Q1 2024 Cipher Mining Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the Cipher Mining First Quarter 2024 Business Update Call. At this time, all participants are in a listen-only mode.

Good day and thank you for standing by welcome to the site for mining first quarter 2024 business update call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question.

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Operator: To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Josh Kane, Head of Investor Relations. Please go ahead.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Josh Jayne head of Investor Relations. Please go ahead.

Joshua Kane: Good morning, and thank you for joining us on this conference call to discuss Cipher Mining's first quarter 2024 business update. Joining me on the call today are Tyler Page, Chief Executive Officer, and Ed Farrell, Chief Financial Officer. Please note that you may also review our press release and presentation, which can be found in the investor relations section of the company's website. Please note that this call will also be simultaneously webcast on the Investor Relations section of the company's website. This conference call is the property of Cipher Mining, and any taping or other reproduction is expressly prohibited without prior consent.

Joshua Kane: Good morning.

Joshua Kane: For joining us on this conference call to discuss cycle Mining's first quarter 2020 for business update.

Joshua Kane: Joining me on the call today are Tyler page, Chief Executive Officer, Ed Carroll, Chief Financial Officer.

Joshua Kane: Please note that you May also review our press release and presentation, which can be found on the Investor Relations section of the company's website.

Joshua Kane: Please note that this call will also be simultaneously webcast on the Investor Relations section of the company's website.

Joshua Kane: This conference call is a property of site for mining and any taping or other reproduction is expressly prohibited without prior consent.

Joshua Kane: Before we start, I'd like to remind you that the following discussion, as well as our press release and presentation, contain forward-looking statements, including, but not limited to, Cipher's financial outlook, business plans, and objectives, and other future events and developments, including statements about the market potential of our business operation, potential competition, and our goals and strategies. The forward-looking statements and risks in this conference call, including responses to your questions, are based on current expectations as of today, and Cipher assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law.

Joshua Kane: Before we start I'd like to remind you that the following discussion as well as our press release and presentation contain forward looking statements.

Joshua Kane: But not limited to Cypress financial outlook.

Joshua Kane: Its plans and objectives and other future events and developments, including statements about the market potential of our business operations.

Joshua Kane: Potential competition.

Joshua Kane: Our goals and strategy.

Joshua Kane: The forward looking statements and risks in this conference call, including responses to your questions are based on current expectations as of today.

Joshua Kane: <unk> assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.

Joshua Kane: Additionally, the following discussion may contain non-GAAP financial measures. We may use non-GAAP measures to describe the way in which we manage and operate our business, and we reconcile non-GAAP measures to the most directly comparable GAAP measures. And you are encouraged to examine those reconciliations, which are filed at the end of our ordinance release issued earlier this morning. I will now turn the call over to Tyler Page.

Joshua Kane: Additionally, the following discussion may contain non-GAAP financial measures, we may use non-GAAP measures to describe the way in which we manage and operate our business.

Joshua Kane: non-GAAP measures to the most directly comparable GAAP measures.

Joshua Kane: And you are encouraged to examine those reconciliations which are filed at the end of our earnings release issued earlier. This morning, I will now turn the call over to college age Tyler.

Rodney Tyler Page: Thanks, Josh. Hello. This is Tyler Page, CEO of Cipher Mining. Thank you very much for joining our first quarter 2024 Business Update Call. Let me begin the call with a few summary financial statistics from our outstanding first quarter of 2020. Our CFO, Ed Farrell, will give a full breakdown of our numbers during his portion of the call, but I wanted to highlight our continued strong performance during the first quarter up front because it represents our second quarter of operating our full Initial Data Center portfolio.

Joshua Kane: Thanks, Josh Hello. This is Tyler page CEO website for mining.

Rodney Tyler Page: Thank you very much for joining our first quarter 2024 business update call.

Rodney Tyler Page: Let me begin the call with a few summary financials statistics from our outstanding first quarter of 2024.

Rodney Tyler Page: Our CFO, Ed Farrell will give a full breakdown of our numbers during his portion of the call.

Rodney Tyler Page: But I wanted to highlight our continued strong performance during the first quarter upfront because it represents our second quarter of operating our full initial data center portfolio and it is our second sequential quarter of growth and positive revenues GAAP net earnings and adjusted earnings.

Rodney Tyler Page: And it is our second sequential quarter of growth in positive revenues, gap net earnings, and adjustment. We continue to believe that the best way to evaluate the success of a public Bitcoin mining company is to look at the financials the company files with the SEC. There are important growth narratives and key performance indicators that are not always encapsulated in backward-looking numbers. But ultimately, it's the numbers that validate that Papers Progress continues at full pace. Quarter over quarter, we improved revenues from $43 million to $48 million, Gap Net Earnings from $11 million to $40 million, and Adjusted Earnings from $28 million to $63 million.

Rodney Tyler Page: We continue to believe that the best way to evaluate the success of our public Bitcoin mining company is to look at the financial of the company files with the SEC.

Rodney Tyler Page: There are important growth narrative and key performance indicators that are not always encapsulated in backward looking numbers, but ultimately it's the numbers that validate the story.

Rodney Tyler Page: Cypress progress continues at full pace.

<unk> over quarter, we improved revenues from $43 million to $48 million.

Rodney Tyler Page: GAAP net earnings from $11 million to $40 million and adjusted earnings from $28 million to $63 million.

Rodney Tyler Page: We are very proud of our continued record-breaking numbers. And with the fourth Bitcoin halving now behind us, we believe that the relative advantages of being a low-cost producer of Bitcoin will only increase going forward. As of the end of April, Cipher held 2033 Bitcoin in inventory and $96 million of cash, while our total self-mining hash rate has grown to 7.7 ExaHash. For the literary minded among you, you will recall that T.S. Eliot shared that April is the cruelest month, and he may as well have been speaking about Bitcoin miners in 2024, as the halving reduced the block rewards of new Bitcoin to 3.125 Bitcoin per block.

Rodney Tyler Page: We are very proud of our continued record breaking numbers and with the fourth bitcoin, having now behind US we believe that the relative advantages of being a low cost producer of bitcoin will only increase going forward.

Rodney Tyler Page: As at the end of April <unk>, 2033, bitcoin in inventory and $96 million of cash while our total self mining hash rate has grown to seven seven exit hash per second.

Rodney Tyler Page: For the literary minded among U you will recall that Ts Eliot's shared that April is the cruelest months and he may as well have been speaking about bitcoin miners in 2024 after having reduced the blocker awards of new Bitcoin to 3125 bitcoin per block.

Rodney Tyler Page: In order to address this known impact on Bitcoin revenues, Cipher is built to succeed with approximately 96% of our portfolio energized through fixed price power at an industry low cost of electricity of roughly 2.7 cents per kilowatt hour. As a reminder, electricity represents the large majority of our operating costs, and our low price is a key driver of our best-in-class unit economy.

Rodney Tyler Page: In order to address this known impact to bitcoin revenues taper is built to succeed with approximately 96% of our portfolio energized through fixed price power at an industry low cost of electricity of roughly $2 seven per kilowatt hour.

Rodney Tyler Page: As a reminder, electricity represents the large majority of our operating costs and our low price is a key driver of our best in class unit economics.

Rodney Tyler Page: As we bring online our planned site expansions at our bear and chief data centers and complete the full Black Pearl site in 2025. We expect our overall rigged fleet efficiency will improve from 29 joules per tera hash currently to 22 joules per tera hash. With a combination of cheap hedged power costs and an efficient fleet of rigs, Cipher has a sustainable business model that is positioned to survive downturns while benefiting from operational leverage in rising profitability environments.

Rodney Tyler Page: As we bring online our planned site expansions at our Barron Chief data centers and complete the full black Pearl site in 2025.

Rodney Tyler Page: We expect our overall rig fleet efficiency will improve from 29 joules per carat <unk> currently to 'twenty two jewels for terahertz.

Rodney Tyler Page: With a combination of cheap hedged power costs.

Rodney Tyler Page: And inefficient fleet of rigs Pfeifer has a sustainable business model that is positioned to survive downturns, while benefiting from operational leverage and rising profitability environments.

Rodney Tyler Page: We have been very busy expanding our production capacity over the last few months. Slide 5 shows construction progress at our BEHR and CHIEF data centers. BEARS infrastructure is now complete, and the first new rigs will be delivered onsite this week, with full completion of the expansion expected to be completed this month.

Rodney Tyler Page: We have been very busy expanding our production capacity over the last few months.

Rodney Tyler Page: Slide five shows construction progress at our bare and chief data centers.

Rodney Tyler Page: Bears infrastructure is now complete and the first new rigs will be delivered on site. This week with full completion of the expansion expected to be completed this month.

Rodney Tyler Page: Chief's infrastructure is expected to be completed in June, and we expect full energization and operations at the site by the end of June. These two on-time expansions will add a total of roughly 1.25 exit hash per second of self-mining to our portfolio. Once we are finished with the Baron Chief expansions, our full attention will be on Black Pearl. But before we begin a progress update on Black Pearl, I want to take a detour into our past with some pictures of the progress we made while constructing our Odessa data center.

Rodney Tyler Page: Chiefs infrastructure is expected to be completed in June and we expect full <unk> and operations at the site by the end of June.

Rodney Tyler Page: These two on time expansion will add a total of roughly 125 <unk> per second of self mining to our portfolio.

Rodney Tyler Page: Once we're finished with the Barron chief expansions, our full attention will be on black Pearl.

Rodney Tyler Page: But before we begin a progress update a black Pearl I want to take a detour into our past with some pictures from the progress we made while constructing our Odessa data center.

Rodney Tyler Page: Odessa began life as 50 acres of dirt and mesquite in late 2021. And a year later, our team of construction experts transformed it into our flagship data center. Take a look at just how different a site can look and operate in a year's time. With that in mind, let's turn to Black Pearl.

Rodney Tyler Page: Adjusted began life at 50 acres of dirt and mesquite in late 2021, and a year later our team of construction experts transformed it into our flagship data center takes.

Rodney Tyler Page: Take a look at just how different our site can look and operate in a year's time.

Black Pearl: With that in mind, let's turn to black Pearl.

Rodney Tyler Page: The next two slides show the beginning of work at Black Pearl and a rendering of what we expect the completed data center to look like. Remember that we are scheduled to energize the site in the second quarter of 2025. The time difference between now and our scheduled energization at Black Pearl is about the same as the time difference between the pictures on the previous slide of the Odessa Data Center construction. We have done this exercise before with the same team.

Black Pearl: The next two slides show the beginning of work at Black Pearl and a rendering of what we expect to completed data center to look like.

Black Pearl: Remember that we are scheduled to energize the site in the second quarter of 2025.

Black Pearl: The time difference between now and our scheduled energy station at Black Pearl is about the same as the time difference between the pictures on the previous slide of the Odessa data Center construction.

Black Pearl: We have done this exercise before with the same team long lead time items are secured and we fully intend and expect to continue our habit of on time execution.

Rodney Tyler Page: Long lead time items are secured, and we fully intend and expect to continue our habit of on-time execution within the Bitcoin mining industry. Cipher has proven uniquely capable of identifying and negotiating the acquisition of greenfield sites. Structuring optimal power arrangements and then building best-in-class data centers all the way to completion. This process takes longer than simply signing a hosting agreement or buying a completed facility, but we believe it delivers the best return on investment in the long run.

