleanSpark.

[Zachary Bradford, President, CEO & Director at CleanSpark]

This is CleanSpark at its best, disciplined, fast and unified. Our team is our greatest asset and when they execute our battle tested playbook, we're nearly unstoppable. Looking forward, we will apply our years of experience to drive our next phase of mining and power expansion. As we shared on our last call, we moved away from time based exahash guidance. Instead, we're focused on capturing a greater share of global hash rate as a key metric, which we believe is a more meaningful measure of our market competitiveness.

[Zachary Bradford, President, CEO & Director at CleanSpark]

At the end of fiscal twenty twenty four, we held 4.3% of global hash rate with 27.6x hash. When we hit 50 in June, our share rose to 5.6%, reflecting our ability to outpace the broader mining landscape and earn more Bitcoin over time. And we are not slowing down. We are taking steps to rapidly deliver an additional 10x a hash of operational hash rate on a cost effective timeline. All miners required for this growth have already been secured, nearly half of the necessary infrastructure is in place, and we are finalizing plans for the remainder.

[Zachary Bradford, President, CEO & Director at CleanSpark]

At today's difficulty, this expansion would represent approximately a 1% increase in global hash rate, further expanding our competitive position and demonstrating continued execution at scale. Now a core tenet of Bitcoin is its decentralized nature. Mining is broadly distributed by design, ensuring no single participant dominates the network's hash rate. With 5.8% of global hash rate at 50x a hash, CleanSpark is amongst the largest miners in the world, an excellent position for us and a healthy signal for the Bitcoin ecosystem overall. We have ample room to grow while remaining responsibly sized within the decentralized landscape.

[Zachary Bradford, President, CEO & Director at CleanSpark]

The scarcity of Bitcoin is also by design, and there are a limited amount of Bitcoin available to miners each day. This is why we are laser focused on responsibly delivering the proof of work required to grow our share of the network, supporting the world's hardest money on behalf of our shareholders. We have multiple proven pathways to capture additional market share, develop new power pipeline capacity to expand our infrastructure portfolio, optimize our mining fleet to extract more hash rate from existing resources, build new sites through greenfield development and acquire capacity through opportunistic M and A. These strategies are not theoretical. We have executed each of them at scale.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Together, they form the foundation of our growth playbook as we continue driving long term value. We have consistently focused on being the best pure play, vertically integrated Bitcoin mining company in the industry by design. While alternative compute models like AI and HPC have drawn attention, repurposing a mining infrastructure for these applications is far more complex than it may appear. Operators must navigate higher capital intensity, customer uncertainty and a rapidly evolving hardware environment that can threaten project ROI. By contrast, Bitcoin mining remains a proven and scalable business model, especially in today's constructive market environment that we have optimized unlike any other company.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Thanks to this focus, CleanSpark stands apart as the only large scale pure play Bitcoin miner with wholly self operated infrastructure, a position earned through deliberate strategy, not rigid ideology. We have followed this course because up to this point, we have determined that our power contracts and land assets are being put to their optimal use in our mining operations. That said, we have always understood that power has value, no matter how it's used. We have always viewed our real estate portfolio, power contracts and geographic positioning as assets that hold significant value independent of their utilization for Bitcoin mining. Some sites, both in our current operational footprint and in our pipeline, have potential alternative value to other use cases.

[Zachary Bradford, President, CEO & Director at CleanSpark]

To the extent that certain sites due to location, infrastructure or proximity to metro air centers can return superior value, we remain flexible and open to evaluating monetization options that enhance shareholder value. Today, CleanSpark has a significant power pipeline that can fuel continued growth. We are currently evaluating approximately 1.2 gigawatts of potential near term power opportunities, primarily in areas where we have already operate or with proven partners we have successfully scaled with in the past. The value proposition for utilities in these areas is clear. In tight power markets, flexible customers like us help balance demand and improve grid resiliency.

[Zachary Bradford, President, CEO & Director at CleanSpark]

In addition to our near term pipeline, we are also exploring an additional 1.7 gigawatts of long term power opportunities. These longer horizon projects would require utility level infrastructure investments. This layered pipeline ensures we have a long term access to scalable, low cost power and gives us the opportunity to execute with precision, speed and capital efficiency when the time is right. As our pipeline moves from evaluation to project implementation, we will execute our growth plans to best utilize these opportunities to continue delivering operational excellence at every point of the growth cycle. Our track record speaks for itself.

[Zachary Bradford, President, CEO & Director at CleanSpark]

We know how and when to pull the trigger on high return opportunities. This discipline allows us to grow with speed and efficiency while keeping capital stewardship at the heart of every decision. The good news for us and for the broader Bitcoin ecosystem is that we are now enjoying significant regulatory tailwinds, both in Washington, D. C. And in state capitals across the country.

[Zachary Bradford, President, CEO & Director at CleanSpark]

On July 18, I was honored to attend a White House ceremony where President Trump signed the Genius Act into law. This legislation, championed in the U. S. Senate by Senator Bill Hagerty of Tennessee, established a clear regulatory framework for U. S.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Dollar backed stablecoins. That clarity is expected to drive increased demand for both U. S. Treasuries and Bitcoin. Earlier that same week, the U.

[Zachary Bradford, President, CEO & Director at CleanSpark]

S. House of Representatives passed another milestone bill, the Clarity Act. This bipartisan legislation would establish a comprehensive federal framework for non Stablecoin digital assets like Bitcoin. It further solidifies Bitcoin's treatment as a commodity, potentially unlocking trillions in capital flows and paving the way for deeper integration with mainstream financial markets. Beyond Washington, momentum is building at the state level as well.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Senator Cynthia Lumas of Wyoming continues to be one of our industry's strongest champions, advocating for the creation of a federal strategic Bitcoin reserve. Both Texas and New Hampshire have already taken steps to establish similar reserves at the state level. And just today, we saw a new executive order on the President's desk making Bitcoin a qualified asset in four zero one accounts. Together, these developments reflect the growing recognition of Bitcoin's role in U. S.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Innovation, energy policy and monetary resilience, and they represent real tailwinds for CleanSpark's continued growth. Progress in this sector isn't limited to Washington. Wall Street and capital markets are increasingly providing tailwinds for Bitcoin adoption. One emerging trend we're watching closely is the rise of Bitcoin treasury companies. Public companies that accumulate Bitcoin on the balance sheet for direct purchases rather than production.

[Zachary Bradford, President, CEO & Director at CleanSpark]

These entities represent a growing cohort of capital activity competing for a scarce resource, and their participation is helping drive spot prices higher. As this dynamic unfolds, CleanSpark's business model becomes even more valuable. We generate Bitcoin below market rates through our mining operations. And unlike treasury companies, we don't have to compete for coins in the open market. We produce them ourselves efficiently, at lower cost and spot prices and at scale.

[Zachary Bradford, President, CEO & Director at CleanSpark]

In a market where the rates to accumulate Bitcoin is accelerating, we believe that mining remains the most strategic and scalable path to long term value. And Bitcoin is not a passive asset on our balance sheet. We have a dedicated digital asset management team operating an institutional grade trading desk to support our operations and generate responsible risk adjusted yield. Since inception, our approach has been measured and disciplined. In late May, the team executed our first derivatives trade.

