Core Scientific, Inc. (CORZ) Earnings Call Transcript & Summary

Welcome or welcome back to the channel, McNallie Money, the official home of Power Mining Analysis. Anthony and I could not be more excited. In today's video, we've got Adam Sullivan joining us once again on the program. He's the CEO of Core Scientific and what a phenomenal 2024 it was for this company, not to mention they're kicking off their monstrous HPC contract with CoreWeave in Q1 of this year, we've got so much to talk about. Before we get into it, take a second, smash a like button, you guys, big help to myself and the channel, especially in getting this content out to other people like you who may find value. If you're not already subscribed, McNallie Money, feel free to join let us know in the comment section below, if you managed to catch the [ chorus ] trade in 2024, if you're currently holding shares and your outlook for 2025. Now with that being said, let's get into today's interview. Okay, guys. So that's right. Huge interview today, Adam Sullivan, CEO of Core Scientific back by popular demand. Adam, I was just saying when we were putting together our question list, we were inundated with questions for Core Scientific, an extremely exciting quarter, year and coming off 2024, which was a tremendous transformational year for Core Scientific. So, so much to talk about. Before we get into it, though, thank you for making the time. Great to see you again.

Thanks for having me on. Happy New Year, everyone.

Most definitely. Happy new year to you, too. So I had just mentioned 2024 was quite the year for Core Scientific. I think anyone in the sector would agree. Do you mind walking us through, Adam, just a few of the top highlights in your mind?

Yes. I mean it was a quarter-by-quarter exciting year for Core Scientific. Q1, we started January 1, we were still in Chapter 11. We went public on January 24. And then shortly thereafter, we announced our first CoreWeave deal, 16 megawatts in Austin, Texas. We've had kind of a blockbuster Q1 in terms of our Bitcoin mining business in the numbers of Bitcoins that we mined. And then Q2, we were able to announce our first conversion deal with CoreWeave. So 200-megawatt deal, June 3. Shortly thereafter in the beginning of Q3, we actually convert -- we were able to convert the mandatory convertible notes based on share price performance that we went on and raised and restructured our capital structure, eliminating all of our previous Chapter 11 debt, putting some cash on balance sheet. Finished out the remaining 300 megawatts of options with CoreWeave and then announced another convertible note deal. So now we sit here today in January of 2025 with a significant cash balance. We signed one of the largest hosting contracts in data center history and potentially one of the most profitable hosting contracts. And so we feel very, very good about entering 2025 with a really strong platform that we built in 2024.

That's great to hear, Adam. I mean 2024 was a phenomenal year, but we're coming to 2025 now. So really, what more can we expect this year to whet the appetite of the retail investment and also those institutional investors that seem to be piling into Core Scientific on a weekly basis?

Yes. We've really set up this platform to build on in 2025. And we laid out our goals through 2027 to build over 1 gigawatt of operational infrastructure for HPC. So 2024, we really set all the groundwork. We built out our team. We built out our asset base and entering 2025, we have a significant portfolio that we can continue to sell in market and we're going to continue to maintain a very strong and profitable Bitcoin mining business. We've announced that we have 400 megawatts dedicated to Bitcoin mining. We have those 15 exahash block chips coming in, in the second half of 2025 and so we expect to have one of the largest HPC businesses that we're going to be building out over the next 3 years, while also maintaining a very strong Bitcoin mining business.

Yes. That's awesome. In terms of the HPC hosting, because obviously, that's a key part of this discussion today. With regards to the contract itself, can you walk us through in terms of the sites that are now allocated for HPC? I mean you've got a -- go on to your website, there's a whole raft of locations of all the sites, but this is a big contract with CoreWeave. So it takes up more than 1 or 2 sites. So you can talk through that. And also sort of put a bit more color on sort of like the refurbishment program, what that entails. I mean, is it a case -- I mean, I heard the word demolition mentioned this week and an update from Core Scientific. And I was surprised about that there. That seems to be going right down to basics and rebuilding. If you can put some color onto that, would be really helpful.

