Cleanspark (CLSK) Q3 2026 earnings call transcript

Good afternoon. My name is Lacey, and I will be your conference operator today. I would like to welcome everyone to the third quarter of fiscal year 2026 Financial Results Conference Call for Clean Spork. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you.

I would now like to turn the floor over to Harry Suda, Clean Spork's Chief Business Officer. Sorry you may have been again.

Thanks Lacey. Thank you for joining us today to review the third quarter 2026 Financial Results for Clean Spork. We encourage you to review our earnings results press release, which was issued today, and is available on our website. Our 10Q will be filed shortly. A webcast replay and transcript of today's call will be added to our website once available.

On the call today, I'm joined by Matt Schultz, our Chairman and Chief Executive Officer, and Gary Vecharelli, our President and Chief Financial Officer. Some of the statements we make today will be forward looking based on our best view of the world and our business as we see them today. The statements and information provided remain subject to the risk factors disclosed in our 10K. We will also discuss certain non-gap financial measures concerning our performance during today's call. You can find the reconciliation of non-gap financial measures in the press release, which is available on our website.

And with that, take it away, Matt.

Thanks, Harry. Good afternoon, everyone, and thank you for joining us. To begin, I'd like to discuss how we're putting our operations and balance sheet to work as we continue our evolution into a diversified digital infrastructure platform. Following the close of this quarter, we completed an agreement that is the most significant transaction in Queen Sparks history. A 20-year triple net lease at our Sandersville, Georgia campus with a high investment grade leading global technology company. That agreement marks the start of our evolution into a diversified digital infrastructure platform and begins the monetization of our power portfolio at an institutional scale. The lease represents $6.6 billion in contracted revenue to the business with the ability to scale to $11.6 billion with the execution of two five-year extensions.

Being a true triple net structure, we expect near 100% net operating income margin. We have also forged a partnership with a vertically integrated mechanical, electrical and plumbing manufacturer and design builder and added 885 megawatts of commercial growth. Taken together, these developments bring our second mover advantage fully to bear. Many of you joined us for our investor update on July 14th, and today I would like to recap three things.

First, I want to spend some time on why we believe this lease is not just a milestone, but among the absolute best commercial outcomes in the sector. Second, I'll update you on execution at Sandersville across our Texas portfolio under exclusivity and across the broader platform. And third, I want to talk briefly about our legacy Bitcoin mining business and how the optionality it provides is a strategic advantage as we enter this next phase of evolution and growth.

Let me start with the market. The demand for compute continues to outpace the industry's ability to supply it. The constraint is not chips, and it is not capital. It is energized grid connected power at scale, sitting on land that can support a full AI campus build. That combination is scarce today, and we believe it will remain scarce for years to come.

The agreement is a 20 year triple net lease covering the entirety of our Sandersville campus, nearly 250 megawatts of gross capacity, and 175 megawatts of critical IT load. The initial term carries approximately $6.6 billion of contracted revenue with two five year extension options that bring the total to approximately $11.6 billion over 30 years.

We expect an average annual NLI of approximately $330 million, and we project our cost per critical IT megawatt at the 10 to $12 million range in line with the market for this generation of data center. Here are two things I want everyone to take away from those numbers.

First, we believe on a risk adjusted basis, the economics are among the best in the space. Headline comparisons across data center deals can be misleading as different contractorations, different lease structures, different risk allocations, and different financing packages can obscure actual returns.

Next, this is a triple net lease, taxes, insurance, and importantly, maintenance CAPX all sit with the tenant, which means our contracted revenue converts to net operating income at effectively 100%. But the benefit goes beyond that.

The triple net structure is a powerful risk mitigate on the finance side. Lenders underwriting this project are looking at two decades or more of clean, predictable, high margin cash flows backed by a high investment grade counterparty with no operating cost volatility sitting between the rent check and the debt service. This is why we're able to structure this deal without credit wrappers. And why we expect most of this build out was, pardon me, we expect to finance most of this build out with a tractively price project based financing.