[Zachary Bradford, President, CEO & Director at CleanSpark]

June marked the first full month of trading activity, and we treated it as a proof of concept focused on execution quality, counterparty betting and operational security. This crawl, walk, run approach is designed to build a sustainable strategy that responsibly harnesses Bitcoin's natural volatility while preserving our capital and protecting shareholder value. While the program is still in its early stages, I'm pleased to report that our initial results were strong and aligned with our expectations. We will measure success over quarters and cycles, not single months, while maintaining tight feedback loops to ensure continuous learning and improvement. Before I hand the call over to Gary, I want to highlight a few foundational concepts that continue to drive our performance and define who we are.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Our four strategic pillars: energy, Bitcoin, operational excellence and capital stewardship anchor everything we do. We focus on the KPIs that matter most: percentage of global hash rate, operational hash rate, fleet efficiency, marginal cost of mine, uptime, and Bitcoin and treasury. These are the real drivers of scale, performance, and long term business health. We call this disciplined approach the Clean Spark Way, which is executed through the everyday grit of our team. It's more than a philosophy, it's embedded in how we work and how we win.

[Zachary Bradford, President, CEO & Director at CleanSpark]

This quarter, that combination of strategy, execution and culture came together to deliver record setting results, our strongest quarter in company history. I want to thank every member of our team for embracing this vision and driving CleanSpark to its position as the leading publicly traded Bitcoin miner in the world. With that, I'll now turn the call over to our CFO, Gary Vincarelli, for a closer look at the financials. Gary, over to you.

[Gary Vecchiarelli, CFO at CleanSpark]

Thank you, Zach. As we've mentioned, our fiscal third quarter was record setting in so many ways. As we dive into the numbers, please keep in mind that our success this quarter has been the logical result of our focus on bringing traditional bottom line business discipline to one of the newest and most innovative industries in the world. Our revenues for the third quarter were approximately $199,000,000 an increase of $95,000,000 or 91% over the same quarter last year. We produced $20.12 bitcoin for the quarter, four thirty six more than the same quarter last year or an increase of 28%.

[Gary Vecchiarelli, CFO at CleanSpark]

Notably, this was also a few bitcoin shy of our all time high production of 2,031 Bitcoin in fiscal Q2 twenty twenty four, which immediately preceded the halving event. This is representative of the significant growth we've achieved in a short fifteen month time frame and especially impressive given the impact of the mid April twenty twenty four halving. Our average revenue recognized per Bitcoin produced in Q3 was approximately $99,000 each, which is an increase of approximately $33,000 or 50% over the same quarter last year. Looking at our margins, our gross profit increased by approximately $50,000,000 year over year with a profit margin of 55% for this quarter. When compared to the immediately preceding second quarter, our gross profit increased $12,000,000 or 13% during the periods.

[Gary Vecchiarelli, CFO at CleanSpark]

This quarter's increase in gross profit was primarily due to the combination of greater Bitcoin production at higher Bitcoin prices and lower energy costs, significantly outpacing difficulty. This quarter, we recognized net income of approximately $257,000,000 Our adjusted EBITDA was $378,000,000 for the quarter. On a normalized basis, when taking out noncash items, it was $78,000,000 which represents the cash generated from our mining operations net all cash expenses. Notably, our marginal cost per coin was $44,806 which represents an increase of only 5% over the immediately preceding second quarter. The slight increase in our marginal cost per coin is primarily attributed to an increase in mining difficulty.

[Gary Vecchiarelli, CFO at CleanSpark]

However, it is important to note that we have made investments in acquiring and maintaining one of the world's most efficient mining fleets, for which we have seen an increase in efficiency and corresponding decrease in energy usage per terahash. Prioritizing fleet efficiency has always been a core strategic theme for CleanSpark, and it is one of the reasons why we have been so successful at driving shareholder value through countercyclical investment. Our all in cost per kilowatt hour decreased during the quarter to $0.56 As we have mentioned on prior calls, we intentionally managed to profitability rather than to a specific cost per kilowatt hour. This maximizes our Bitcoin production numbers and may result in us occasionally mining Bitcoin at higher prices per kilowatt hour. Looking at our overhead and expenses, our total cash overhead, which we consider to be professional fees, salaries and wages and G and A expenses less stock based compensation, increased approximately $4,600,000 or 17% over Q2.

[Gary Vecchiarelli, CFO at CleanSpark]

This was primarily driven by an accrual due to a true up on our local property taxes and property and casualty insurance policy. I've spoken on prior calls about our risk adverse approach to safeguarding our assets. As a result, ensuring our top of the line fleet comes at a cost. And since we have significantly grown the value of our miners, mining equipment and infrastructure by approximately $420,000,000 since last fiscal year end, we have chosen to also rightsize the insurance policy to protect our investment in miners and infrastructure, which now stands at well over $1,300,000,000 in fair value. We are taking steps to minimize costs related to our insurance program, which I expect to be realized in the coming quarters.

[Gary Vecchiarelli, CFO at CleanSpark]

The other increases were largely seasonal or related to growth. We ended the quarter with $35,000,000 in cash and over $12,600 Bitcoin, representing a fair value of approximately $1,000,000,000 In total, the company had more than $1,000,000,000 of liquidity at the end of Q3. I'll have more to share about our Bitcoin treasury activities in a few moments. Total debt as of the end of the quarter stands at approximately $820,000,000 Note that this amount is net debt issuance costs of approximately $16,000,000 which were incurred as part of the company's $650,000,000 convertible transaction in December. As a reminder, this issuance has a 0% coupon and an effective conversion price of $24.66 per share.

[Gary Vecchiarelli, CFO at CleanSpark]

When it comes to our Bitcoin treasury, you've heard us talk about our efforts, which internally we refer to as the digital asset management team. I am pleased to report that in the third quarter, we onboarded several high quality counterparties and completed our first derivative transaction at the May. We have previously discussed our conservative approach and strategy to monetizing our huddle balance, which we describe as a crawl, walk, run strategy. We're currently in the crawl phase. And while the volume of the derivative transactions is still ramping up, we are happy to see the proof of concept come to life.

[Gary Vecchiarelli, CFO at CleanSpark]

These results are just as good, if not better, than what we had initially projected. We completed a number of derivative transactions through our selected partners, solely comprising the writing of covered calls. While the total dollar value of these premiums aren't large enough to separately present on the income statement, I will tell you, on a risk adjusted basis, the cash on cash returns look quite promising. For example, we have written and will continue to write short term calls slightly out of the money. If these get called away, great.

[Gary Vecchiarelli, CFO at CleanSpark]

We use the proceeds to fund our operating expenses, and we likely sold at amounts greater than what we would have sold at spot at the time we wrote the calls. They expire out of the money. We keep the premium and roll the strategy forward. Additionally, we are writing low delta calls, also on a short or midterm basis, which have a low likelihood of expiring in the money. These premiums are used to generate the yield we set out to achieve.

