Core Scientific, Inc. Price & Performance (CORZ)

We will conduct a question and answer session after management's remarks. Please note that on this Core, certain information presented contains forward looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements include without limitation, any statement other than historical or current facts that predict or indicate future events Core trends forecasts, performance or achievements and may contain words such as believe, anticipate, expect, estimate, intend, project, plan Core words or phrases with similar meaning. Forward looking statements are based on current expectations forecasts and assumptions that involve risks and uncertainties that may cause actual results to differ materially. For further information on these risks and uncertainties, we encourage you to review the risk factors discussed in the company's annual report on Form 10 ks filed with the Securities and Exchange Commission and a special note regarding forward looking statements contained the company's current report on Form eight ks filed today and the earnings release and slide presentation contained there. Today's presentation is available on our website at Core the Events and Presentations section. The content of this conference call contains information that is accurate only as of today February 26, 2025.

The company undertakes no obligation to update statements made today to reflect events or circumstances occurring after today. Joining me today from Core Scientific are our CEO, Adam Sullivan and our CFO, Denise Sterling. With that, we will now begin with remarks from Adam. Good afternoon, and thank you all for joining us today.

I'll begin today's call by looking back at our key achievements from the quarter and fiscal year before handing it over to Denise we'll review our financials. I'll then highlight our growth strategy and the meaningful value creation opportunities we see ahead Core Scientific Core. We will then take your questions. 2024 was guided by the three growth catalysts we identified on our second quarter earnings call. Contract the remaining HPC hosting capacity expand infrastructure capacity and diversify our customer base. Starting with HPC, we began by signing a 16 megawatt agreement with Coreweave in Austin which we delivered thirty days ahead of schedule We then moved quickly to fully contract the original 500 megawatts of HPC capacity through a series of new twelve year agreements with Coreweave Core. This deal carries a total revenue potential of $8,700,000,000 over the contract term. Equivalent to about $725,000,000 per year once fully online. To put that in perspective, our total revenue in 2024 was just over $500,000,000 mostly from our Bitcoin mining operations Securing this landmark HBC contract marks a pivotal step in our evolution into a leading data center business. Next, we made significant progress expanding our HPC infrastructure capacity in 2024 by reallocating resources from our Bitcoin mining operations enlarging existing sites, and acquiring new sites As a result, we ended the year with over 1,300 megawatts of contracted power, In the fourth quarter, we secured approval to expand gross capacity at our Denton site by nearly 100 megawatts equating to approximately 70 megawatts of critical IT load.

Dallas remains one of the fastest growing data center markets in The United States and we believe our Denton facility is on track to host one of the largest GPU supercomputers in North America. Separately, on the last earnings call, we discussed our expansion into Auburn, Alabama, we signed a lease to buy agreement at the Obix facility. This site currently has 11 megawatts of critical IT load and we are actively working with Alabama Power to secure a much larger power agreement. Due to power constraints in the nearby Atlanta market, and given Auburn's strategic location, this site has the potential to be a major development for the company. Are deferring significant capital deployment until negotiations with prospective customers are finalized.

Ensuring our investment is optimally aligned with demand. Briefly, on organic customer diversification, while we did not sign another large HPC hosting customer last year, we are in active discussions and remain confident in our ability to diversify our HPC customer base Shifting to our capital structure, I would like Denise Core the details but we significantly improved our balance sheet in 2024 which leaves us well positioned to execute on our growth strategy this year and beyond. Finally, want to take a moment to emphasize how proud I am of the strategic hires we've made across the business last year.