Gary will speak to the capital markets backdrop, but the short version is this. The structure of this lease was engineered to make financing straightforward and support a high loan to cost protecting our equity. We deliberately went after a longer duration lease. We deliberately targeted a triple net structure, and we deliberately chose a high investment grade counterparty as our tenant.

Each of these choices was made with the strategic intention to protect and enhance shareholder value. As we sit here today, we have already fully funded the equity portion of the Sandersville project on execution. The project is advancing according to plan site preparation work has been underway for months on the 122 acre greenfield parcel we acquired earlier this year, which allows us to build without disturbing our Bitcoin mining footprint just down the road.

We're working with our tenants preferred engineering procurement and construction management firm and general contractor, a partner with a proven track record and domestic domestic manufacturing capability across key mechanical electrical plumbing and cooling components. That familiarity, meaningful meaningfully de-risk the supply chain and the long lead equipment timeline. It's also another step in shifting construction out of the field and into the factory, reducing onsite labor and delivering a faster, more repeatable build.

The first data hall remains on track to be ready for service in the fourth quarter of calendar 2027. And we've already ordered and prepaid for all data center long lead items for our office.

Let's turn to Texas in conjunction with the Sandersville lease, our entire Texas portfolio. 718 acres and up to 885 megawatts of secured and planned capacity across our ceiling and brazoria campuses is under exclusivity with the exact same counterparty. As I said on July 14, we are in an exclusivity window, not at the finish line. Still, the scope of this discussion reflects the portfolio dynamic we described to you last quarter.

Sophisticated compute buyers are not looking for a single data hall. They want a growth path measured in gigawatts and a developer they can trust across a multi decade relationship. Sandersville is the first chapter exclusivity across 885 megawatts in Texas shows how our counterparty views the rest of our portfolio.

Outside of clean sparks work in Texas, there's been a broader policy discussion this week. As many of you likely seen, Governor Abbott directed the public utilities commission of Texas and Urcott to audit and verify all data center projects seeking a grid connection before they can move forward.

While this may be seen as uncertainty or short term setback, we don't see it that way. We commend the governor for a thoughtful attention to one of the nation's most important power markets and a broader impact of Urcott's upcoming actions. The operational rigor and financial commitments required to progress through the next phases of development and energization in Texas align exactly with how clean spot sparked already plans and operates.

While a formal batch process is now expected to extend beyond August 7, our campus quality discipline site selection and project readiness remain unchanged. Urcott has notified large load applicants that final badge zero determinations will be delayed with the next key milestone, the August 20 PUCT open hearing. In the meantime, the state agencies are mobilizing to address the governor's directive, which underscores the critical role our sector plays in the Texas economy.

Clean spots historical growth through counter cyclical acquisitions provides a strong basis for us to run a similar playbook in your market. As an example, you may recall that we acquired the original standards of campus during challenging political and economic times for the prior owner. We anticipate similar opportunities might develop in Texas in the near term. With remains intact. We continue to invest in our ceiling and brazoria sites, and there is no anticipated change to our energization timelines.

Across the broader broader portfolio, we hold 1.8 gigawatts of contracted capacity today with a high degree of confidence in growing beyond 2.1 gigawatts in the near term. Through the Urcott review process, and we are evaluating multiple gigawatts of projects as we look to scale and diversify our digital infrastructure across the US. Our land and power engine is not slowed down because of this lease. If anything, this transaction sharpens our conviction.

Powered land is the scarce asset of our area of our era and finding it, contracting it and developing it is what our team does better than anyone else. Before I handed to Gary, I want to spend a moment on our legacy Bitcoin mining business and the role it plays as we evolve into something profoundly different. When speed to power matters to a utility, we have the ability to bring a paying load online faster than a traditional data center developer.

