Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Core Scientific Inc (CORZ, Financial) reported a strong first quarter with total revenue of $179 million, up 49% year over year, driven by increased bitcoin production and hosting revenue.
- Net income for the quarter was a robust $211 million, a significant improvement from a net loss in the previous year, highlighting effective cost management and operational efficiency.
- The company has expanded its infrastructure footprint, now operating 745 megawatts with contracts for up to 1.2 gigawatts, positioning it as a leader in bitcoin mining infrastructure.
- Core Scientific Inc (CORZ) has successfully entered into a high-performance compute hosting contract, enhancing its service offerings and leveraging its existing infrastructure for new revenue streams.
- The company's strategic focus on both bitcoin mining and high-performance compute hosting is expected to provide stable, multiyear, high-visibility cash flows, which can help buffer against bitcoin price volatility.
Negative Points
- Despite strong financial performance, Core Scientific Inc (CORZ) faces inherent risks associated with the volatility of bitcoin prices, which can impact profitability.
- The company's significant reliance on the cryptocurrency market exposes it to regulatory and market risks that could affect operational stability.
- Core Scientific Inc (CORZ) has a substantial amount of debt, with total debt standing at $608 million as of the end of the first quarter, although it has been reduced from the previous year.
- The company's growth and expansion plans are highly capital intensive, requiring substantial ongoing investment in infrastructure and technology.
- While the company is expanding into high-performance compute hosting, the transition requires significant time and capital investment, with full conversion of infrastructure projected to take three to four years.
Q & A Highlights
Q: On the HPC front, with the 500 megawatt potential infrastructure capacity, what kind of customers are you currently having conversations with? Are they hyperscalers, datacenter operators, startups or just that color you can provide?
A: (Adam Sullivan - President, CEO, Director) Our target base right now is mainly around our goal to have prepaid revenues part of this contract. So then having the client pay for the CapEx definitely narrows the scope of potential clients for that definitely puts it in the range of large tech companies that are looking at the development of their AI segments. So that's really our focus right now is mainly around large tech companies with a focus on AI where the demands are for application-specific infrastructure.
Q: And just drilling down to the economics you guys mentioned, I would like the existing Kharif contract with now roughly $100 dollars per megawatt hour never used get closer to $150 to $170. I'm just kind of curious, is that $150 per megawatt hour level with these existing agreements where the CapEx will be to pay? And really just any other color you could provide margin.
A: (Adam Sullivan - President, CEO, Director) Yes, of course. So our target for or what we laid out is really our target for conversions of sites. And so when we when we talk about things like the existing corporate deal for any conversion of existing space, where we leased and then subleased to potential clients, if our total revenue in our margin profile would be of a different and a bit lower. Our focus going forward is really on the conversion of sites. And so what we've laid out are based on discussions with potential clients as well as industry data. That's helping guide us really to the answer. And so what we're looking at on the on the margin side is really that 75% to 80% is really what we're targeting today. And that's on the back of about $1.4million to $1.6 million in revenue per megawatt.
Q: Thank you very much, operator. Thank you for all the detail in the prepared remarks and presentations. And Adam, I also wanted to ask about the HPC. opportunity. And you mentioned kind of three to five years for greenfield. And if I understood you right, and you mentioned three to four years for your conversions, is that correct? And maybe more importantly, kind of what is the process and for developing greenfield. I'd like to understand kind of the competition. And so if someone comes in, we're looking at a greenfield, how long does it take power? How long does it take to construction? And how do you how do you compete against them? Thank you very much.
A: (Adam Sullivan - President, CEO, Director) Of course, their focus. I'm going to start with the second part of the question here what we're seeing from traditional operators today, traditional data center operators, they have long dated contracts. You have 10 years or greater. And so for on the existing infrastructure side, they have a very hard time competing with the part of the industry that we're focused on today. And then going forward, they've sold forward, I would say, at least three to five years of capacity at which they've locked up. And so converting any of that in the short term is very difficult for them. Now if you look forward right now, you're seeing some of large tech companies securing power 2028, 2029, 2030. That's just to secure the power aspect you tack on on top of that, a lot of supply chain constraints for equipment, luckily that we already have. So in the traditional data center industry, it's a minimum three to five years for them to really start attacking this industry and from our perspective, what we're looking at, we said three to four years to fully develop the 500 megawatt you mentioned, we're going to have incremental capacity come online throughout that time period. And that's mainly driven by the fact that we have a lot of the long-lead items already owned inside of our inside of our business today. And you have a lot of those constraints around the electrical infrastructure that you could see.
Q: Thank you, Wei Adam, Denise, thanks for having me on. So Adam, maybe you could offer a little operational insight. I know the hedge price has trended down right it may be a little bit lower than you expected or had modeled. I'm wondering and I know you said that you expect miners to come off and you look for the next difficult or difficult the adjustment this week and two weeks beyond. Is there anything that you're doing sort of in house term maximize the performance of the fleet?
A: (Adam Sullivan - President, CEO, Director) Thanks, Kevin. I think it comes down to two really two items. First, it comes down operations prior to the Harvey. We actually moved our machines based on their efficiency amongst our sites based on their power contracts really to prepare for a time period that could be much worse than what we're seeing today in terms of the $0.05 ask price level. The second part is our in-house software development team has developed a significant amount of firmware around the ability to adjust machines on a minute-by-minute basis amongst different types of firmware settings. And really what that does, it allows us to change our efficiency of our machine fleet, and it allows us to do that based on power prices at each of our sites as well as prevailing house price metrics. And so for us, that provides a significant advantage over our peers who have outsourced much of that capability set, whereas we've been able to integrate really all three parts of the software stack, the energy management on the fleet management and the firmware all into a single software stack that allows us to provide a significant amount of control greater than our peer set today.
Q: Yes, thank you and good afternoon and thanks for taking my questions on. And I was kind of curious on your thoughts on Kevin's question where you kind of addressed your firmware in your stack on you mentioned other miners using third party on solutions on, I guess as I think about your US firmware solution that you're using internally, is there an opportunity potentially to bring that out into the market and have and have others have other smaller miners, the potential customers, i.e., is this a potential other revenue stream for Gores?
A: (Adam Sullivan - President, CEO, Director) Yes, thanks for the question. This is something that we've evaluated in the past potentially rolling out to the broader market. We view this as a significant competitive advantage over that over our peers. And what we've seen over the past few years in terms of the development of software is that we've continued to lead the pack in terms of our development. And so from our perspective, we're going to continue to keep this as our proprietary in-house in-house software so that we can maintain
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