Yes, absolutely. So we've said that there's 5 sites being converted for this contract that we signed with CoreWeave, we've announced so far Denton, which is going to be one of the largest supercomputers in the United States, which is incredibly exciting. We also had the groundbreaking ceremony in Q4 as well for Muskogee, Oklahoma which are 2 fantastic sites in our portfolio. Now we have 3 other sites that are going through conversion processes. And we said previously that we don't like to announce the sites, where we're going because we're -- that means we're still in discussions on whether it be more power approvals, what the power price might be for additional power allocations. And so these are things that we're still working through on some of these new or, I should say, expanded power contracts that we're working through. And so it's providing us an opportunity where we can continue to work with the local community, work through incentives, work through utility contracts and put us in a position where when we do announce it, we know we've gotten and extracted as much potential power as possible from those sites. And so that's happening for 3 more sites. And then if we shift to talking about conversions of existing sites, for certain sites, we are converting the buildings. In other situations, though, we are going through a process. We're either removing an existing facility and building from the ground up. And that is usually based on whether it be cost or whether it be speed to deployment. And so this is a significant amount of capital. It's anywhere from, let's call it, $5 million to $8 million per megawatt depending on the site, depending on what we're building out. Muskogee, Oklahoma is a great example. That's a greenfield site outside of the fact that we already have leveled the ground -- we already had the ground leveled. We already had the high-voltage substation in place, but everything else essentially has to be developed there. So that comes at really the higher end of the price range. But we feel very strongly about the fact that we've secured the entire supply chain for 2025 for all of those developments and then securing the remainder of the items that are left over for the 2026 developments, which if you recall, we've said by the end of 2026 -- or by the end of 2025, we'll have 270 megawatts fully operational. By the end of 2026, we'll have the full 500 megawatts that is currently contracted with [ Core ] operational.

In terms of -- you mentioned about cost per megawatt there, and that's a significant amount. That's not something to -- the funding that you're receiving from CoreWeave itself, they're going to give you an advance on that funding. How much of the sort of refurb will that actually cover in terms of the HPC contract?

Yes. So our contract with CoreWeave is they cover 100% of the CapEx. And so if they decide to change based on whether it be their requirements or their end customers' requirements, whether it be redundancy, whether it be the style of building that they would like to have, any of those increases in costs are still passed through directly to CoreWeave. So we have no burden. The only burden that we do have is paying them back $1.5 million per megawatt. And essentially, that happens over the course of the first about 2 years, just over 2 years at a 50% revenue credit against their contract.

And in terms of when -- I'm assuming those payments are starting effectively now because you're doing the refurbishment now, in fact, if you're doing demolitions, that's all part of the capital requirement. When do you anticipate sort of like revenue coming in from the first phase of the contract itself?

Yes. So we've said that we expect to have 200 megawatts by the end of Q2. And so that's going to come into ramp schedule over the course of 2025, not only the first half but also the second half to get to that full 270. So those are going to ramp on kind of a building-by-building basis. And so I would say we would expect to see revenue over the course of the first 6 months of this year as we work to build towards that 200 megawatts.

The reason I bring that up, Adam, is I'm still scratching my head at why the market aren't sort of like fully factoring all this in. I mean we've seen the numbers, we've seen the table, I produced a table using your numbers, and it really is a phenomenal contract to have. But I just don't feel, having spoken to 3 analysts in Sweden at the end of last year on a trip to a site over there, we talked about the Core Scientific, these are Wall Street guys that you know very well. And I said, can you give me an idea of how we should value these companies? And even if you were prudent, you'd use 15x earnings and I'm scratching my head really even in those early years because you still get a percentage of the earnings, even though you're paying back an element, you'll still get revenues starting to come through. And yes, from sort of like year 3 to 4, you're going to start getting significant amounts, I mean, well over $500 million a year of net income. And I keep repeating on the podcast, it's net income. It's not -- there's not more cost to come out of it. This is net. This is something that's unusual, even in the Bitcoin mining space to have companies come out with net income. We go back to last quarter, only one mine in North America had a net income. And that was because of a couple of one-off transactions that really helped them in that period. Everyone else was red and the whole lot should have been red booked. One was green. This will be nice in 2025 when we start seeing that green turn. But for pretty much most of the miners, in terms of self-mining but especially you guys in terms of the HPC hosting. Now we know about the CoreWeave deal. We know you brought out updates about your -- you've got more power because I think you've allocated 900 megawatts in total. Now thinking about what you've got CoreWeave plus the ancillary, that's probably over 700 megawatts there, but that still gives you about 130, 150 megawatts of additional. What are the conversations that you're having now? And bear in mind, we were there in June at the Denton facility when we were listening to the first part of that contract, the 200 megawatts, and you indicated that their phone was hot and there was plenty of conversations. Are you still having those type of conversations now knowing that you've got a significant amount of power that you're putting towards extra deals in this space?