That capability helped us build this portfolio and it will help us to expand it. At Sandersville, mining will continue to keep the site productive until the day of cut over. Financially, mining and our Bitcoin Treasury gives us a set of levers that very few companies in this sector can match.

Our hodl balance is not a passive position. It is a flexible source of capital that we can deploy in whichever way creates the most value. What that means in practice is that we are never forced sellers of anything, not our Bitcoin and critically, not our equity. Gary will walk through the capital strategy in detail, but the principle is simple. Mining funds the platform, the balance sheet protects our shareholders and the AI business monetizes the portfolio for decades to come.

I'll close where I always do, and that's with our people. The lease we signed in July reflects the grit, discipline and talent of a team that I am privileged to work alongside. From the operators in Sandersville and all across Georgia, Texas, Mississippi, Tennessee and Wyoming to the deal team that completed this transaction, a heartfelt thank you. Your tireless commitment to the mission we all share has paved the way for our future success.

And with that, I'll turn it over to Gary to walk through the numbers.

Gary. Thank you, Matt, and good afternoon, everyone. I will dive into the quarters numbers and then talk about our new centers release and our capital strategy going forward. For the quarter, our revenue of 138 million reflected a modest increase of 1% compared to the preceding second quarter. The average revenue per Bitcoin mind in Q3 was approximately 72,000, a 5% decrease from the prior quarter.

The average revenue per Bitcoin mind was 76,000. However, we still managed to recognize an increase in revenue as our uptime and hash rate increased in the third quarter. Gross margin in third quarter was approximately 38% compared to 40% in the second quarter, as power prices had a modest increase of 1 10th of a penny over the prior quarter.

Gap net loss for the third quarter was 240 million compared to a loss of 378 million in the preceding second quarter. The primary driver in this quarter's net loss was unfavorable market adjustments on Bitcoin balances approximately 133 million.

Comparatively, we recognize a larger unfavorable marked market adjustment of 263 million in the prior quarter. Our adjusted EBITDA in the third quarter was negative 113 million. It's important note that this adjusted EBITDA number does not adjust out the 133 million marked market adjustment. When normalized for such non-cash items, we produce 20 million, a positive 20 million for the quarter.

In the third quarter, our digital asset management activities once again delivered net positive cash returns. This quarter, we generated approximately 8.6 million in cash, which brings our total for the fiscal year to 25.8 million. Additionally, we sold the majority of our quarterly Bitcoin production. And through the efforts for digital asset management team, we were able to recognize sales for Bitcoin 7% greater than spot. With the sandwich release announced and progress being made towards future lease announcements, we are quickly approaching a day with much more consistent, predictable, and durable cash flows.

A job between now and then is to unlock significant shareholder value by continuing to educate the market on the evolution our business is undergoing and the progress we are making towards that goal.

Last quarter, I mentioned our second mover advantage in the AI infrastructure space. As Matt discussed, we have seen this play out in the commercialization of San Azale. The 20 year duration of our lease combined with its triple net structure and the high investment grade credit quality of our counterparty put us in rarefied air amongst our peers. We are positioned extremely well to execute on time and on budget with strong returns for our shareholders.

With respect to the financing for the San Azale project, I want to be explicitly clear. Our plan is to seek project based debt financing to cover the vast majority of the build out based on our estimate estimated project costs at 10 to 12 million per megawatt. We expect toll cash needed for CapEx in a range of 1.75 to 2.1 billion.

Recent financings have exceeded 90% loan to cost. However, we have the equity portion of the San Azale project already funded and we will not be raising capital via equity or equity link instruments for San Azale. It's also important to note that we had total liquidity of 917 million as of June 30, including approximately 200 million of cash and almost 14,000 Bitcoin. To follow up on match remarks, we have a very positive view on the recent developments in our car.

As we expect further creative opportunities to present themselves. Prior to Governor Abbott's directive, there were a number of opportunities that came to us on the eve of the SB 6 attestation deadline requirement. This is quite telling as we believe there are potential sites that either need capital or don't have access to capital. We have significant dry powder with our Bitcoin balance, which we would be willing to part with if and when the right opportunity presents itself.