[Gary Vecchiarelli, CFO at CleanSpark]

We expect to use approximately 40% of our huddle balance to generate a target yield of 4% on the entire Bitcoin treasury. We also expect the volume and complexity of our strategies to increase as time goes on. I also want to point out that we feel very comfortable with the risk reward relationship of our derivative strategies. However, we are not comfortable with lending out our Bitcoin, a practice some of our peers engage in. We find that lending out Bitcoin is typically on an unsecured basis and often only borrowed for speculative purposes.

[Gary Vecchiarelli, CFO at CleanSpark]

We have internalized the lessons learned from stories such as SEX, Three Arrows and Celsius and have incorporated risk management best practices as part of our institutional grade efforts. More importantly, the yield generated from derivative strategies appears to be greater than lending activities and on a risk adjusted basis performs far better. We will continue to have a conservative yet opportunistic approach to our Bitcoin treasury and believe our strategy will generate appropriate returns for the risk we take. Bringing my comments regarding our treasury function to a close, I want to drive home an important point. We have a structural advantage due to two factors.

[Gary Vecchiarelli, CFO at CleanSpark]

One, we have a reliable Bitcoin production operations and two, our capital strategy, which includes funding operational expenditures with production. This gives us a unique strategic advantage amongst our peers, where we can achieve a better risk adjusted portfolio yield while transferring fewer Bitcoin to counterparties using derivative products versus lending. Looking deeper into our balance sheet, there are some other deals I would like to highlight. We have the ability to self fund operations and grow our Bitcoin balance while enhancing shareholder value. In April, we were proud to expand our relationship with Coinbase through their Bitcoin collateralized lending program as part of our broader strategic approach to capital management and increasing our line of credit with Coinbase Prime to $200,000,000 Given our clean balance sheet and conservative approach to debt, we have significant additional capacity to raise cost effective and non dilutive capital.

[Gary Vecchiarelli, CFO at CleanSpark]

Our current Bitcoin holdings of over 12,700 are valued at approximately $1,500,000,000 at today's spot price, representing a source of liquidity and opportunity. And we believe this quarter was the right time to evolve from a nearly 100% HODL strategy. We have been long on the record that the 100% huddle strategy was not sustainable for the long term, and our current capital strategy is rooted in business fundamentals and with the intention of limiting dilution as much as possible. We view our approach as deliberately strategic rather than ideological, particularly now that we've reached our current scale and escape velocity. While we remain committed to Bitcoin as a long term hardened asset, we believe a more effective way to increase shareholder value is through a balanced approach between monetizing new production and growing and monetizing our treasury.

[Gary Vecchiarelli, CFO at CleanSpark]

As a part of this strategy, we intend to further diversify our capital stack. As we have consistently emphasized, our focus is on ROI and our ability to make real time decisions in the market. Given today's market environment, we view the revolving line of credit as the most efficient and responsible path to supporting accretive growth. And a strong balance sheet positions us to take full advantage of that opportunity and others. It's our intention to continue to use proceeds from the revolver for accretive CapEx purposes and intend to manage the business on a net debt basis to ensure proper liquidity to cover all debt obligations.

[Gary Vecchiarelli, CFO at CleanSpark]

I want to take a moment to discuss our investment growth past 50xAsh. We have approximately 20,000 of the latest generation emerging units paid for and in hand, which represents six exahash of compute. We have over one gigawatt under contract and a little over 800 megawatts currently operational, which equates to over 200 megawatts contracted and not yet energized operating. For these 200 megawatts, as of today, we have approximately $75,000,000 of CapEx cash needs left to build out all 200 megawatts, which we expect could come over the next six months. Additionally, as we have discussed on prior calls, we have historically been successful in rolling our contracted options for machines with Bitmain into the latest generation machines.

[Gary Vecchiarelli, CFO at CleanSpark]

We have approximately $17,000,000 on deposit with Bitmain as of today and have received an extension on the option as we negotiate what the size and terms of the next order are. Looking ahead, we remain confident in CleanSpark's ability to lead through innovation, discipline and scale. As we chart our path forward, we are energized by the opportunities in front of us and remain committed to creating lasting value for our shareholders, our partners and the communities we serve. With that, I'll turn the call back over to Harry to open the floor for questions. Harry?

[Harry Sudock, SVP at CleanSpark]

Thank you, Gary, for that detailed financial overview. We will now open the floor to questions from the analyst community. Operator, please provide instructions and manage the queue for the Q and A session.

[Operator]

And your first question comes from the line of Mike Colonnais with H. C. Wainwright. Please go ahead.

[Mike Colonnese, MD - Senior Crypto & Blockchain Analyst at H.C. Wainwright & Co., LLC]

Hey, good afternoon guys and congrats on a really strong quarter here. First one for me, Zach, you mentioned that you have over 200 megawatts of additional contracted power available in the existing pipeline. Could you just unpack that a bit and speak to how you envision bringing those megawatts online over the coming quarters?

[Zachary Bradford, President, CEO & Director at CleanSpark]

Yes, absolutely. Mike, thanks again for joining the call. Appreciate your support. Yes, that 200 megawatts is you know, in areas that we operate in. Some of these contracts come as a result of, you know, expanding on existing operations or, you know, getting something nearby.

[Zachary Bradford, President, CEO & Director at CleanSpark]

How we're looking at that from a rollout is our first focus is gonna be on that 10 x ash. We have some optionality beyond that. So we we really only require a portion of the 200 megawatts to roll out this next next piece of infrastructure, leaving a 100 megawatts of optionality in addition to the pipeline. We're we're we are still really building on what that's gonna look like after that. Again, the focus is on maintaining and outpacing difficulty while acquiring, you know, additional market share from a percentage of global hash rate.

[Zachary Bradford, President, CEO & Director at CleanSpark]

So, I do expect the next 10x the hash to come up quickly. And we will have more news on the balance of that, in the near term.

[Mike Colonnese, MD - Senior Crypto & Blockchain Analyst at H.C. Wainwright & Co., LLC]

Great. Appreciate the color there, Zach. And, obviously, really good organic growth opportunities over the near term here, but just curious to get your views on the current M and A landscape and your appetite for potential deals here.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Yes. We're still seeing a very robust pipeline in the private space in particular. You know, and, you know, frankly, we think that there's opportunity elsewhere too as miners rotate out of, mining into HPC and they evaluate assets they have on hand, many miners are going to be faced with this decision of going all in one direction or the other. And we are ready and willing to be the first call that comes in. So I'd say it's very robust.

[Zachary Bradford, President, CEO & Director at CleanSpark]

There's great opportunity in the M and A landscape and we look forward to hopefully taking advantage of some of that in the future.

[Mike Colonnese, MD - Senior Crypto & Blockchain Analyst at H.C. Wainwright & Co., LLC]

Great color. I appreciate you taking my questions.

[Operator]

Your next question comes from the line of Nick Giles with B. Riley Securities. Please go ahead.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Thanks, operator. Good afternoon, everyone, guys. Nice job here. My first question was just on the digital asset management side. I mean, when would you expect to reach targeted run rates?