Absolutely. I mean the market demand right now is still very hot. I think what we can expect to see over the course of 2025 is a lot of more deals being announced, especially the larger deals. I think over the next 12 months in 2025, we're going to see all of these large mega site deals get announced. Not necessarily, they're not going to be built in 2025. They may be built over the next 3 to 5 years. But I think this is the year where all the hyperscalers locked down all of their large-scale sites. And so we're working closely with a number of different not only hyperscalers but also large enterprises on securing a new contract with one of them because we feel like we have an opportunity to potentially secure multiple contracts over the course of 2025, which will put us in a position to achieve that 1 gigawatt fully operational by the end of 2027. Our goals are bigger as you look out the next 5 to 10 years, but over the next 3 years, if we achieve this 1 gigawatt of fully operational capacity, that will make us one of the largest data center companies in North America. And if you look at what kind of our investment thesis is now for investing in Core Scientific. We signed highly profitable 500-megawatt deal with CoreWeave, that's not only one of the largest, but potentially most profitable contract in data center history. So we have a great platform to start on top of. And then our growth story. I mean we're going to be growing faster than really any other data center company on a percentage basis over the course of the next 5 years. So you take a company with better margins, better growth profile. That puts us in a position where we think we should be trading at a premium multiple. And we believe we can execute on this given the team that we've been able to put together and the asset base that we have today.

You talk about team and you raise a good point because my next question is about, obviously, having all these new sites coming on the refurbishment, it sounds like you're having to put together a bigger team to take on this new business that you're going to provide with CoreWeave. How is that recruitment process being going? And have you had a lot of interest in the sites that you're already utilizing for this business?

Yes. I mean you talk about the team, the team that we've been able to assemble that we had when I joined this company that we've been able to add to over the course of the past 6 to 12 months, I mean we are highly rigorous in terms of the talent that we recruit. We're looking for top-tier talent, and we've been able to be in a position where people want to join this company. You take top-tier talent from any of the other large data center companies and you put them in a position where they can be accretive from day 1 and add value to the company. And on top of that, they know that they're receiving equity as part of joining Core Scientific and the fact that they can directly influence how that equity performs puts them in a position where they want to come to Core Scientific. And the 500-megawatt asset base, obviously, incredibly interesting to not only engineers but also construction people as we're building out infrastructure that's really being developed in some cases, for the first time. And we're developing infrastructure for GB200s, which haven't been really deployed at scale before. So this is providing all of these people that have been building traditional data centers for decades in a position where they can build out the next generation of data center. And so people are excited, and we've been able to assemble quite the team. We're taking very senior level people from the other large data center companies and bringing them to Core Scientific. And when you look around the table today, I mean, we're surrounded by a lot of a lot of folks that have been in this industry for decades. And it feels great when we walk into meetings with many of these potential clients, and they know everyone in the room, they're like, "Oh, we built a data center together in Georgia, remember that?" It's like those are all the fun conversations that you get to hear about data center development over the course of the past 30 years.

We were extremely fortunate to be there in June and met a great deal with the senior management team there and we can talk firsthand of that team, and I mentioned the team in many of the podcasts. It's not -- it's Core Scientific team that delivered where we are today. My last question on the sort of the HPC is, obviously, we're now seeing a number of other miners. One has already announced. We've got TeraWulf announced their contracts recently. And it looks like we may have another miner imminently about to announce as well. They've got some planning decisions going through this week. So maybe we get an update from [ Haute ] on how that's going along. But in terms of -- and I don't want to speak too much about it, but in terms of what you're seeing at the moment, and you were the first one to come out with the really big contracts, you're laying everything out there and you're now seeing other companies -- contracts with other clients. How do you feel about your contract in terms of the numbers and looking at what other competitors are doing at the moment? Do you feel you've got a great deal or do you feel actually it's a market with potential to get even better?

Yes. First, I want to say congratulations to Paul and the entire TeraWulf team. It was great to see another contract. We were really excited when we saw that across the wire. As we look at our contract versus not only the [ TeraWulf ] contract, but the rumblings that we're hearing in the market, the CoreWeave contract that we signed was truly exceptional and best-in-class and one of a kind. Obviously, we're looking to continue to expand with CoreWeave at some of the existing sites where we're getting some additional power. And so looking at our contract versus where the market stands, we're still extremely confident that this is potentially going to go down as the best data center contract in history. As we think about continuing to negotiate contracts in the future, and we've said there's going to be a mix of whether it be us paying for a portion of CapEx or potentially even 100% of CapEx, whether it be through debt or a combination of debt and equity, we're seeing rates though in a very strong position, referring to lease rates here. And so we're excited about where we're going to sit by the end of 2025 with potentially more contracts being signed. And I think we're still in a position today where we can sign better contracts than the rest of the market because people have a significant amount of trust in our team and I believe we have the right asset base to deliver high-quality infrastructure to clients, hyperscalers and large enterprises.