We brought on top tier data center professionals have a proven track record of successfully executing large scale projects This has significantly strengthened our leadership and execution capabilities and we believe this expanded talent pool underscores our commitment to growth and innovation we continue our evolution into a premier data center provider. With that, I'd like to hand it over to Denise will take a deeper dive into our financials. [indiscernible] Thank you, Adam. I am pleased with our financial performance in 2024, especially given the operational hurdles we navigated namely the Bitcoin having in April and the deliberate shutdown of several active mining sites to accommodate our major HPC hosting contract with Coreweave Core, Securing that contract was a major milestone for the company. Offering a robust foundation Despite these transitions, delivered financial results that underscore our operational expertise and significantly strengthened our balance sheet positioning us for a productive 2020 With that, I will begin with an overview of our fourth quarter financial Total revenue was $94,900,000 down 33% year over year and adjusted EBITDA was $13,300,000 In terms of our segment results, digital asset self mining revenue was $79,900,000 a decline of 29%. This was largely driven by $9.74 bitcoin earned in the fourth quarter versus 3,042 in the same period a year ago.

Partially offset by the 130% year over year increase in the price of Bitcoin. As of 12/31/2024, we operated approximately 164,000 self mining units or 96% of our total mining fleet, with the remaining 4% representing hosted mining units. Digital asset hosted mining revenue was $6,500,000 down from $30,000,000 in the fourth quarter of twenty twenty three, as we sunset our hosted mining contracts, a trend we Finally, we generated $8,500,000 in HPC hosting revenue during the quarter, and as expected, exited the year with 16.5 megawatts of critical IT load, which includes an additional 0.5 megawatt contracted in the fourth quarter.

Shifting now to costs, our 2024 average annual fleet wide power rate of $0.04 per kilowatt hour beat our 2024 target guidance of between $0.042 and $0.044 per kilowatt hour.

Our average fleet wide power rate for the fourth quarter A summary of our segment mining economics can be found on Slide seven. Gross margins for the quarter were 2369%, respectively, for digital asset self mining, digital asset hosting and HPC hosting. [indiscernible] For our HPC hosting segment, we also measure performance utilizing a non GAAP cash gross margin.

Which excludes the direct pass through of power costs as well as non cash items including stock based compensation and depreciation. For the fourth quarter of twenty twenty four, our non GAAP cash gross margin was 16%. Operating expenses for the fourth quarter of $20 Core the same period in the prior year.

And net loss for the fourth quarter of twenty twenty four was $265,000,000 as compared to a net loss of $195,700,000 for the same period in the prior year. On Slide eight, our direct cash cost to self mine a bitcoin in the fourth quarter was $51,035 And our total cash based cash cost in the fourth quarter was approximately $0.033 per terahash. Next, I'd like to walk you through the balance sheet starting on Slide nine. Exiting 2023, our total debt balance was approximately $1,000,000,000 During 2024 Core, as part of Chapter 11 debt restructuring, we lowered total debt by $270,000,000 Subsequently, we equitized our secured convertible notes for $260,000,000 largely through mandatory conversion. This was shortly followed by the $460,000,000 which allowed us to pay off $260,000,000 in existing senior debt, eliminate restrictions and covenants and on the notes from as high as over 12% to 3%. More recently, in December Core, we completed a $625,000,000 convertible note offering at a very attractive 0% interest rate. [indiscernible] All told, we entered 2025 with an unlevered balance sheet, outside of our convertible notes and over $830,000,000 in cash, which we believe positions us well to execute on our growth strategy.

With regard to HPC capacity, Any uncontracted expansion, whether tied to additional power allocations at existing sites or entirely new locations, may require our own capital expenditures. We will provide further details on any necessary outlays once we announce new customer contracts Given our focus on growing our HPC hosting business, we do not expect to increase or refresh our Bitcoin mining fleet until we procure the new block ASIC chips in the second half of twenty twenty five. We are not planning any further CapEx this year associated with our Our pro form a fully diluted share count as of February 20 was approximately $5.00 1,000,000 shares as summarized on Slide 10. We are currently modeling a statutory effective tax rate of 22% in 2025. We also have more than $300,000,000 in net operating loss carryforwards, which will reduce future cash taxes. And with that, I'll turn the call back to Adam. Adam Core? Thanks, Denise. As we look ahead to 2025, will continue to capitalize on our strength for building attractive large scale infrastructure and the key focus areas this year include one, diversifying our customer base by adding new HPC customers. Two, successfully executing on the HPC contracts we have in place and three, continuing to expand our capacity organically and through strategic M and A. Starting with diversifying our customer base, This is the top priority for the company this year and the goal is to sign enough contracts so that Corrie represents less than 50% of critical IT load by the end of twenty twenty eight.