Black Pearl: Within the bitcoin mining industry diaper has proven uniquely capable of identifying and negotiating the acquisition of Greenfield sites structuring optimal power arrangements and then building best in class data centers, all the way to completion.

Black Pearl: This process takes longer than simply signing a hosting agreement or buying a completed facility, but we believe it delivers the best return on investment in the long run.

Rodney Tyler Page: With an eye toward delivering the best returns to our shareholders, I am pleased to share that we have accelerated our building plans at the site and plan to energize not only the first half of our total capacity at Black Pearl but the full 300 megawatts available. Slide 8 shows a 3D rendering of the data center we expect to see at Black Pearl in 2021. Slide nine is a high-level overview of our Bitcoin mining business that we like to include each quarter to remind everyone how our business model works.

Black Pearl: With an eye towards delivering the best returns to our shareholders I am pleased to share that we have accelerated our building plans at the site and plan to energize in 2025, not only the first half of our total capacity at black Pearl, but the full 300 megawatts available.

Black Pearl: Slide eight shows a three D rendering of the data center, we expect to see at Black Pearl in 2025.

Black Pearl: Slide nine is a high level overview of our bitcoin mining business that we like to include each quarter to remind everyone. How our business model works, we operate the box in the middle of the drawing because mining equipment, which represents our datacenters in mining rigs.

Rodney Tyler Page: We operate the box in the middle of the drawing that says mining equipment, which represents our data centers and mining rigs. As I discussed earlier, the majority of our operating expenses are electricity, which our data centers convert into computing outputs. Unlike traditional data centers, which operate a similar model and sell their computing output to enterprise clients, Cipher sells its computing output, called hash rate, to the Bitcoin network for Bitcoin.

Black Pearl: As I discussed earlier, the majority of our operating expenses as electricity, which our datacenters convert into computing output.

Black Pearl: Unlike traditional data centers, which operate a similar model and sell their computing output to enterprise clients for dollars.

Black Pearl: Type ourselves its computing output called hatch rate to the Bitcoin network for bitcoins.

Rodney Tyler Page: To make this model operate profitably, a Bitcoin mining company needs to control both its electricity costs and the capital it spends to build its data centers, including mining equipment. Controlling these costs enables a miner to be a lower cost producer, and our focus at Cipher has always been on controlling these specific costs to produce the best possible unit economics. That illustration hopefully gives you a good sense of a straightforward Bitcoin mining business.

Black Pearl: To make this model operate profitably a bitcoin mining company needs to control both its electricity costs and the capital expense to build its data centers, including mining equipment.

Black Pearl: Controlling these costs enables a minor to be a lower cost producer and our focus at <unk> has always been on controlling these specific costs to produce the best possible unit economics.

That illustration hopefully gives you a good sense of a straightforward bitcoin mining business.

Rodney Tyler Page: Cipher, however, does have an additional element in our business that is incredibly valuable. We have the ability to sell power back to the grid at our Odessa facility. Our power purchase agreement gives us a combination of downside risk protection, as well as upside optionality to our revenue streams that doesn't exist for most Bitcoin miners. Let's now turn to page 10 and look at some recent Bitcoin market events. A lot has happened since our last business update.

Black Pearl: However, does have an additional element to our business that is incredibly valuable we have the ability to sell power back to the grid at our Odessa facility. Our power purchase agreement gives us a combination of downside risk protection as well as upside optionality to our revenue streams that doesn't exist for most bitcoin miners.

Let's now turn to page 10, and look at some recent bitcoin market events.

Rodney Tyler Page: We have seen all-time highs in both Bitcoin price and network cash rate, as well as the halving and a brief period of skyrocketing transaction fees related to the launch of the RUNES protocol thereafter. Now that the halving has passed, we are seeing the anticipated squeeze on miner economics, and we at Cipher are witnessing firsthand the benefits of being a large, low-cost producer in real time.

Black Pearl: A lot has happened since our last business update we have seen all time highs in both bitcoin price and network cash rate as well as the having and a brief period of skyrocketing transaction fees related to the launch of the runes protocol thereafter.

Black Pearl: Now that having has passed we are seeing the anticipated squeeze on minor economics, and we had cipher are witnessing firsthand the benefits of being a large low cost producer in real time.

Rodney Tyler Page: We believe that the supply and demand dynamics of Bitcoin, given the halving of new supply coming to market, will likely eventually produce Bitcoin price appreciation as seen in previous halves. We have also been encouraged by the enthusiasm for the US Bitcoin ETFs thus far as a driver of potential new demand. With the squeeze on margins, we have seen a pickup in acquisition discussions over the last several weeks, and we are engaged in several ongoing reviews of opportunities. We continue to have a disciplined focus on potential return on investment in our evaluation. And we are looking for opportunities where Cipher's unique strengths can unlock extra abilities.

Black Pearl: We believe that the supply and demand dynamics of bitcoin given the halving of new supply coming to market will likely eventually produce bitcoin price appreciation as seen in previous habits.

Black Pearl: We have also been encouraged by the enthusiasm for the U S. Bitcoin Etfs, thus far as a driver of potential new demand.

Black Pearl: With the squeeze on minor economics, we have seen a pick up in acquisition discussions over the last several weeks and we are engaged in several ongoing reviews of opportunities.

Black Pearl: We continue to have a disciplined focus on potential return on investment in our evaluations.

Black Pearl: We are looking for opportunities, where cypress unique strengths can unlock extra value.

Rodney Tyler Page: As we move forward, Cipher is focused on finishing the expansions at Barron Chief while ramping up the build-out of Black Pearl and selectively looking for new growth opportunities via acquisition. On slide 11, we give a portfolio overview of our existing data centers and a timeline for expected scaling of our data centers and expansion in our self-mining hash rate. In the first quarter, we paid an average all-in electricity cost of $11,912 per Bitcoin produced at our data center.

Black Pearl: As we move forward <unk> is focused on finishing the expansion at Barron chief while ramping up the build out of black Pearl.

Black Pearl: And selectively looking for new growth opportunities via acquisition.

Black Pearl: On slide 11, we give a portfolio overview of our existing data centers and the timeline for expected scaling of our data centers and expansion in our self mining cash rate.

Black Pearl: In the first quarter, we paid an average all in electricity cost of $11912 per bit quaint produced at our data centers.

Rodney Tyler Page: We are very proud of this number, and it drives our best-in-class unit economy. Please note that when some of our competitors talk about these costs, they only include electricity and not transmission and other charges. By contrast, when we talk about all-in electricity costs, we mean the total cost to deliver electricity to our mining rigs. So our numbers include all transmission and other charges, and our low numbers dramatically demonstrate our competitive advantage.

Black Pearl: Very proud of this number and it drives our best in class unit economics.

Black Pearl: Please note that when some of our competitors talk about these costs. They only include electricity and not transmission and other charges. In contrast, when we talk about all in electricity costs. We mean, the total cost to deliver electricity to our mining rigs. So our numbers include all transmission and other charges and our low <unk>.

Black Pearl: <unk> dramatically demonstrate our competitive advantage.

Rodney Tyler Page: On the left side of this slide, you have an overview of our four current data centers, along with our all-in electricity cost per bitcoin at the respective sites for the first. The charts on the right side of the slide give you a graphic illustration of the amount of megawatts we manage related to our self-mining operations and the hash rate produced by those operators, as well as the additional growth opportunities in the coming year and a half. As discussed, in 2025, we anticipate bringing on the full capacity of the Black Pearl site.

Black Pearl: On the left side of this slide you have an overview of our four current data centers, along with our all in electricity cost per bit coin at the respective sites for the first quarter.

Black Pearl: The charts on the right side of the slide gives you a graphic illustration of the amount of megawatts, we manage related to our self mining operations.

Black Pearl: The hash rate produced by those operations as well as the additional growth opportunities in the coming year and a half.

Black Pearl: As discussed in 2025, we anticipate bringing on the full capacity of the black Pearl site.

Rodney Tyler Page: At this point, we will turn to production by site. On slide 12, you can see a picture of our Odessa facility. Odessa is the most significant part of our portfolio as it represents approximately 90% of our Bitcoin production. Odessa is a wholly owned facility with a five-year fixed price power purchase agreement and some of the lowest cost power in the industry.

Black Pearl: At this point, we will turn to production by site on Slide 12, you can see a picture of our Odessa facility.

Odessa is the most significant part of our portfolio as it represents approximately 90% of our bitcoin production.

Black Pearl: Odessa is a wholly owned facility with a five year fixed price power purchase agreement and some of the lowest cost power in the industry.

Rodney Tyler Page: We report a third-party independent valuation to give investors a sense of how much value is represented in the fixed-price power contract alone, and that contract continues to be valuable and differentiating for us. As always, Ed will talk more about it in his remarks. We currently generate approximately 6.7 ExaHash per second at the site, utilizing approximately 207 megawatts.

Black Pearl: We report a third party independent valuation to give investors a sense of how much value is represented in the fixed price power contract alone and that contract continues to be valuable and differentiating for us as always Ed will talk more about it in his remarks.

Black Pearl: We currently generate approximately $6 seven exit hash per second at the site utilizing approximately 270 megawatts.

Rodney Tyler Page: We have mined roughly 1,183 bitcoins at the site year-to-date through April 30. On slide 13, we show a picture and highlights from our Alborz data center, which we believe is a truly unique site. Alborz is 100% powered by wind and is a joint venture that we share with our energy providers. It currently has a total operating capacity of 40 megawatts when the wind blows.

Black Pearl: We have mined roughly 1183 bitcoins at the site year to date through April 30.

Black Pearl: On Slide 13, we show a picture and highlights from our <unk> datacenter, which we believe is a truly unique site ours is 100% powered by wind and as a joint venture that we share with our energy provider.

Black Pearl: It currently has a total operating capacity of 40 megawatts when the wind blows that 40 megawatts Power's roughly one three <unk> per second of rigs.

Rodney Tyler Page: That 40 megawatts powers roughly 1.3 exit hash per second of RIG. Alborz has mined approximately 168 Bitcoin year to date through April 30. Roughly half of that total capacity in site production belongs to Cipher. We expect to supplement the wind production at Alborz with a grid connection by the end of the second quarter. This grid connection will allow us to bring our uptime at Alborz in line with Bear and Chief and, most importantly, generate more Bitcoin with the existing equipment at the site. We currently target roughly 75% uptime at the site, and with the supplemental grid connection, we anticipate our uptime will be closer to roughly 95%. Slide 14 shows operational highlights from our Baron Chief Data Center. Combined, the sites operate 20 megawatts, which can generate approximately 0.7 ExaHash per second.

Black Pearl: Our board has mined approximately 168 bitcoin year to date through April 30.

Black Pearl: Roughly half of that total capacity and site production belonged cypress.

Black Pearl: We expect to supplement the wind production at <unk> with a grid connection by the end of the second quarter.

Black Pearl: This grid connection will allow us to bring our uptime at al bores in line with bear and cheap and most importantly generate more bitcoin with the existing equipment at the site.

Black Pearl: We currently target roughly 75% uptime at the site and with the supplemental grid connection we anticipate our uptime will be closer to roughly 95%.

Black Pearl: Slide 14 shows operational highlights from our Barron chief data centers.

Black Pearl: Combined the sites operate 20 megawatts, which can generate approximately 0.7 exit hash per second.