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Or maybe in your words, Gary, when would you expect to be kind of fully running here? I just want to kind of make sure I understand the cadence of this new strategy. You.

[Gary Vecchiarelli, CFO at CleanSpark]

Hey, Nick, thanks for the question. So we expect it's going to ramp in the coming quarters. As as you can probably respect, you know, that there's a lot to consider when you're establishing institutional grade desks such as what we're doing. Right? And we wanna make sure that the trades that we're doing, not only the strategies are coming out the way we expect, but there's a lot of financial reporting, internal control, tax considerations as well.

[Gary Vecchiarelli, CFO at CleanSpark]

And so far, everything is going just as good, if not better than what we expected. So for us, we we, again, are taking a very measured approach to this. And as we start to onboard additional counterparties and look at more complex strategies, I'd expect that we'll probably ramp to that really over the next year.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Got it. That's helpful. My next question was just on the growth pipeline. And you guys have relied on building strong relationships with your utility partners. And so I was wondering if you could speak to you know, what are those conversations looking like today?

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Have you seen, lead times for interconnect shift at all? Are are you competing with, HPC sites to any extent? Just any any color there would be great.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Yeah. Great question. I think it's important to context to look at it in. When we approach a utility, we approach them with a flexible load in mind. And the flexibility is an asset in their portfolio.

[Zachary Bradford, President, CEO & Director at CleanSpark]

There's a very small number of hours every year that utilities reach peak capacity and, you know, risk needing to require curtailments. And for us to be, you know, early in line to be that curtailable party puts us in a different class when it comes to data centers who want mega sites that are very large and that require firm load. Data centers, you know, the way they're structured and the way the business really runs is it's not advantageous to raise your hand and say that you're willing to be the flexible load. You wanna run flat out all the time as much as you can. And so as much as there are absolutely conversations where between capacity and availability, there is competition in the space, we're a friendly face in that scene of players.

[Zachary Bradford, President, CEO & Director at CleanSpark]

And so we see abundant opportunity. You know, I mentioned the pipeline, which, you know, is is multiple gigawatts. That that pipeline is is with utilities that we feel, you know, comfortable that there's an opportunity to meaningfully and actively move forward rather quickly. And for, you know, I would a large portion of that, our flexible nature creates that opportunity.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Guys, I really appreciate the update. Continue best of luck. Thank you.

[Operator]

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

[Brian Dobson, Managing Director at Clear Street LLC]

Hey, thanks so much for taking my question. So you spoke in pretty great detail about yield generation. Just a follow-up question there. So 4% on your huddle would do a lot to cover operating expense. Would you give us just a little bit of color on what percentage of your huddle you're thinking about putting to work and the time frame that that percentage of the huddle might be out so we can kind of back into what types of returns you're looking at on a short term basis?

[Gary Vecchiarelli, CFO at CleanSpark]

Brian.

[Gary Vecchiarelli, CFO at CleanSpark]

Thanks for the question. So in my comments, I specifically called out actually that we plan on using 40% of the huddle balance for yield generation. Okay? And so if you extrapolate that based on a 4% return on entire huddle balance, it's probably closer to 10%, which we believe is very reasonable and achievable, if not a number that we can exceed, at least based on on the small sample size that we have, in June. So in terms of the ramp, again, you know, we're going to we're going to grow the team.

[Gary Vecchiarelli, CFO at CleanSpark]

We're complexity and volume of those transactions, and and we think we'll grow it, within the next year. Grow it 2% to 4% target within the next year.

[Brian Dobson, Managing Director at Clear Street LLC]

Yeah. Excellent. So, you know, in at the beginning of your prepared remarks, you also kind of opened the door for selling power assets. Are you encouraged by recent M and A that we've seen? And I know it's early days, but how do you view demand for those assets?

[Zachary Bradford, President, CEO & Director at CleanSpark]

Yeah. So maybe I'll step back and also add some clarity there. So the underlying assets that we own and the ability to have land with a power contract gives us control that has value regardless of whether using it for Bitcoin or not. We are always open to evaluating the use cases. It wouldn't mean that we would sell it or not sell it.

[Zachary Bradford, President, CEO & Director at CleanSpark]

It means that we're always evaluating optionality. Now we firmly and strongly believe, and the numbers continue to prove themselves, that the returns we're generating, taking that infrastructure paired with power and generating returns in Bitcoin mining is outpacing and outperforming any of the available alternative uses. You know, when and if there's a point in time that that slips, we are open to that. Now I will say that the geographic location of many of our sites adds quite an advantageous position for us in that situation, but we would still hold firm to it's really about the cash on cash returns that those assets can generate in whatever form. So we're not really looking to downsize, exit, trade, or transition.

[Zachary Bradford, President, CEO & Director at CleanSpark]

We are just looking to always maximize the use cases of our assets.

[Gary Vecchiarelli, CFO at CleanSpark]

If I could add one more thing. You know, I I think the point to drive home here is that the value of our assets and our balance sheet is is not reflective of fair value. The fair value of those assets and access to energy is far greater than that. And I think that's something that that may not be accounted for in the current valuation.

[Brian Dobson, Managing Director at Clear Street LLC]

Yes. That's very helpful. And then just one last comment on the treasury models. You called them out as a macro positive. I agree.

[Brian Dobson, Managing Director at Clear Street LLC]

Do you see these companies as an accelerant in bringing more Bitcoin related ownership into portfolio management and also, call it, wealthy individual portfolios?

[Gary Vecchiarelli, CFO at CleanSpark]

Yes. I'll take that one first. Look, the more people buying Bitcoin, the merrier. I think that anything that leads to greater adoption of Bitcoin is good for Bitcoin ecosystem and really the whole TradFi system. What we're seeing now is that there's a number of these treasury companies that are are coming to market, or looking to come to market, and there's billions of dollars locked up waiting for their SEC, statements to go effective.

[Gary Vecchiarelli, CFO at CleanSpark]

And we think that that type of buying power is only gonna gonna push Bitcoin prices higher. But ultimately, I mean, just as we saw today with, you know, executive order crossing, president's desk, Bitcoin's gonna start to infiltrate other areas of the traditional financial networks such as four zero one k's, pensions, and all of that. And we have we've been waiting really for this moment, and we're here to really capture capture those, those tailwinds and upside. Yeah.

[Zachary Bradford, President, CEO & Director at CleanSpark]

And, you know, in addition to that, the the upside kinda trends further. Not only are these treasury companies existing, but with how SAP 01/2021 and the changes that were around the repeal of it are taking place, it creates massive additional opportunities. Everything not only just banks holding it, but you now institutions allowing leverage against Bitcoin based assets such as treasury companies, such as ETFs and things like that. And so all of these changes coming together creates more capital in the space, which we see as nothing but positive tailwinds.

[Brian Dobson, Managing Director at Clear Street LLC]

Thank you very much.

[Operator]

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

[Gregory Lewis, Managing Director at BTIG]

Yes. Thank you and good afternoon and thanks for taking my questions. Gary, realizing there's probably only so much you want say, you kind of laid out clearly how you're thinking about the ability to be opportunistic with the huddle strategy and then of course you overlaid it with the derivative strategy. But I guess more not as much about Q2, but in July it looked like there were a decent amount of the production was sold. And I guess you could say, well, we were selling the Bitcoin that we produced.