That's awesome. We'll comment a bit more about funding in a second, but I'll hand over to Bryce, probably got some questions on the self-mining part of the business.

I certainly do, Anthony. Yes, if you've noticed, viewers, we've split it up into sections here. So now we're going to talk about self-mining and HODL question mark potentially. So self-mining, interesting, just on the HPC, Anthony, you had talked about that as the deal of the year last year. Then we started calling it the deal of the decade, now it's sounding like the deal, period, in HPC AI history. So it just continues to get better. But you're right, Adam, as we compare to other deals, a lot more transparency and it looks like a lot better numbers from what we can see with the CoreWeave situation. So again, congratulations there. On the self-mining, we brought this up on today's podcast as well. There's been so much excitement around Core Scientific and CoreWeave about the HPC, the megawatts, the retrofit. People often forget, you guys are the most consistent, reliable and largest net producer of Bitcoin that is in-house mined period as well. So you get both elements of this company. Speaking of self-mining, we know you have the big order with block in. And can you talk to us about when we can expect to see those installed and how that's going to impact the fleet?

Yes. Yes. So we've said publicly that we expect to receive those over the course of the second half of 2025. So whether it be a portion or the entirety of that 15 exahash to be installed. The majority of that is actually going to be refreshing existing machines that we have on our sites. If you look back at what our mix of machines is, we do still have a significant amount of not only traditional S19s and an S19 Pro. So this is going to put us in a position where we'll be able to increase our terahash while maintaining the same amount of exposure in terms of megawatts to Bitcoin mining. That's a business that we're looking forward to be able to refresh the machines. Some of that fleet is aging as we look at them being operational for 3-plus years. And at the point in time now, it's where things start to break on machines, you're going through more significant repairs. And so these 15 exahash machines is going to be fantastic for our portfolio. We don't know -- we haven't necessarily said where we're going to end up in terms of hashrate expectations for end of the year. But I think a lot of that is honestly going to be dependent on where hash price is because the block chips are going to be able to help us provide so much more flexibility in terms of not only total terahash exposure, but also efficiency of machines on a joules per terahash basis. And so we could end up with -- if hash price is performing well with significantly more exahash online than we are expecting today.

Yes. That's really exciting. Another comment we talked about today was just the consistency you've been able to maintain with the Bitcoin division despite the moving, the retrofitting, the build-out for the HPC. So really incredible there. You touched on an interesting point, some of the aging fleet that you're upgrading, Adam. As the price of Bitcoin continues to increase, we see the economics improve. Is there a point at which maybe you could remain with some of these older machines as part of your portfolio?

Yes, it's not necessarily profitability that is the issue. It really comes down just to the degradation over time of those machines. And so as they degrade, you're putting more into maintenance of maintaining that terahash. And so I think as we look forward to the 15 exahash of block chips, I mean, that's going to be highly profitable and highly accretive to our business that we're excited to be able to do that across the 2 remaining sites we have for dedicated Bitcoin mining.

Great. And I just wanted to clarify, so you're saying as hash price and Bitcoin price improves, you haven't committed to a specific exahash target, but you're going to monitor that and you've got the chips and the machines as needed to scale?

Absolutely right.

Okay. Great. That was a specific subscriber question. So I just want to make sure we hit that one. Now you've talked about the allocation between HPC and Bitcoin mining, about 400 megawatts right now allocated to Bitcoin mining. We've talked about some of the site opportunities expansion in the United States. Are you still looking for Bitcoin mining sites at this point?

I would say we're definitely still looking for more sites, but not necessarily in the Bitcoin mining side. Our focus today is on the HPC side. The 400 megawatts we have for Bitcoin mining, those are fantastic sites. We have great power contracts. We're able to participate in power programs there. That puts us in a really strong position to maintain a profitable Bitcoin mining business, let alone that infrastructure that's on the sites will allow us to introduce those block chips and have them perform exceptionally well. So we're happy with the 400 megawatts, but on the HPC side, we're still looking at a number of different acquisitions on the site side, including potentially even portfolio side. So that's where our focus is, and it's really moved away from looking at new sites for Bitcoin mining.

