Business context and reporting period
Core Scientific, Inc. filed this Form 10-K for the fiscal year ended December 31, 2022. It operates bitcoin-mining data centers and provides hosting services; by year-end, it had eight operational facilities with approximately 592 MW of power and about 234,000 deployed bitcoin miners. The filing reports annual results, not a clear set of Q4-only financial results. Fourth-quarter developments included the Chapter 11 filing and termination of hosting contracts for 24 customers.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $640.3 million | $544.5 million |
| Gross profit (margin) | $8.4 million (about 1.3%) | $238.9 million (about 43.9%) |
| Operating income (loss) | $(2,109.6) million | $131.5 million |
| Net income (loss) | $(2,146.3) million | $47.3 million |
| Adjusted EBITDA, non-GAAP | $174.9 million | $238.9 million |
| Cash and cash equivalents at year-end | $15.9 million | $117.9 million |
Revenue comprised $397.8 million of bitcoin-mining income, $159.7 million of hosting revenue, and $82.8 million of equipment sales. Bitcoin mining supplied 62% of revenue, versus 40% in 2021. Average bitcoin price fell 41% year over year to $28,198, while self-mining hash rate increased to 15.7 EH/s from 6.66 EH/s.
Cash-flow figures require reconciliation: the consolidated cash-flow statement reports $205.2 million provided by operating activities in 2022, while another going-concern disclosure says the Company used $205.2 million in operating activities. Investing activities used $590.8 million and financing activities provided $306.2 million. Verify the operating cash-flow figure against the filed statements and notes.
At December 31, 2022, restricted cash was $36.4 million, making cash, cash equivalents and restricted cash $52.2 million in total. Current assets were $85.1 million versus current liabilities of $186.8 million. Total liabilities were $1.217 billion, including $1.027 billion classified as liabilities subject to compromise; the filing also cites approximately $1.2 billion of aggregate debt principal. Stockholders’ deficit was $409.3 million.
Material changes versus the prior year
- Revenue grew 18%, largely as self-mining expanded; total bitcoins mined rose to 14,436 from 3,948. However, higher power and depreciation costs contributed to gross profit falling 96%.
- The Company recorded $231.3 million of digital-asset impairment, $1.059 billion of goodwill and other intangible impairment, and $590.7 million of property, plant and equipment impairment. Goodwill was reduced to zero.
- Operating expenses rose 250% to $253.0 million. The filing attributes much of the increase to stock-based compensation, including a 2022 RSU amendment, public-company and advisory costs, insurance, and bad debt expense.
- During Q4, 24 hosting customer contracts were terminated and customer-owned miners were returned; the Company replaced equipment with its own miners. It reported $60.1 million of 2022 hosting revenue from those customers collectively.
- The Company filed for Chapter 11 on December 21, 2022 and continued operating as a debtor in possession. Nasdaq trading was suspended January 3, 2023; the shares and warrants moved to OTC trading as CORZQ and CRZWQ.
Outlook, risks and unusual items
The filing provides no clear quantitative operating guidance. Management describes a strategy centered on growing self-mining while maintaining hosting operations, but says continued viability depends on confirming and completing a restructuring, emerging from Chapter 11, and obtaining adequate liquidity. The auditor’s report includes a going-concern explanatory paragraph, citing significant losses, a working-capital deficit, limited cash and the bankruptcy proceeding. The filing warns that existing common stock could be canceled or substantially diluted in a restructuring.
After year-end, the Bankruptcy Court approved a replacement super-priority DIP facility of up to $70 million, bearing 10% interest payable in kind, with a stated maturity of December 22, 2023 (potentially extendable to March 22, 2024). These are subsequent events, not year-end cash or debt balances. The Company had defaulted on certain financing and lease obligations after deciding in October 2022 not to make certain payments.
Major operating risks include bitcoin-price volatility, rising electricity costs, network difficulty and hash-rate growth, equipment-supplier concentration, access to financing, and reliance on a small number of facilities and customers. Celsius, a major customer in bankruptcy, owed $8.7 million at year-end; the Company recorded a full allowance. Other disclosed legal matters include disputes with Celsius, Sphere 3D, McCarthy Building Companies and a putative securities class action; pre-petition claims are generally stayed, subject to exceptions.
The filing identifies material weaknesses in financial reporting controls, including system change-management controls, user-access and segregation-of-duties controls, and timely recording of transactions. Management describes remediation efforts, but says the weaknesses were not yet considered remediated. The 2022 financial statements received an unmodified audit opinion, accompanied by the going-concern warning.
Important facts for investors to verify
- Reconcile the conflicting 2022 operating cash-flow descriptions and assess unrestricted cash, restricted cash and near-term liquidity.
- Review the current Chapter 11 plan, claims and creditor recoveries, DIP borrowings and covenants, and the potential treatment or cancellation of existing equity.
- Confirm the status and recovery prospects of the Celsius receivable and other material legal claims or disputes.
- Assess sustainable mining economics using bitcoin prices, power rates, network difficulty, deployed hash rate and post-impairment asset values.
- Track remediation of material weaknesses and any subsequent financial-reporting or audit developments.