Rodney Tyler Page: Bear and Chief are also structured as joint ventures and feature shared economics similar to Al Gore. Unlike our other sites, which have behind-the-meter power arrangements, Bear and Chief are set up in front of the meter at a location in Texas that typically features attractive market prices. And we are excited to report on their production next quarter, when they will each be four times their current size. As you can see, we are extremely busy at Cipher, as always.

Black Pearl: Barron Chief are also structured as joint ventures and feature shared economics similar to our board.

Black Pearl: Unlike our other sites, which have behind the meter power arrangements Barron chief are set up in front of the meter at a location in Texas that typically features attractive market prices and we are excited to report on their production next quarter when they will each be four times their current size.

Black Pearl: As you can see we are extremely busy at safer as always we have been a company focused on long term success since day, one and our disciplined approach strategic decision, making continues to differentiate us.

Rodney Tyler Page: We have been a company focused on long-term success since day one, and our disciplined approach to strategic decision-making continues to differentiate us. In the post-halving environment, the value of our low-cost producer model is clear. We believe our ability to identify attractive electrical interconnection opportunities at greenfield locations and manage their evolution all the way to the state-of-the-art data centers we operate makes us unique. We are thrilled to have two consecutive quarters of GAP profit.

Black Pearl: In the post having environment the value of our low cost producer model is clear we.

Black Pearl: We believe our ability to identify attractive electrical interconnection opportunities at greenfield locations and manage their evolution all the way to the state of the art data centers, we operate makes us unique.

Black Pearl: We are thrilled to have two consecutive quarters of GAAP profits and.

Rodney Tyler Page: And the way we are going to celebrate is to keep investing in the expansion of the business. At this point, I'll turn it over to our Chief Financial Officer, Ed Farrell. Thank you, Tyler, and hello to everyone on the call.

Black Pearl: And the way we are going to celebrate is to keep investing in the expansion of the business.

Black Pearl: At this point I'll turn it over to our Chief Financial Officer, Ed Farrell.

Edward John Farrell: Thank you Tyler and Hello to everyone on the call.

Edward John Farrell: Tyler has already discussed some of the key financial metrics for the first quarter. Before we proceed with the walkthrough of the balance sheet and statement of operations, I'd like to add some further insights and content. Last quarter, we emphasized the importance of having all four of our data centers fully deployed, and the Beneficial Effects of This Reflected in Our Earnings. In the first quarter, we observed a continuation of many of these favorable trends, amplified by a tailwind from higher Bitcoin prices.

Edward John Farrell: Tyler has already discussed some of the key financial metrics for the first quarter.

Edward John Farrell: Before you proceed with the walk through on the balance sheet and statement of operations I'd like to add some further insights in context.

Edward John Farrell: Last quarter, we emphasize the importance of having all four of our data centers fully deployed and we saw the beneficial effects of this reflected in our earnings.

Edward John Farrell: In the first quarter, we observed a continuation of many of these favorable trends amplified by a tailwind from higher bitcoin prices.

Edward John Farrell: Slides 16 and 17 are some financial metrics on both a sequential and year over year basis, highlighting our performance and strength of our underlying business. As you can see, for both comparisons, the trends are favorable. Let's move on to slide 18 and drill down on the numbers in more detail. In the first quarter, we experienced top-line growth, which translated to the bottom line. For the second consecutive quarter, we had gap net income reporting $39.9 million, a sequential increase of 277% and a 970% growth rate of million dollars.

Edward John Farrell: Slide 16, and 17 are some financial metrics on both the sequential and year over year basis, highlighting our performance and strength of our underlying business as you can see for both comparisons the trends are favorable.

Edward John Farrell: Let's move on to slide 18, and drill down on the numbers in more detail.

Edward John Farrell: In the first quarter, we experienced top line growth, which translated into significant bottom line results.

For the second consecutive quarter, we had GAAP net income reporting $39 $9 billion. This quarter, a sequential increase of 277% and 976% increase from the prior year quarter, We reported a net loss of $4 6 million.

Edward John Farrell: In the current quarter, we mined 924-bit, resulting in $48.1 million in revenue, a sequential increase of 11 percent. Year-over-year, our revenues increased from $21.9 million to $48.1 million, 120%! A critical contributor to this revenue-to-profit conversion is our previously discussed power cost, which increased in step with the growth in revenue. In the current quarter, it's worth noting that the cost of revenues included $1.1 million of non-recurring costs. Purchase Upgrade Parts to Increase Deficiency over Mining, and comparing revenues in the current quarter versus the same quarter in the prior year, the cost of power on a percentage basis was well below the increase in revenue.

Edward John Farrell: In the current quarter, we mined 924, bitcoin, resulting in $48 1 billion in revenues a sequential increase of 11%.

Edward John Farrell: Year over year, our revenues increased from 21 9 million to $48 1 million or 120% increase.

Edward John Farrell: A critical contributor to this revenue to profit conversion is our previously discussed power costs, which in the current quarter increased in step with the growth in revenues.

Edward John Farrell: In the current quarter, it's worth noting for the cost of revenues included $1 1 million of nonrecurring costs.

Edward John Farrell: Purchase upgrade parts to increase the efficiency of our miners.

Edward John Farrell: When comparing revenues in the current quarter versus the same quarter in the prior year you can see that the cost of power on a percentage basis was well below the increase in revenues.

Edward John Farrell: This is primarily attributable to our fixed price power contract at Odessa. The value of that contract rose by over $7.3 million this quarter alone, underscoring the inherent value of the power range that we secured at Odessa. As you recall, we adopted the new crypto fair value accounting standard in 2023, and in the first quarter of 2024, we had a fair value gain on our Bitcoin, $40.6 million. I'd like to talk a bit about our G&A expenses and our philosophy for managing these costs. To provide greater transparency into our financials, starting this quarter, we've further broken down our... Compensation. General Administrative on the face of the state of operation.

Edward John Farrell: This is primarily attributable to our fixed price power contract that Odessa.

Edward John Farrell: You have that contract rose by over seven $3 million this quarter alone underscoring the inherent value of the power arrangement, we secured at Odessa.

Edward John Farrell: As you recall, we adopted the new crypto fair value accounting standard in 2023 and in the first quarter of 2024, you had a fair value gain on our bitcoin inventory of $40 6 million.

Edward John Farrell: I'd like to talk a bit about our G&A expenses in our philosophy for managing these costs.

To provide greater transparency into our financials, starting this quarter, we further broken down our G&A expenses into compensation and benefits and general administrative on the face of the statement of operations.

Edward John Farrell: In the first quarter of 2024, compensation and benefit costs were $13 million, representing a decrease of $2.7 million compared to the last quarter of 2023. Comparing the first quarter of 2024 against the first quarter of 2023. Compensation and benefits increased $1.1 million, primarily due to a rise in headcount as we grew the company in 2023. Now on to General Administrative Expenses. [inaudible] We reduced these costs by $700,000 or 11% compared to the prior quarter, and they increased $600,000 or 11% from the first quarter of 2023, again due to the growth in our business. Appreciation and amortization expense of $17.2 million was up $400,000 or 3% from the prior quarter and up 48% comparing the first quarter of 2024 to the first quarter of 2023.

Edward John Farrell: In the first quarter of 2020 for compensation and benefit costs were $13 million.

Edward John Farrell: Representing a decrease of $2 7 million compared to the last quarter of 2023.

Edward John Farrell: Comparing the first quarter of 2024 against the first quarter of 2023 compensation and benefits increased $1 1 billion, primarily due to the rise in head count as we grew the company in 2023.

Edward John Farrell: Now onto general administrative expenses, which include corporate.

Edward John Farrell: Corporate insurance professional fees occupancy and other public company expenses, we reduced these costs by $700000 or 11% compared to the prior quarter and the increased $600000 or 11% from the first quarter of 2023 again due to the growth in our business.

Edward John Farrell: Depreciation and amortization expense of $17 2 million was up $400000 or 3% from the prior quarter and up 48% comparing the first quarter of 2024 to the first quarter of 2023.

Edward John Farrell: That was driven by both a full year of service for some mining rigs, infrastructure, and some new rigs that were placed into service in 2024. Tyler mentioned that we view our ability to find greenfield sites and quickly turn them into best-in-class data centers as differentiating and our best return on investment in the long term. Right from Cipher's earliest days, we have invested in both personnel and technology.

Edward John Farrell: That was driven by both the full year of service for some mining rigs infrastructure and some new rigs that were placed into service in 2024.

Edward John Farrell: As Tyler mentioned, we view our ability to find greenfield sites and quickly turn them into best in class data centers is differentiated and our best return on our investments in the long run.

Edward John Farrell: Right from Cypress earliest days, we have invested in both personnel and technology, because we think our model scales as well as we expand the aggregate amount of megawatts we manage.

Edward John Farrell: We think our model scales as well as we expand the aggregate amount of megawatts we manage. We believe those early investments will drive top-line growth for the future and, in turn, flow through to our bottom line. Now, let's turn to our slide on the non-GAAP measurements we use to reconcile our adjusted earners. Allow me to remind everyone that our adjusted earnings exclude the impact of depreciation on fixed assets. Change in Fair Value of a Derivative Asset

Edward John Farrell: We believe those early investments will drive top line growth for the future and in turn flow through to our bottom line.

Edward John Farrell: Now, let's turn to our slide on non-GAAP measurements, we use to reconcile our adjusted earnings.

Edward John Farrell: Allow me to remind everyone that our adjusted earnings exclude the impact of depreciation of fixed assets. The change in fair value of our derivative asset deferred income tax expense the change in fair value of the warrant liability stock compensation expense and other nonrecurring gains and losses.

Edward John Farrell: Deferred Income Tax Expense, Change in Fair Value of the Warrant Liability, Stock Compensation Expense, and Other Non-Returning Gains and Losses. These supplemental financial measures are not measurements of financial performance in accordance with U.S. GAAP, and as such, they may not be comparable to similarly titled measures of other companies.

Edward John Farrell: These supplemental financial measures are not measurements of financial performance in accordance with U S GAAP and as such they may not be comparable to similarly titled measures of other companies. We believe that these non-GAAP measures may be useful to investors in comparing our performance across reporting periods on a consistent basis.

Edward John Farrell: We believe that these non-GAAP measures may be useful to investors in comparing our performance across reporting periods on a consistent basis. Management uses these non-GAAP financial measures internally to help understand, manage, and evaluate our business, to help make operating. When we adjust our first quarter gap net income, we add $23.1 million for those items I just listed. That brings us to an adjusted net income of $63 million for the quarter versus an adjusted net income of $27.8 million in the prior quarter. 8.4 million in the last year.

Edward John Farrell: Management uses these non-GAAP financial measures internally to help understand manage and evaluate our business performance and to help make operating decisions.

Edward John Farrell: When we adjust our first quarter GAAP net income, we had $23 $1 million for those items I just listed.

That brings us to adjusted net income of $63 million for the quarter versus an adjusted net income of $27 8 million in the prior quarter and $8 4 million in last year's first quarter.

Edward John Farrell: Thanks to our top-line growth, our discipline on costs, and our industry-leading power, the first quarter showcased strong free cash. These conditions, along with our access to capital for a strategic use of our ATM shelves to fund a creative expansion opportunity, contributed to a significant improvement in our liquidity position, further bolstered our balance sheet and liquidity outlook, and close the quarter with over $200 million in cash and Bitcoin holdings. Now, let's turn our attention to the Consolidated Balance.

Edward John Farrell: Thanks to our top line growth, our discipline on costs and our industry, leading power arrangements. The first quarter showcase strong free cash flow.

