Core Scientific(CORZ) - 2025 Q1 - Quarterly Results

Executive Summary & Business Update This section summarizes Core Scientific's Q1 2025 financial performance and strategic shift towards high-performance data infrastructure First Quarter 2025 Highlights Core Scientific reported a significant increase in net income for Q1 2025, primarily driven by a non-cash mark-to-market adjustment, while total revenue and Adjusted EBITDA saw substantial declines compared to the prior year, reflecting an operational shift towards Colocation services Fiscal First Quarter 2025 Key Financial Highlights (YoY) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | Change (Millions) | Change (%) | | :--------------- | :----------------- | :----------------- | :---------------- | :--------- | | Net Income | $580.7 | $210.7 | +$370.0 | +175.6% | | Total Revenue | $79.5 | $179.3 | -$99.8 | -55.7% | | Operating Income | $(42.6) (Loss) | $55.2 (Income) | -$97.8 | -177.2% | | Adjusted EBITDA | $(6.1) | $88.0 | -$94.1 | -107.0% | - Net income increase primarily resulted from a $621.5 million non-cash mark-to-market adjustment on warrants and contingent value rights due to a decrease in share price[2] - The company is on track to deliver 250MW of billable capacity to CoreWeave by the end of 2025, anticipating annualized colocation revenue of approximately $360 million in 2026[6] - Ended the quarter with a strong liquidity position, including $778.6 million in cash and cash equivalents and digital assets[6] CEO Statement CEO Adam Sullivan highlighted Q1 2025 as an inflection point, emphasizing the company's rapid execution in delivering high-performance data infrastructure and its strategic positioning for the next era of data center infrastructure amidst accelerating demand - The quarter marks an inflection point for Core Scientific, transforming vision into execution by delivering infrastructure at scale[3] - The pace of demand for high-performance data infrastructure is accelerating, and the company's speed and precision are differentiating factors[3] - Core Scientific is not just expanding capacity but is shaping the foundation for the next era of data center infrastructure[3] Detailed Financial Performance Analysis This section provides an in-depth analysis of Core Scientific's Q1 2025 financial results, detailing revenue, gross profit, operating expenses, net income, and Adjusted EBITDA Total Revenue and Operating Results Total revenue for Q1 2025 significantly decreased year-over-year, primarily due to a 75% reduction in bitcoin mined from the halving event and a strategic shift towards Colocation services, with the revenue composition also shifting as Colocation emerged as a new stream Q1 2025 Total Revenue Breakdown (YoY) | Revenue Stream | Q1 2025 (Millions) | Q1 2024 (Millions) | Change (Millions) | Change (%) | | :----------------------------- | :----------------- | :----------------- | :---------------- | :--------- | | Digital asset self-mining | $67.2 | $149.9 | -$82.7 | -55.2% | | Digital asset hosted mining | $3.8 | $29.3 | -$25.5 | -87.0% | | Colocation (formerly HPC hosting) | $8.6 | $0.0 | +$8.6 | N/A | | Total Revenue | $79.5 | $179.3 | -$99.8 | -55.7% | - The decrease in total revenue was a result of a 75% decrease in bitcoin mined due to the halving and the operational shift to Colocation[10] Segmental Gross Profit Analysis Gross profit across digital asset mining segments declined sharply due to reduced bitcoin mining and the strategic shift, while the new Colocation segment, though contributing revenue, showed a lower gross margin due to its pass-through cost structure Digital Asset Self-Mining Gross Profit Digital asset self-mining gross profit decreased significantly, primarily due to a substantial reduction in self-mining revenue from decreased bitcoin production, partially offset by higher bitcoin prices and lower power costs Digital Asset Self-Mining Gross Profit (YoY) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | Change (Millions) | Change (%) | | :----------------- | :----------------- | :----------------- | :---------------- | :--------- | | Gross Profit | $6.0 | $68.4 | -$62.4 | -91.2% | | Gross Margin | 9% | 46% | -37 pp | | - Decrease driven by an $82.8 million decrease in self-mining revenue, resulting from a 75% decrease in bitcoin mined due to the halving and operational shift to Colocation[5] - Partially offset by a 74% increase in the average price of bitcoin and a 33% decrease in power costs[5] Digital Asset Hosted Mining Gross Profit Digital asset hosted mining gross profit also declined, mainly due to a decrease in hosted mining revenue as a result of the operational shift to Colocation, though partially mitigated by lower power costs Digital Asset Hosted Mining Gross Profit (YoY) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | Change (Millions) | Change (%) | | :----------------- | :----------------- | :----------------- | :---------------- | :--------- | | Gross Profit | $1.7 | $9.3 | -$7.6 | -81.7% | | Gross Margin | 46% | 32% | +14 pp | | - Decrease primarily due to a $25.6 million decrease in hosted mining revenue driven by the operational shift to Colocation[6][7] - Partially offset by a 90% decrease in power costs due to lower usage and rates, also