[Gregory Lewis, Managing Director at BTIG]

Or really what I'm wondering is there was a sharp run up in Bitcoin price in July. What I'm wondering is did that maybe trigger some of those covered calls to be exercised? And is that maybe why we saw more Bitcoin sold in July than, say, what it looked like was averaging in Q2?

[Gary Vecchiarelli, CFO at CleanSpark]

Yes. Thanks for the question. I'll tell you foremost that with this new capital strategy, our focus is on no dilution. Right? And so we're willing to sell the entire month's production if need be.

[Gary Vecchiarelli, CFO at CleanSpark]

But I think we've hit a sort of a Goldilocks zone where not only do we get to sell to cover operational expenditures, cover some CapEx and or service the line of credit, but we also added to the huddle. Right? So we didn't sell everything. If you see, we've increased it by 90 to a 100. I'd continue I'd like to continue to stair step that. But at the end of the day, we really see this as an area of non dilutive capital, and we would rather sell the production than issue equity or take on additional debt or whatnot. But for right now, I think that we could hit the trifecta in terms of all three areas.

[Gregory Lewis, Managing Director at BTIG]

Okay. That's great to hear.

[Gregory Lewis, Managing Director at BTIG]

And then just on the pipeline, the 1.7 gigawatts of potential out there. I guess a couple of questions around that. Just given the lead times that we're hearing multiyear, some states three, some places we're hearing four, longer. Realizing you might not want to get too specific, but as we think about that 1.7 gigawatts, any kind of structure in terms of how we should be thinking about maybe in baskets when some of that could potentially come online maybe in '26, '27 or '28?

[Zachary Bradford, President, CEO & Director at CleanSpark]

The way I would think about that is, you know, it's all optionality. You know, I I wanna stress that first and foremost. The second, I think I wanna point to our strategy versus some of the other strategies that exist, only in the data center space and or not only in the Bitcoin mining space, but also the data center space. A lot of the parties that are searching for power are looking for it in very large chunks, in single locations for their purposes. We have a lot of flexibility in coming in, let's say, between twenty and fifty megawatts.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Plus, you know, some of these are even bigger than that. But a large portion of you know, I'd I'd I'd I'd say 30 to 40% of that in our pipeline is power that if we were to choose to take it, we could take very quickly without the need for long term infrastructure investment. Now the balance of it, need infrastructure investment. But we're also choosing where we're investing. Rural areas, we're seeing some of these areas have lower lead times than what and the time it's gonna take them to get things because they've already been planning for years to ramp up their distribution because there's lots of these net export states that are trying to find ways to keep it inside.

[Zachary Bradford, President, CEO & Director at CleanSpark]

So are there lead times? Yes. Most of our lead times are measured, you know, in months, I would say. You know, for when it's a big investment, investment, it's it's gonna going to be between twelve and twenty four months. We don't really look at anything beyond that.

[Zachary Bradford, President, CEO & Director at CleanSpark]

And that's just the pockets of the areas that we're looking at. So I think we have a strategic advantage. If we wanted to go build a very large amount of megawatts just outside of Chicago, let's say, we would be having completely different conversation with that utility around lead times.

[Gregory Lewis, Managing Director at BTIG]

Super helpful. Thank you very much.

[Operator]

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

[Paul Golding, US Senior Payments & Lifestyle Analyst at Macquarie]

Thanks so much. I wanted to ask, given the recent deal with Canaan for more Avalon Immersion miners that was announced, I wanted to ask how you're thinking about price of hash rate. You have this 10x a hash prepurchase. And just trying to think through how you're approaching the hash rate price dynamics in the context of so many institutional miners pausing and pivoting to HPC AI And just thinking about opportunistic deals going forward or backwards looking given this 10x a hash to come. Thank you.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Hey. Appreciate the question. Thanks for joining the call. We said over a year ago, we welcome when we see miners exit the space to pursue other avenues, because it creates countercyclical opportunities. So the benefit we're seeing as we get into the tail end of this year and we optimally see the trend continue into 2026 is a softening of demand for those miners.

[Zachary Bradford, President, CEO & Director at CleanSpark]

And that softening creates opportunities for us as one of the largest buyer for the majority of the manufacturers to strike a deal, to push power prices in our favor because there's just not as many customers as maybe they expected there would be this time of the year or there was the year before. So we're seeing really great movement in the pricing that we think will benefit us over the next twelve months in particular, due to that softening. So we're pretty enthusiastic about what we see.

[Gary Vecchiarelli, CFO at CleanSpark]

I'd also add that, with the increase in competition, because you now have more miners more manufacturers in the space that also helps contribute to the softening. So you have an increase in supply and reduction in demand, and we know what that does with prices.

[Paul Golding, US Senior Payments & Lifestyle Analyst at Macquarie]

Thanks. I guess, is there a scenario where you could foresee maybe proactively placing deposits or engaging capacity even if that optionality isn't something where the the power you have line of sight to the power, but simply to take advantage of what might be this countercyclical pricing dynamic and then find the power later or, you know, potentially maybe resell or or just run ahead of what the capacity pipeline looks like? Thanks.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Yeah. You know, that we we've done that in the past. I think, you know, any any mining company or and if you look at how we've done it over the cycles, you're either long infrastructure and power, or you're long miners. And it's kind of this ebb and flow that goes through. So when it's advantageous, just like we did last year, we executed a very large option order that put us in a position to lock in pricing when we thought it was the right time to lock in pricing.

[Zachary Bradford, President, CEO & Director at CleanSpark]

So we would, you know, potentially look to do that again. When we find timing where we think pricing is at the right place, we would look to lock in long term optionality to acquire, you know, large amounts of miners and, you know, work on the infrastructure on the back end depending on if we were long or short at that point So absolutely, when the timing is right, that's always been part of our strategy.

[Paul Golding, US Senior Payments & Lifestyle Analyst at Macquarie]

Thanks, Zach.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Thank you.

[Operator]

Your next question comes from the line of Bill Papinaccio with Keefe, Brier and Woods. Please go ahead.

[Bill Papanastasiou, Vice President at Keefe, Bruyette & Woods (KBW)]

Yes. Good evening.

[Bill Papanastasiou, Vice President at Keefe, Bruyette & Woods (KBW)]

Thanks for taking my questions. Maybe for the first one, perhaps you can give us an update on how you're weighing the existing tariff environment today when it comes to future fleet expansion. Hoping you could walk us through some of your options to prevent or mitigate these impacts. And how might that change your strategy going forward? I think we heard from a peer of yours today that secondary market purchases of hardware are being more heavily considered this day. So just curious to hear your thoughts as well.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Yeah. The secondary market purchases are always an option because ultimately, you're looking at net net pricing by the time you get it in your hands. The tariff environments are, you know, unfortunately clear as month as it seems, you know, on a on a day to day basis. We've seen them improve. We've seen them ebb and flow.