Edward John Farrell: These conditions, along with our access to capital through our strategic use of our ATM shelf to funding accretive expansion opportunities contributed to significant improvement in our liquidity position and further bolstered our balance sheet and liquidity outlook.

Edward John Farrell: We closed the quarter with over $200 million in cash and Bitcoin holdings.

Edward John Farrell: Now, let's turn our attention to the consolidated balance sheet.

Edward John Farrell: As of March 31st, our total assets amounted to $250 million, an increase of $95 million from $156 million at the end of 2023. Our cash position remained relatively flat at $88.7 million, up a little bit from the $86.1 million at the close of 2023. I'll quickly touch on some of our balance sheet line items. Accounts receivable totaled $680,000 compared to $622,000 at year-end, while prepaid expenses amounted to $2.9 million, down from $3.7 million at the end of 2023.

Edward John Farrell: As of March 31, our total assets amounted to $250 million, an increase of $95 million from $156 million at the end of 2023.

Edward John Farrell: Our cash position remained relatively flat at $88 7 million up a little bit from the $86 1 million at the close of 2023.

Edward John Farrell: It's worth mentioning that most of these prepaid expenses are related to corporate insurance. We reported a Bitcoin balance of $123.3 million, reflecting the $1,730 Bitcoin held in Treasury as of March 31. This figure marks an increase from the 780 Bitcoin held at year-end 2023 valued at $33 million. We did not sell any Bitcoin during. Our treasury management philosophy remains a frequent topic of inquiry, and our stance remains: We maintain an opportunistic approach, continually assessing various funding avenues for our growth.

Edward John Farrell: I'll quickly touch on some of our balance sheet line items.

Edward John Farrell: Accounts receivable totaled $680000 compared to 622000 at year end, while prepaid expenses amounted to $2 9 million.

Edward John Farrell: Down from $3 7 million at the end of 2023.

Edward John Farrell: It's worth mentioning that most of these prepaid expenses related to corporate insurance and as discussed last quarter, we were able to significantly reduce our D&O insurance premiums.

Edward John Farrell: We reported a bitcoin balance of $123 3 million, reflecting the 1730 bitcoin held in treasury as of March 31.

Edward John Farrell: This figure marks an increase from the 780 bitcoin held at year end 2023 valued at $33 million.

Edward John Farrell: We did not sell any between during the quarter.

Edward John Farrell: Our Treasury management philosophy remains a frequent topic of inquiry and our stance remains consistent.

Edward John Farrell: We maintain an opportunistic approach continually assessing various funding avenues for our growth initiatives.

Edward John Farrell: While we generally aim to increase the size of our Bitcoin inventory over time, our decisions are guided by the markets and our overarching capital allocation strategy. We constantly assess the markets, looking for the most attractive forms of capital available. And we weigh the pros and cons of all the various ways to fund our business and expansion plan. This may be through our cash reserves, our bitcoin holdings, or issuing tokens through this constant evaluation process. Try not to be dogmatic.

Edward John Farrell: While we generally aim to increase the size of a bitcoin inventory over time, our decisions are guided by the markets and our overarching capital allocation strategy.

Edward John Farrell: We constantly assess the market's looking for the most attractive forms of capital available and we weigh the pros and cons of all the various ways to fund our business and expansion plans efficiently.

Edward John Farrell: This may be through our cash reserves are bitcoin holdings or issuing equity.

Edward John Farrell: Through this constant evaluation process, we determined our estimated cost of capital and manage our treasury dynamically.

Edward John Farrell: We try not to be dogmatic.

Edward John Farrell: Though we sell Bitcoin this quarter, there may be times when we sell more of our Bitcoin holdings to fund a creative growth plan. Now I'd like to shift focus to the value of our Odessa power contract, which we record as a derivative S, consistently emphasize the substantial competitive advantage afforded by our power contract at Odessa. As a refresher, we began publishing a third-party mark for this agreement in the third quarter of 2022.

Edward John Farrell: We sold the bitcoin this quarter there may be times, when we sell more of a bitcoin holdings to fund accretive growth plans.

Edward John Farrell: This mark is depicted as a derivative asset on our balance sheet, subject to revaluation each reporting period. Essentially, it reflects the in-the-money value of the contract in relation to the time value of the contract and prevailing forward power prices at our Odessa facility. As of March 31st, this asset was valued at $101 million, reflecting a $7.4 million write-down at end of 2023. This change is recorded as a gain on the statement of operation. It is important to highlight that this asset is categorized into two components on the ballot.

Edward John Farrell: Now I'd like to shift focus to the value of our Odessa power contract, which we record as a derivative asset.

Edward John Farrell: We consistently emphasize the substantial competitive advantage afforded by a power contract that Odessa.

Edward John Farrell: As a refresher we began publishing a third party mark for this agreement in the third quarter of 2022.

Edward John Farrell: This mark is depicted as derivative asset on our balance sheet subject to revaluation each reporting period SM.

Edward John Farrell: Essentially it reflects the in the money value of the contract in relation to the time value of the contract and prevailing forward power prices at our Odessa facility.

Edward John Farrell: As of March 31.

Speaker Change: Yes, it was valued at $101 million.

Speaker Change: Afflicting, a 7.4 million increase since the end of 2023.

Speaker Change: This change is recorded as a gain.

Speaker Change: Gain on the statement of operations it.

Speaker Change: It is important to highlight that this asset is categorized into two components on the balance sheet.

Edward John Farrell: $34.2 million as a current asset and 6.7 million as a non-care test. As always, fluctuations in the fair value of this contract will impact our gap earnings, but we exclude it from our adjustment. Our other significant assets comprise property and equipment totaling $238.5 million, primarily attributable to our Odessa facility. Within this figure, mining rigs and related equipment account for $168.5 million, while leasehold improvements are valued at $137.5 million. These amounts are net of $75.9 million of accumulated depreciation.

Speaker Change: $34 2 million as a current asset and $66 7 million as a non current asset.

Speaker Change: As always fluctuations in the fair value of this contract will impact our GAAP earnings, but will be excluded from our adjusted earnings.

Speaker Change: Our other significant assets comprised of property and equipment totaling $238 5 million.

Speaker Change: Primarily attributable to our Odessa facility.

Speaker Change: Within this figure mining rigs and related equipment account for $168 7 million, while leasehold improvements are valued at $137 5 million. These.

Speaker Change: These amounts are net of $75 $9 million of accumulated depreciation.

Edward John Farrell: We also hold intangible assets amounting to $8.2 million, with $7 million attributable to the Black Pearl site and associated ERCOT approval, and the remaining $1.4 million relating to capitalized software. These amounts are net of $270,000 of Amardis. At the end of the first quarter, our equity investee interest in Albor's Bear and Chief JV stood at $52.6 million, and we had an operating lease obligation of $6.3 million. We had security deposits totaling $23.9 million, which include the $12.5 million of collateral post-mortem to our Odessa power provider and the $6.3 million deposit to Encore related to the construction of our new Black Pearl data center.

Speaker Change: We also hold intangible assets amounting to $8 $2 million with $7 million attributable to the black Pearl site and associated ERCOT approval and the remaining $1 4 million relating to capitalized software.

Speaker Change: These amounts are net of $270000 of amortization.

Speaker Change: At the end of the first quarter, our equity investor interest in the outboard bear and Chief Jv's stand at $52 6 million and we had an operating lease obligations of $6 8 million.

Speaker Change: We had security deposits totaling $23 9 million, which include the $12 $5 million of collateral posted to our disapproval provider and a $6 $3 million deposit to oncor related to the construction of our new Black Pearl data Center.

Edward John Farrell: There were no significant changes to the liability side of the balance sheet from your end, and we have no debt that Hindus are capital. Our current liquidity position as of April 30 was $213 million comprised of $96 million in cash and $117 million in value. I will close my remarks by saying we're extremely pleased with our financial performance in Q1 and excited about our position as we enter this new halving epoch. Since Day 1, we have been disciplined and relentlessly focused on our unit economics while also delivering a prudent growth strategy.

Speaker Change: There were no significant changes to the liability side of the balance sheet from year end and we have no get it hinders our capital structure.

Speaker Change: Our current liquidity position as of April 30th.

Speaker Change: $213 million comprised of $96 million in cash and $117 million worth of bitcoin.

Speaker Change: I will close my remarks by saying we are extremely pleased with our financial performance in Q1 and excited about our position as we enter this new having epoch.

Speaker Change: From day, one we have been disciplined and relentlessly focused on our unit economics, while also delivering a prudent growth strategy.

Edward John Farrell: These financial results reflect the value of all the careful decisions we have made. Now that the having is behind us, I hope we'll see the markets recognize that we have deliberately built Cipher to be different from other mines. As Tyler stated, Cipher is built to survive market downturns and to benefit from operational leverage in rising profitability environments.

Speaker Change: These financial results reflect the value of all the capital decisions we have made.

Speaker Change: Now that they're having is behind us I hope, we will see the markets recognize that we have deliberately built cipher it to be different from other miners.

Speaker Change: Pilot stated ciphers built to survive market downturns and to benefit from operational leverage and rising profitability environments.

Edward John Farrell: As always, we look forward to updating you in greater detail on our growth plans over the coming quarter. I will pause now, and Tyler and I are happy to answer your question. Thank you. As a reminder, to ask a question, please press Star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 11 again.

Speaker Change: As always we look forward to updating you in greater detail on our growth plans over the coming quarters, I will pause now and Tyler and I are happy to answer your questions.

Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.

Operator: Please stand by while we compile the Q&A roster. And our first question comes from Josh Siegler of Cantor. Your line is open. Yeah, hi, guys. Good morning.

Speaker Change: Withdraw your question. Please press star one again, please standby, while we compile the Q&A roster.

Speaker Change: And our first question comes from Josh <unk> of Cantor Your line is open.

Joshua Michael Siegler: Great results here. Great continued execution. Always good to see. For my first question, I was wondering if you could comment on some post-halving dynamics. Have you seen any change in regards to the types of deals that are being presented to you or how your competitors are currently executing? Any color on that would be helpful.

Joshua Kane: Yes, hi, guys. Good morning, Great revolt here brake continued execution and always good to see.

Joshua Kane: <unk>.

Joshua Kane: For my first question I was wondering if you could comment on the timing dynamic have you seen any tunes in regards to yields that are being presented to you or how your competitors are currently.

Joshua Kane: Getting any color on that would be helpful.

Rodney Tyler Page: Thanks, Josh. And good morning. I should say good evening, too.

Speaker Change: Thanks, Josh and good morning, I should say good evening, I'm actually doing the call from Hong Kong.

Rodney Tyler Page: I'm actually doing the call from Hong Kong. I'm over here with Will, our co-president, meeting with rig manufacturers and investors. So if there's a slight delay in my line of apology, I'll try to be deliberate in my answers. Yeah, great question. It's been interesting to watch the post-halving dynamics. So if we put aside the day or two where there was a huge explosion in transaction fees and an all-time high daily USD revenue for miners immediately after the halving, we've seen the economics settle in to exactly as expected.

Speaker Change: We're here with Wil, our co president meeting with rig manufacturers and investors. So.

Speaker Change: If there is a slight delay on my line of apologies I'll try to be deliberate in my answers.

Speaker Change: Yes, great question, it's been interesting to watch.

Speaker Change: Post having dynamics so.

Speaker Change: If we put aside the day or two where there was a huge explosion in transaction fees and like an all time high daily USD revenue for minors immediately after the having we've seen the economics settle in to exactly basically as expected.

