Core Scientific Inctx
For the period ended Sep 30, 2024. Filed Nov 6, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 6, 2024
CORZ$11.76+3.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001628280-24-035714
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-06.
0001628280-24-045811
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 229 previous paragraphs and 229 current paragraphs.
128 unchanged; 88 reworded; 10 added; 9 removed; 4 previous and 3 current paragraphs rearranged.
Tables are not compared: 36 previous and 35 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
Beginning on March 6, 2024, we announced a series of new contractual agreements with a third-party provider of HPC operations for customers using specialized cloud-based graphics processing units (“GPUs”). These new agreements leverage the Company’s existing digital infrastructure and expertise in third-party hosting solutions. We believe that using our existing infrastructure for HPC hosting operations will provide more consistent dollar-based revenue and represents substantially less risk than for our traditional hosted bitcoin mining or our bitcoin self-mining operations. As a result, we intend to focus our business development and marketing efforts on expanding our HPC hosting customer base. We expect that third-party hosting for traditional bitcoin mining customers will decline significantly as a portion of our revenue mix.
Current report
2029 Convertible Notes Offering
Current report
On August 19, 2024, the Company the Company completed a private offering (the “2029 Convertible Notes Offering”) of $460.0 million aggregate principal amount of 3.00% Convertible Senior Notes due 2029 (the “2029 Convertible Notes”), which included the exercise in full of the initial purchasers’ option to purchase up to an additional $60.0 million aggregate principal amount of 2029 Convertible Notes. The net proceeds from the 2029 Convertible Notes Offering were approximately $447.6 million, after deducting the initial purchasers’ discounts and commissions and the Company’s estimated offering expenses. The Company used approximately $62.0 million of the net proceeds from the 2029 Convertible Notes Offering to repay in full the outstanding loans under the Exit Credit Agreement, of which $0.8 million was paid for interest. Additionally, the Company used approximately $154.1 million of the net proceeds from the 2029 Convertible Notes Offering to redeem all of the outstanding Secured Notes, of which $4.1 million was paid for interest. Further, On September 6, 2024, the Company paid $49.6 million to repay the BlockFi facility in full, of which $0.7 million was paid for interest. The Company intends to use the remaining net proceeds from the 2029 Convertible Notes Offering for general corporate purposes, including working capital, operating expenses, capital expenditures, acquisitions of complementary businesses or assets, or other repurchases of its securities. For more detailed information regarding the 2029 Convertible Notes Offering conversion, refer to Note 6 — Convertible and Other Notes Payable to our condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.
Current report
For the three months ended September 30, 2024, gross profit in the HPC Hosting segment was $1.3 million compared to nil for the three months ended September 30, 2023, due to the HPC Hosting segment starting operation during the quarter ended June 30, 2024.
Current report
Results of Operations for the Nine Months Ended September 30, 2024 and 2023
Current report
Total digital asset hosted mining revenue from customers decreased by $1.2 million or 2%, to $71.1 million for the nine months ended September 30, 2024, from $72.2 million for the nine months ended September 30, 2023. The decrease in hosted mining revenue from customers was primarily driven by the termination of contracts with several customers since September 30, 2023, due primarily to the reallocation of a majority of our data centers from digital asset mining to HPC hosting.
Current report
Total operating expenses increased $10.5 million or 13%, to $88.7 million for the nine months ended September 30, 2024, from $78.1 million for the nine months ended September 30, 2023.
Current report
For the nine months ended September 30, 2024, gross profit in the Digital Asset Hosted Mining segment increased by $3.5 million compared to the nine months ended September 30, 2023, reflecting a Digital Asset Hosted Mining segment gross margin of
Current report
30% for the nine months ended September 30, 2024, compared to a gross margin of 22% for the nine months ended September 30, 2023. The increase in Digital Asset Hosted Mining segment gross margin for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 was primarily due to lower Cost of digital asset hosted mining services primarily driven by lower power costs from lower rates and usage, partially offset by decreased digital asset hosted mining revenue from related parties as there were no related party transactions during fiscal 2024 and by the termination of contracts with several customers since September 30, 2023, due primarily to our shift to HPC hosting.
Current report
For the nine months ended September 30, 2024, gross profit in the HPC Hosting segment was $1.9 million compared to nil for the nine months ended September 30, 2023, due to the HPC Hosting segment starting operation during the quarter ended June 30, 2024.
Removed paragraphs (9)
Previous report
We believe that our integrated services portfolio, as well as our differentiated customer experience and technology, are keys to retaining and growing revenue from existing customers and to acquiring new customers. For example, we believe our significant build-out and ready power combined with our technology stack represent meaningful competitive advantages favorable to our business.
Previous report
Change in fair value of energy derivatives, which is related to the change in fair value of the derivative liability of the energy forward purchase contract entered into in October 2023, was $0.5 million for the three months ended June 30, 2024. The $0.5 million change in fair value consisted of a realized loss of $2.0 million partially offset by an unrealized gain of $1.5 million.
Previous report
For the three months ended June 30, 2024, gross profit in the HPC Hosting segment was $0.6 million compared to nil for the three months ended June 30, 2023, due to the HPC Hosting segment starting operation during the quarter ended June 30, 2024.
Previous report
Results of Operations for the Six Months Ended June 30, 2024 and 2023
Previous report
Total digital asset hosted mining revenue from customers increased by $8.9 million or 20%, to $54.2 million for the six months ended June 30, 2024, from $45.2 million for the six months ended June 30, 2023. The increase in hosted mining revenue from customers was primarily driven by the onboarding of new customers since June 30, 2023, under proceeds sharing arrangements.