driven by the operational shift[7] Colocation Gross Profit The newly reported Colocation segment generated $0.5 million in gross profit with a 5% gross margin, or 8% non-GAAP gross margin excluding power pass-through costs, with revenue including a base license fee and direct pass-through of power costs Colocation Gross Profit and Margin (Q1 2025) | Metric | Q1 2025 (Millions) | | :----------------- | :----------------- | | Gross Profit | $0.5 | | Gross Margin | 5% | | Non-GAAP Gross Margin | 8% | - Colocation revenue includes a base license fee and the direct pass-through of power costs to clients, with no margin added on power[8] - Costs primarily consist of lease expense, direct pass-through of power costs, and facilities operations expenses[8] Operating Expenses Selling, general and administrative (SG&A) expenses increased significantly year-over-year, driven by higher stock-based compensation, non-capitalizable Colocation site startup costs, and increased personnel expenses to support the transition to Colocation operations Selling, General and Administrative Expenses (YoY) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | Change (Millions) | | :----- | :----------------- | :----------------- | :---------------- | | SG&A | $40.1 | $16.9 | +$23.2 | - Increase primarily attributable to a $13.9 million increase in stock-based compensation[9] - Also driven by a $7.2 million increase in non-capitalizable Colocation site startup costs and a $2.5 million increase in personnel and related expenses due to increased headcount for Colocation operations[9] Net Income Analysis Net income saw a substantial increase, primarily due to a large non-cash mark-to-market adjustment on warrant liabilities, partially offset by a decrease in total revenue and the absence of reorganization items present in the prior year Net Income (YoY) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | Change (Millions) | | :-------- | :----------------- | :----------------- | :---------------- | | Net Income | $580.7 | $210.7 | +$370.0 | - Increase driven primarily by a net $621.5 million mark-to-market adjustment on warrants and other contingent value rights, comprising a $634.3 million decrease in fair value of warrant liabilities, partially offset by a $12.8 million increase in fair value of contingent value rights[10] - Also contributed by a $16.3 million decrease in interest expense, net, and a $7.9 million increase in proceeds from money market funds[10] - Partially offset by $111.4 million of Reorganization items, net (no comparable activity in fiscal 2025), and a $99.8 million decrease in Total revenue[10] Non-GAAP Adjusted EBITDA Performance Non-GAAP Adjusted EBITDA significantly decreased, primarily due to lower total revenue, a decrease in the fair value of digital assets, and increased cash operating expenses, partially offset by reduced cash cost of revenue Non-GAAP Adjusted EBITDA (YoY) | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | Change (Millions) | | :-------------- | :----------------- | :----------------- | :---------------- | | Adjusted EBITDA | $(6.1) | $88.0 | -$94.1 | - Decrease driven by a $99.8 million decrease in total revenue, an $11.2 million decrease in the change in fair value of digital assets, and a $7.4 million increase in cash operating expenses[11] - Partially offset by a $21.4 million decrease in cash cost of revenue and a $3.0 million decrease in realized losses on energy derivatives[11] Company Profile This section provides an overview of Core Scientific's business, highlighting its leadership in digital infrastructure and its strategic shift towards AI-related colocation services About Core Scientific Core Scientific is a leader in digital infrastructure for high-density colocation services and digital asset mining, actively transitioning a significant portion of its facilities to support AI-related workloads, moving beyond its primary self-mining revenue model - Core Scientific is a leader in digital infrastructure for high-density colocation services and digital asset mining[18] - The company operates dedicated, purpose-built facilities for digital asset mining and provides digital infrastructure, software solutions, and services to third-party customers[18] - Currently allocating and converting a significant portion of its ten facilities across multiple states to support artificial intelligence-related workloads under new contracts[18] - Historically derived the majority of revenue from self-mining digital assets, but is undergoing an operational shift[18] Forward-Looking Statements & Risk Factors This section outlines the inherent risks and uncertainties associated with forward-looking statements, emphasizing factors that could cause actual results to differ materially from projections Special Note Regarding Forward-Looking Statements This section serves as a cautionary note, highlighting that the press release contains forward-looking statements subject to various risks and uncertainties, which could cause actual results to differ materially from projections, and the company disclaims any obligation to update these statements - The press release contains forward-looking statements regarding projections, estimates, and forecasts of financial