We will continue to be aggressive, yet disciplined and pursuing opportunities that secure pipeline, which will deliver significant returns. With that, I'll hand it back over to Harry and lead us into Q&A.

Thanks, Barry. We will now open the floor to questions from the analyst community operator. Please provide instructions and manage the queue for the Q&A session.

Thank you. I would like to remind everyone if you would like to ask a question, please press star than the number one on your telephone keypad will pause for just a moment to compile the Q&A roster.

Thanks, Paul. This is Harry. So really important for our strategy for developing in Sandersville was to procure the 122 acre parcel a little bit down the road so that we could build out the data center as a true greenfield development. So when we think about all of the data center costs associated with the build out, those are really apples to apples versus any greenfield project in our mind. There is a very modest, a creative value from the current deployment that's related to the substation being already built and energized.

That point was a critical piece in the commercialization process because having landed power and energized power made that a particularly attractive campus. But when you think through the CAPX budget outside of the substation itself, really, this is a true greenfield build.

Thanks, Paul. I think that, you know, the fundamental macro perspective is that the explosive growth in the data center market and the relentless demand profile that sits behind that is going to require behind the meter deployments to achieve any of the, you know, even the bear or the mid case data center growth numbers that are out there from, you know, from yourself and from other shops that are looking to see, you know, what does this really look like over a five 10 and 15 year deployment scale.

It's something that we're very actively looking at internally, but like with everything we move strategically and deliberately. And we want to make sure that there is true continuity between the energy source, between the clean spark capability and between the customer needs so that we have full end to end project clarity before any of those solutions would come to market.

Great.

This is Matt. I'll take that. I'd say given the scale of our Texas assets and how progressed our discussions are both on permitting substations, the batch zero base load process that we're in. I wouldn't exactly say that something is going to jump the line per se. But what I can tell you is the, you know, we've, we've had a VDR open for a number of parties over time and the interest in assets like Washington, Georgia, for example, present an extremely compelling opportunity. It's 86 megawatts of energized capacity today.

However, we've already submitted a line study at the request of me ag and a local utility to expand that by up to 500 megawatts. So as we've progressed that those discussions, we've also secured options on several hundred acres adjacent to the existing substation to support that build. Additionally, you nailed it. We have a hundred megawatts in Wyoming. We have 60 megawatts in Jackson, Tennessee. We have other capacity in, in, in Ripley, Tennessee as an example. So there, the, I would say that the value of the assets outside of Texas for those in search of 2728 RFS went up significantly due to the uncertainty on the timing of this audit period that Governor Abbott pushed forward.

Yeah, John, absolutely. So the way that the acquisition process for the other two Texas sites went was very deliberate on our part. We are always thinking about risk management first and foremost in the business. And so the way we went about acquiring those projects fit into the same framework. When we acquired the asset in Coley, very importantly, that asset came with or caught approval already in hand in 2025.

That changed in January of 2026 when the batch zero process was rolled out purely from a timing and requirement perspective. But what that site received out of the gate there was batch zero go status, which means the base load designation. And so while we do require the final determination from her caught in order to interconnect that location, it has been given every green light every step of the way through, despite needing the final check mark in order to proceed through that final energization gate.

The second is in Brazil. There the 300 megawatts of additional phase one capacity. Those are functionally exactly the same as Coley, other than the fact that they were given the go status in 2026 rather than a 2025 overview. The second 300 in Brazil are the ones that are sub is the segment of the megawatts that are subject to the final determination between base load status and studied load status. Though we still went through a very detailed transmission line assessment when we made the decision to acquire that location. And based on the transmission line capacity that we evaluated, we understand that site to have a tremendous amount of capacity, both upstream and downstream within that segment of the utilities system.

