Core Scientific(CORZ) - 2025 Q1 - Quarterly Report

Part I. Financial Information This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2025 Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, with accompanying notes detailing accounting policies and key financial items Organization and Description of Business Core Scientific, a digital infrastructure company, is transitioning its ten data centers from bitcoin mining to high-density colocation for AI workloads, operating through three segments - The company operates in three segments: Digital Asset Self-Mining, Digital Asset Hosted Mining, and Colocation (for GPU-based HPC operations)[26] - A significant portion of the company's ten data centers are being converted to support AI-related workloads under new agreements with CoreWeave, Inc., a provider of high-performance computing (HPC)[24][25] - The company emerged from Chapter 11 bankruptcy on January 23, 2024, upon the effectiveness of its Plan of Reorganization[28] Summary of Significant Accounting Policies This note details significant accounting policies, including GAAP basis, estimates, early adoption of ASU 2023-08 for fair value measurement of digital assets, and distinct revenue recognition methods for its three segments - The company elected to early adopt ASU 2023-08, effective January 1, 2024, which requires measuring digital assets at fair value each reporting period with changes recognized in net income[36][37] - Revenue from the Colocation segment is accounted for under ASC Topic 842 as an operating lease, as the lease components are predominant in the licensing arrangements[57] - Digital asset self-mining revenue is recognized based on non-cash compensation from third-party mining pool operators, measured at the spot rate for Bitcoin when control is transferred[45][50] Property, Plant, and Equipment Net property, plant, and equipment increased to $650.3 million by March 31, 2025, primarily due to a significant rise in construction in progress Property, Plant, and Equipment, Net (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total PP&E (Gross) | $780,711 | $779,408 | | Less: accumulated depreciation | $407,184 | $385,922 | | Subtotal | $373,527 | $393,486 | | Add: Construction in progress | $276,764 | $162,856 | | Property, plant and equipment, net | $650,291 | $556,342 | Commitments and Contingencies The company has $1.25 billion in capital expenditure commitments for data center conversion and is involved in various legal proceedings, some resolved post-bankruptcy - The company is contractually committed to approximately $1.25 billion of capital expenditures for infrastructure modifications and equipment related to its high-density colocation services, expected to occur within the next 12 to 24 months[98] - The company is subject to several legal proceedings, including a purported shareholder class action (Pang) and contract claims (GEM), some of which have been resolved post-bankruptcy emergence through stock issuance[100][111][112] Segment Reporting The company reports across three segments: Self-Mining, Hosted Mining, and Colocation, with Q1 2025 gross profits of $6.0 million, $1.7 million, and $0.5 million respectively Segment Gross Profit for Q1 2025 vs Q1 2024 (in thousands) | Segment | Q1 2025 Gross Profit | Q1 2025 Gross Margin | Q1 2024 Gross Profit | Q1 2024 Gross Margin | | :--- | :--- | :--- | :--- | :--- | | Digital Asset Self-Mining | $6,009 | 9% | $68,395 | 46% | | Digital Asset Hosted Mining | $1,737 | 46% | $9,251 | 32% | | Colocation | $467 | 5% | $— | —% | | Consolidated | $8,213 | 10% | $77,646 | 43% | - For Q1 2025, 84% of the company's total revenue was generated from digital asset mining of bitcoin from a single customer (a mining pool operator)[135] Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Assets | $1,625,371 | $1,598,815 | | Cash and cash equivalents | $697,942 | $836,197 | | Digital assets | $80,646 | $23,893 | | Property, plant and equipment, net | $650,291 | $556,342 | | Total Liabilities | $1,806,878 | $2,418,995 | | Warrant liabilities | $421,902 | $1,097,285 | | Convertible and other notes payable, net | $1,071,843 | $1,073,990 | | Total Stockholders' Deficit | $(181,507) | $(820,180) | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Account | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | 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 | | Diluted EPS | $1.25 | $0.78 | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | 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 | $(138,255) | $44,567 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the strategic shift from bitcoin mining to HPC/AI colocation, analyzing Q1 2025 financial results, liquidity, and key operating metrics, including the impact of bitcoin price volatility and the halving event - The company is undergoing a significant strategic transition from bitcoin mining to providing high-density colocation services for HPC and AI workloads, which it believes will offer more consistent, dollar-based revenue and lower risk[143][151] Key Performance Metrics (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Self-Mining Hash rate (EH/s) | 18.1 | 19.3 | | Total cost to self-mine one bitcoin | $56,627 | $18,853 | | Total cash-based hash cost ($/TH) | $0.032 | $0.033 | | Adjusted EBITDA (in millions) | $(6.1) | $88.0 | - The April 2024 bitcoin 'halving' event, which reduced block rewards by 50%, was a primary driver of the 55% decrease in self-mining revenue year-over-year[174][226] - Total