Previous report
Total operating expenses decreased $3.0 million or 6%, to $48.3 million for the six months ended June 30, 2024, from $51.3 million for the six months ended June 30, 2023.
Previous report
For the six months ended June 30, 2024, gross profit in the Digital Asset Hosted Mining segment increased $3.5 million compared to the six months ended June 30, 2023, reflecting a Digital Asset Hosted Mining segment gross margin of 31% for the six months ended June 30, 2024, compared to a gross margin of 25% for the six months ended June 30, 2023. The increase in Digital Asset Hosted Mining segment gross margin for the six months ended June 30, 2024, compared to the six months ended June 30, 2023 was primarily due to a larger share of more profitable hosting arrangements.
Previous report
For the six months ended June 30, 2024, gross profit in the HPC Hosting segment was $0.6 million compared to nil for the six months ended June 30, 2023, due to the HPC Hosting segment starting operation during the quarter ended June 30, 2024.
Previous report
Refer to “Recent Developments — Emergence from Bankruptcy” above for more information on our emergence from bankruptcy and the effect on our liquidity.
Reworded paragraphs (88)
Previous wording
The following Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to promote understanding of the results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited condensed consolidated financial statements and the accompanying Notes to Unaudited Financial Statements (Part I, Item 1 of this Form 10-Q) as well as the financial and other information included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on March 13, 2024. This section generally discusses the results of operations for the quarter ended June 30, 2024 compared to June 30, 2023.
Current wording
The following Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to promote understanding of the results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited condensed consolidated financial statements and the accompanying Notes to Unaudited Financial Statements (Part I, Item 1 of this Form 10-Q) as well as the financial and other information included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on March 13, 2024. This section generally discusses the results of operations for the three and nine months ended September 30, 2024 compared to September 30, 2023.
Previous wording
As discussed in the section titled “Cautionary Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” under Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on March 13, 2024.
Current wording
As discussed in the section titled “Cautionary Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” under Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on March 13, 2024,and under Part II, Item 1A in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, filed with the Securities and Exchange Commission on August 7, 2024.
Previous wording
Core Scientific is a leader in digital infrastructure for bitcoin mining and high-performance computing. We operate dedicated, purpose-built facilities for digital asset mining and are a premier provider of digital infrastructure, software solutions and services to our third-party customers. We employ our own large fleet of computers (“miners”), primarily manufactured by Bitmain Technologies Limited (“Bitmain”), to produce bitcoin for our own account and provide hosting services for large bitcoin mining and high-performance compute (“HPC”) customers at our eight operational data centers in Georgia (2), Kentucky (1), North Carolina (1), North Dakota (1) and Texas (3). We derive the majority of our revenue from earning bitcoin for our own account (“self-mining”). We began digital asset mining at scale in 2018 and in 2020 became one of the largest North American providers of hosting services primarily for third-party mining customers. We had an average hourly operating power demand of approximately 641 megawatts (“MW”) for the six months ended June 30, 2024. We had secured approximately 1,200 MW of contracted power capacity at our sites as of June 30, 2024. We also operate and manage one of the largest data center infrastructure asset bases among publicly listed North American miners with operational capacity of approximately 830 MW in support of our mining and HPC operations.
Current wording
Core Scientific is a leader in digital infrastructure for bitcoin mining and high-performance computing. We operate dedicated, purpose-built facilities for digital asset mining and are a premier provider of digital infrastructure, software solutions and services to our third-party customers. We employ our own large fleet of computers (“miners”) to earn digital assets for our own account and to provide hosting services for large bitcoin mining customers and we are in the process of allocating and converting a significant portion of our nine operational data centers in Alabama (1), Georgia (2), Kentucky (1), North Carolina (1), North Dakota (1) and Texas (3), and our facility in development in Oklahoma to support artificial intelligence-related workloads under a series of contracts that entail the modification of certain of our data centers to deliver hosting services for high-performance computing (“HPC”). We derive the majority of our revenue from earning bitcoin for our own account (“self-mining”). We began digital asset mining at scale in 2018 and in 2020 became one of the largest North American providers of hosting services primarily for third-party mining customers. We had an average hourly operating power demand of approximately 607 megawatts (“MW”) for the nine months ended September 30, 2024. We had secured approximately 1,200 MW of contracted power capacity at our sites as of September 30, 2024. We also operate and manage one of the largest data center infrastructure asset bases among publicly listed North American miners with operational capacity of approximately 830 MW in support of our mining and HPC operations.
Previous wording
We improved our average self-mining fleet energy efficiency for the three months ended June 30, 2024, to 24.7 joules per terahash compared to 26.9 joules per terahash for the three months ended March 31, 2024. Self-mining fleet energy efficiency is a measure of our fleet’s average energy efficiency over the period presented.
Current wording
Our average self-mining fleet energy efficiency for the three months ended September 30, 2024 was 24.5 joules per terahash, compared to 24.7 joules per terahash for the three months ended June 30, 2024. Self-mining fleet energy efficiency is a measure of our fleet’s average actual energy efficiency over the period presented.
Previous wording
Our total revenue was $320.4 million and $247.6 million for the six months ended June 30, 2024 and 2023, respectively. We had operating income of $61.8 million and $17.1 million for the six months ended June 30, 2024 and 2023, respectively. We had net loss of $594.2 million and $9.6 million for the six months ended June 30, 2024 and 2023, respectively. Our adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) was $134.0 million and $85.3 million for the six months ended June 30, 2024 and 2023, respectively. Adjusted EBITDA is a non-GAAP financial measure. See “Key Business Operating Metrics and Non-GAAP Financial Measures” below for our definition of, and additional information related to Adjusted EBITDA.