[Zachary Bradford, President, CEO & Director at CleanSpark]

But it is absolutely part of our calculus. You know, our goal and intention is always to acquire miners at a best in class pricing at the lowest cost possible. The other good thing we're seeing is almost every manufacturer has now announced that they will they either do or will have North American production capabilities. So for better or worse, if you're a manufacturer, it is pushing things onshore. We do expect that to ultimately benefit us as large scale buyers because as they make these large investments in factories and production here, they need anchor clients to be purchasers of U.

[Zachary Bradford, President, CEO & Director at CleanSpark]

S.-made equipment, and we are ready to buy U. S.-made. That is the easiest way to navigate tariffs in this environment, is just to go direct where it can be done.

[Bill Papanastasiou, Vice President at Keefe, Bruyette & Woods (KBW)]

Appreciate that color, Zach. And then maybe just speaking to the Bitcoin treasury strategy. It appears that CleanSpark was selling at peak, I think, this last quarter, 85% of monthly production while still funding obviously all of the OpEx. Maybe you can give us like a little bit of a scenario analysis on how that could change depending on upward or downward price movements to Bitcoin and whether you know, the the thought that we might be in the tail end of a crypto cycle may may may adjust to any of your strategy.

[Gary Vecchiarelli, CFO at CleanSpark]

Yeah, Bill. So so look. We, you know, we you know, in in the case where Bitcoin price increases, we just sell less Bitcoin. Right? Because our our costs aren't directly attributable to Bitcoin price going up and down.

[Gary Vecchiarelli, CFO at CleanSpark]

Right? They're relatively fixed. You know, power prices don't change necessarily because Bitcoin price goes up 10% overnight. So I think that we definitely welcome the additional, you know, increased Bitcoin prices means we because it means that we could sell less. And then we have a choice to either, have the huddle balance or rapid credit, which is a priority of ours.

[Gary Vecchiarelli, CFO at CleanSpark]

In the event that Bitcoin price decreases, we'd obviously have to sell more than more than, we would in the other scenario. But, you know, at the end of the day, we feel very comfortable, obviously, selling up to the production. And that's where digital asset management comes in because we if we can monetize this volatility up and down, we could use those premiums to offset the OpEx and ultimately have some amount of Bitcoin that we're able to add to the huddle balance. And I believe that over time, as we get a little bit longer in the tooth in the cycle, which I don't necessarily believe that we're, you know, late in the cycle in by any means right now. But when we do get maybe a little frothy later on down the road, the digital asset management efforts will not only generate premiums and cash and cash returns, but we'll be able to use a portion of premium to add some downside protection on the entire huddle balance.

[Bill Papanastasiou, Vice President at Keefe, Bruyette & Woods (KBW)]

Thanks. Very clear. Appreciate that color as well.

[Operator]

Your next question comes from the line of Brent Noblov with Cantor Fitzgerald. Please go ahead.

[Brett Knoblauch, Managing Director at Cantor Fitzgerald]

Hi, guys. Thanks for taking my question. Kind of on a similar topic here with selling some of the Bitcoin production. At what point, I guess, is it a function of scale that allows you to sell Bitcoin to cover cash costs? And with greater scale, would you be able to sell less bitcoin to cover the same cash costs?

[Brett Knoblauch, Managing Director at Cantor Fitzgerald]

And how are you thinking about that dynamic? Because I think if as we speak to get more comfortable with the ability for you guys to you know, sell Bitcoin and accrue Bitcoin to the balance sheet at the same time, it kinda becomes a, you know, a whole different story.

[Gary Vecchiarelli, CFO at CleanSpark]

Yeah. Good. Great. Great question. I'll tell you that that's that's one of our distinct competitive advantages is the operating leverage we have.

[Gary Vecchiarelli, CFO at CleanSpark]

Right? So every new exahash that we bring online, the majority of that is dropping to the bottom line, which means that we have to sell less Bitcoin to cover that monthly nut. I think that's the best way I could put it.

[Brett Knoblauch, Managing Director at Cantor Fitzgerald]

Yeah. No. That that helps. And then on maybe the the the pace of growth, I know you guys talked about wanting to outperform or outgrow network cash, which, you know, as I'm sure you guys know, is quite volatile from day to day and month to month. So, you know, how are you I guess, what are your expectations for network cash growth maybe over the rest of the year or maybe over the next year? Maybe that will help us frame how we should model your money cash growth.

[Zachary Bradford, President, CEO & Director at CleanSpark]

It's always a guess with network hash rate. The good thing is I think we're seeing a general slowing as the public miners were a very large driver of hash rate growth historically over the last three to five years. As capital miners like us continue to deploy capital in this space, but there's a subset of our peers that are deploying either less or not at all. And so I think that's a contributing factor to hash rate growth slowing. What we're also seeing is the upgrade cycle as miners get more efficient, as they get replaced, the same amount of power produces the same or sorry, significantly larger amounts of hash rate.

[Zachary Bradford, President, CEO & Director at CleanSpark]

We think that's actually going to be a larger driver over the next year of global hash rate growth than potentially new build outs of Bitcoin mining data centers. Interestingly, we saw at the end of last quarter where if you looked at the entire quarter, it kind of canceled itself out. It grew 8%. It went down 8%. It was flat, right?

[Zachary Bradford, President, CEO & Director at CleanSpark]

We're expecting a little bit more of that, a flattening of what it's going to be. But it's still going to stair step up. We're going to be making improvements to our facilities. We're going to continue to grow. But we feel long story short, without making any direct predictions, we feel very comfortable on our ability to outpace the global hash rate growth.

[Zachary Bradford, President, CEO & Director at CleanSpark]

And we also see something we didn't get into, but one benefit of M and A in this space is instead of building and adding to the global hash rate in total, when you acquire a piece of existing global hash rate, it's a direct add without diluting yourself. So all of these things are options. But, again, we're we're I think it's positive that we're seeing investment occur in other forms of compute because it is slowing down global hash rate growth.

[Brett Knoblauch, Managing Director at Cantor Fitzgerald]

Awesome. Thank you, Really appreciate it.

[Operator]

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

[John Todaro, Senior Analyst at Needham & Company]

Hey guys. Thanks for taking my question. First, can you just help me understand the risks in the yield generating strategy? Just kind of where could the model break down, just given it is a large portion of the stack. Right? It's 40%. So just, just help me, frame that up a little bit better.

[Gary Vecchiarelli, CFO at CleanSpark]

Right. Right. So so, like, with any other option, like, let's just take covered calls. Right? You have several variables to look at.

[Gary Vecchiarelli, CFO at CleanSpark]

Right? You have duration. You have strike price. Right? Those would translate to some, you know, volatility and or delta.

[Gary Vecchiarelli, CFO at CleanSpark]

And I'll tell you that we take, greater risks on the short end, such as writing a one or two or five day call, that might have a higher delta, and you can look at deltas, probably the percentage that it's gonna get called away. The higher the delta, the higher the premium. And so since and we call that internally our spot plus program. Right? So, technically, instead of just selling at spot, we should be we should be selling at a strike price, the same as spot for tomorrow, for example, and that will effectively mean that we're always be able to head stay ahead of the of the spot market because of the premiums.