Makes sense. And I appreciate the transparency. Now another thing we're looking for some transparency on. I've been tweeting this out over the last few weeks. One of the keyboard warriors out there, Adam, has seemed to have found a Core Scientific HODL account or address. We've been watching it grow and grow. I think it was around $27 million or something in that neighborhood. So Anthony and I on today's podcast when we talked about your production results for December, we promised we would ask the subscribers, what is the HODL strategy? Do you have a HODL? And how is that going to look in 2025?

Yes, we're looking at maintaining a certain portion of our balance sheet to be held in Bitcoin not only for exposure but also for potentially using in hedging as well as we look forward towards potentially taking advantage of opportunities where hash price increases significantly over a short period of time. But as noted in our production report that we released this morning, we did not sell all of the Bitcoin that we mined over the course of December. And that's a strategy that we're looking to continue to implement over the course of 2025.

Any chance we'll be able to get visibility on those production reports, Adam, similar to some of the other miners?

I mean we're just going to continue to be announcing in terms of the Bitcoins that are sold at the end of each month in our production reports. And so that's really the form of communication that we'll be utilizing to communicate to the market.

That's okay. We'll keep you busy, Anthony, with that one then.

But moving on to sort of like funding now. We've covered a couple of topics in funding already in terms of what call we are going to be helping to pay in terms of the refurbishment and in terms of the advanced payments, et cetera, et cetera. But one real big story that came out towards the end of last year was the successful convertible note, the $550 million convertible note. Can you tell the subscribers listeners? What's the plans for that at the moment?

Yes. So the first thing I'll say is we're not using it to buy Bitcoin. We have really 3 outlined purposes that we're going to use it for. The first is in our negotiations with these large hyperscalers and large enterprises, we had to have enough cash on balance sheet because you do have to pay for -- if it's 20% to 30% of a total cost of a build out. They have to pay for in an equity check. We needed to have that cash on balance sheet to be able to negotiate with these potential counterparties and some of these larger deals that we're working on. The second is looking at new site opportunities. So we need cash to be able to go out and continue to be active on new site acquisitions. And then third is looking at prebuying parts of the supply chain for some of these sites that we're acquiring or -- that we have acquired or in the process of acquiring. And so that's something where contract negotiation or negotiation really on engineering, not just the contract details. That can take months and so we don't want to be in a position where we lose and have time lines slip because we didn't purchase the long lead items ahead of time. And so we're looking at potentially pre-buying some of these long lead items for some of these new sites so that we can be in a position where we can negotiate with a counterparty and continue to maintain a firm delivery date with those clients. And so that cash is going to go to great use, and we're looking forward to be able to deploy portion of it over the course of 2025.

Yes. And I wasn't implying about whether to buy a Bitcoin, but you make a good point. I mean in terms of being a success, and we've seen other North American miners go down the same route. We've seen CleanSpark follow your line in terms of using it to grow the business. And we've seen the likes of Riot and Marathon. I think Marathon has done 2 in the space of literally 2 months. But they purposely bought Bitcoin with theirs. Do you feel it's another lever that you can access in the future with the markets being the way they are and the fact that you've got this amazing deal that stands up for potential investors in convertible notes.

Yes. I think what we're seeing right now in the market is that they're having a hard time continuing to digest all of this paper just to buy Bitcoin. I think the market and investors are getting relatively full of that paper. Otherwise, I think we would have seen MicroStrategy come back and hit another convertible note. They pivoted and announced a different type of capital markets transaction. But I think the market, looking back over the course of Q4, digested billions of dollars in paper just to buy Bitcoin. And I think we have a much different story here. I think our equity story is relying on a thesis that we're going to be developing one of the largest data center companies in North America. I think as we think about capital market strategy over the course of 2025, I think it's going to come down to what's going on broadly in the market and what type of opportunities arise for us. It's hard to forecast whether it's going to be converts if that's the right tool, whether it's traditional debt, whether it's broad just traditional equity capital markets transactions, we don't know yet because we don't know what the opportunity is going to be. We don't know where the market is going to be, and it's just really hard to forecast the future.

I mean, obviously, in -- I've got a couple of questions. In terms of funding what you've got at the moment and you've got this convertible note, you're obviously bringing the Bitcoin mining revenue, you're covering your costs there, you're [ huddling ] a little bit of the production. What sort of big additional cost, I mean, in terms of the block chips, are they covered already? Or is it a case of you still got to find additional funding in the future to cover the elements that we've got in the strategy as we know it at the moment?