Current wording
Our total revenue was $415.7 million and $360.5 million for the nine months ended September 30, 2024 and 2023, respectively. We generated operating income of $20.6 million and $5.0 million for the nine months ended September 30, 2024 and 2023, respectively. We incurred net loss of $1.05 billion and $50.8 million for the nine months ended September 30, 2024 and 2023, respectively. Our adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) was $144.2 million and $112.9 million for the nine months ended September 30, 2024 and 2023, respectively. Adjusted EBITDA is a non-GAAP financial measure. See “Key Business Operating Metrics and Non-GAAP Financial Measures” below for our definition of, and additional information related to Adjusted EBITDA.
Previous wording
On February 29, 2024, the Company entered into a long-term contract with CoreWeave, Inc. (“CoreWeave”) to deliver 16 MW of infrastructure at the Company’s Austin, Texas facility. Following commencement of operations in Texas, on June 3, 2024, the Company entered into a series of long-term contracts with CoreWeave to deliver approximately 200 MW of infrastructure to host CoreWeave’s HPC operations, which will require the Company to modify multiple existing sites. The site modifications commenced in the second half of fiscal 2024 and operational status is expected in the first half of fiscal 2025. On June 25, 2024, the Company announced CoreWeave’s execution of an option to secure an additional 70 MW of infrastructure to host its HPC operations. Operational status for the additional 70 MW is also expected in the second half of 2025. Further, on August 6, 2024, the Company announced that CoreWeave executed an option to secure an additional 112 MW of infrastructure to host CoreWeave’s graphics processing units (“GPUs”) for HPC operations.
Current wording
On February 29, 2024, the Company entered into a long-term contract with CoreWeave, Inc. (“CoreWeave”) to deliver 16 MW of infrastructure at the Company’s Austin, Texas facility. Following the commencement of operations in the Austin, Texas facility, on June 3, 2024, the Company entered into a series of long-term contracts with CoreWeave to deliver approximately 200 MW of infrastructure to host CoreWeave’s HPC operations, which will require the Company to modify multiple existing sites. The site modifications commenced in the second half of fiscal 2024 and operational status is expected to begin in the first half of fiscal 2025. On June 25, 2024, the Company announced CoreWeave’s execution of an option to secure an additional 70 MW of infrastructure to host its HPC operations. Operational status for the additional 70 MW is expected in the second half of 2025. Further, on August 6, 2024, the Company announced that CoreWeave had executed an option to secure an additional 112 MW of infrastructure to host its HPC operations. On October 22, 2024, the Company announced that CoreWeave had exercised its final option for an additional 120 MW of infrastructure.
Previous wording
In April 2024, the Bitcoin protocol executed its fourth planned halving, wherein the bitcoin rewards issued for each solved block dropped from 6.25 bitcoin to 3.125 bitcoin, reducing the bitcoin received from bitcoin mining by 50% (excluding transactions fee rewards). As a result, assuming stable network hashrate and no change to the price of bitcoin after the halving, the Company’s revenue related to mining bitcoin would decline by 50%, resulting in a significant negative impact on revenue and gross profit.
Current wording
On April 19, 2024, the Bitcoin protocol executed its fourth planned halving, wherein the bitcoin rewards issued for each solved block declined from 6.25 bitcoin to 3.125 bitcoin, reducing the bitcoin received from bitcoin mining by 50% (excluding transaction fee rewards). As a result, revenue generated from bitcoin mining declined, adversely impacting gross profit.
Previous wording
On January 15, 2024, the Company and certain of its affiliates filed with the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) the Fourth Amended Joint Chapter 11 Plan of Core Scientific, Inc. and its Affiliated Debtors (with Technical Modifications) (the “Plan of Reorganization”). On January 16, 2024, the Bankruptcy Court entered an order confirming the Plan of Reorganization. On January 23, 2024 (the “Effective Date”), the conditions to the effectiveness of the Plan of Reorganization were satisfied or waived and the Company emerged from bankruptcy.
Current wording
On January 15, 2024, the Company and certain of its affiliates filed with the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) the Fourth Amended Joint Chapter 11 Plan of Core Scientific, Inc. and its Affiliated Debtors (with Technical Modifications) (the “Plan of Reorganization”). On January 16, 2024, the Bankruptcy Court entered an order confirming the Plan of Reorganization. On January 23, 2024 (the “Effective Date”), the conditions to the effectiveness of the Plan of Reorganization were satisfied or waived and the Company emerged from bankruptcy. On January 24, 2024, the Company’s common shares began trading on the Nasdaq market under the ticker symbol CORZ.
Previous wording
As a large-scale owner and operator of high-powered digital infrastructure for bitcoin mining and hosting services, we believe that we are well positioned to serve customers in an expanding market for digital asset mining and HPC operations. We believe that the adoption and mainstream use of bitcoin and the blockchain technology on which it is based has accelerated the demand for bitcoin and other digital currencies. Further, as noted in the “Business Strategy” section below, we believe that opportunities for growth exist in various applications of our data centers for third party customers focused on cloud computing as well as machine learning and artificial intelligence, which has driven our recent expansion into providing HPC hosting services.
Current wording
As a large-scale owner and operator of high-power digital infrastructure for bitcoin mining and hosting services, we believe that we are well positioned to serve customers in digital asset mining and an expanding market for HPC operations. We believe that the adoption and mainstream use of bitcoin and the blockchain technology on which it is based has accelerated the demand for bitcoin and other digital currencies. Further, as noted in the “Business Strategy” section below, we believe that opportunities for growth exist in various applications of our data centers for third-party customers focused on cloud computing as well as machine learning and artificial intelligence, which has driven our recent expansion into providing HPC hosting services.