[Gary Vecchiarelli, CFO at CleanSpark]

So the risk is is, in the short term, I don't think it's very, very high because we know what our cash needs are on a week by week basis and that we write calls, high delta calls, not in excess of that. On the longer term, you know, low delta calls, ten, fifteen deltas, you know, we're not really writing, calls too far out, but maybe, you know, four to six weeks currently. Those deltas will generate a small amount of premium, and we'll just increase the kind of volume and close those calls out if we need to if they're if they're at, you know, if there's an opportunity to close them out, in terms of, you know, they're they're profitable. I will tell you, you know, going back to my comments about versus lending. In lending, you're lending out, let's say, a 100 Bitcoin at the somewhat, right, on an unsecured basis.

[Gary Vecchiarelli, CFO at CleanSpark]

It's good about the derivative strategy is that we have negotiated these ISDA agreements where we only have to post a percentage of, the collateral. Right? So the collateral is only a percentage of what the total contracts are. So if we write a 100 contracts for Bitcoin or or a 100 Bitcoin contracts, we only need to post 30 to, you know, 45% collateral and then have margin calls as you get closer to the strike date. And so that means that it reduces our counterparty risk, and our counterparty risk is further reduced by the fact that we do robust due diligence on our counterparties, to make sure that they have the financial wherewithal to really responsibly maintain that collateral.

[Gary Vecchiarelli, CFO at CleanSpark]

And oftentimes, it means that they have licensing or registration with government regulators.

[John Todaro, Senior Analyst at Needham & Company]

Got it. Okay. That's that's very helpful. I appreciate that. And then just one quick on on m and a.

[John Todaro, Senior Analyst at Needham & Company]

I think from where we're all sitting on the sell side, seems like these opportunities would be coming up here in the next couple of quarters. But just kind of any sense on timeline of these opportunities? Like are you already looking at some pretty closely, and are the assets looking fairly attractive out there now versus some of these opportunities that presented themselves a couple years ago?

[Zachary Bradford, President, CEO & Director at CleanSpark]

Yeah. You know, I I can't really count comment on time lines, of course, by by any means. I can just say that there's a robust pipeline of opportunities. And, you know, just like all things, some some are looking better than than others. We we say no to nine nine deals out of 10.

[Zachary Bradford, President, CEO & Director at CleanSpark]

That's what we've always done from a historical basis because, you know, capital is always finite. And, you know, our goal to have the best capital stewardship to generate the best ROI means that we only want to take the best deals that are out there. So again, as much as there's a very robust pipeline, it's about finding the best ones. And that's going to happen in right time, right place concept.

[Gary Vecchiarelli, CFO at CleanSpark]

If I could add one other thing based on I mean, Zach's exactly right. ROI is the top of our list on any acquisition we look at. But I I will say that we're not interested in paying the premium that's required to take out another public company because that's premium that we can put into other infrastructure machines, upgrading our fleet, and get a better ROI. So I think you're gonna see less public to public. And if there's acquisitions, like, it's probably gonna be in the private space or greenfield.

[John Todaro, Senior Analyst at Needham & Company]

Got it. That's very helpful. Thank you, guys.

[Operator]

Your next question comes from the line of Stephen Glagola with Jones Trading. Please go ahead.

[Stephen Glagola, Director - TMT Equity Research at JonesTrading]

Hey, Zach, Gary and Harry. Thanks for the question. Zach, I wanted to dig into more on your prepared and Q and A remarks around the potential flexibility of certain sites for alternative uses. I mean, I think it's clear that CleanSpark has consistently shown its prowess in mining as an operator and, you know, strong long term commitment to Bitcoin mining. At the same time, your hybrid peers are seeing higher valuation multiples by pivoting toward, you know, AI HPC.

[Stephen Glagola, Director - TMT Equity Research at JonesTrading]

So there's, you know, specific sites you view as particularly well suited for nonmining applications, such as AI HPC? And, additionally, have you engaged any preliminary discussions with potential partners in these areas so far? I'm just trying to gauge what would have to change in your calculus or or the the company's calculus for any strategic shifts here. Appreciate it. Thank you.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Yeah. You know, it would have to be, you know, quite simply, we have 55% returns that are consistent based on the types of investments we have to make, which the capital outlay is very predictable, significantly less than a lot of these alternative compute spaces. What I will say from a geographic point of view, the closer we are to a major area, whether that's Atlanta, Georgia or Cheyenne, Wyoming or places like that, it's it's always more valuable. And so, again, I I don't think that's any secret that data centers want to be in areas with low latency opportunities. So I call it a 100 miles from a major metro area creates significant value for our power assets.

[Zachary Bradford, President, CEO & Director at CleanSpark]

But, you know, it's not just alternative forms of compute. You know, anything that where power is the ultimate source of the value is how we're looking at this. Areas with lower cost power than others, obviously creates, you know, its its own calculus in in the portfolio. So, you know, I I you you asked a little specific. I obviously can't comment on on more specific about any ongoing discussions, whether they're they're happening or not, but, you know, that's how we look at it.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Geography plays a very important role, but it has to be able to produce great even better returns than we're already producing. We also have our view on where Bitcoin is going. And so if you look at the direction and our directional view of Bitcoin and the returns we think it's not only generating now but can generate in the near term, that's something else that also has to be contended with before we would consider a change.

[Stephen Glagola, Director - TMT Equity Research at JonesTrading]

And and would you

[Zachary Bradford, President, CEO & Director at CleanSpark]

I I you know, I'm gonna add one more thing. Don't think it can ever be underestimated. The fact that if you if we were to take down any one of our sites, major metro or not, for two or three years to do a full rebuild, how much revenue we're gonna miss out on, that is also something I just wanna call out is very important to us, is what is that revenue cost gonna be to us. It's an opportunity cost that goes away. And and so there's always an uphill battle for any other opportunity.

[Stephen Glagola, Director - TMT Equity Research at JonesTrading]

And and, Zach, I appreciate all that. That was really helpful. And and just, like, to clarify too on it sounds like you might be maybe looking into this to some extent. If something were to materialize or you were to go more in this direction with maybe something closer to Georgia sites or so forth, would that be telegraphed, you know, you know, on an earnings call or something beforehand? Or would this just be something like might get announced one day, you know, and and, you know, you you did a deal for for some alternative purpose? I'm just curious if you can add any color there.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Yeah. I'm gonna say what I've always said. We we're not in the business of saying we're gonna do something that we're still trying to figure out. We're in the business of doing what we say we're gonna do.

[Zachary Bradford, President, CEO & Director at CleanSpark]

And so we would announce it when and if there is a real deal and opportunity, because we don't need our shareholders to wonder if there is or isn't a customer that exists.

[Stephen Glagola, Director - TMT Equity Research at JonesTrading]

Good point. Thank you.

[Operator]

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

[Jon Hickman, MD - Equity Research at Ladenburg Thalmann]

Hi. As you might imagine, most of my questions have been answered. I was just wondering what you're seeing as far as transaction costs not transaction costs, but transaction fees for each award. What's happening there?