Rodney Tyler Page: We actually, if we look at hash price, so the metric that measures what a miner is paid per unit of compute that it contributes to the network, it made an all-time daily low about a week after the halving, and it's kind of hung around there, it's bounced.

Speaker Change: Good.

Speaker Change: We actually if we look at.

Speaker Change: <unk> price so the metric that measures.

Speaker Change: A minor is paid per unit of compute that it contributes to the network.

Speaker Change: It made an all time daily low.

Speaker Change: About a week after the habit and has kind of hung around there it's bounced so.

Rodney Tyler Page: So it touched about four and a half cents per terahash, and it's bounced back. I think it's above, now that Bitcoin's at 64,000, it's above five cents per terahash per day. But what that means is that it is going to squeeze, folks.

Speaker Change: It touched about $4.05 per Terra ash.

Speaker Change: And its bounce back I think it's above another bitcoins at 64000, that's above five per <unk>.

Speaker Change: Per day, but what that means is that is going to squeeze folks.

Rodney Tyler Page: That's an all-time low in terms of revenue paid in dollars for compute. And so you really have to be a miner that has a growth plan, has the ability to update fleets, tap capital markets and raise capital, expand, et cetera, or you could be getting squeezed. So it seems like, based on what we have seen, If you look at the dynamic between the hash price and the cost to produce that hash, or the hash cost, it is pretty tight or even negative for a lot of miners.

Speaker Change: It's an all time low in terms of revenue paid in dollars for compute.

Speaker Change: And so you really have to be a minor that has a growth plan has the ability to update fleets tap capital markets and raised capital expand et cetera.

Speaker Change: Or.

Speaker Change: You could be getting squeezed so it seems like based on what we have seen.

Speaker Change: If you look at the dynamic between half price and the cost to produce that pasture to hash cost.

Speaker Change: It's pretty tight or even negative for a lot of miners.

Rodney Tyler Page: Cipher has stayed positive since the halving, but it's definitely getting into the zone where if we are the low-cost producer or among the lowest cost producers, there are others that are getting squeezed harder. So I can't say specifically how each company is dealing with this, but it's fair to say that, as expected and as historically happens, immediately post-halving, the economics are squeezed for miners.

Speaker Change: <unk> has stayed positive since they are having.

Speaker Change: But it's definitely getting into the zone, where if we are the low cost producer or among the lowest cost producers. There are others that are getting squeezed harder. So I can't say, specifically how each company is dealing with this but it's fair to say that as expected and as historically have.

Speaker Change: Immediately post having the economics are squeezed for miners I have seen or we have seen.

Rodney Tyler Page: I have seen, or we have seen, I think, a pickup in other miners needed to come up with a strategic plan. You know, so much of that is obviously driven by your power cost. And if you don't have it, [inaudible] Because otherwise, I think, you know, it just becomes a question of how long miners with worse economics can withstand the pain. So, we'll have to see. I mean, I think you could also maybe batten down the hatches, and as we normally see post-halving, Bitcoin historically makes all-time highs a few months later, and if that happens, maybe the Bitcoin price appreciation will come to help miners with tougher economics. Yeah, understood. And I appreciate the color there, Tyler.

Speaker Change: I think a pick up in other.

Speaker Change: Other miners needed to come up with our strategic plan.

Speaker Change: So much of that is obviously driven by your power costs.

Speaker Change: If you don't have.

Speaker Change: Cheaper power costs, those you could be cash flow negative and you need to figure things out so I do think and I alluded to this in my earlier remarks.

Speaker Change: Probably we will see a pickup in acquisition activity I would expect.

Speaker Change: Because otherwise I think it just becomes a question of how long.

Speaker Change: Ken miners with worse economics withstand the pain.

Speaker Change: So we will have to see I mean, I think you could also maybe battened down the hatches and as we normally see post having bitcoin historically makes all time highs a few months later and if that happens maybe the bitcoin price appreciation will come help.

Speaker Change: Miners with tougher economics, but.

Speaker Change: I think a lot of them are thinking about what the plan is going to be going forward.

Rodney Tyler Page: I guess as a follow-up, I was wondering if we could talk a little bit more about how much, you know, how you're thinking about raising capital for the full 25x cash of Black Pearl. And, you know, now that you've delivered on kind of building up this Bitcoin balance, if you'd be looking to potentially sell Bitcoin to help fund that. So let me talk about Black Pearl, and projections are pretty much in line with what we've said in the past. If you look at the total 300 megawatt site, we forecast it to cost about $420 million to build.

Speaker Change: Yes, understood and I appreciate the color there Tyler I guess as a follow up I was wondering if you could talk a little bit more about how much.

Speaker Change: How youre thinking about raising capital for the full 25 back positive black Pearl and.

Speaker Change: Now that you've delivered on kind of building up the <unk> balance that you'd be looking at potentially felt they are going to help fund that.

Speaker Change: So let me.

Rodney Tyler Page: Talk about black Pearl and projections are pretty much in line with what we've said in the past if you look at the total 300 megawatt site.

Rodney Tyler Page: And that's roughly $200 million in non-rig infrastructure and $220 million for rigs. And I'm using the $220 million figure because that's pretty cheap.

Rodney Tyler Page: It's about we forecast that the cost about $420 million to build and Thats roughly.

Rodney Tyler Page: 200 million in non rig infrastructure and $220 million in.

Rodney Tyler Page: Our rigs and I'm using the 220 million figure that that's pretty cheap that's the figure that we have contracted for with bit Maine.

Rodney Tyler Page: That's the figure that we have contracted for with Bitmain. Recall that we have a purchase contract and a purchase option to buy 300 megawatts of rigs in total for about $220 million. So of that, we've put down deposits on the rigs, and we've paid for work at the site. We've already paid for some of the payments for substations, et cetera. So I think about, give or take $30 million or so has been paid for that.

Rodney Tyler Page: Call that we have a purchase option.

Rodney Tyler Page: We have a purchase contract and a purchase option to buy 300 megawatts of Briggs in total.

Rodney Tyler Page: For about $220 million.

Rodney Tyler Page: So of that.

Rodney Tyler Page: We've put down deposits on the rigs we've paid for our work at the site. We've already paid for some of the payments are substations et cetera.

Rodney Tyler Page: So I think about give or take $30 million or so has been paid of that.

Rodney Tyler Page: If you look at our Bitcoin balance and today's Bitcoin price and cash on hand, as we just reported, we're sitting on about $226 million of liquidity as of this morning. And so that would leave a gap over the next, you know, five quarters or so to pay about $164 million.

Rodney Tyler Page: If you look at our bitcoin balance in today's bitcoin price and cash on hand, as we just reported.

Rodney Tyler Page: On about $226 million of liquidity there as of this morning.

Rodney Tyler Page: So that would leave a gap or.

Rodney Tyler Page: Over the next.

Rodney Tyler Page: Five quarters, or so to pay about $164 million.

Rodney Tyler Page: And so we feel very comfortable between our positive cash flow operations, the Bitcoin balance we have, and, if we need to, tapping either equity or debt markets to fill in any of the remainder between here and there. As a reminder, I mean, we have an equity shelf that has plenty of capacity on it if we choose to tap it. So that's how we're thinking about that overall spend for Black Pearl and why we feel so comfortable that we can build the full data center.

Rodney Tyler Page: And so we feel very comfortable between our positive cash flow operations.

Rodney Tyler Page: The bitcoin balance, we have and if we need to tapping either equity or debt markets to fill in any of the remainder between here and there as a reminder, I mean, we have an <unk>.

Rodney Tyler Page: And equity shelf.

Rodney Tyler Page: Has plenty of capacity on it if we chose to tap it.

Rodney Tyler Page: So that's how we're thinking about the overall spend for black Pearl and why we feel so comfortable that.

Rodney Tyler Page: We can build the full data center.

Rodney Tyler Page: As far as spending the bitcoin versus other means of capital.

Rodney Tyler Page: As far as spending Bitcoin versus other means of capital, yeah, I think we stay very consistent as Ed described in our philosophy that it's always been our goal to build a Bitcoin treasury that increases over time. We do not expect that to be linear.

Rodney Tyler Page: I think we stay very consistent as Ed described in our philosophy that it's always been our goal to build a bit quaint treasury that increases over time.

Rodney Tyler Page: We do not expect that to be linear.

Rodney Tyler Page: There will be times we sell Bitcoin, and no one should think that's a bad thing. If we do, it doesn't indicate, you know, a change in heart about a long-term direction of where we think Bitcoin will go or how we'll manage the business, so much as just at any given time, we're trying to come up with the optimal way to source capital. And so we spend a lot of time looking at the relative price of Bitcoin to our options and debt and equity markets. And we also sometimes hedge that Bitcoin, as we've described in the past.

Rodney Tyler Page: There will be times, we sell bitcoin and no one should think Thats a bad thing if we do it doesn't indicate.

Rodney Tyler Page: And heart about long term track of where we think bitcoin will go or waves.

Rodney Tyler Page: Manage the business so much as just at any given time, we're trying to.

Rodney Tyler Page: Come up with the optimal way to source capital and so we spend a lot of time looking at the relative price of bitcoin to our options and debt and equity markets.

Rodney Tyler Page: And we also sometimes hedge that bitcoin as we've described in the past. So we're very actively manage the treasury and certainly some of that cost at black Pearl I would expect to come from bitcoin overtime.

Rodney Tyler Page: So we very actively manage the treasury, and certainly some of that cost at Black Pearl I would expect to come from Bitcoin over time. But currently, where we're positioned and where we've been putting on hedges, we're comfortable with what we've got in the treasury, which was again, 2033 Bitcoin at the end of last month. Yeah, understood. That's very helpful, Tyler.

Rodney Tyler Page: Currently where we're positioned and where we've been putting on hedges, we're comfortable with what we've got in the Treasury, which was again 2033 bitcoin at the end of last month.

Joshua Michael Siegler: Thanks again for taking my questions and congratulations on the strong execution squad. Thank you. One moment for our next question. And our next question comes from Mike Colonnese of H.C. Wainwright. Your line is open. Hi, good morning, guys. Nice quarter here.

Speaker Change: Yes, that's very helpful color. Thanks, again for taking my questions and congrats on the strong execution this quarter.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from Mike Colony of H C. Wainwright. Your line is open.

Michael Anthony Colonnese: Great to see you here, Tyler. First question for me: if you could just walk us through your thought process in deciding to do the full 300 megawatt build out at Odessa by the end of next year and how the full infrastructure build influences your decision to exercise all or part of your purchase options for the T21s under your purchase order with Bitmain. Thanks, Mike.

Michael Anthony Colonnese: Hi, Good morning, guys nice quarter here, great to see first question for me.

Michael Anthony Colonnese: Tyler if you could just walk us through your thought process in deciding to do the full 300 megawatt build out I don't know desk by the end of next year and how the full infrastructure build influences your decision to exercise all or part of your purchase options for the $2 20 ones under your purchase order with it.

Michael Anthony Colonnese: Okay.

Rodney Tyler Page: Thanks, Mike.

Rodney Tyler Page: So, there, as always, we look to preserve flexibility to try to find the best opportunities for our shareholders. So it's easy to kind of pencil in that we have a contract to purchase enough rigs to fill all of the 300 megawatts. And, you know, a week from now, after I do these meetings in Hong Kong with all the rig manufacturers, I'll have a better sense for, you know, what we think about the dynamics of that market going forward. But if you just look at our purchase contract, it's for T21s, and it's $14 a terahash.

