Crypto Miner Core Scientific Cuts 10% of Staff, Keeps Hashrate Projection

Crypto miner Core Scientific (CORZ) cut 10% of its staff and dramatically reduced the value of its assets as the cryptocurrency rout continued to drag on the industry.

The workforce reduction was announced Thursday as the company reported its second-quarter financial results, which included an $840 million charge to reduce the accounting value of its assets that took the Core's net loss for the period to $862 million.

CFO Denise Sterling said during the earning conference call that the staff cuts were "surgical" and didn't affect operational personnel in Core Scientific's data centers.

Like other bitcoin miners amid the crypto winter, the company has been forced to shore up its liquidity. In July, Core sold more bitcoin than it mined, in part to keep up with costs.

However, Core stuck with its forecast for the company's hashrate, a measure of computing power on the Bitcoin network and a key metric for mining companies. On May 12, Core Scientific lowered its 2022 hashrate projection to 30-32 exahash per second and total power of about 1 gigawatt, citing market turmoil. The company retained that forecast Thursday.

The miner reported $164 million in revenue, narrowly beating the average analyst estimate of $161.8 million, according to FactSet data. Revenue more than doubled from a year earlier, driven by "increases in digital asset mining revenue and hosting revenue, partially offset by a decrease in equipment sales," the earnings report said.

CEO Mike Levitt said during the earnings call that two-thirds of the company's 2022 growth is set to take place in the second half of the year.

But the miner's personnel and facilities costs have also climbed by 25% compared to last year, while their power cost has reached $0.05-$0.055 per kilowatt hour.

Answering several questions from concerned analysts about the company raised its power-cost expectations for the year, Levitt pointed to the company's Georgia facility, where Core faces the greatest exposure to rising natural gas prices. The miner is trying to get a better arrangement with its energy provider, the CEO said. The miner is also thinking about scaling up its operations such that economies of scale bring down unit costs.

Revenue streams

The company mines bitcoin for itself while also hosting other companies’ bitcoin mining machines. Revenue from hosting was up 110% compared with a year earlier, while self-mining revenue rose 920%.

Hosting is in high demand after available rack space dwindled. But Levitt noted that "a lot of folks that don't have a home for their mining equipment also don't have capital" and Core is only interested in working with clients who can make prepayments and are "very, very credit worthy."

At the same time, Core has had to re-examine the profitability of its hosting business, the CEO said.

"In the good old days, we used to be a reseller of servers, and there was margin in that," Levitt said. "We could look at the margin of that, and combine that with our hosting agreements, and look at the overall profitability. Now that we really don't have a very vibrant reseller business, because most folks are going direct to the manufacturers. Our hosting business needs to stand on its own two feet," he said.

Core produced 3,365 bitcoin for itself and, as of the end of the quarter, it holds 1,959 bitcoins in its reserve.

Shares of the miner fell about 1% following the report. The stock has fallen about 68% this year, in-line with its bitcoin mining peers as bitcoin price fell nearly 50%.

UPDATE (Aug. 11, 22:26 UTC): Adds details from earnings conference call throughout.