[Gary Vecchiarelli, CFO at CleanSpark]

Yeah. Yeah, John. I'll I'll take that. So so those have been real relatively low. So, you know, I think they've been between one to 3% of the block size.

[Gary Vecchiarelli, CFO at CleanSpark]

I'd point you to website that we use. It's mempool.space/mining. It's a great reliable place. You could see even what the last block was and what the reward was. Knowing that every block right now is 3.125 Bitcoin.

[Gary Vecchiarelli, CFO at CleanSpark]

You see something that's greater than that, the delta, obviously, is gonna be transaction fees. But transaction fees, there's gonna be an ebb and a flow. You know, it's really hard to predict those. I think that when you look at the theory of hyper Bitcoinization and really the life cycle of of Bitcoin, you know, the miners, in coming decades. Right?

[Gary Vecchiarelli, CFO at CleanSpark]

I think it's gonna be once we get there, but in coming years, the miners are gonna are gonna flip from actually being paid by the subsidy to the transaction fee. And I think we got a ways to go there, but with Bitcoin adoption increasing greater volumes, we'll see that tick up. But it is hard to hard to really forecast that because when you look at the halving, I mean, there were some transaction fees that were in excess of what was it, like four or five x or 10 x, whatever the, you know, whatever the subsidy was. But the great thing about mining is that if and when that uptick in transaction fees does come, there is no incremental cost to us. So that's just additional gravy.

[Jon Hickman, MD - Equity Research at Ladenburg Thalmann]

Okay. Then one last question. As you, kind of upgrade your fleet, to the latest miners, what do you is there a market for the older stuff still? Like, do you have to just write that off or can you sell it? What's the strategy there?

[Zachary Bradford, President, CEO & Director at CleanSpark]

No. There's a very robust market, in fact. It's always existed. And actually, these tariffs that was mentioned earlier potentially make it more robust. So we are seeing some of the older generation miners continuing to have a more long term, I'll call it terminal value as they're sold to third parties because there's a lot of groups that don't want to deal with either whether it's shipping timing or the tariffs or the unknowns around that.

[Zachary Bradford, President, CEO & Director at CleanSpark]

You can get certainty by buying it essentially from your neighbor. And, so it's a very, very robust. And so we absolutely expect to extract value and have, you know, each each and every quarter over the past couple of years. As we rotate out of minors, we we definitely pull dollars out of the market.

[Gary Vecchiarelli, CFO at CleanSpark]

Which I'll add really helps us with the ROI calculation for future investments too. So that's why keeping our finger on the pulse of the secondary market is very important because that's part of our calculus.

[Jon Hickman, MD - Equity Research at Ladenburg Thalmann]

Okay. Thanks.

[Operator]

Your next question comes from the line of Jim McIlree with Chardan Capital. Please go ahead.

[James McIlree, Senior Equity Research Analyst at Chardan Capital Markets]

Thank you. Gary, you talked about 40% of your auto balance used for asset management. And I'm wondering if that is limited by the 40%, if that's limited by your risk tolerance or the market depth or liquidity or your internal expertise. If you can just comment on that, please.

[Gary Vecchiarelli, CFO at CleanSpark]

Yes. Great question. I think through all of our comments regards whether it's digital asset management or how we run the business, you know, there's a certain prudence and, conservatism that we take in all regards. So the 40% is just what we would allocate, you know, the greatest amount of the huddle balance that we would put at some risk. And remember, I'd answered this actually in a prior question.

[Gary Vecchiarelli, CFO at CleanSpark]

Only a percentage of that gets posted as collateral. So the amount that's actually at risk is less than that. But, again, with low delta options and derivatives, we're able to get some additional juice and and continue that low risk. We're always able to take out derivatives of cash if we need to close out this position because we don't want them to get called because maybe it has a low tax basis, things like that. But at the end of the day, that that's really meant more for risk management, and that's gonna increase and decrease as we see opportunities, and as our experience in this area, kinda tricks on.

[James McIlree, Senior Equity Research Analyst at Chardan Capital Markets]

Great. That's very helpful. Thank you. And Zach, you've talked a lot about energy this afternoon. But the current administration has made significant changes in the nation's energy strategy.

[James McIlree, Senior Equity Research Analyst at Chardan Capital Markets]

I'm wondering if you have any comments on how that might impact your short term or long term expansion activities.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Yes. I think it's more the way that the policies are changing, I think it's gonna be more of a medium and long term thought process because what the administration is really focusing on is largely with generation. There's a little bit, yes, on a natural gas basis. There's production mindset, which should hopefully drive down natural gas prices. But really, it's about building production.

[Zachary Bradford, President, CEO & Director at CleanSpark]

Because with additional generation, being produced, obviously, there's more power to be had by the markets in general. We are not going to see the impact of that for the most part for three to ten years. And different fuel sources, whether it's nuclear, that's probably the furthest out. And then, of course, you see things such as natural gas that I think will be sooner on the list. So again, on a medium to long term basis, what it does is it makes us more confident in where The U.

[Zachary Bradford, President, CEO & Director at CleanSpark]

S. Is going to be from a strategic positioning for keeping cost in control for power, just further solidifying that The U. S. Is a great place to grow. Now do I think that the administration is going to solve all the problems inside the next short term?

[Zachary Bradford, President, CEO & Director at CleanSpark]

No. But we're incredibly well positioned and really strategically positioned as miners with our flexible load where we can handle any of the short term volatility and pricing that comes. But again, by the time you get to the back end of that short term, I'll call it, pressure, at this point in time, we think that the policies are setting The U. S. Up to be very solid on the energy basis long term.

[James McIlree, Senior Equity Research Analyst at Chardan Capital Markets]

Great. Thank you. Appreciate it.

[Operator]

There are no further questions at this time. Harry, I turn the call back over to you.

[Harry Sudock, SVP at CleanSpark]

Thank you again for joining today's earnings call. We look forward to staying in touch and sharing future results with you in the coming quarters. Stay tuned for more groundbreaking achievements from CleanSpark, America's Bitcoin miner.

[Operator]

This concludes today's conference call. You may now disconnect.

Participants

Executives

• Zachary Bradford, President, CEO & Director
• Gary Vecchiarelli, CFO

Analysts

• Harry Sudock, SVP at CleanSpark
• Mike Colonnese, MD - Senior Crypto & Blockchain Analyst at H.C. Wainwright & Co., LLC
• Nick Giles, Senior Research Analyst at B.Riley Securities
• Brian Dobson, Managing Director at Clear Street LLC
• Gregory Lewis, Managing Director at BTIG
• Paul Golding, US Senior Payments & Lifestyle Analyst at Macquarie
• Bill Papanastasiou, Vice President at Keefe, Bruyette & Woods (KBW)
• Brett Knoblauch, Managing Director at Cantor Fitzgerald
• John Todaro, Senior Analyst at Needham & Company
• Stephen Glagola, Director - TMT Equity Research at JonesTrading
• Jon Hickman, MD - Equity Research at Ladenburg Thalmann
• James McIlree, Senior Equity Research Analyst at Chardan Capital Markets