We are in active discussions with dozens of new customers including the vast majority of hyperscale providers and several large enterprise companies. Demand remains strong but we're seeing considerably more due diligence compared to the first half of twenty twenty four Core. This heightened scrutiny reflects the influx of new market entrants who make ambitious capacity promises yet lack the tangible power agreements to back them up.

Much like the recent situation where a hyperscaler canceled contracts with companies that overstated their available power. Our proven track record and secured power agreements set us apart in this environment we won't be expanding our footprint unless we have a high degree of confidence in our ability to deliver for additional customers Moving on to our second priority, executing on the HPC contracts we already have in place.

Today, we announced a significant expansion of our relationship with Core Weave at our Denton facility which will bring that site to full capacity. This new agreement adds approximately 70 megawatts of critical IT load and represents approximately $1,200,000,000 in additional contracted revenue over a twelve year term.

Our total contracted value with CoreReve now exceeds $10,000,000,000 amount that includes our Austin, Texas agreement and covers roughly five ninety megawatts of critical IT load once fully online. Of that total, just over five seventy megawatts were capacity we're converting at existing sites to HPC where we expect 75% to 80% cash gross profit margins We view this as one of the largest HPC deployments in The United States and Corrug's continued demand already outpaces their supply which we see as a strong signal of their business health and growth potential. Under this newest agreement for the additional 70 megawatts, we will fund $1,500,000 in capital expenditures per megawatt whereas in prior agreements, Corweave covered those costs.

In return, we will benefit from full rental payments during the first two years of the contract because there will be no CapEx credit associated with this new agreement. Looking ahead, we now expect to have delivered approximately two fifty megawatts HPC capacity to Core Reef by the end of this year with the full five ninety megawatts coming online in early twenty twenty seven. This represents a shift from our previous timeline and reflects both the size and complexity of the project. Particularly the addition of an incremental 70 megawatts of critical IT load These factors introduce several permitting challenges we resolved in collaboration with Coreweave Core. As part of that process, we implemented design enhancements to further optimize GPU performance and mutually agreed upon new delivery timelines. While these steps have extended our schedule somewhat, we believe they ultimately position us to provide a more robust and efficient infrastructure that meets our customers evolving HPC needs. Our third priority is to continue expanding our HPC capacity both organically through strategic M and A. Building on the recently announced 70 megawatt expansion in Denton, we believe we can add another 300 megawatts of capacity across our sites by the end of twenty twenty seven which is an increase from the previous quarter.

We also see significant greenfield opportunities and aim to add approximately 400 megawatts of new capacity over the next three years. On the M and A front, we're actively pursuing opportunities in our current markets carefully evaluating expansions into new ones. This includes acquiring stabilized data center assets or book but not built projects that come with strategic customer contracts. Offering greater revenue predictability. This approach aligns well with our broader objective of reducing our largest customer to below 50% of total critical IP load by the end of twenty twenty eight. [indiscernible] In closing, I'm more excited than ever about the momentum we've carried into this year. Our team is fully energized and confident in our ability to will drive significant value creation I want to extend my sincere gratitude to our clients industry partners, and especially our dedicated teammates for their ongoing efforts and support I also want to personally thank our existing shareholders.

Your confidence in our vision has been critical in bringing us to this point and we won't be here without you. With that, we will now take your questions.