metrics, market opportunity, growth plans, and the company's ability to execute contracts and source energy[19] - All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially[20] - Key risks include the ability to earn digital assets profitably, attract colocation customers, perform under agreements, maintain competitive position, impact of network hash rate, ability to raise capital, power availability, system failures, climate change, changes in blockchain transaction methods, security breaches, market slowdowns, digital asset price volatility, and regulatory changes[20] - The company disclaims any obligation to update or revise any forward-looking statement, except as required by applicable law[20][21] Condensed Consolidated Financial Statements This section presents the condensed consolidated balance sheets, statements of operations, and cash flows, providing a summary of the company's financial position and performance Condensed Consolidated Balance Sheets The balance sheet shows a slight increase in total assets, driven by property, plant and equipment, while total liabilities decreased significantly, primarily due to a reduction in warrant liabilities, leading to a substantial improvement in stockholders' deficit Condensed Consolidated Balance Sheets (Key Figures, in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--------------------------- | :------------- | :---------------- | | Total Assets | $1,625,371 | $1,598,815 | | Total Liabilities | $1,806,878 | $2,418,995 | | Total Stockholders' Deficit | $(181,507) | $(820,180) | | Cash and cash equivalents | $697,942 | $836,197 | | Digital assets | $80,646 | $23,893 | | Warrant liabilities | $421,902 | $1,097,285 | Condensed Consolidated Statements of Operations The statement of operations reflects a substantial decrease in total revenue and gross profit, leading to an operating loss, however, a significant non-operating income from the change in fair value of warrants and contingent value rights resulted in a higher net income compared to the prior year Condensed Consolidated Statements of Operations (Key Figures, in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------- | :-------------------------------- | :-------------------------------- | | Total revenue | $79,525 | $179,291 | | Gross profit | $8,213 | $77,646 | | Operating (loss) income | $(42,596) | $55,227 | | Change in fair value of warrants and contingent value rights | $(621,464) | $(60,114) | | Net income | $580,693 | $210,691 | | Net income per share - Basic | $1.44 | $0.91 | | Net income per share - Diluted | $1.25 | $0.78 | Condensed Consolidated Statements of Cash Flows Cash flows from operating activities turned negative in Q1 2025, primarily due to adjustments reconciling net income, including the non-cash warrant valuation change, while investing activities saw increased cash usage for property, plant, and equipment purchases, and financing activities also used cash Condensed Consolidated Statements of Cash Flows (Key Figures, in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash (used in) provided by operating activities | $(40,599) | $22,174 | | Net cash used in investing activities | $(93,458) | $(31,970) | | Net cash (used in) provided by financing activities | $(4,198) | $54,363 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(138,255) | $44,567 | | Cash, cash equivalents and restricted cash—end of period | $698,725 | $114,276 | - Purchases of property, plant and equipment increased significantly to $88.4 million in Q1 2025 from $31.9 million in Q1 2024[29] - The change in fair value of warrant liabilities was a significant non-cash adjustment, decreasing by $634.3 million in Q1 2025[29] Detailed Segment Results This section provides a detailed breakdown of financial performance across the Digital Asset Self-Mining, Digital Asset Hosted Mining, and Colocation segments, highlighting revenue, costs, and gross profit for each Digital Asset Self-Mining Segment The self-mining segment experienced a substantial decline in revenue and gross profit, with power fees remaining the largest cost component despite a decrease, and gross margin fell sharply from 46% to 9% Digital Asset Self-Mining Segment Performance (in thousands) | Metric | Q1 2025 | Q1 2024 | | :------------------------- | :--------- | :--------- | | Digital asset self-mining revenue | $67,179 | $149,959 | | Cost of digital asset self-mining: | | | | Power fees | $30,319 | $44,983 | | Depreciation expense | $19,259 | $27,478 | | Total cost of digital asset self-mining | $61,170 | $81,564 | | Digital Asset Self-Mining gross profit | $6,009 | $68,395 | | Digital Asset Self-Mining gross margin | 9% | 46% | Digital Asset Hosted Mining Segment The hosted mining segment also saw a significant reduction in revenue and gross profit, reflecting the company's strategic shift, with power fees, while still a major cost, decreasing substantially Digital Asset Hosted Mining Segment Performance (in thousands) | Metric | Q1 2025 | Q1 2024 | | :------------------------- | :--------- | :--------- | | Digital asset hosted mining revenue from customers | $3,773 | $29,332 | | Cost of digital asset hosted mining services: | | | | Power fees | $1,367 | $13,494 | | Total cost of digital asset hosted mining