revenue for Q1 2025 decreased by 56% to $79.5 million from $179.3 million in Q1 2024, primarily due to lower self-mining and hosted mining revenue, partially offset by $8.6 million in new revenue from the Colocation segment[222] Overview Core Scientific is strategically transitioning from bitcoin mining to high-density colocation for HPC and AI, reporting $79.5 million in Q1 2025 revenue and $580.7 million net income - The company is strategically transitioning from bitcoin mining to high-density colocation services for HPC and AI customers[142][143] Q1 2025 Financial Snapshot (in millions) | Metric | Q1 2025 | | :--- | :--- | | Total Revenue | $79.5 | | Operating Loss | $(42.6) | | Net Income | $580.7 | | Adjusted EBITDA | $(6.1) | Results of Operations Total revenue decreased 56% to $79.5 million in Q1 2025, primarily due to reduced self-mining and hosted mining, while net income increased to $580.7 million due to a non-operating gain from warrant fair value changes - Total revenue decreased by $99.8 million (56%) YoY, driven by an $82.8 million drop in self-mining revenue and a $25.6 million drop in hosted mining revenue[222] - The decrease in self-mining revenue was caused by a 75% decrease in bitcoin mined, resulting from the April 2024 halving, fewer deployed miners, and increased network difficulty, partially offset by a 74% increase in the average price of bitcoin[223][226] - Total non-operating income increased by $467.8 million, primarily due to a $621.5 million gain from the change in fair value of warrants and contingent value rights, which was driven by a decrease in the company's stock price[232][235] Liquidity and Capital Resources The company maintains $698.7 million in cash and equivalents, asserting sufficient liquidity for the next twelve months, despite using $40.6 million in operating cash and $93.5 million in investing activities in Q1 2025 - The company believes its operating cash flows and existing cash balance of $698.7 million are sufficient to satisfy cash requirements for the next twelve months and beyond[245][247] - Net cash used in operating activities was $40.6 million in Q1 2025, compared to $22.2 million provided in Q1 2024, primarily due to a decrease in income before non-cash adjustments and changes in bitcoin holdings[251] - Purchases of property, plant, and equipment totaled $88.4 million in Q1 2025, with $59.5 million related to the Colocation segment, partially funded by $42.0 million in prepaid base license fees from a customer[252] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are bitcoin price volatility and electricity costs, holding 977 bitcoin valued at $80.6 million as of March 31, 2025, with a 10% bitcoin price change impacting net income by $6.7 million - The company's primary market risks are the price of bitcoin and electricity commodity prices[261][264] - As of March 31, 2025, the company held 977 bitcoin with a carrying value of $80.6 million[261] - A hypothetical 10% increase or decrease in the price of bitcoin produced during Q1 2025 would have changed net income by approximately $6.7 million[263] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[268] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[269] Part II. Other Information This section covers legal proceedings, risk factors, equity sales, and other disclosures, including executive trading plans and exhibit listings Legal Proceedings The company is involved in various legal proceedings and refers to Note 8 of the financial statements for details on material pending matters - The company is involved in lawsuits and other contingencies in the ordinary course of business and refers to Note 8 of the financial statements for details on material proceedings[271] Risk Factors This section refers to the Annual Report on Form 10-K for a comprehensive discussion of risk factors, clarifying that 'HPC Hosting' is now termed 'Colocation' - For a full discussion of risk factors, the report refers to Part I, Item 1A of the company's Annual Report on Form 10-K for the year ended December 31, 2024[273] - The company clarifies that the term 'HPC Hosting' used in prior reports is now referred to as the 'Colocation' segment[274] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2025, the company issued 0.1 million shares from Tranche 1 Warrants for $0.5 million and 3.4 million shares from Tranche 2 Warrants with minimal proceeds, relying on Bankruptcy Code Section 1145 - During Q1 2025, 0.1 million shares of New Common Stock were issued upon exercise of Tranche 1 Warrants, resulting in $0.5 million in cash proceeds[275] - During Q1 2025, 3.4 million shares of New Common Stock were issued upon exercise of Tranche 2 Warrants, resulting in minimal cash proceeds[276] Defaults Upon Senior Securities The company reported no defaults on its senior securities during the period - None[277] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[278] Other Information The company reported no other significant information, but disclosed that an EVP adopted a Rule 10b5-1 trading plan to sell approximately 600,000 shares on March 4, 2025 - On March 4, 2025, Todd DuChene, EVP, Chief Legal and Administrative Officer, adopted a Rule 10b5-1 trading plan to sell an aggregate of approximately 600,000 shares[280] Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including CEO and CFO certifications and interactive data files - The report includes a list of filed exhibits, such as CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and XBRL data files[281]