And so we're very optimistic, but that is the segment of the load that we are still waiting for base load versus studied load status.

Yeah, definitely no pullback. The, the inbound inquiries have ramped up in the last 48 hours. With questions surrounding whether or not there's any exclusivity on the Washington project. I'd say that's the one that has has garnered the most, the most interest of late just because of the capacity of scale in the short term.

Call it utility areas and do you think ultimately it favors established players such as yourself? Yeah, so I think that let's take the second part first, which is that as we see the demand profile on the tenant side of the house continue to be relentless. The established players who have a long track record of procurement and development of energy and infrastructure assets are going to continue to rise to be the cream of the crop on the go forward basis.

When it comes to the proliferation of this type of audit or assessment. I think it's dynamic. I think that Governor Abbott is facing the largest interconnect application queue of anybody in the nation. And so his response is going to be tailored to the Texas specific dynamics and the ERCOT specific dynamics, you know, that that takes that grid in particular.

I think that ultimately one of the things that is currently not well understood broadly in public is the economic benefit that data center projects represent to cities, counties and states across the nation. And some of the technical specifics of data center deployments. There is dramatic technological improvement, then, then 20 or 25 years ago in the way that data centers operate water usage has been crushed to near zero. The footprint that these data centers are operating on from a land use perspective is shrinking. And so I think that while there's still an education curve that the public is going through. When we look back in five to 10 years, this is going to look like another industrial revolution in America.

And, you know, if I may Brian just to add on to Harry's comments on the second part of your question about established players. You know, I've engaged meaningfully with the senior site selection folks from a number of hyperscalers. And what seems to be the consensus is that, you know, similar to, you know, Las Vegas residential real estate 20 years ago. In Texas, a lot of a lot of the developers or a lot of the hyperscalers are encountering folks that maybe put down a deposit on some land with proximity to transmission lines and applied for status within ERCOT approvals.

What we're seeing now is with the implementation of SB six. Now you have to put your money where your mouth is. And so a lot of these projects that may have real viability have kind of washed out because there's not the capital support behind them that's necessary. And we based on our engagement with the communities and with ERCOT, having the balance sheet to actively stand behind the guarantees and the attestation process puts us in a really favorable position going forward.

I think that, you know, one of the things that we really pride ourselves in is being dynamic and flexible. I think that the opportunity set across these power projects are really at the project level where the big opportunity evaluation process happens. And so I think that we have the diligence team and the relationships to be successful in essentially every American power market as it exists today. But really where the special sauce from our perspective is, is being able to take in an enormous volume of deal visibility and be the strongest selectors within that deal volume so that we're able to be hyper hyper surgical and specific about where we make selections and a lot of that isn't about region or jurisdiction.

It's even more granular than that.

Mike, thanks for the question. This is Matt. Just to give you a little bit of color. We had a VDR open that encompassed a number of our sites and we invited a number of major players into that VDR to do an analysis. And what surprised us wasn't that, you know, hey, I'm interested in site A or site B or site D or whatever the case may be the response was I'll take it all. So our Sandersville tenant was also in the VDR and as a function of the negotiations and understanding the tailwinds that we brought to the Sandersville project. They were aggressive in seeking that exclusivity and optionality for on the go forward. Now we're still under exclusivity there.

We're working with them constructively on a daily basis. But suffice it to say that should this slip beyond the, you know, if we get bad news on the August 20 P. U. C. team meeting. There's so much pent up demand for energized megawatts that I think that if they were to fall out, there would be a another company rushing to the gates in short order because of the quality of the asset. Because of the status in that batch process.

Yeah, great question Mike. Some of the stuff that we saw in the past that we passed on. Lacked the high quality that I think is a standard for clean spark. Maybe had power that was in a later batch process that we passed on. But then as it got closer to that SD six period, the quality assets started to accelerate just because folks didn't have the bandwidth or the capital to be able to support those those initial payments. So, you know, I think for us, nothing changes in light of Governor Abbott's position. We're still going to maintain the same rigor on site selection. It has to meet our criteria. We're we're not. You know, I think we talked about this back in the Bitcoin days, Mike, and that is we're we're we're going to find a high quality assets and we say no more often than we say yes.