Thank you. We'll now be conducting a question and answer session. Our first question is coming from Darren Aftahi from Roth Capital Partners. Your line is now live. Hey, guys. Thanks for taking my questions and good to see an expansion on the capacity. Two, if I may. First, can you just talk Adam a little bit on the Core detail about the permitting process and maybe what's elongating that timeline? And then secondarily, On the Alabama site, know you guys said you're not going to kind of commit too much capital until negotiations with prospects are more finalized. With Alabama Power. I guess like where are you with them? The feasibility study been done? Like how quickly can evolved? Just kind of any more insight on that would be helpful. Thanks. [indiscernible] So you're talking about the Permian process, that was really one of our sites in particular [indiscernible] we had to go through additional permitting process just related to the expansion and related to a pretty major design adjustment that was made in that process, and that's really around optimizing for efficiency and optimizing for the scale of that asset. And so we're past that process today and we feel very confident given that at that site we have construction, we have contractors, we have the boots on the ground to know that the process moving along with the existing schedule that we have in front of us.

To the second question, related to Alabama, Right now, we're in a place where we have have high confidence in the ability to gain additional megawatts at that site. And once we get those commitments, that's going to be a time when we will begin placing additional capital into that site. Now you have to think about the delineation between having a secured customer and us preparing to have that customer. And so obviously a significant amount of capital will be deployed once that new customer contract secured. But up until that point, there will be limited CapEx, albeit [indiscernible] related to bringing that site to more of a pad ready status.

Thank you. And the question is coming from John Peterson from Jefferies. Your line is now live.

Great. Congratulations on the expansion with CoreWeave Maybe if you could talk about the economics, I know you guys mentioned on the call that you're going to pay the $1,500,000 upfront instead of a CapEx credit. Should we think about the rents other than that, should we think about the rents on the deal as the same? As what you had before?

Yes, exactly. Everything is exactly the same. And so after the after about two just over two years, those comps Okay. And then I like the goal of I appreciate the goal of wanting to bring core weave down to less than 50% of revenue by the end of twenty twenty eight. I think that would require you to procure a lot more power this year in addition to signing on a additional customers. So maybe just talk through the milestones that you need to hit throughout this year to be on track to do that?

Yes. And that's really about getting them below 50% of critical IT load by 2028. And we're working through that process today. We talk about the ability to continue to expand at existing sites and that's a competitive process. We are getting direction in terms of how much additional power we're going to be able to achieve at some of our existing sites. And then some of our new sites as well.

Very attractive locations. Our focus today is on building blue chip assets and we want to have those blue chip assets with blue chip clients. And so that's where our focus is today and we're going to continue to execute and acquire more sites to bring more capacity online. To secure more contracts and achieve our goal of getting them below 50% by 2028.

Thank Next question is coming from Joe Flynn from Compass Point Research. Your line is now live. [indiscernible] get some more color on the The push out of capacity this year and the finalization of ultimately kind of data center designs, like what has been the biggest challenge, whether that be changing architectures, supply chain, And ultimately, as you ramp up capacity in the future, are you going to be designed to spec to support GB300s or Ruben architectures as well? Thanks.

Yes, of course. And you're absolutely right. On that last point there. As we are evaluating the infrastructure development the GB200s and the GB300s, there are some incremental design changes that are required as part of that process. And as we've gone as we went through really Q4 of last there was some incremental permitting challenges Some of that was driven by the increase in complexity and size. Other parts were for other sites, we had to go back and just reconfirm permitting based on the fact that supply chains are constrained as you look out into 2026. And one of the things that we wanted to ensure that we achieved was that we had the right the right equipment on the right schedules for the site plans that we had. And so that required us to change some of the designs to fit for the equipment that was available to deliver on the timelines that we set forward.

And so there was just some incremental delays there. But overall, we have high confidence in where the delivery schedules that we've put forward today and we believe we're going to be able to hit those timelines. And I mean also just to address like maybe concerns related to Microsoft, pulling back [indiscernible] don't think the contracts are structured that way, but ultimately, I'll just say there is risk that Corley Core contract revenues goes down I think what From your sense, How do you guys maybe like explain that impact and is there ability for Corewave to ultimately kind of go forward with or without Microsoft for and maybe just any kind of demand there?