Previous wording
We focus primarily on mining and selling bitcoin for cash and activities directly related to growing our mining capabilities (increasing the number of bitcoin mined) and enhancing efficiencies in our operations (reducing our cost to mine). Our growing digital asset mining operation is focused on earning bitcoin by solving complex cryptographic algorithms to validate transactions on specific bitcoin blockchains, which is commonly referred to as “mining.” Our digital asset self-mining activity competes with myriad mining operations throughout the world to complete new blocks on the blockchain and earn the reward in the form of bitcoin. The terms of our debt agreements currently require that we sell our bitcoin within ten days of receipt, and we typically use the proceeds to fund our operations and growth.
Current wording
We focus primarily on mining and selling bitcoin for cash, enhancing efficiencies in our operations (reducing our cost to mine) and contracting our digital infrastructure for HPC hosting. Our digital asset mining operation is focused on earning bitcoin by solving complex cryptographic algorithms to validate transactions on specific bitcoin blockchains, which is commonly referred to as “mining.” Our digital asset self-mining activity competes with myriad mining operations throughout the world to complete new blocks on the blockchain and earn the reward in the form of bitcoin.
Previous wording
Our data centers house bitcoin mining computers and lever our specialized construction proficiency by employing high-density, low-cost engineering and power designs. Our proprietary thermodynamic structural design manages heat and airflow to deliver best-in-class uptime and, ultimately, increased mining rewards to us and our customers. We continually evaluate our mining performance, including our ability to access additional megawatts of electric power and to expand our total self-mining, customer and related party hosting hash rates. In addition to exploring additional mining facilities and mining arrangements, we may also explore additional uses of our current and future data centers to support other forms of high-value compute, such as our developing HPC hosting operations, in connection with our short-, medium- and long-term strategic planning.
Current wording
Our data centers house bitcoin mining computers and will increasingly house GPUs. These specialized facilities lever our specialized design and construction proficiency by employing high-density, low-cost engineering, power designs and modular construction. For bitcoin mining, our proprietary thermodynamic structural design manages heat and airflow to deliver best-in-class uptime and, ultimately, increased mining rewards to us and our customers. We are allocating a significant portion of our current and future data centers to support other forms of high-value compute, such as HPC hosting operations, in connection with our short-, medium- and long-term strategic plan.
Previous wording
Our business strategy is to grow our revenue and profitability by increasing the capacity and efficiency of our self-mining fleet and by enhancing our third-party hosting business. We intend to strategically develop the infrastructure necessary to support business growth and profitability and pursue adjacent high-value compute opportunities that lever our mining expertise and capabilities. For example, in February 2024, we entered into a multi-year lease agreement for a data center in Austin, Texas, to perform colocation hosting services for CoreWeave to supply up to 16 MW of data center infrastructure in support of its GPU cloud compute workloads. This facility became operational in the second fiscal quarter of 2024. During the fiscal quarter ended June 30, 2024, we completed the expansion of our Denton, Texas facility by 72 MW of data center infrastructure to support our digital asset self-mining business. On
Current wording
Our business strategy is to grow our revenue and profitability by maximizing the portion of our infrastructure portfolio contracted for HPC hosting, expanding that portfolio and increasing the efficiency of our self-mining fleet. We intend to strategically develop the infrastructure necessary to support business growth and profitability and pursue adjacent high-value compute opportunities that lever our data center expertise and capabilities. For example, in February 2024, we entered into a multi-year lease agreement for a data center in Austin, Texas, to provide hosting services for CoreWeave with up to 16 MW of data center infrastructure in support of its GPU cloud compute workloads. This facility became operational in the second fiscal quarter of 2024. Since June 3, 2024, the Company has entered into a series of long-term contracts with CoreWeave to deliver approximately 500 MW of infrastructure to host CoreWeave’s HPC operations.
Previous wording
These contracts represent a significant step in HPC build-out and tap into the rapidly growing hyperscale data center market. We believe the potential for HPC hosting complements our current business model with expected stable, long-term and high margin revenue.
Current wording
These contracts represent a significant milestone in the HPC hosting portion of our strategy and tap into the rapidly growing hyperscale data center market. We believe the potential business opportunity for HPC hosting complements our current business model with expected stable, long-term revenue.
Previous wording
We believe our expertise in digital asset mining can be applied favorably to the design, development and operation of large-scale data centers configured to optimize the performance of specialized computers for other specific, high-value applications such as cloud computing, as well as machine learning and artificial intelligence. We intend to look for opportunities to expand our business into these areas using our knowledge, expertise and existing infrastructure where favorable market opportunities exist.
Current wording
We believe we can successfully apply our experience developing and operating a large, multi-state portfolio of digital infrastructure for digital asset mining to the design, development and operation of large-scale data centers configured to optimize the performance of specialized computers for other specific, high-value applications such as cloud computing, machine learning and artificial intelligence. We intend to seek additional opportunities and to engage additional customers in the HPC Hosting segment to expand our business into these areas using our knowledge, expertise, existing and future infrastructure where favorable market opportunities exist.
Previous wording
We have three operating segments: “Digital Asset Self-Mining,” consisting of digital asset mining for our own account, “Digital Asset Hosted Mining,” consisting of our digital infrastructure and third-party hosting services for digital asset mining, and “HPC Hosting,” consisting of our hosting services for high-performance compute operations. Our Digital Asset Self-Mining operation segment generates revenue from operating our own mining computers as part of a pool of users that process transactions conducted on one or more blockchain networks. In exchange for this activity, we receive digital assets in the form of bitcoin. Our Digital Asset Hosted Mining operation segment generates revenue through the sale of electricity-based consumption contracts for our hosting services, which are recurring in nature. Our HPC Hosting operation segment generates revenue by providing colocation, cloud and connectivity services to customers in exchange for a fee. The Company’s HPC and cloud compute operations met the criteria to be considered a new segment during the second quarter of 2024.