Rather than, you know, find a powered land and then try and shoe on something to fit there. We look for the opportunities that best fit the demand profile we're seeing.

Yeah, great question. Thank you for joining. Tell Brett we're not forgiving him for not showing up. You know, so the I think the interesting part about this is when a utility has available power or when there's new generation that comes online, occasionally these loads are offered to the market initially as an interruptable load. So to be able to raise your hand and say I'll take that power with 90 hours of annual curtailment with the understanding that once we once we demonstrate sustainability on the new generation, it becomes a fixed load or a firm load. So Bitcoin mining enables that ability for us. Additionally, if it is firm power that is available to monetize today for the benefit of the local utility and the community.

They don't really care who's paying the power bill as long as the power gets paid and we can drop in modular immersion cool Bitcoin mining technology inside our 90 days and start to monetize those megawatts that are otherwise going underutilized. We can then, just like we've done in many jurisdictions, acquire sufficient land behind that that we can take our time to build a data center according to the basis of design of the end use tenant and switch that power over if and when the data center is complete. It's important to know the CAPEX requirement for that has already been spent on many of these modular deployments. As we move out of Sandersville in a couple of years, we'll repurpose those those immersion cooled pods and the a six to to kind of plow the road, if you will, for future developments, if and when those kind of interruptable or early energized asset opportunities make themselves available.

Yeah, appreciate the question. You know, I think the correct answer regarding Texas is we don't know. There's, there's not a great deal of certainty in what lies beyond that August 20 PC meeting. What I can tell you is the outbound communications that we've had the dialogue that we've had with folks such a center point is that the governor and the governor's representatives are aggressively looking to communicate to the market that that. The data center component of the loads is important to Texas. So it is a priority.

I think that the challenge is if we're being honest and this is purely speculation on my part. I think a lot of the objections that you're seeing in Texas come from the 765 KV high tension lines that are that are forced to be stretched across farmland or other areas. We're really fortunate in that the property that we own don't require that so that I see that as a bit of a differentiator, but that, you know, that may be true. That's just what we're hearing, you know, from the community relations folks that we have on the ground there.

And, and, and, and, and, and, regarding the financing portion up to you, you know, as you've seen some of the recent deals financing access of 90% low in the cost is very common and that's our target. Obviously the higher the loan to cost the greater the internal rate of return is because you're bringing less equity to the project. So we obviously want to target the highest rates of return possible. So we're targeting above 90%. In terms of demand, we've been watching the market very closely and you saw across the wire this morning and we saw Google or alphabet. Draw about interest of about 115 billion demand on just a $25 billion transaction right there's about four and a half times over subscribe.

And so to us, that's a clear indication that demand remains robust and, you know, while spreads have widened in recent months. We've seen those hyperscheter bond bonds bid tighten up to 25 dips, you know, just in the last week. So the markets can be a little fickle, but, but we're, we're keeping a close eye on it. And we feel pretty confident we'll be able to hit our targets.

Can we just double click there where you see the most value today? Hey, Bill, thanks for the question. We, I think what you probably know about cleanse park since the day we sat in the van when we had two sites way back in the day. You know, kind of talking about the path forward. We, we've been very disciplined.

And I think a differentiator for us is when we talk about our 2.1 gigawatt pipeline or the 1.8 contract pipeline. We're sharing what we have contractually bound to the company under, under some form of certainty to go forward. Duncan and his team, I think at, at last glance had 6.5 or 7 gigawatts of projects actively under analysis and development.

Now, many of our peers would talk about that being part of the pipeline. We're very careful about that because we want to have certainty.