Yes. I mean, I can't comment specifically on any relationship between CoreEve and Microsoft other than what they've spoken about publicly. But I mean Corway Core continuing to expand. You're seeing it not only with Core Science but really across across the globe and internationally. So from what we're seeing on Cory's demand side is is significantly stronger than what we saw in 2024 Core. There's a lot of things going on in the market today that we're seeing that's actually driving continued demand and flow into CoreWeave. And so we're excited about continuing to expand with them at Denton.

And is going to be one of the largest supercomputers in The United States and it's going to be a flagship asset for Coreweave. And so we're really excited about continuing to expand our relationship with them.

Thank you. Next question is coming from Brett Noblak from Cantor Fitzgerald. Your line is now live.

Thanks guys. Really appreciate it.

Maybe just quickly on the delays, if you will, or the pushback in timing Just let me make sure I heard you right. You're now expecting Curio by T was this year to be two fifty megawatts.

Does that include the 16.5 And before you guys were expecting I think, two seventy plus the 16.5 Yes.

Thanks, Brett.

Yes, that's correct. That's really a push out of just one forty megawatt building out into the early 2026 and absolutely right, that number does include the 16.5 megawatts. Perfect. And then I think we've gotten a lot of questions following DeepSeq, which hit the space quite hard. What have you seen with customer conversations post deep seek, has it really changed anything Core is demand just as good if not greater since then?

I would say from what we're seeing in all of our discussions is that people want to move fast which in terms of developments and where they would like to build. But overall, the DeepSeq news for hitting the public markets rather hard from everything that we've seen on the actual demand side. Demand continues to increase and those conversations continue to progress very well. So We think the DeepSeq was a little bit of a head fake for the broader markets. But overall hasn't changed the demand picture for us. Thank you. Next question is coming from Greg Lewis from BTIG. Your line is now live. Yes. Hey, thank you and good afternoon and thanks for taking my question. Hey, Adam.

Could you talk a little bit about you mentioned enterprise customers potentially, it's something that seems to be we're hearing more about beyond just the hyperscalers. As maybe you've broaden out the customer base beyond just the hyperscalers, which It seems that latency is a big issue for them, maybe scalability is a big issue for them. As you kind of look at potential does that open up more sites that maybe in kind of a hype that does that open up more sites maybe in your portfolio and elsewhere that maybe under a hyperscaler footprint would have worked, but through an enterprise it might That's a great question. As we see those two different customer bases, hyperscale is obviously looking for a very specific set [indiscernible] Being looked at on the enterprise side. So yes, absolutely some smaller sites still with low latency capabilities are being evaluated for enterprises. But overall, one of the things that we're looking at is we want to have longevity in all of our assets And so we're looking at having hyperscales at the very least as anchor potentially a single tenant and if they're serving as anchor, anchor, being able to fill out the rest of the capacity with enterprise clients as well.

So demand, does it open up more sites? With enterprise? Absolutely. But we're focused on blue chip assets blue chip clients, which include both of those groups.

Okay, super helpful. Thank you very much.

Your next question is coming from George Sutton from Craig Hallum. Your line is now live. Thank you. Adam, you said two things that flick a little. I just wanted to make sure I heard correctly. People are wanting to move fast on one hand, but you mentioned considerable increases in due diligence. Can you just sort of marry those two? Yes, absolutely. The move faster is really about delivery timelines. Being able to complete the due diligence process is a different part of that equation. They talk about wanting to be able to deliver sites over a certain period of time, but that's also [indiscernible] bring these sites closer to pad ready closer to powered shell. And part of this is to weed out a lot of people who believe they're in the data center business because they have power and land. That doesn't make you a data center provider. And so that's really the difference here for Core Scientific. We have the power, we have the land, we have the team that can deliver those assets. So that's what's bringing us into these conversations. And want to move faster on delivery timelines. Once they have a signed contract, they want to have that firm delivery date.

And so that's really the difference there and I hope that married up that for Core, George.