Current wording
We have three operating segments: “Digital Asset Self-Mining,” consisting of performing digital asset mining for our own account, “Digital Asset Hosted Mining,” consisting of providing hosting services to third parties for digital asset mining, and “HPC Hosting,” consisting of providing hosting services to third parties for GPU-based HPC hosting operations. Our Digital Asset Self-Mining operation segment generates revenue from operating our own digital infrastructure and mining computers as part of a pool of users that process transactions conducted on one or more blockchain networks. In exchange for this activity, we receive digital assets in the form of bitcoin. Our Digital Asset Hosted Mining operation segment generates revenue through the sale of electricity-based consumption contracts for our hosting services, which are recurring in nature. Our HPC Hosting operation segment generates revenue by providing colocation, cloud and connectivity services to customers in exchange for a fee. The Company’s HPC and cloud compute operations met the criteria to be considered a new segment during the second quarter of 2024.
Previous wording
We own and host specialized computers (“miners”) configured for the purpose of validating transactions on multiple digital asset network blockchains (referred to as, “mining”), predominantly the Bitcoin network. Substantially all of the miners we own and host were manufactured by Bitmain and incorporate application-specific integrated circuit (“ASIC”) chips specialized to solve blocks on the bitcoin blockchains using the 256-bit secure hashing algorithm (“SHA-256”) in return for bitcoin digital asset rewards.
Current wording
We own and host specialized computers (“miners”) configured for the purpose of validating transactions on multiple digital asset network blockchains (referred to as, “mining”), predominantly the Bitcoin network. Substantially all of the miners we own and host were manufactured by Bitmain Technologies Limited (“Bitmain”) and incorporate application-specific integrated circuit (“ASIC”) chips specialized to solve blocks on the bitcoin blockchains using the 256-bit secure hashing algorithm (“SHA-256”) in return for bitcoin digital asset rewards.
Previous wording
We have entered into and facilitated agreements with vendors to supply mining equipment for our digital asset mining operations. The majority of our purchases are made on multi-month contracts with installment payments due in advance of scheduled deliveries. Delivery schedules have ranged from one month to 12 months. As of December 31, 2023, we had two active purchase agreements with Bitmain. The first agreement was for the acquisition of Antminer S19J XP miners with a combined exahash of 4.1 or 28,400 miners. The second agreement was for the acquisition of Antminer S21 miners with a combined exahash of 2.5 or approximately 12,900 miners. As of June 30, 2024, the Company had received all of the miners. As of the reporting date of this Quarterly Report on Form 10-Q, we have completed all 2024 payments due on miners ordered for deployment this year.
Current wording
We have entered into and facilitated agreements with vendors to supply mining equipment for our digital asset mining operations. The majority of our purchases are made on multi-month contracts with installment payments due in advance of scheduled deliveries. Delivery schedules have ranged from one month to 12 months. As of December 31, 2023, we had two active purchase agreements with Bitmain. The first agreement was for the acquisition of Antminer S19J XP miners with a combined exahash of 4.1 or 28,400 miners. The second agreement was for the acquisition of Antminer S21 miners with a combined exahash of 2.5 or approximately 12,900 miners. As of September 30, 2024, the Company had received all of the miners and completed all 2024 payments due on miners ordered for deployment this year.
Previous wording
Activity related to our digital asset balances for the six months ended June 30, 2024 and 2023, were as follows (in thousands):
Current wording
Activity related to our digital asset balances for the nine months ended September 30, 2024 and 2023, were as follows (in thousands):
Previous wording
2 As of June 30, 2024 and June 30, 2023, there was $0.8 million and $1.0 million, respectively, of digital asset receivable included in prepaid expenses and other current assets on the condensed consolidated balance sheets.
Current wording
2 As of September 30, 2024 and December 31, 2023, there was $0.7 million and $1.7 million, respectively, of digital asset receivable included in prepaid expenses and other current assets on the condensed consolidated balance sheets.
Previous wording
Our business is heavily dependent on the spot price of bitcoin. The prices of digital assets, specifically bitcoin, have experienced substantial volatility, meaning that high or low prices may have little or no relationship to identifiable market forces, may be subject to rapidly changing investor sentiment, and may be influenced by factors such as technology, regulatory void or changes, fraudulent actors, manipulation, and media reporting. Bitcoin (as well as other digital assets) may have value based on various factors, including their acceptance as a means of exchange by consumers and others, scarcity, and market demand.
Current wording
Our Digital Asset Self-Mining segment is heavily dependent on the spot price of bitcoin. The prices of digital assets, specifically bitcoin, have experienced substantial volatility, meaning that high or low prices may have little or no relationship to identifiable market forces, may be subject to rapidly changing investor sentiment, and may be influenced by factors such as technology, regulatory void or changes, fraudulent actors, manipulation, and media reporting. Bitcoin (as well as other digital assets) may have value based on various factors, including their acceptance as a means of exchange by consumers and others, scarcity, and market demand.
Previous wording
In addition to factors underlying our mining business growth and profitability, the success of our hosting business greatly depends on our ability to retain and develop opportunities with our existing customers and to attract new customers.
Current wording
In addition to factors underlying our mining business growth and profitability, the success of our HPC hosting business greatly depends on our ability to retain and develop opportunities with our existing customers, secure additional infrastructure and attract new customers.
Previous wording
Despite this trend, we believe we have continued to maintain a competitive hash rate capacity among both public and private bitcoin miners. However, to remain competitive in our evolving industry, both against new entrants into the market and existing competitors, we anticipate that we will need to continue to expand our existing miner fleet by purchasing new and available used miners, as well as innovating to develop and implement new technologies and mining solutions.