For the elements that we know today, we have enough [ cash ]. Now if there's some large transactions that we need to undertake, that could change the story. And so that may present an opportunity where we do need to go out and raise additional capital. But like I said, it's going to be so dependent on what's going on, what the opportunity is, what the return is on that type of investment. So it's so hard to know where we sit today, what's going to be happening in the future.

The good thing is at least you've got a few more levers to sort of like play with. One of those levers, tell me if I'm wrong. I mean you're coming up to the anniversary of leaving Chapter 11 back in, I think it was the 23rd of January this year. With that anniversary, I'm assuming that you're eligible then to apply for an at-the-market shelf offering. Is that something that's one of those levers that you might look to pull in the future?

So it's January 24 is the date that we are eligible. Yes, I would say it's really going to come down to market conditions and -- do we need more capital? What's the opportunity to raise or for us to deploy that capital. We're looking at a number of opportunistic things today. We're a company that is looking to continue to grow aggressively. And so we're looking at a number of different types of opportunities. But from where we sit today, it's -- we haven't made a decision about which direction we're going in terms of whether it be any type of capital raise, first of all, but if there is a capital raise, what form that's going to take.

And finally, we've asked this question before. But in terms of the [ Cause W warrant ], have you seen much in progress on those being activated? Or is this going to be a long journey you think recovering that capital?

Yes, not too much progress today. I wish there was more. There's still a significant amount of option premium embedded in that warrant. And so there's 2 things that can affect that. Time decay, which every single day we're decaying a little bit more, which is going to reduce that option premium. But as stock price increases and as we kind of break through new handles, whether it be the $20 handle, $25 handle, those things are going to continue to push that option premium because the in-the-moneyness is going to be so high that the option premium will migrate towards 0. And so we're very hopeful that with some additional time decay, with some better stock price performance and pushing us into the 20s. We'll be in a position where more of those warrants choose to exercise before the exercise date.

Yes, great visibility into the warrants there, Adam, and we appreciate that update. Now next topic here or section is really moving into the future of Bitcoin mining. The industry, obviously, a lot of political developments and updates even here today in Canada. So with that being said, what do you see as some of the biggest challenges facing this digital infrastructure or Bitcoin mining sector in the next year or 2?

I think it's really going to come down to power generation. I think that's going to be one of the biggest headwinds to the continued development of this business. We look at the past 10 years and really the past 30 years in the United States, we've been atrocious of building transmission lines from where power generation is to actually bringing it to major metropolitan areas. That presented a great opportunity for Bitcoin miners over the last 4 to 5 years, being able to find the stranded power across the United States. As we think about new sites and new opportunities and utilities that we're working with, they're looking at also having us co-locate closer to power generation because of all the stranded power across the U.S. But the major issue with that is latency, really the fiber latency back to a major metropolitan area, which is a major focus for everyone developing these next-generation data centers. And so it's really about bridging that gap between finding sites that fit well based on where the actual generation is and proximity to that major metropolitan area with that fiber connection. So I think the big headwind here is being able to find sites that fit into that kind of perfect basket. And that's not always that easy. But I think we have great tailwinds from this new administration. Their focus on new power generation. They're focused on Bitcoins being mined in America and their focus on artificial intelligence infrastructure also being located here in the U.S. And I'm hopeful that we see positive regulation for us to be able to continue to build out across the United States.

Just a quick question because you mentioned power there and across the country. In terms of power cost, which varies significantly state to state, how much of that had an impact on the choices for sites that will remain self-mining because, yes, you incur a power cost, but the margins for self-mining versus HPC is so drastically different that you can probably use higher-cost power and not be impacted as much. So the question is, I mean, was that part of the process? Or is it a case of there are so many other factors, power price is just one of them?

Yes, power price is really just one of them. It also comes down to latency back to a major metropolitan area. I would say in terms of how hyperscalers and other large data center developers think about power prices is they start to get sensitive around the $0.08 to $0.09 range in terms of when they start to feel the pressure. So all of our sites, the great part all of our sites were in locations that had favorable power cost and so even moving to this full 24/7 power type contract doesn't bring them above that level where they feel like there's pain from the power cost. So we're excited about that. The fact that we had a full portfolio of sites that had that type of opportunity. And then on the Bitcoin mining side, those are really -- the 2 remaining sites are 2 of the least expensive sites from a power cost perspective is that we had in our portfolio. So it puts us in a really strong position to maintain a profitable Bitcoin mining business.