Makes sense. And then one other question on the $1,500,000 per megawatt that you will be funding in this latest contract, My assumption is in a negotiation, given your balance sheet now, you can handle this pretty comfortably. Therefore, you'd rather have the the revenue event when that occurs? Is that correct? Yes.

That was definitely one of the considerations in it. Denton Core a unique asset, incredible asset and this is a great opportunity Core us to continue to expand our relationship with Coreweave. So we're very happy we'll go to the economics economics landed on it.

Thank you. Next question today is coming from Steven Guagola from Jones Trading. Your line is now live.

Hi, Adam and Denise. Thanks for the question.

My question pertains to Core weave and the long term health of the AI Neo Cloud business model. I think following deep seek, there was some arguably uncertainty on the impact to GPU rental pricing power long term if AI model were to get increasingly commoditized or proliferate in open Core?

Maybe you just provide your thoughts one on that and then two, any color to the extent you can on your confidence around the security of the Core we've contracts Thank you.

Sure. I'll cover Core first question and then we can go back to your second Core. From what we're seeing in terms of the demand for Cori's business, they're able to sign long term contracts which is something that's very strong signal for the demand of the existing or the newest generation of GPUs that are coming out. If it was an entirely an hourly based system for Core Wave in terms of the business model, There are businesses out there that are like that and they're much less valuable than CoreWeave is.

And so we believe based on their company how they're structuring their contracts, we have high confidence in their continued continued ability to deliver. I'd love for you to ask your second question just because I hope I covered your first one Clearly, That was great. Thank you. I just second was just again, speaking I guess, again, your confidence in these contracts long term, I mean, you kind of of just spoke on that. And just the AI Neo cloud business model in general, long term. That'd be great.

Yes, absolutely. There are definitely going to be winners and there are definitely going to be losers in this situation. It's a growing [indiscernible] their contracted revenue. It's definitely an exciting time in the industry and I think the folks who sign large contracts with large enterprise customers are going to be the winners here long term. And I think that's what we're seeing amongst a few of these neo cloud providers but I think there will be only a few winners in this industry.

You. Our next question is coming from John Zadaro from Needham and Company. Your line is now live.

Great. Thanks. Hey, Adam. Congrats on another lease that's That's great to see. Question and a follow-up. First one, as it relates to up Core or expanding tension with CoreWeave Core, was there discussions with other hyperscalers or is it just CoreWeave And then I have a follow-up on the push out part.

Sure. Denton was a site that we were really slating for Coreweave Core. We did have conversations with some other hyperscalers and other clients on those megawatts. As we talked about the 300 megawatts potential at other existing sites, We're in conversation today with other potential customers around that. And there's really no guarantee that anything like that would go to CoreWeave Core we do want to do now is really focus on continuing to diversify our client base. Our existing sites are great campuses for us to do that.

Great. Understood. And then I just want to make sure I have it on the push out. So I understand there's one forty megawatt building that got pushed out to 26. So are we still targeting that 200 megawatts by Q2 twenty twenty five that was in the initial press release Core I guess just kind of that first those couple of hundred megawatts, when should we expect those to be operational?

We're targeting really for the year end number. I would say there was push out throughout the schedule due to those delays and that was really one of our major campuses.

So So this is something that the timeline is elongating by a few months here. So I would say the expectation is that the timeline Core each of the megawatts to come on, the ramp schedule for these megawatts to come on, a little bit later than was originally thought to happen.

Thank you. Next question today is coming from Kevin Deese from H. C. Leerink. Your line is now live.

Hi, Adam, Denise. Thanks for having me on.

Just to to go back to what John was talking about on your rollout here, can you characterize I guess, how much the influence was was permitting or equipment It's still a little unclear to me. Apologies, Adam. What's really the key issue [indiscernible] the question, Kevin. I would say as part of the process of expanding that site, what we had to do was ensure that we had ample amount of equipment on the timelines that we Core trying to deliver. That required us to source different types of equipment for sorts of for certain parts of the build out, which complicated the process for us to go through permitting just because there was a multitude of different pieces of equipment that had to be ordered in order for us to be able to fulfill this additional capacity at that site. So it's a combination of supply chain and permitting that all really come together And so that was part of that was really in aggregate what resulted in these delays.

