Core Scientific(CORZ) - 2024 Q1 - Quarterly Results

Fiscal First Quarter 2024 Overview Core Scientific's Q1 2024 performance was strong, marked by significant improvements in net income, revenue, operating income, and Adjusted EBITDA Executive Summary of Results Core Scientific reported strong financial results for Q1 2024, with significant improvements across key metrics including net income, total revenue, operating income, and Adjusted EBITDA compared to Q1 2023 Fiscal First Quarter 2024 Key Financial Highlights | Metric | Q1 2024 | Q1 2023 | Change | | :---------------- | :---------- | :---------- | :------- | | Net Income | $210.7 million | ($0.4 million) | +$211.1 million | | Total Revenue | $179.3 million | $120.7 million | +$58.6 million | | Operating Income | $55.2 million | $7.6 million | +$47.6 million | | Adjusted EBITDA | $88.0 million | $40.3 million | +$47.7 million | CEO Commentary and Strategic Outlook CEO Adam Sullivan highlighted outstanding Q1 performance, driven by record bitcoin mining and balance sheet strengthening, emphasizing strategic infrastructure for HPC and mining expansion - Achieved outstanding Q1 results by earning more bitcoin than any other publicly traded miner, strengthening the balance sheet, and improving fleet efficiency with new generation miners[3] - Leveraging 745 megawatts of operational, high-power data center infrastructure as a competitive advantage to build an alternative compute hosting business[3] - Evaluating the potential to transform over 500 megawatts of infrastructure for high-performance computing and plans to expand bitcoin mining hash rate while developing HPC offerings, utilizing 1.2 gigawatts of total power access[3] Key Financial and Operational Achievements The company achieved significant financial and operational milestones in Q1 2024, including substantial net income, strong Adjusted EBITDA, and leading bitcoin production among North American public miners Fiscal First Quarter 2024 Financial Achievements | Metric | Q1 2024 | Q1 2023 | Change | | :-------------------------------- | :---------- | :---------- | :------- | | Net Income | $210.7 million | ($0.4 million) | +$211.1 million | | Adjusted EBITDA | $88.0 million | $40.3 million | +$47.7 million | | Total Revenue | $179.3 million | $120.7 million | +$58.6 million | | Operating Income | $55.2 million | $7.6 million | +$47.6 million | | Cash and cash equivalents (as of Mar 31, 2024) | $98.1 million | N/A | N/A | - Earned 2,825 self-mined bitcoin, more than any other publicly listed miner in North America[4] - Operated total hash rate of 25.5 EH/s, comprising 19.3 EH/s self-mining and 6.2 EH/s hosting[4] - Owned and managed approximately 745 megawatts of infrastructure, the largest owned infrastructure footprint among publicly listed miners in North America[4] - Improved average actual self-mining fleet energy efficiency to 26.85 joules per terahash[4] - Expanded hosting offering by delivering 16 MW of infrastructure to a high-performance compute customer over 30 days ahead of schedule[10] - Completed deployment of 28,400 new S19j XP miners and deployed the first shipment of approximately 2,500 S21 miners[10] - Expanded operational infrastructure by 21 MW at the Pecos, Texas site[10] Detailed Financial Results This section provides an in-depth analysis of Core Scientific's Q1 2024 financial performance, covering revenue, segment results, operating expenses, net income, and Adjusted EBITDA Total Revenue Analysis Total revenue for Q1 2024 increased significantly to $179.3 million, up $58.6 million from Q1 2023, driven by digital asset mining and hosting revenue growth Q1 2024 Total Revenue Breakdown | Revenue Type | Q1 2024 (Millions) | Q1 2023 (Millions) | Change (Millions) | | :----------------------- | :------------------- | :------------------- | :---------------- | | Total Revenue | $179.3 | $120.7 | +$58.6 | | Digital Asset Mining | $150.0 | $98.0 | +$52.0 | | Hosting | $29.3 | $22.6 | +$6.7 | Digital Asset Mining Segment The digital asset mining segment saw substantial revenue and gross profit increases in Q1 2024, driven by higher Bitcoin prices and self-mining hash rate, improving gross margin to 46% Digital Asset Mining Segment Performance | Metric | Q1 2024 (Thousands) | Q1 2023 (Thousands) | | :-------------------------- | :-------------------- | :-------------------- | | Digital asset mining revenue | $149,959 | $98,026 | | Cost of digital asset mining | $81,564 | $72,676 | | Mining gross profit | $68,395 | $25,350 | | Mining gross margin | 46 % | 26 % | - Digital asset mining revenue increased by $51.9 million, driven by a 134% increase