Current wording
Despite this trend, we believe we have continued to maintain a competitive hash rate capacity among both public and private bitcoin miners. However, remaining competitive in our evolving industry, both against new entrants into the market and existing competitors, will require the expansion of our existing miner fleet by purchasing new and available used miners, as well as innovating to develop and implement new technologies and mining solutions.
Previous wording
In HPC hosting, we compete with other providers of high-power data center capacity, such as major data center real estate investment trusts (“REITs”), developers of data centers, hyperscalers and bitcoin miners with capacity suitable for HPC hosting. This competition focuses primarily on the identification and acquisition of new, high-power sites, but also includes competition for the capital required to build or modify existing sites to support HPC hosting. Additionally, the modification of some of our data centers to accommodate HPC hosting involves the procurement of critical equipment, technologies and skilled labor, which are in high demand from other entities seeking to address the same market opportunity, thereby putting us in competition with many other organizations for those resources.
Current wording
In HPC hosting, we compete with other providers of high-power data center capacity, such as major data center real estate investment trusts (“REITs”), developers of data centers, hyperscalers and bitcoin miners with capacity suitable for HPC hosting. This competition focuses primarily on the identification and acquisition of new, high-power sites, but also includes competition for the capital required to build or modify existing sites to support HPC hosting. Additionally, the modification of some of our data centers to accommodate HPC hosting involves the procurement of critical equipment, technologies and skilled labor, which are in high demand from other entities seeking to address the same market opportunity, thereby putting us into competition with many other organizations for those resources.
Previous wording
Our self-mining hash rate was 19.4 EH/s and 15.1 EH/s as of June 30, 2024 and 2023, respectively representing a 28% increase year over year.
Current wording
Our self-mining hash rate was 20.4 EH/s and 15.0 EH/s as of September 30, 2024 and 2023, respectively representing a 36% increase year over year.
Previous wording
Our combined self-mining and customer and related party hosting hash rate increased 10%, to 24.6 EH/s as of June 30, 2024, from 22.3 EH/s as of June 30, 2023.
Current wording
Our combined self-mining and customer and related party hosting hash rate increased 5%, to 23.4 EH/s as of September 30, 2024, from 22.3 EH/s as of September 30, 2023.
Previous wording
Adjusted EBITDA is a non-GAAP financial measure defined as our net income or (loss), adjusted to eliminate the effect of (i) interest income, interest expense, and other income (expense), net; (ii) provision for income taxes; (iii) depreciation and amortization; (iv) stock-based compensation expense; (v) Reorganization items, net; (vi) change in fair value of energy derivatives; (vii) change in fair value of warrant and contingent value rights; (viii) business or site startup costs which are not reflective of the ongoing costs incurred after startup, (ix) bankruptcy advisory costs incurred related to reorganization which are not reflective of the ongoing costs incurred in post-emergence operations, and (x) certain additional non-cash items that do not reflect the performance of our ongoing business operations. For additional information, including the reconciliation of net income (loss) to Adjusted EBITDA, please refer to the table below. We believe Adjusted EBITDA is an important measure because it allows management, investors, and our Board of Directors to evaluate and compare our operating results, including our return on capital and operating efficiencies, from period-to-period by making the adjustments described above. In addition, it provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business, as it removes the effect of net interest expense, taxes, certain non-cash items, variable charges and timing differences. Moreover, we have included Adjusted EBITDA in this Quarterly Report on Form 10-Q because it is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, evaluate performance, and perform strategic and financial planning.
Current wording
Adjusted EBITDA is a non-GAAP financial measure defined as our net income or (loss), adjusted to eliminate the effect of (i) interest income, interest expense, and other income (expense), net; (ii) provision for income taxes; (iii) depreciation and amortization; (iv) stock-based compensation expense; (v) Reorganization items, net; (vi) change in fair value of energy derivatives; (vii) change in fair value of warrant and contingent value rights; (viii) HPC advisory startup costs or site conversion startup costs which are not reflective of the ongoing costs incurred after startup, (ix) bankruptcy advisory costs incurred related to reorganization which are not reflective of the ongoing costs incurred in post-emergence operations, and (x) certain additional non-cash items that do not reflect the performance of our ongoing business operations. For additional information, including the reconciliation of net income (loss) to Adjusted EBITDA, please refer to the table below. We believe Adjusted EBITDA is an important measure because it allows management, investors, and our Board of Directors to evaluate and compare our operating results, including our return on capital and operating efficiencies, from period-to-period by making the adjustments described above. In addition, it provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business, as it removes the effect of net interest expense, taxes, certain non-cash items, variable charges and timing differences. Moreover, we have included Adjusted EBITDA in this Quarterly Report on Form 10-Q because it is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, evaluate performance, and perform strategic and financial planning.
Previous wording
The following table presents a reconciliation of net loss to Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023, (in thousands):
Current wording
The following table presents a reconciliation of net loss to Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023, (in thousands):
Previous wording
•HPC hosting revenue. HPC hosting revenue is generated by licensing data center space and related services to licensees. These licensing agreements and orders include lease components, nonlease components (such as power delivery, physical security, maintenance and other billable expenses), as well as noncomponent elements such as taxes. Under these contracts, customers pay fixed payments (based on electric capacity) and variable payments on a recurring basis.
Current wording
•HPC hosting revenue. HPC hosting revenue is generated by licensing data center space and related services to licensees at our Austin, Texas data center. These licensing agreements and orders include lease components, nonlease components (such as power delivery, physical security, maintenance and other billable expenses), as well as noncomponent elements such as taxes. Under these contracts, customers pay fixed payments (based on electric capacity) and variable payments on a recurring basis.