So more specifically regarding equipment is that UPC gensets, B200s, the networking connectivity that you need, It's not related to the GP themselves. It's all related to the of it's in the electrical equipment, some of it's in the broader design So it's not one item to pin down Core. It's really a plus across the board.

Thank you. Next question is coming from Nick Giles from B. Riley. Your line is now live.

Thank you, operator. Good afternoon, everyone. Congratulations, Adam, on another contract with Core Weave. So appreciate your target that CoreReve represents less than 50% of critical IT [indiscernible] that implies that you cite at least the same amount amount with other customers, but you do have 700 megawatts that you've outlined between existing and new sites by 2027. So should we assume that the delta would be new customers as well or could that kind of $130,000,000 be split between new customer and maybe one more tranche with Core Leaf? [indiscernible] outlined the 300 and the 400 number. That's critical IT load megawatts, so about 700 megawatts. As we look forward, if we have five ninety of Core we've contracts, the 700 available to us is really where our focus is going to be on executing new clients. So that's part of our goal to get them below 50% Core to have enough capacity available and saleable for us to be able to bring them down to that level.

Got it. That's very helpful. And then maybe just any other color on how we should think about magnitude and cadence of these incremental customer contracts between now and the Yes. I mean, right now, we're in discussions with a majority of the hyperscalers in conversations with large enterprises. Those really represent some of the larger buckets of saleable capacity and our ability to begin bringing them down below that 50% number much more quickly. There are other customer other customers that we're looking at. Those would be more contract that we would use if a hyperscaler large enterprise didn't take a whole campus, but Core more as an anchor tenant to a campus. But those customer conversations are continuing to evolve over the course of the early part of this year We're very excited about being able to sell additional capacity. And we believe we're going to be able to execute on more customer contracts this year with new customers.

Your next question is coming from Joseph Vafi from Canaccord Genuity. Your line is now live. Hey, Adam. Hey, Denise. I'll add my congrats on the expansion at Denton.

Maybe you could kind of tell us, compare and contrast the trade off between I think everybody understands revenue diversification Core, you've got potentially a lot less capital intensity on new builds versus with maybe some other players in the sector.

So how you look at the trade off between potentially more CapEx on new contracts versus more revenue with CoreWeave Core?

Then I have a quick follow-up.

Yes.

No, thank you for the question. We think about this business on the long term.

We think about this as a not a five year business it's a twenty, thirty, forty year business. And so as we think about growing this this enterprise over the course of the next few years, bringing revenue diversification a high CapEx industry, to begin putting ourselves in a position target becoming investment grade over the course of the next three to five years. But also really we're thinking about this business to be a much more stable free cash flowing business that all of our investors can understand. Today with a majority of our revenue coming from Coreweave, that's something that we need to continue to work on to ensure that we have a business three years from now, four years from now, that's coming from multiple different sources and investment grade counterparties that can really show how strong of a company we have.

Sure.

Thanks for that color. And then then we still haven't seen a ton of contracts in the sector yet.

It sounds like the pace of discussions with providers and those looking to procure continue to kind of expand. Even at this early [indiscernible] has there been any change in pricing discussions with customers even though we don't really have kind of a firm landscape yet, at least from our view of where pricing is at this point?

Yes. I mean pricing is something that is very geographic specific and also proximity specific. So how strong of an asset we have. And so you have to think about a few different ways. There are definitely certain markets that demand premium pricing across across the industry. Those are some of the Tier one markets.

Then on top of that, it also relates directly to what is the latency, what is proximity to that Core metropolitan market.

And so there is a little bit of price discovery. There was a lot of price discovery in 2024 Core, price discovery is becoming we're starting to find pricing, really a pricing foundation across a number of different markets. So I would say pricing is really stabilizing over the course of 2025 Core the expectation is by the time we get to 2026, we'll have a much firmer footing in terms of where that lands.