Rodney Tyler Page: No.

Michael Anthony Colonnese: There are as always we look to preserve flexibility to try to find the best opportunities for our shareholders.

Speaker Change: So it's easy to kind of pencil in that we have.

Speaker Change: Contract to purchase enough rigs to fill all of the 300 megawatts.

Speaker Change: And.

Speaker Change: A week from now after I do these meetings in Hong Kong with all the rig manufacturers I'll have a better sense for.

Speaker Change: What we think about the dynamics of that market going forward, but if you just look at our purchase contract. It's for $2 21 in $2014 of Terra hash and last I checked the going rate for that is about 15% higher so that that contract is in the money we have locked in cheaper price.

Rodney Tyler Page: And last I checked, the going rate for that is about 15% higher, so that that contract is in the money. We have a locked in cheaper price. And so that's one factor. We know we have access to rigs at a very good price. The second thing is thinking about timing and opportunity. Our greatest relative strength compared to other miners, I believe, is our ability to source greenfield sites. Structure Favorable Power Arrangements and go all the way through a very long construction process to then fully operate these data centers that require active power management.

Speaker Change: So that's one factor we know we have access to rigs at a very good price.

Speaker Change: The second thing is is thinking about timing and opportunity.

Speaker Change: Our greatest relative strength compared to other miners I believe.

Speaker Change: Is our ability to source greenfield sites structure favorable power arrangements and go all the way through a very long construction process.

Speaker Change: Then fully operate these data centers that require active power management.

Rodney Tyler Page: And there's not, I don't believe any of our competitors, most of them don't do that entire chain of value, and I think the ones that do, we do it better. You know, when we think about the opportunities that are out there, the opportunity to build Black Pearl really leverages those strengths. And so looking at the timing, it's scheduled to start operations in the second quarter of next year. I mentioned the various costs for infrastructure and rigs. The decision to build everything really begins with infrastructure because that's the longer lead time item.

Speaker Change: And Theres not I don't believe any of our competitors most of them don't do that entire chain of value and I think the ones that do we do it better.

Speaker Change: And so when we think about the opportunities that are out there the opportunity to build black Pearl really leverages those strengths.

Speaker Change: And so looking at the timing.

Speaker Change: Scheduled to energize the second quarter of next year.

Speaker Change: I mentioned, the various cost per infrastructure in rigs.

Speaker Change: The decision to build everything.

Speaker Change: Really begins with infrastructure because that's the longer lead time items.

Rodney Tyler Page: That is, again, the rigs are sitting there waiting to be exercised, you know, when we want to buy them. And so the decision begins with thinking about the value of that infrastructure. It's been a popular theme for the past few weeks.

Speaker Change: That is again the rigs are sitting there waiting to be exercised when we want to buy them and so the decision begins with thinking about the value of that infrastructure. It's been a popular theme for the past few weeks I know theres been some.

Rodney Tyler Page: I know there have been some research pieces written in the industry about the value of having interconnection for large loads of electricity. And having those assets ready to go with approvals is very valuable. And so moving forward on the infrastructure side seems like a no-brainer to us that produces the most value. On the rig side, that will be sort of the final decision. We'll be exercising that purchase option. And that gives us another, you know, eight months or so to see what happens to the market, market dynamics, and think about whether there are opportunities to better exercise that option and use those rigs earlier.

Speaker Change: Research pieces written in the industry about the value of having.

Speaker Change: Interconnection for large loads of electricity.

Speaker Change: And the having.

Speaker Change: Having those assets ready to go with approvals as very valuable and so.

Speaker Change: Moving forward on the infrastructure side, it seems like a no brainer to us that as producers the most value.

Speaker Change: On the rig side that will be sort of the final decision will be exercising that purchase option and that gives us another.

Speaker Change: Eight months or so to see what happens to the market and market dynamics and think about are there opportunities to better exercise that option and use those rigs earlier say, we acquire another site that needs upgrading or something like that we may choose to move those rigs earlier or alternatively.

Rodney Tyler Page: Say we acquire another site that needs upgrading or something like that. We may choose to move those rigs earlier. Or, alternatively, we have this fallback to Black Pearl, which gives us lots of optionality and plays to our greatest strength.

Speaker Change: We have this fall back to black Pearl, which gives us lots of optionality in place to our greatest strengths. So that's kind of the framing on the decision, making there but it is dynamic I think.

Rodney Tyler Page: So that's kind of the framing on decision making there, but it is dynamic, I think. It's an exciting time. We've talked about this. I feel like on all of our earnings calls that this squeeze in cash flow economics is coming, and we've tried to build our business to be ready for it, and we'll have to see how everyone reacts. I think we could see amazing opportunities to scoop up sites that we could upgrade cheaper than others by using that purchase option. We'll do it.

Speaker Change: It's an exciting time, we've talked about this I feel like on all of our earnings calls that this squeeze in cash flow economics has come in and we've tried to build our business to be ready for it and we'll have to see how everyone reacts I think if we see amazing opportunities to scoop up sites that we could upgrade cheaper than.

Speaker Change: Others by using that purchase option.

Rodney Tyler Page: And then we'll figure out if we want to buy more rigs for black pearl, you know, alternatively, as we are building this long process towards next year to get all of black pearl built. We have time value in that purchase option to see how things are going and see what the Bitcoin price and the network cash rate are, four or five, six months, and make our decisions strategically then. So we've got optionality, but that's the framework for sort of how we think about it, that we can unlock the most by focusing on what we do best.

Speaker Change: We'll do it and then we'll figure out if we want to buy more rigs for black Pearl.

Speaker Change: Alternatively as we are building over this long process towards next year to get all black Pearl built.

Speaker Change: We have time value and that purchase option to see how things are going and see what the bitcoin price in the network cash rate is in.

Speaker Change: 456 months and make our decision strategically been so so we've got optionality, but that's the framework for sort of how we think about it that we can unlock the most are you focusing on what we do best.

Rodney Tyler Page: That makes a lot of sense. I appreciate that, Tyler. And just a follow-up for me, and I appreciate the $420 million CapEx number to fully build out BlackPearl, but how should we think about the cadence of the CapEx-related spend as you continue to build out BlackPearl over the coming quarters, you know, between the remaining rig payments to Bitmain, but obviously, again, on the infrastructure side as well? So let me give you some color, and then, Ed, if you have any other colors, feel free to jump in or pass.

Speaker Change: That makes a lot of sense I appreciate that color and just a follow up from me and I appreciate the $420 million Capex number to fully build out black Pearl, but how should we think about the cadence of the capex related spend as you continue to build out like pro over the coming quarters be it between the remaining rig payments have been made but obviously.

Speaker Change: On the infrastructure side as well.

Speaker Change: So let me give some color and then if Ed if you have any other color feel free to jump in or pass but.

Rodney Tyler Page: But we're now in the steady drumbeat of construction. You saw the pictures there. Also, now that we are just about done with Bear and Chief, we'll be bringing the full brunt of our capabilities to build Black Pearl. And so the cost is month by month, right? Because you're paying for labor at different stages of construction.

Ed: We're now in the steady drumbeat of construction you saw the pictures. There also now that we are just about done with bear and chief will be bringing the full brunt.

Speaker Change: Of our capabilities to build black Pearl.

Speaker Change: So the cost is month by month right because you are paying for labor at different stages of construction.

Rodney Tyler Page: The biggest payments, the chunkiest payments, are related to rigs. And so there is a payment schedule there where, within Bitmain's contracts, large payments are made six months out from delivery and one month out from delivery. So there will be payments made towards the end of the year because, again, in general, when we build a site from a greenfield, we try to make the various stages work with a just-in-time sequencing, and pretty much the last step is having the rigs show up on site to then be installed.

Speaker Change: The biggest payments the chunky as payments are related to rigs and so there is a payment schedule there were within the contracts.

Speaker Change: Large payments are made six months out.

Speaker Change: From delivery and one month out from delivery.

Speaker Change: So there will be payments made towards the end of the year because again in general when we build a site from a greenfield we try to make the various stages work with it just in time sequencing them pretty much. The last step is having the rig show up on site to then be installed and so we would anticipate.

Speaker Change: Those being delivered in the second quarter of next year, which meet those chunkier payments are later in the year, specifically on the <unk> contracts, we put 10% down on each contract and then the two remaining payments are 45% 45%.

Rodney Tyler Page: And so, you know, we would anticipate those being delivered in the second quarter of next year, which means those chunkier payments are later in the year. Specifically, on the Bitmain contracts, we put 10 percent down on each contract, and then the two remaining payments are 45 percent and 45 percent.

Rodney Tyler Page: Great. Thank you for taking my questions. And again, congrats on the quarter.

Speaker Change: Great. Thank you for taking my questions and again congrats on the quarter.

Michael Anthony Colonnese: Thank you. One moment for the next question. And our next question comes from John Todaro of Needham & Company. Your line is open. Great. Hey, everyone. Good morning, or good evening, Tyler.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Thank you.

Speaker Change: And our next question comes from John <unk> of Needham <unk> Company. Your line is open.

John Todaro: Thanks for taking my question. There are two here, one a little bit more specific and then one kind of broader. So, I guess first, a little bit more specific one, and I'd appreciate the color on this, but just wondering about that DNA, you know.

John: Great Hey, everyone. Good morning, or good evening Tyler Thanks for taking my question.

John: To hear one.

John: A little bit more specific and then one kind of broader.

John: So I guess personally more specific one I appreciate the color on this but just wondering on that G&A.

John: Kind of came down versus I guess, the second half of 'twenty three.

John: Understood some of the dynamics driving that.

John: But just wondering if you assume this kind of the new quarterly rate, we should be going with or any dynamics for the remainder of the year that would change that.

Speaker Change: And then my second question.

Edward John Farrell: [inaudible] It's just on hash rates. It's come down a bit here. Tyler, it seems like you're almost saying it could be kind of the early innings in that flushing out, or do you think this was kind of a flush out that maybe called a 6% drawdown from the top network cash rates? Yeah, hi, John, it's Ed here.

Speaker Change: Just on cash right.

Speaker Change: It's come down a bit here Tyler.

Speaker Change: Tyler It seems like Youre almost thing it could be kind of early innings of that are flushing out or do you think this was kind of a flush out that maybe call it 6% drawdown.

Speaker Change: Network Ashwin.

Edward John Farrell: With regard to your question on G&A, you can see that we, this quarter, will continue to break out compensation and benefits and G&A. I think that gives everybody a little bit more insight into the true costs, the true expenses, and items that we have within G&A. Yes, it is down this quarter.

Speaker Change: Yeah, Hi, John It's Ed here.

Ashwin: With regard to your question on G&A.

Ashwin: You can see that we this.

Ashwin: This quarter and will continue to do is break out compensation and benefits and G&A.

Ed: I think that gives everybody a little bit more insight to the true cost to true expense and items that we have within G&A, yes. It is down this quarter.

Edward John Farrell: It's up from a year ago; it's up a year ago because of some additional staffing that we had to help build out our team, which we fully expect to leverage as. You know, we'd build out Black Pearl. I would expect that number to remain relatively constant. Maybe we'll have one or two or a few more strategic hires. 2024 as Black Pearl, and you build up Black Pearl, but with some of our other expenses.

Ed: And it's up from a year ago.