Previous wording
The Company’s cost of digital asset self-mining and digital asset hosted mining services, primarily consist of electricity costs, salaries, stock-based compensation, depreciation of property, plant and equipment used to perform mining operations and hosting services and other related costs. Cost of HPC hosting services primarily consist of lease expense and electricity costs.
Current wording
The Company’s cost of digital asset self-mining and digital asset hosted mining services, primarily consist of electricity costs, salaries, stock-based compensation, depreciation of property, plant and equipment used to perform mining operations and hosting services and other related costs. Cost of HPC hosting services relate to our Austin, Texas data center, and primarily consists of lease expense, power, payroll and benefits expense and stock-based compensation expense.
Previous wording
Gain (loss) on disposal of property, plant and equipment are measured as the differences between the carrying value of the property, plant and equipment disposed of and fair value of the consideration received upon disposal.
Current wording
Loss on disposal of property, plant and equipment are measured as the differences between the carrying value of the property, plant and equipment disposed of and fair value of the consideration received upon disposal.
Previous wording
•General and administrative. General and administrative expenses include compensation and benefits expenses for employees who are not part of the research and development and sales and marketing organization and other personnel-related expenses. Also included are stock-based compensation, rent, HPC startup costs, bankruptcy advisor fees related to the reorganization, professional fees, business insurance, auditor fees, bad debt, amortization of intangibles, franchise taxes, and bank fees. HPC startup costs were specifically incurred preparing for and entering into the HPC hosting business on activities and services that are not expected to be utilized within future ongoing operations of the HPC hosting business.
Current wording
•General and administrative. General and administrative expenses include compensation and benefits expenses for employees who are not part of the research and development and sales and marketing organization and other personnel-related expenses. Also included are stock-based compensation, rent, HPC advisory and site startup costs, bankruptcy advisor fees related to the reorganization, professional fees, business insurance, auditor fees, bad debt, amortization of intangibles, franchise taxes, and bank fees. HPC advisory startup costs were specifically incurred preparing for and entering into the HPC hosting business on activities and services that are not expected to be utilized within future ongoing operations of the HPC hosting business.
Previous wording
Total revenue increased by $14.2 million or 11%, to $141.1 million for the three months ended June 30, 2024, from $126.9 million for the three months ended June 30, 2023, as a result of the factors described below.
Current wording
Total revenue decreased by $17.6 million or 16%, to $95.4 million for the three months ended September 30, 2024, from $112.9 million for the three months ended September 30, 2023, as a result of the factors described below.
Previous wording
Digital asset self-mining revenue increased by $13.7 million or 14%, to $110.7 million for the three months ended June 30, 2024, from $97.1 million for the three months ended June 30, 2023. The increase in mining revenue was driven primarily by an increase in the price of bitcoin and an increase in our self-mining hash rate, which was due to an approximate increase of 19,000 mining units deployed. The increase in mining revenue was partially offset by a 52% decrease in bitcoin mined. Our self-mining hash rate increased by 28%, to 19.4 EH/s for the three months ended June 30, 2024, from 15.1 EH/s for the same period in the prior year. The total number of bitcoins self-mined for the three months ended June 30, 2024, was 1,680 compared to 3,470. Although our self-mining hash rate increased 28%, the April 2024 halving and a 68% increase in network hash rate lead to a 52% decrease in bitcoin received from self-mining. The average price of bitcoin for the three months ended June 30, 2024, was $65,677 as compared to $28,034 for the same period in the prior year, a 134% increase.
Current wording
Digital asset self-mining revenue decreased by $14.9 million or 18%, to $68.1 million for the three months ended September 30, 2024, from $83.1 million for the three months ended September 30, 2023. The decrease in mining revenue was driven primarily by a 62% decrease in bitcoin mined. The decrease in mining revenue was partially offset by an increase in the price of bitcoin and an increase in our self-mining hash rate, which was due to an approximate increase of 31,000 mining units deployed. Our self-mining hash rate increased by 36%, to 20.4 EH/s for the three months ended September 30, 2024, from 15.0 EH/s for the same period in the prior year. The total number of bitcoins self-mined for the three months ended September 30, 2024, was 1,115 compared to 2,953 for the same period in the prior year. Although our self-mining hash rate increased 36%, the April 2024 halving and a 61% increase in network hash rate lead to a 62% decrease in bitcoin received from self-mining. The average price of bitcoin for the three months ended September 30, 2024, was $61,002 as compared to $28,091 for the same period in the prior year, a 117% increase.
Previous wording
Total digital asset hosted mining revenue from customers decreased by $1.5 million or 6%, to $24.8 million for the three months ended June 30, 2024, from $26.3 million for the three months ended June 30, 2023. The decrease in digital asset hosted mining revenue from customers was primarily driven by the termination of contracts with several customers since June 30, 2023.
Current wording
Total digital asset hosted mining revenue from customers decreased by $10.1 million or 38%, to $16.9 million for the three months ended September 30, 2024, from $27.0 million for the three months ended September 30, 2023. The decrease in digital asset hosted mining revenue from customers was primarily driven by the termination of contracts with several customers since September 30, 2023, due primarily to the reallocation of a majority of our data centers from digital asset mining to HPC hosting.
Previous wording
Total digital asset hosted mining revenue from related parties was nil for the three months ended June 30, 2024, compared to $3.5 million for the three months ended June 30, 2023. There were no related-party transactions during the three months ended June 30, 2024.
Current wording
Total digital asset hosted mining revenue from related parties was nil for the three months ended September 30, 2024, compared to $2.8 million for the three months ended September 30, 2023. There were no related-party transactions during the three months ended September 30, 2024.