Thank you. That's question is coming from Bill Papadustacio from Stifel. Your line is now live.

Good evening, Adam and Denise. Thanks for taking my question.

Questions. There was mention on the call about heightened scrutiny given the influx of low quality data center operators coming into play. Can you add some more color in terms of what the existing supply demand dynamic looks like? And are you getting a sense that we can see hyperscalers throwing more of their weight around going forward and how that could impact terms that are secured with these counterparties?

I think one of the things that we've seen as the landscape has developed over the course of 2024 and a number of new folks entered the industry, really a lot of these hyperscalers are looking at certain sites from the perspective of they'd rather just buy them from people who don't have the experience to actually develop them and take them over to the goal line. They're finding obviously other partners to to work with them on construction design, etcetera. But from where we sit today, I would say hyperscalers are not necessarily throwing their weight around in that regard. What they're doing is making sure that they're completing all the steps in the due diligence Given what we saw happen at the end of last year related to some contracts with hyperscalers, that end up getting canceled. It's really about ensuring that those those folks are putting like hyperscalers are putting their capital in places where they feel confident. I think there was such a mad rush in 2024 Core especially in the early parts people were just trying to grasp as much power as they possibly could. And today where we sit it looks a little bit different.

These folks want to make sure that they're building assets in the right locations and that they have the right exposure for the demand picture that they have for that location.

Thanks for that color. And for my follow-up, are you seeing any changes in demand across inference and training workloads on the back of DeepSeq and other recent headline news, Just wanted to hear your perspective on how this may impact your future site acquisition plans. Thanks.

Yes, absolutely. I mean really from what we're seeing now is a lot less focus on some of these larger scale training sites and much more focused on locations that have a lower better proximity to major metropolitan areas. So I would say the demand or what we're looking at from a site evaluation perspective is much more targeted and much more focused to sites that are closer to major metropolitan metropolitan areas. Some points last year where we definitely were evaluating certain sites that were further away, but had greater power capacity.

You. Our next question is coming from Rosemarie Sison from Odeon Capital. Your line is now live.

Thank you. Just to follow-up on that comment that you made, Adam, about proximity to major metro areas. Would that mean that you're potentially looking at expanding out of the markets that you're in right now, possibly into the East Coast or the West Coast, as those opportunities themselves Yes, absolutely. Thank you for the question, Rosemary.

I mean, we are building one of the larger data centers on the East Coast right now. And so we have a lot of confidence in our ability to continue to expand in new markets. This is something where we're going to be one of the large providers in the Dallas market. We believe something similar in the Atlanta market [indiscernible] But albeit that looks a little bit different because we might have familiarity with the utilities in that location.

Point on that is we currently operate with seven utilities. We're continuing to And so we're taking a very diligent process of utility first process when we're evaluating entering new locations to ensure that we have a strong partnership relationship with that utility so that we know that we have that firm power available when we go take them to a client.

Okay. And then just a follow-up, you have a lot of cash on your balance sheet right now that you can use to fund the upfront investment for some of these data centers as you say you will be doing with this Denton expansion. Do you see that how do you look at that? And you mentioned also that you want to be investment grade rated. So I assume that some point you may be raising debt to fund some of that. How do you look at that capital allocation decision?

Yes. So I mean, I would say as we look at contracts going forward, there's going to be a need for additional capital deployment. As we continue to grow this business over time, this business is going to mature in much look much more like some of our other public peers in the data center industry. As we're targeting leverage ratios, as we're targeting a number of different metrics that are important to the data center industry, our company is going to go through a period of maturation where we're going begin to look much more like them from a capital structure perspective. And so that's really the comment there is that we are going to have to deploy capital on future deals We know that. And we want to make sure that we put ourselves in the right position in a high CapEx industry to ensure that we're achieving the lowest cost of capital that we possibly can.

Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments.

Thank you everyone for joining the call today and look forward to speaking with everybody in the coming weeks and Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.