Ed: A year ago, because some additional.

Ed: Staffing that we had to help fill.

Ed: Build out our team, which we fully expect to leverage as we build out.

Ed: Black Pearl.

Ed: I would expect that number to remain relatively constant maybe we will have one or two a few more strategic hires in 2024 as black Pearl.

Speaker Change: We continue to build out black Pearl, but with some of our other expenses were bringing more things keep in mind, we were Greenfield company, we relied on a lot of third party service providers.

Edward John Farrell: We're bringing more things. Keep in mind, we were a greenfield company. We relied on a lot of third-party service providers, which they have been great with, and we're now looking at maybe bringing some of that stuff in-house.

Speaker Change: Which they have been great and we're now looking at maybe bringing some of that stuff in house. So I wouldn't expect to see Gee too long stories, Nick loss ratio I wouldn't really expect to see G&A move significantly.

Edward John Farrell: So, I wouldn't expect, to make a long story short, I wouldn't really expect to see G&A move significantly over the next two or three quarters. And then I can jump in on hash rate. Before I do, I think it's worthwhile mentioning because I've had this discussion with a lot of investors over the last few months, thinking about SG&A, and it actually gets at the broader way of thinking about Bitcoin mining companies, going through the halving, the M&A landscape, and the hash rate question you asked, and that's, You know, there are different kinds of companies. So, our belief is that this is still We still believe, I can't tell you when, but we believe that Bitcoin prices will go up over time as network adoption increases.

Speaker Change: The next two to three quarters.

Speaker Change: And then I can jump in on hash rate, although before I do I think it's worthwhile mentioning because I've had this discussion with a lot of investors over the last few months thinking about SG&A.

Speaker Change: Actually gets at the broader way about thinking about these bitcoin mining company is going through the having the M&A landscape and the hash rate question you asked.

Speaker Change: Yes.

Speaker Change: There is different kinds of companies. So our belief is that this is still a growth industry.

Speaker Change: We still believe I can't tell you when but we believe that bitcoin prices will go up over time as network adoption increases we see a lot of signs for supply and demand imbalance and we feel very bullish on that and so as a company. We are trying to find more opportunities, where we can acquire a cheap site with lots.

Rodney Tyler Page: We see a lot of signs of a supply and demand imbalance, and we feel very bullish about that. And so, as a company, we are trying to find more opportunities where we can acquire a cheap site with lots of potential power interconnections that we can build and operate, right? And so we are a development company, building more sites in a growth industry, and that's our outlook. And this is pretty important for contextualizing SE&A, I think, overall, that it's very different than if you have a company that has one or two sites and is not expanding and is kind of just running those two sites.

Speaker Change: So potential power interconnection that we can build and operate right and so we are a development company building more sites growth industry and that's our outlook and this is pretty important for contextual contextualized and SG&A I think overall.

Speaker Change: That's very different than if you have a company that has one or two sites and is not expanding and is kind of just running those two sites.

Rodney Tyler Page: You know, in those cases, SG&A becomes a really important metric with the hash rate where it is and the squeeze on margin. And there's a big difference in our minds between a development company that is pursuing growth and one that is sort of hanging on. And that's important because as we think about SG&A spend overall, the KPI that I like to look at internally is SG&A per megawatt. And really, both per megawatt being operated and under construction, because we have to keep paying the wonderful people that source these opportunities, structure these power contracts, build these sites, etc.

Speaker Change: Those cases, SG&A becomes a really important metric with the hash rate where it is.

Speaker Change: The squeeze on minor economics, and Theres, a big difference in our minds between a development company that is pursuing growth and one that is sort of hanging on and thats important because as we think about SG&A spend overall.

Speaker Change: But I like to look at internally is SG&A per megawatt.

Speaker Change: And really both per megawatt being operated and under construction because we have to keep paying the wonderful people that source. These opportunities structure. These power contracts build these sites et cetera.

Rodney Tyler Page: And so, you know, from an SG&A perspective, the way I look at efficiency, but it's related to these bigger questions about hash rate and what happens, as appropriately being analyzed on a per megawatt basis, and obviously, we're going to 566 megawatts of self-mining. And so, that's an important, what's called a longer-term contextualization for SG&A, and where I think On hash rate specifically, you know, John, I think it's got a time dynamic for how long the hash price stays where it does and the magnitude of how low it gets.

Speaker Change: So from an SG&A perspective, the way I look at the efficiency, but it's related to these bigger questions about hash rate and what happens.

Speaker Change: Appropriately.

Speaker Change: Being analyzed on a per megawatt basis, and obviously, we're going to 566 megawatts of self mining and so that's an important let's call it longer term contextualized for SG&A, and where I think a lot of our tech investments will scale very well.

Speaker Change: How should rates specifically.

Speaker Change: John I think it's got a time dynamic for how long hash price stays where it does.

Rodney Tyler Page: So again today, it's above 5 cents. Last I checked, it dips to about 4.5 cents. That is definitely in the zone where it starts to squeeze the cash flow dynamics of most Bitcoin miners, and I would say the majority of them are negative when you get down to those levels. Lots of companies that are large can withstand that for a week. But if it stays in the zone or goes further down and lasts months... That could happen, right?

Speaker Change: And the magnitude of how low it gets so again today, it's above <unk> last I checked it dips to about $4.05 that is definitely in the zone, where it starts to squeeze the cash flow dynamics of most big coin miners and I would say the majority of them are negative when you get down to those levels.

Speaker Change: Lots of companies that are large can withstand that for a week.

Speaker Change: If it stays in the zone. It goes further down in the last months.

Rodney Tyler Page: You could still get a big Bitcoin price explosion later this year, but it may take a few months of really grinding the miner's economics. That will produce a very different result where more hash rate would come offline. So, you know, look, I think what was funny about the timing of the difficulty adjustments here is that the day after the halving, we had the highest revenue day ever. And even the day after that, there were still lingering effects where revenue was decent. And then we had a difficulty adjustment, I think, maybe two days after that.

Speaker Change: That could happen right you could still get a big bitcoin price explosion later this year, but it may take a few months of really grinding the minor economics.

Speaker Change: That will produce a very different result were more hash rate would come off line.

Speaker Change: So look I think what was funny about the timing of the difficulty adjustments here is it the day after the having we had the highest revenue day ever.

Speaker Change: And even the day after that there were still lingering effects, where the revenue was decent and then we had a difficulty adjustment I think maybe two days after that and so.

Rodney Tyler Page: And so, you know, looking at more than the immediate day before the difficulty adjustment, minor economics looked great. People felt like they were making a lot. So not a lot of people turned off in advance of that difficulty adjustment.

Speaker Change: Looking at more than the immediate day before the difficulty adjusting a.

Speaker Change: Minor economics look great people felt like they were making a lot. So not a lot of people turned off in advance of that difficulty adjustment. We now have another one in another day and a half or so and Thats where were seeing this first downward adjustment that last I looked was trending towards about four 5%.

Rodney Tyler Page: We now have another one in another day and a half or so, and that's where we're seeing this first downward adjustment that, you know, last I looked was trending towards about four and a half percent of an easier difficulty, so reflecting a lower hash rate on the network.

Speaker Change: Of an easier a difficulty so reflecting lower cash rate on the network.

Rodney Tyler Page: I think to directly answer your question, the one that we will really be looking at is the next difficulty adjustment, so about 15 days from now, because I think then you'll start to get a truer reflection of these sustained hash price dynamics, and you'll start to see miners' real-time reaction. I think the other thing that's going to be hard to measure is, so I think on our last call, we said we didn't think much of a hash rate was going to come off. And frankly, I may have even said 5%.

Speaker Change: I think to directly answer your question that the one that we will really be looking at is the next difficulty adjustment. So about 15 days from now.

Speaker Change: Because I think then youll start to get a truer reflection of these sustained.

Speaker Change: Price dynamics, and Youll start to see minors real time reactions.

Speaker Change: I think the other thing it's going to be hard to measure. It. So I think on our last call. We said, we didnt think much hash rate was going to come off and frankly, maybe even said 5%.

Speaker Change: And that's about where we are now.

Rodney Tyler Page: And that's about where we are now. But we'll see. This hash price squeeze is tough, I think, on a lot of miners. And you've also got the summer coming up, and we now have a lot of hash rate in Texas. And so we could see hash rates moderate further over the next couple months. But I think that the next difficulty adjustment in two weeks will be very telling in that direction.

Speaker Change: Sure.

Speaker Change: But we'll see.

Speaker Change: This hash price squeeze is tough I think a lot of miners and you've also got the summer coming up but we now have a lot of pass rate in Texas, and so we could see.

Speaker Change: Ashley moderate further over the next couple of months, but I think the next difficulty adjustment in two weeks will be very telling towards that direction.

John Todaro: Great. Thanks, guys. Thank you.

Speaker Change: Great. Thanks, guys.

Gregory Robert Lewis: One moment for our next question. And our next question comes from Greg Lewis of BTIG. Your line is open. Yes, thank you. And good morning. And good evening, everybody.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from Greg Lewis of BPI Youre.

Gregory Robert Lewis: Your line is open.

Rodney Tyler Page: Um, you know, Tyler, I had a quick question on, um, rig pricing. You mentioned, um, for your purchases that are going to be delivered that rig pricing is up on a tarash basis around 15%. I'm curious, not necessarily for these newer generation rigs. Um, but you know, just post that I mean, and maybe it's too early since the having was, you know, less, you know, less than a month ago.

Gregory Robert Lewis: Yes, thank you and good.

Gregory Robert Lewis: Good morning, and good evening everybody.

Gregory Robert Lewis: Tyler I had a quick question on <unk>.

Gregory Robert Lewis: On rig pricing you mentioned.

Gregory Robert Lewis: For your purchases.

Gregory Robert Lewis: That are going to be delivered that rig pricing is up an entire ash basis around 15%.

Gregory Robert Lewis: I am curious not necessarily for these newer generation rigs.

Gregory Robert Lewis: But just post that and maybe it's too early since the having was.

Rodney Tyler Page: Um, what has been the pricing response reaction from the market for, you know, kind of older generation rigs that, you know, are more in the, you know, maybe that 30 joules per tarash range, is there a bid for those? And how has that been developing? Thanks, Greg.

Gregory Robert Lewis: Less less than a month ago.

Gregory Robert Lewis: What has kind of been the pricing response reaction from the market for.

Gregory Robert Lewis: Kind of.

Gregory Robert Lewis: Older generation rigs that.

Gregory Robert Lewis: Or more in May.

Gregory Robert Lewis: Maybe that that 30 joules per tire ash is there a bid for those and how has that been developing.

Rodney Tyler Page: I think the real question there is how deep the secondary market would be for rigs at that efficiency or at worse efficiency. Because, you know, there are various secondary markets that get made by some different players where you see prices; they're obviously down. Because, again, if the hash price is five cents or five and a half cents, or even especially if it's four and a half cents, you start looking at an efficiency curve where, you know, you have to have really low power prices to make less efficient rigs operate profitably in that environment.

Speaker Change: Thanks, Greg.

Gregory Robert Lewis: I think the the real question there is how deep would the secondary market be for rigs.

Gregory Robert Lewis: At that efficiency or at worst efficiencies.

Gregory Robert Lewis: Because.

Rodney Tyler Page: There are various.

Rodney Tyler Page: Secondary markets that get made by some different players where do you see prices. There are obviously down because again if cash price is.

Rodney Tyler Page: Five or five <unk> sensor or even especially if it's four five cents.