in the price of bitcoin and a 20% increase in self-mining hash rate[7] - Bitcoin received from self-mining decreased by 34% due to an approximate 73% increase in the global hash rate[7] - Increase in digital asset mining cost of revenue primarily driven by increased depreciation expense from deploying approximately 18,000 new generation self-miners[7] Hosting Segment Hosting revenue and gross profit increased in Q1 2024, with revenue growing by $6.7 million due to new client onboarding, improving gross margin from 28% to 32% Hosting Segment Performance | Metric | Q1 2024 (Thousands) | Q1 2023 (Thousands) | | :-------------------- | :-------------------- | :-------------------- | | Hosting revenue | $29,332 | $22,629 | | Cost of hosting services | $20,081 | $16,198 | | Hosting gross profit | $9,251 | $6,431 | | Hosting gross margin | 32 % | 28 % | - Increase in Hosting revenue of $6.7 million primarily due to the onboarding of new digital asset mining clients[8] - Partially offset by increased proceeds sharing costs of $2.6 million and increased depreciation expense of $1.1 million[8] Operating Expenses Operating expenses decreased by $7.3 million in Q1 2024 to $16.9 million, mainly due to lower stock-based compensation, partially offset by higher personnel and advisor fees Operating Expenses Summary | Expense Category | Q1 2024 (Thousands) | Q1 2023 (Thousands) | Change (Thousands) | | :------------------------ | :-------------------- | :-------------------- | :----------------- | | Total Operating Expenses | $16,924 | $24,187 | ($7,263) | | Research and development | $1,799 | $1,415 | +$384 | | Sales and marketing | $982 | $1,008 | ($26) | | General and administrative | $14,143 | $21,764 | ($7,621) | - Decrease of $7.3 million in operating expenses primarily attributable to lower stock-based compensation of $13.3 million due to forfeitures and no new equity awards granted in fiscal year 2023[9] - Partially offset by a $3.4 million increase in personnel and related expenses and a $1.7 million increase in advisor fees related to reorganization[9] Net Income (Loss) Core Scientific reported a net income of $210.7 million in Q1 2024, a significant turnaround from a net loss in Q1 2023, driven by a $143.0 million decrease in reorganization items Net Income (Loss) Summary | Metric | Q1 2024 (Thousands) | Q1 2023 (Thousands) | Change (Thousands) | | :---------------- | :-------------------- | :-------------------- | :----------------- | | Net income (loss) | $210,691 | ($388) | +$211,079 | | Basic EPS | $0.91 | $0 | N/A | | Diluted EPS | $0.78 | $0 | N/A | - Net income increased by $211.1 million, primarily driven by a $143.0 million decrease in reorganization items, net[10] - Reorganization items included a $143.8 million gain on extinguishment of pre-emergence obligations and lower Chapter 11 financing costs of $11.1 million[10][11] - Partially offset by a $12.8 million increase in reimbursed claimant professional fees and a $60.1 million mark-to-market adjustment on warrants and other contingent value rights[11] Non-GAAP Adjusted EBITDA Non-GAAP Adjusted EBITDA increased by $47.7 million to $88.0 million in Q1 2024, driven by higher total revenue and decreased digital asset impairment, despite increased operating expenses Adjusted EBITDA Summary | Metric | Q1 2024 (Thousands) | Q1 2023 (Thousands) | Change (Thousands) | | :-------------- | :-------------------- | :-------------------- | :----------------- | | Adjusted EBITDA | $87,996 | $40,337 | +$47,659 | - Increase driven by a $58.6 million increase in total revenue and a $1.1 million decrease in impairment of digital assets[12] - Partially offset by a $4.4 million increase in cash operating expenses, a $4.1 million increase in cash cost of revenue, a $3.0 million increase in realized losses on energy derivatives, and a $0.5 million decrease in gain from sales of digital assets[12] Company Information This section provides an overview of Core Scientific, details on its Q1 2024 conference call, and important disclosures regarding forward-looking statements and associated risks About Core Scientific Core Scientific is a leading North American bitcoin miner and hosting solutions provider, operating seven data centers and deriving most revenue from self-mining - One of the largest bitcoin miners and hosting solutions providers for bitcoin mining in North America[18] - Operates seven data centers in Georgia (2), Kentucky (1), North Carolina (1), North Dakota (1), and Texas (2)[18] - Derives the majority of its revenue from earning bitcoin for its own account ('self-mining')[18] Conference Call and Webcast Information