Kind of harkens back to when we were giving guidance about hash rate in our prior business. You know, we were the company that hit our guidance and raised and hit again, not that missed and made an excuse. So we're very conservative in the way we talk about that with regard to geography. I can tell you we're looking actively in projects today in all 4 time zones.

I would say that we, you know, we remain under exclusivity. The conversations have literally not skipped the beat. They want the projects. They, they're interested in going forward for us. It's not a fear of, you know, kind of losing that if it goes on for an indefinite period of time, because quite frankly, what we're seeing is rates are raising. You know, we're seeing, we're seeing terms that continue to improve.

So if this for some reason or for any reason were to fall out, we would once again run a market clearing exercise. And based on the demand we're seeing, it's likely we create even greater value.

Jackson, Tennessee, or Cheyenne Wyoming, or were they just offered Texas? To be honest with you, when we populated the VDR, we populated it with the three sites that they seized on immediately.

As I mentioned in a prior question, everybody that entered the VDR wanted D all of the above. And so obviously with Sandersville being power that's been running 11 extra Bitcoin mining successfully with being wildly popular in the community, having tremendous community support behind us. That was the one they wanted to get right now because that gives Q for RFS on the first data hall.

Obviously, Texas was was critical because it represents almost 900 megawatts of power that, you know, we have, as Harry mentioned in his comments, a high degree of certainty is going that falls in that base zero or that batch batch zero base load certification. So those were the the properties of the projects that we offered. Only later did we start to talk about Washington, Georgia, and that's been met with overwhelming inbound demand.

Because of the way that we've talked about our portfolio and the fact that we've been very transparent about what megawatts we hold where organically many of these developers have reached out to us and said, Hey, what about that? So I can only tell you that with regard to the Sandersville tenant, everything that we put in front of them as an opportunity they seized on.

And ultimately, we remain incredibly constructive with the community. We think that positive resolution is always the best path forward and it's the way we've done business for many, many years. I think this is going to be a tremendous success story where the leaders in that community had additional questions. They're going to get those questions answered with incredible results and we're going to be able to proceed constructively together in short order.

Thanks for the question. You know, we've been very consistent on with regards to our Bitcoin hodel balance and digital asset management. And I'll just reiterate that right now. You know, we have almost 14,000 Bitcoin on the balance sheet. And as we've said over and over again, we're not ideological about the Bitcoin balance. We're very strategic and we see it as a capital asset and intend to use it as such. So what does that mean? Well, what we believe that there's greater upside than downside in Bitcoin value right now.

We will continue to use the Bitcoin to do the several things is one, generate cash through cover call, derivative strategies. And my comments have said that we've already produced, you know, almost $26 million fiscal year to date in premiums just based on that strategy, which allows us even to stay above spot price. Because we are selling the majority or all of our Bitcoin production right now to fund operational expenditures. And second, it's a great source of dilutive capital from from really to non dilutive capital from two perspectives.

One is that we can borrow against it because as it's 30, we had $400 million on the Bitcoin back lines of credit. And two, as I also said, in my comments that we're willing to part with that Bitcoin balance. For highly creative opportunities in the marketplace, especially considering now that, you know, management feels that our equity is not getting a respectable valuation. And so, so knowing that we want to keep our cost of capital low, we'll look to the Bitcoin balance to help keep that cost of capital little while while driving share all the value.

Yeah. Thanks for the question. So, look, if I had a crystal ball and could tell you where Bitcoin mining accounts were going, I probably wouldn't be sitting here today because it's a really hard business to forecast. But what I will tell you is that we have one of the world's most efficient fleets, which allowed us to operate at 38% gross margin and what was otherwise a historically one of the historically most difficult periods for Bitcoin mining.

I don't know what the future holds, you know, 24 months from now, but I'll say that we're focused on deploying capital to get significant shareholder returns. And right now the highest best in use of that capital is towards AI data centers with hunting, lending power, which we're really good at. And Bitcoin mining, I think, will be the mean to the end and help us get there.