services | $2,036 | $20,081 | | Digital Asset Hosted Mining gross profit | $1,737 | $9,251 | | Digital Asset Hosted Mining gross margin | 46% | 32% | Colocation Segment The new Colocation segment generated $8.6 million in revenue, primarily from license fees and power pass-through, and reported a gross profit of $0.5 million, with a 5% HPC Hosting gross margin and an 8% Colocation licensing gross margin Colocation Segment Performance (in thousands) | Metric | Q1 2025 | Q1 2024 | | :------------------------- | :--------- | :--------- | | Colocation revenue: | | | | License fees | $5,995 | — | | Power fees passed through to customer | $2,586 | — | | Total Colocation revenue | $8,573 | — | | Cost of Colocation services: | | | | Cost of licensing revenue | $5,520 | — | | Power fees passed through to customer | $2,586 | — | | Total cost of Colocation services | $8,106 | — | | Colocation gross profit | $467 | — | | Colocation licensing gross margin | 8% | — | | HPC Hosting gross margin | 5% | — | Consolidated Segment Results Consolidated results show a significant decrease in total revenue and gross profit, leading to a lower consolidated gross margin of 10% compared to 43% in the prior year, reflecting the overall impact of the operational shift and market changes Consolidated Segment Results (in thousands) | Metric | Q1 2025 | Q1 2024 | | :------------------------- | :--------- | :--------- | | Consolidated total revenue | $79,525 | $179,291 | | Consolidated cost of revenue | $71,312 | $101,645 | | Consolidated gross profit | $8,213 | $77,646 | | Consolidated gross margin | 10% | 43% | Non-GAAP Financial Measures This section defines and reconciles Adjusted EBITDA, a non-GAAP financial measure used to evaluate the company's operational performance by excluding certain non-cash and non-recurring items Adjusted EBITDA Definition and Rationale Adjusted EBITDA is presented as a non-GAAP financial measure to provide insights into the company's operating results by excluding non-cash items, interest, taxes, and other non-recurring or non-operational charges, and is used by management and investors for evaluating performance and making operational decisions - Adjusted EBITDA is defined as net income adjusted for interest, taxes, depreciation, amortization, stock-based compensation, reorganization items, unrealized fair value adjustments on energy derivatives, changes in fair value of warrants and contingent value rights, colocation organizational startup costs, post-emergence bankruptcy advisory costs, and other non-cash items[34] - The measure is used by management, investors, and the Board to evaluate and compare operating results, return on capital, and operating efficiencies, as it removes the effect of certain non-cash items, variable charges, and timing differences[34] - It is a key measurement used internally for operating decisions, performance evaluation, and strategic/financial planning[34] - Adjusted EBITDA should not be considered in isolation or as a substitute for GAAP financial information, and its computation may not be comparable to other companies[35] Adjusted EBITDA Reconciliation The reconciliation table details the adjustments made to net income to arrive at Adjusted EBITDA, showing a significant shift from positive Adjusted EBITDA in Q1 2024 to negative in Q1 2025, largely influenced by the change in fair value of warrants and contingent value rights Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $580,693 | $210,691 | | Adjustments: | | | | Interest (income) expense, net | $(2,187) | $14,087 | | Depreciation and amortization | $19,731 | $28,996 | | Stock-based compensation expense | $16,185 | $(1,060) | | Reorganization items, net | — | $(111,439) | | Change in fair value of warrants and contingent value rights | $(621,464) | $(60,114) | | Adjusted EBITDA | $(6,071) | $87,996 | Investor Relations & Corporate Information This section provides details on investor communication, including conference call information, audio replay access, and contact details for investor relations and media inquiries Conference Call and Live Webcast Core Scientific hosted a conference call and live webcast on May 7, 2025, to discuss the fiscal first quarter 2025 results, featuring key executives - Conference call held on Wednesday, May 7, 2025, at 4:30 pm Eastern Time[13] - Speakers included Adam Sullivan (CEO), Jim Nygaard (CFO), and Jon Charbonneau (VP, Investor Relations)[13] - Investors could dial in via telephone or listen to a live audio webcast on the company's Investor Relations page[14][15] - A supplementary investor presentation for Q1 2025 was accessible online[16] Audio Replay An audio replay of the conference call is available for one year via the company's investor relations website and a dedicated telephone number - An audio replay of the event is archived on the Investor Relations section of the Company's website[17] - Replay also accessible via telephone by dialing +1 (877) 660-6853 (U.S. toll free) or +1 (201) 612-7415 (U.S. local) and entering Access Code 13753188[17] Contacts Contact information for investor relations and media inquiries is provided for stakeholders - Investors can contact ir@corescientific.com[40] - Media can contact press@corescientific.com[40]