In terms of where we are at the moment -- I mean switching on the news -- I'm U.K. based, obviously. And the news in America at the moment is about the cold weather. What are you seeing with regards to the -- with regards to power costs now compared to where you've benefited this year. And believe you, me, I looked at the Q3 numbers, and you are one of the most profitable miners in terms of cash costs. I look at hash price [ versus ] hash cost is another metric to you. So you had a really low power. Are you seeing a change in the power? We know you don't put your power cost on your update. But one miner did this month, and it was noticeably a massive increase, about 50% of what they paid in November.

Yes. I mean you have to remember, a lot of our portfolio is in regulated utilities, so you don't see as much of that volatility as you might see if you were more heavily weighted towards ERCOT. Hard to say where we're going to fall for 2024, where we sit today, but we experienced favorable power cost over the course of 2024. As you saw from the initial number that we put out in terms of guidance for power cost in the Bitcoin mining side in Q1 to where the next few quarters rolled out, those were numbers that were revised lower, numbers that we beat. So we are excited about the favorable power cost in 2024.

Now we were down in Denton. We saw your repair facility there, and you also gave us visibility into your software stack or your tech stack, Adam. Obviously, a lot of insight you can gather from these machines on the software technology side. Can you speak to us a little bit about that on the HPC AI side of things. You mentioned in a lot of cases, you're actually pioneering these build-outs. You're one of the biggest HPC builders in the United States. What is that learning process like on that side of the business?

Yes. I would say GPUs have downtime just like the ASICs for Bitcoin mining do. And so we're working on development strategy around maintenance and repairs of some of these GPUs. And this is something where we were one of the largest ASIC repair centers in North America just for our own fleet and the fleet that we were hosting. Puts us in a really great position to be able to be a large provider of this repair and maintenance services as well on the GPU side just because we have all of that muscle memory from doing this on the ASIC side, developing specific tools for specific types of repairs. These are all things that we are very good at doing. And it just shows the breadth and depth of our team, the fact that we can replicate this again on the GPU side, and that's something that we're actively working on today.

Now would that maintenance be a value-add or an enhancement to the existing contract? As I understand it, you basically provide the building, the shell. They bring their own GPUs and units. Are you looking to maybe extend that into a maintenance and [ protection ] as well?

I would say we're looking at a number of different products and services that can be offered to not only CoreWeave, but also other new clients as well that may look to have us having much more hands-on approach to the site and actually touching GPUs and maintaining the GPUs. So I would say there's a plethora of different options available to us in 2025, and we're looking to continue to expand our offering.

And it should never be underestimated the amount of work that's required to keep a fleet operational. I was amazed at the numbers. I think we were there in June, it was like the 6-month numbers on the screens in front of us. And it sort of blew my mind as to how many -- some are probably obviously very simple repairs and some maybe a bit more work required, but it should never be underestimated. We've had like the likes of Compass Mining on the podcast and they do some in-house, but they do a lot of remote as well. Rigs have to go away and come back and you guys have managed to set up repair centers, so things can be put back to work in a very short space of time and keep that hash rate moving. So that was really -- that's really impressive there. In terms of HPC and artificial intelligence, do you see the AI machine learning impacting Core Scientific operations and the service itself?

We utilize some artificial intelligence, machine learning. We use it on the Bitcoin mining side today, which is as we evaluate how machines are performing, what firmware settings they're on based on all of the different variables we take in, whether it be weather, wind, ambient temperature, precipitation outside, humidity, all these different factors come into play. And we actually have our own firmware stack that actually helps adjust the entire fleet or on individual machine basis based on whether machine starts to experience some type of heat poisoning, starts to heat poison the machines around it to actively control for those types of outbreaks inside of a facility. And that's utilizing data from -- we've had over 700,000 machines in our facility. We've collected data on all of them. It put us in an opportunity where we are very good at maintaining all of the settings on these machines to maintain a higher uptime. And so we've used it in the past. We continue to deploy new services on the machine learning side, and we're looking at deploying more items internally on the AI side because it is truly interesting what many of these things can do. And given that we're providing the infrastructure for so much of this development and learning capabilities that these machines are going through, it only makes sense for us to deploy a lot of that internally as well.

Just got me thinking, Bryce, is this the real Adam we're speaking to? Or is this an AI virtual Adam?