Previous wording
Total HPC hosting revenue was $5.5 million for the three months ended June 30, 2024, compared to nil for the same period in the prior year due to the onboarding of CoreWeave during the quarter ended June 30, 2024.
Current wording
Total HPC hosting revenue was $10.3 million for the three months ended September 30, 2024, compared to nil for the same period in the prior year due to the initiation of HPC hosting operations for CoreWeave at our Austin, Texas data center during the quarter ended June 30, 2024.
Previous wording
Cost of revenue increased by $12.3 million or 14%, to $102.3 million for the three months ended June 30, 2024, from $90.0 million for the three months ended June 30, 2023. As a percentage of total revenue, cost of revenue totaled 72% and 71% for the three months ended June 30, 2024 and 2023, respectively. The increase in cost of revenue was primarily attributable to increased depreciation expense of $8.8 million driven by the increase in the number of miners in service, HPC hosting costs, primarily lease and power, of $4.9 million incurred during the current quarter with no comparable activity for the same period in fiscal 2023, increased proceeds sharing costs of $1.2 million associated with the increase in average bitcoin price over prior year, a $1.1 million increase in payroll and benefits primarily related to salary adjustments, partially offset by a $3.2 million decrease in power costs.
Current wording
Cost of revenue decreased by $2.0 million or 2%, to $95.5 million for the three months ended September 30, 2024, from $97.5 million for the three months ended September 30, 2023. The decrease in cost of revenue was primarily attributable to a $11.6 million decrease in power costs and a $1.9 million decrease in facility operations expense, partially offset by increased HPC hosting costs, primarily lease, power, payroll and benefits and stock-based compensation, of $7.4 million incurred during the current quarter with no comparable activity for the same period in fiscal 2023, increased depreciation expense of $4.4 million driven by the increase in the number of miners in service, and a $0.8 million increase in stock-based compensation expense.
Previous wording
Change in fair value of digital assets was $0.6 million for the three months ended June 30, 2024, and reflects the Company’s adoption of ASU 2023-08 effective January 1, 2024. The $0.6 million decrease in fair value consisted of a realized loss of $0.6 million.
Current wording
Change in fair value of digital assets was $0.2 million for the three months ended September 30, 2024, and reflects the Company’s adoption of ASU 2023-08 effective January 1, 2024.
Previous wording
Gain from sale of digital assets was nil for the three months ended June 30, 2024, compared to a gain of $0.9 million for the three months ended June 30, 2023. There are no gains from sale of digital assets recorded in fiscal 2024 due to the Company’s adoption of ASU 2023-08 effective January 1, 2024. For the three months ended June 30, 2023, the carrying value of our digital assets sold was $102.5 million and the sales price was $101.2 million.
Current wording
Gain from sale of digital assets was nil for the three months ended September 30, 2024, compared to a gain of $0.4 million for the three months ended September 30, 2023. There are no gains from sale of digital assets recorded in fiscal 2024 due to the Company’s adoption of ASU 2023-08 effective January 1, 2024. For the three months ended September 30, 2023, the carrying value of our digital assets sold was $88.5 million and the sales price was $88.1 million.
Previous wording
Impairment of digital assets was nil for the three months ended June 30, 2024, compared to $1.1 million for the three months ended June 30, 2023. Upon the Company’s adoption of ASU 2023-08 effective January 1, 2024, the Company measures digital assets at fair value each reporting period with changes in fair value recognized in net income. Prior to the adoption of ASU 2023-08, impairment existed when the carrying amount exceeded its fair value. Impairment was measured using quoted prices of the digital asset at the time its fair value was being assessed. Quoted prices, including intraday low prices, were collected and utilized in impairment testing and measurement on a daily basis. If the then current carrying value of a digital asset exceeded the fair value so determined, an impairment loss occurred with respect to those digital assets in the amount equal to the difference between their carrying value and the price determined. The carrying value of our digital assets amounted to nil as of June 30, 2024 and $0.3 million as of June 30, 2023.
Current wording
Impairment of digital assets was nil for the three months ended September 30, 2024, compared to $0.7 million for the three months ended September 30, 2023. Upon the Company’s adoption of ASU 2023-08 effective January 1, 2024, the Company measures digital assets at fair value each reporting period with changes in fair value recognized in net income. Prior to the adoption of ASU 2023-08, impairment existed when the carrying amount exceeded its fair value. Impairment was measured using quoted prices of the digital asset at the time its fair value was being assessed. Quoted prices, including intraday low prices, were collected and utilized in impairment testing and measurement on a daily basis. If the then current carrying value of a digital asset exceeded the fair value so determined, an impairment loss occurred with respect to those digital assets in the amount equal to the difference between their carrying value and the price determined. The carrying value of our digital assets amounted to nil as of September 30, 2024 and $0.6 million as of September 30, 2023.
Showing the first 40 of 88 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Change in fair value of energy derivatives
Current report — wording carried from elsewhere
Change in fair value of energy derivatives
Current report — wording carried from elsewhere
The increase in stock price resulted in a $1.22 billion increase in the fair value of the warrant liabilities during the nine months ended September 30, 2024, partially offset by a $79.3 million decrease in fair value of contingent value rights;
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
June 3, 2024, the Company entered into a series of long-term contracts with CoreWeave to deliver approximately 200 MW of infrastructure to host CoreWeave’s HPC operations. On June 25, 2024, the Company announced CoreWeave’s execution of an option to secure an additional 70 MW of infrastructure to host its HPC operations.
Previous report — wording carried elsewhere
Gain (loss) on disposal of property, plant and equipment
Previous report — wording carried elsewhere
Gain (loss) on disposal of property, plant and equipment
Previous report — wording carried elsewhere
Loss on disposal of property, plant and equipment