Yeah, appreciate the question. Thank you. We I'll take the feedback that that I received from their team. After the successful execution of the lease and entering into the exclusivity. And that spoke largely to clean sparks DNA or history in energy markets and having an understanding with how that worked the way we packaged up the project. You know, we haven't talked a lot about. We have 40 acres with 250 megawatts that mine Bitcoin and prior to entering into agreement.

The community stepped in and assisted us in procuring 122 acres. Additionally, aside from that, the community stood up and said, let us help you with the easements and the power pathway to move the power from your existing site to the new site. So having the ability to have a collaborative constructive relationship with the utility with the community with the policy people in and around the project was was a real tailwind. The comment that we got back from that tenant was that your team is unique in the fact that they really understand energy markets. They understand the leasing process and everything was collaborative.

Obviously, you know, top line lease numbers or something that matters to everyone, but when you look at 100% on an OI versus 80 or 85% on a modified gross, the top line is significantly less relevant. So we shared with them what was important to us and to their credit, they negotiated with us with us in good faith to put across a deal that was meaningful for them, but also supported all of our goals. And so as we turned to the Texas opportunity, the, the exclusivity agreement for Texas pointed back at many of the terms in the Sandersville lease, because we established the baseline. And I'll use their, their vernacular as they referred to the process going forward with clean spark as a development partner.

They look to use these as a rinse and repeat format. So it made us feel very confident in the team that we had that executed that lease and what the progress looks like going forward.

So the initial lease contemplates a, you know, a powered data center. Included in beyond the original or the initial lease, you know, we, we negotiated and, and agreed to do some TFO work. But as a true triple net, once we turn over the keys, we, we basically walk away. We're not tasked with cutting the grass or changing light bulbs. It is all of all of the operational costs passes through to our tenant.

No, John. So what we're responsible for is delivering data center certainty at the end of the build process. And so that includes the run of the power from the existing substations to the data center, but it does not include the ongoing maintenance of that power infrastructure that sits in between or at the substation. And then ultimately on the data center side, you can think of this as everything from the ground level to the shell and into the MEP and gray space of the core, but not, but not inside of the of the white space from a least asset perspective. You know, one, one last layer as far as risk mitigation. I think we talked about in our prepared comments, but I think it's important to emphasize that the EPCM contractor that we selected is also a, a manufacturer of many of the mechanical electrical plumbing and cooling components.

And they have a history of successful execution with this end use tenant. So it was made as an introduction and it gave us a great deal of certainty in execution timelines and compatibility with the end use tenant.

Yeah, John, so it's very important to understand some of the power market dynamics in the area. And really what this type of 20 year long duration relationship delivers on is the certainty and ability for the utility to procure power with a lot more of an understanding of how that power is going to be used, you know, day to day quarter quarter. And so while they're losing some of the real time demand response capabilities that a Bitcoin mind would have had, they're significantly enhancing the tax base. The employment density of a data center relative to a Bitcoin mind is greater.

And ultimately those factors are dramatically dramatically desired by, by the folks in Sandersville. And I think, you know, many, many other places around the country.

We're talking about a high performance compute AI data center with proprietary technology and our tenant wanted to remain somewhat anonymous. That's not unique within the space. I think what's important to note, and you can Google this yourself, it is a high ingress investment grade global technology company, which is as much as they have allowed us to talk about the high investment grade is really, I think, the differentiator. There are no credit wrappers. There's no equity component given away for a backstop.

The finance rates are favorable because the credit rating of the tenant is amongst the highest in the cohort. So we're, we're comfortable with the disclosure that we've made and they've asked us to keep it at that level.

This includes the Q&A session. I would like to turn it back over to a hairy setup for closing remarks.

Thank you again for joining today's call. We look forward to staying in touch and sharing future announcements with you in the coming quarters. Stay tuned for more progress and exciting achievements ahead of us here at clean spark.