Core Scientific hosted a conference call and live webcast on May 8, 2024, to discuss Q1 2024 results, with access details and replay information provided - Conference call and live webcast held on Wednesday, May 8, 2024, at 4:30 pm Eastern Time[13] - Investors could dial into the call using provided telephone numbers and access code, or listen via live audio webcast on the company's Investor Relations page[14][15] - An audio replay of the event is archived on the Investor Relations section of the Company's website and accessible via telephone for one year[17] Forward-Looking Statements The press release includes forward-looking statements regarding future performance and growth, subject to various risks and uncertainties, with no obligation for updates - The press release contains 'forward-looking statements' subject to risks and uncertainties that may cause actual results to differ materially from projections[20] - Risks include the ability to earn digital assets profitably, competitive position, capital raising, power availability, system failures, climate change, blockchain transaction methods, security breaches, economic slowdowns, internal control weaknesses, digital asset price volatility, Bitcoin halving, debt agreement requirements, SEC interpretive positions, and increasing regulation[20] - The company disclaims any obligation to update or revise any forward-looking statement, except as required by applicable law[20][21] Financial Statements This section presents Core Scientific's Q1 2024 consolidated balance sheets, statements of operations, segment results, and reconciliation of non-GAAP financial measures Consolidated Balance Sheets The consolidated balance sheet shows total assets increased to $813.968 million at March 31, 2024, driven by cash and operating lease assets, while total liabilities decreased Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :---------------------------------- | :--------------- | :------------------ | | Total Assets | $813,968 | $712,156 | | Total Liabilities | $1,132,477 | $1,309,097 | | Total Stockholders' Deficit | ($318,509) | ($596,941) | | Cash and cash equivalents | $98,125 | $50,409 | | Digital assets | $— | $2,284 | | Accounts payable | $16,165 | $154,751 | | Notes payable, current portion | $23,333 | $124,358 | | Warrant liabilities | $327,465 | $— | Consolidated Statements of Operations The consolidated statements of operations show a significant turnaround to a net income of $210.691 million in Q1 2024, driven by higher revenue and positive non-operating items Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Total revenue | $179,291 | $120,655 | | Gross profit | $77,646 | $31,781 | | Operating income | $55,227 | $7,602 | | Non-operating (income) expenses, net | ($155,670) | $7,886 | | Net income (loss) | $210,691 | ($388) | | Net income (loss) per share: Basic | $0.91 | $— | | Net income (loss) per share: Diluted | $0.78 | $— | Segment Results Both Mining and Hosting segments showed improved performance in Q1 2024, with Mining gross profit more than doubling and both segments seeing increased gross margins Segment Results (in thousands, except percentages) | Segment / Metric | Q1 2024 | Q1 2023 | | :----------------------- | :-------- | :-------- | | Mining Segment | | | | Digital asset mining revenue | $149,959 | $98,026 | | Mining gross profit | $68,395 | $25,350 | | Mining gross margin | 46 % | 26 % | | Hosting Segment | | | | Hosting revenue | $29,332 | $22,629 | | Hosting gross profit | $9,251 | $6,431 | | Hosting gross margin | 32 % | 28 % | | Consolidated | | | | Consolidated total revenue | $179,291 | $120,655 | | Consolidated gross profit | $77,646 | $31,781 | | Consolidated gross margin | 43 % | 26 % | Non-GAAP Financial Measures Reconciliation The report reconciles Net income (loss) to Adjusted EBITDA, a non-GAAP measure, showing a significant increase to $87.996 million in Q1 2024 Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income (loss) | $210,691 | ($388) | | Adjustments: | | | | Interest expense, net | 14,087 | 157 | | Income tax expense | 206 | 104 | | Depreciation and amortization | 28,996 | 20,094 | | Stock-based compensation expense | (1,060) | 12,273 | | Reorganization items, net | (111,439) | 31,559 | | Change in fair value of warrant and contingent value rights | (60,114) | — | | Adjusted EBITDA | $87,996 | $40,337 | - Adjusted EBITDA is a non-GAAP financial measure used to evaluate and compare operating results by eliminating the effect of interest, taxes, depreciation, amortization, stock-based compensation, reorganization items, and certain non-cash or non-recurring items[30]