There you go, a digital twin. No, Adam I think we have one each left, and then we'll let you go for your day. You're doing great. Final one, and this is relevant now more so than ever with the addition of the HODL. But you guys obviously have a lot of trade secrets, a lot of intellectual property. There's the whole cybersecurity side of things and, of course, protecting your digital assets themselves. Can you speak to us just quickly about how that all looks within Core Scientific as well?

We have an exceptional information security team and physical security team. This is something that as an early Bitcoin mining company, you can't take too lightly. And so it's put us in a position where we have very strong physical and digital security that's put us in a position where as we go through all of the audits, all of these different things that are required and due diligence that's required as part of working with hyperscalers, they're impressed with the infrastructure that we've built out, how we protect our facilities, all that security. And so without going into specific details, I would say we're a very highly advanced company from that perspective, and we really pride ourselves on how strong our control environment is.

Follow-on for me is more along the lines of what metrics are you using to determine when we -- I mentioned already in the conversation about hash price and hash cost for self-mining. But in terms of metrics you're using for HPC, are there any sort of like that standout metrics when you're doing compare and contrast as to -- through negotiations as to what you want to achieve?

Yes, I'd say it's really about where do we fall in the barbell of paying for all the CapEx ourselves versus them paying for all of the CapEx. And those are the 2 ends of the barbell. Now the rate decreases as the customer pays for more of the CapEx, but there are sweet spots and stopping points along that barbell that it might be then paying for a certain portion of the CapEx to do a small rate buydown. And so these are things that we're utilizing over the course of our negotiations and was one of the main reasons why we did that last convertible note raise to put us in a position where we can go all the way to the one side of barbell where we're utilizing 70% to 80% debt and 20% to 30% of an equity check to get the highest rate we could possibly get because the ROI looks more attractive than them paying for a portion of that CapEx. So we feel very confident with the capital that we put on our balance sheet that we have that full spectrum to play with today. And it will put us in a stronger position as we negotiate these contracts moving forward.

In terms of -- final one, with the CoreWeave contract as it is at the moment and you have this additional amount of megawatts available, can you currently build out other sites at the same time? Or is it a case of its time lines now. So CoreWeave will take place over these years. And then when we've got a chance to build out another contract, that will be -- or can you sort of like run parallel projects at the same time?

Our team, not only the existing team, but as we continue to add to it, has additional capabilities for 2025 and 2026 on top of what's already been announced with CoreWeave. So we feel very confident in our execution capabilities getting to that 1 gigawatt, to get us to that number, it's really going to come down to booking those contracts and having an opportunity just to be able to prove that we can build that 1 gigawatts over the next 3 years.

Yes, absolutely. Adam, it's great to hear everything is working well. You've got a great team. We've been privileged. We've seen a great team at Core Scientific, met most of the senior management team there. We were part of a great group assembled in there. And every one of the people that were in that meeting back in June there, especially on the journey back to Dallas was extremely positive. The positivity remains with Core Scientific. You're quite right that this is a deal of the century. I'm just waiting myself for the market to really accept that and sort of build that price, build that pricing that should be there. But as our early podcast for 2025, I'm really pleased that it was you that came, Adam, and fulfilled that. Thank you very much.

I certainly am too. We had 32 questions. We tried to poke a hole in the core business model. But even the simultaneously build-outs at the end, you said you're capable of doing, Adam. So very good podcast, you guys. Thank you so much for submitting the questions. Adam, we wanted to give you the opportunity just to close out any potential big catalysts we're unaware of or anything maybe we've missed in the podcast. But as Anthony said, Core Scientific, you guys, one we've been watching closely all throughout 2024 and 2025 promises to be even bigger.

Yes. I would just say, we had that third outstanding catalyst for 2024. That's something that we're working diligently on over the course of the first half of this year. And if you look at what we did over the course of 2024, we built the platform that we are going to continue to build on top of in 2025 and beyond. And we couldn't be more excited about it with the team that we have, the assets that we have, the opportunity that's ahead of us is to become one of the largest data center companies in North America. We have high confidence in our ability to execute on that plan and be one of the largest companies in the data center space in not only North America but potentially the world as well.

Phenomenal. Congratulations on a very successful year and awesome start to 2025. You guys, if you have any additional questions for Adam and team, leave them in the comments section below. Let us know if you're currently holding shares of Cores. What you think about the HPC contract with CoreWeave and of course, your outlook for 2025. Thanks so much. We'll see you back here tomorrow.