Rodney Tyler Page: You start looking at an efficiency curve, where you have to have really low power prices make less efficient rigs.

Rodney Tyler Page: So I would say that, you know, the question that's hard to say is it's still too early because I don't know anyone moving large quantities of those rigs. And so could you sell a rig, you know, with 30 joules per terahash? Absolutely. The price would probably be lower than it had been. But, you know, I'm sure you could get, probably mid to high single digits per terahash dollars if I had to guess. Um..., you know, but the question would be how much could you sell? I mean, could you sell a hundred of them?

Michael Colonnese: Operate profitably in that environment.

Rodney Tyler Page: I would say that.

Rodney Tyler Page: The question that is hard to say is it still too early because I don't know anyone moving large quantities of those rigs and so.

Rodney Tyler Page: Could you sell a rig.

Rodney Tyler Page: With a 30 jewels <unk> absolutely.

Rodney Tyler Page: The price would be probably lower than it had been but I'm sure you could get.

Rodney Tyler Page: Probably mid to high single digits per Terra ash dollars, if I had to guess.

Rodney Tyler Page: But the question would be how much could you sell I mean could you sell a 100 of them probably.

Rodney Tyler Page: Probably. If you tried to sell, you know, 25,000 of them, I think the price would probably go lower, but that could also change really quickly depending on this next, like, difficulty. Part of it is everyone's trying to predict this question about, well, what's going to happen to hashrate? Is it going to go down, more are going to come off?

Rodney Tyler Page: Have you tried to sell <unk>.

Rodney Tyler Page: 5000 of them.

Rodney Tyler Page: I think the price would probably go lower but that could also change really quickly depending on this next like difficult to each part of it is.

Rodney Tyler Page: Everyone's trying to predict this question about what's going to happen to Ashford isn't going to go more of it to come off.

Rodney Tyler Page: And so it's just hard to say that there are a lot of questions about that. So I'd say it's easy to say it's less than it was. It's probably high single digit dollars or mid, mid, single-digit dollars per terahash.

Rodney Tyler Page: And so it's just hard to say that theres a lot of questions to that.

Rodney Tyler Page: Easy to say, it's less than it was.

Rodney Tyler Page: Probably high single digit dollars or mid mid single digit dollars per tire ash.

Rodney Tyler Page: And that could change a lot in a month, depending on the next difficulty adjustment or two. Okay, great. And then just because it has become topical for some, you know, for any kind of data, any kind of company that has accessed the power, you know, obviously AI data centers are kind of, you know, everyone wants to talk about them on earnings calls all across the energy and industrial space. You know, I guess what I'm wondering is, you know, and it's interesting, right? I mean, some of these major tech companies have been working on AI for years.

Rodney Tyler Page: And that could change a lot in a month, depending on the next difficulty adjustment or two.

Rodney Tyler Page: Okay, Great and then and then just because it has become topical for for some for any kind of data any kind of company that has access to power.

Rodney Tyler Page: Obviously AI data centers are kind of everyone wants to talk about them on our earnings calls all across the energy and industrial space.

Rodney Tyler Page: I guess, what I'm wondering is.

Rodney Tyler Page: And it's interesting right I mean like some of these major tech companies have been working on AI for years.

Rodney Tyler Page: Really, my question is around, you know, hey, you know, we're moving forward with Black Pearl. You meant, you know, everyone's aware that it takes a couple years from start to finish to actually get a data center up and running, at least in the U.S. Or are we starting to run into price inflation on potential data center sites that maybe somebody like Cipher or others in the industry are looking at simply because there's a competitive bid coming from somewhere else.

Rodney Tyler Page: My question is around.

Rodney Tyler Page: We're moving forward with black barrel you meant.

Rodney Tyler Page: Everyone's aware that it takes a couple of years from start to finish the actually get it data center up and running.

Rodney Tyler Page: At least in the U S or are we starting to run into.

Rodney Tyler Page: Price inflation on potential data center sites that maybe somebody like site for others in the industry are looking at <unk>.

Rodney Tyler Page: Simply because theres, a competitive bid coming from somewhere else.

Rodney Tyler Page: That's a great question. Listen, we've had many discussions around AI-related data centers, particularly in the last month or two. We have been approached by people asking for capacity for AI at Black Pearl. We have no plans to do that, I think.

Rodney Tyler Page: Okay.

Speaker Change: That's a great question I think what we've.

Speaker Change: We've had many discussions around AI related data centers.

Speaker Change: Particularly in the last month or two.

Rodney Tyler Page: We have been approached by people asking for capacity for AI at Blackrock.

Speaker Change: We have no plans to do that I think.

Rodney Tyler Page: We are still where we have always been with operating AI data centers, which is. It seems like a no-brainer that it's a huge growth market. I think it, in some ways, it depends on which part of that market you're trying to play in. But you know, GPUs are very expensive.

Speaker Change: We are still where we have always been with operating AI data centers, which is.

Rodney Tyler Page: It seems like a no brainer that it is a huge growth market I think it some.

Rodney Tyler Page: Some ways it depends on which part of that.

Rodney Tyler Page: Market Youre trying to play in but.

Rodney Tyler Page: Speculating on the progress that those chips will make over time seems highly speculative when you're spending so much capex on the rig. And on the data center side, it's also more expensive in general to build a data center that is ready for AI. There are some questions about stratification within that market where there may be opportunities as that market matures to take advantage of things like managing curtailment like we do. That's where it starts to get more interesting to us. But the challenge for us at least to be an AI at this point is really a cost of funding question.

Rodney Tyler Page: Gpus are very expensive.

Rodney Tyler Page: Speculating on the progress that those chips will make over time as it seems highly speculative when you are spending so much capex on the rigs.

Rodney Tyler Page: And on the datacenter side. It also more expensive in general to build a data center that is ready for AI. There are some questions about stratification within that market, where there may be opportunities as that market matures.

Rodney Tyler Page: Take advantage of things like managing curtailment like we do that's where it starts to get more interesting to us.

Rodney Tyler Page: But the challenge for us at least to be NII at this point is.

Rodney Tyler Page: And we have been approached by some people saying that we could set up access to cheap debt capital to do AI-related data centers, you know, set it up on some sort of special purpose vehicle or something, nothing, you know; we're sort of trying to keep our finger on the pulse. It is an interesting question to ask. And I think there was a prominent research analyst on Wall Street that put out a piece about a week ago that said, you know, basically, there's such a crunch and a time lag to get interconnection set up, just the approvals and sites ready, that having these interconnections themselves could be extremely valuable, and we could be attractive to someone just to buy for our portfolio of sites. That would be great.

Rodney Tyler Page: Really a cost of funding question and we have been approached by some people, saying that there we could set up access to cheap debt capital to do AI related data centers set it up in some sort of a special purpose vehicle or something.

Rodney Tyler Page: Nothing we're sort of trying to keep our finger on the pulse. It is an interesting question to ask about and I think there was a prominent research analysts on wall Street that put out a piece about a week ago that said.

Rodney Tyler Page: Basically there is such a crunch in a time lag to get interconnection setup, just the approvals in sites ready that having these interconnections themselves could be extremely valuable and we could be attractive to someone just to buy for our portfolio of sites.

Gregory Robert Lewis: And that's an extra call option for us if that develops, and we'll just have to see over time. It certainly does take a long time to get approvals for interconnection. There is a lot of value in having that. Okay, great. Hey, super helpful. Thanks for the thoughts. Have a great day.

Rodney Tyler Page: That would be great and Thats, an extra call option for us if that develops and we will just have to see over time. It certainly does take a long time to get approvals for interconnection. So if that becomes the chokepoint.

Gregory Robert Lewis: There is a lot of value in having that.

Speaker Change: Okay, Great. That's super helpful. Thanks for the thoughts have a great day.

Rodney Tyler Page: Thank you one moment for our next question. And our next question comes from Joseph Vafi of Canaccord Genuity. Your line is open. Hey, guys. Good morning and good afternoon or good evening to you, Tyler, over in Hong Kong.

Speaker Change: Thank you one moment for our next question.

Joseph Anthony Vafi: And our next question comes from Joseph <unk> of Canaccord Genuity. Your line is open.

Joseph Anthony Vafi: Nice results. Just, Tyler, I know you have mentioned M&A here a few times on this call, which I think is a lot more than you've mentioned it in the past. And, you know, I think you've kind of hinted at what maybe what you're looking at here with the halving and potentially squeezed other operators that may need to merge. Maybe some extra thoughts here on how that would work. Would you, you know, do you see sites with attractive power costs or is it just really a time to market where you could incrementally increase hash rates profitably given some of your mining, you know, your rig contracts, et cetera? Maybe just a little more on how M&A might work for you. And I'll follow up.

Joseph Anthony Vafi: Hey, guys. Good morning, and good afternoon, or good evening to you Tyler over in Hong Kong.

Joseph Anthony Vafi: Nice results.

Joseph Anthony Vafi: Tyler I know you have mentioned M&A here, a few times on the call, which I think is a lot more than you had mentioned that in the past.

Joseph Anthony Vafi: And I think you've kind of hinted at what maybe what youre looking at here with with the having an potentially squeezed.

Speaker Change: Squeezed other operators that may need to merge.

Speaker Change: Maybe some extra thoughts here on how that would work would you.

Joseph Anthony Vafi: Do you see sites with attractive power costs or or is it does it just really is it time to market, where you could incrementally increase has rate profitably.

Joseph Anthony Vafi: Given some of your mining your rig contracts et cetera, maybe just a little more on how M&A might work for you.

Speaker Change: Ill follow up.

Joseph Anthony Vafi: Yeah.

Rodney Tyler Page: Sure. So I'd say we are casting a broad net because, again, I feel like we've been planning for this time period for a while and are so excited to see things develop. So we look at everything, but in general, I'd say the two buckets of opportunities we see are if there are greenfield sites where a developer is basically running out of time. They've got the interconnection and the approvals and so forth, and they're set up. Maybe their financing didn't come through, or they didn't have access to capital.

Tyler: Sure So I'd say.

Rodney Tyler Page: We are casting a broad net because we've again I feel like we've been planning for this time period for a while and so excited to see things develop.

Rodney Tyler Page: So we looked at everything but in general I'd say, the two buckets of opportunities we see are.

Rodney Tyler Page: If there are greenfield sites, where a developer is basically running out of time.

Rodney Tyler Page: They've got the interconnection and the approvals and so forth and they are set up maybe their financing it didn't come through or they don't have access to capital.

Rodney Tyler Page: That really plays to our greatest strengths. Now, that's what we'll call the longer-term story. Again, over time, I think we probably produce the most value and the highest return on investment in those situations. From a starting point, those tend to be our favorites. That said, there's a second bucket, which is more what you alluded to and a little bit more related to the shorter-term crunch on existing mining operators where maybe they have a site and again, maybe the power setup is decent, but they don't have as much access to capital, they're private or, for whatever reason, they're having challenges, maybe they have debt, whatever, and their rigs might be getting older.

Rodney Tyler Page: That really plays to our greatest strengths now that they will call the longer term story.

Rodney Tyler Page: Again over time, I think we probably produced the most value in the highest return on investment in those situations. So.

Rodney Tyler Page: From the starting point those tend to be our favorites.

Rodney Tyler Page: And so there could be situations where we find a site, we do have access to new generation rigs, we have access to capital, and maybe it's a win-win because we can get a site that we can upgrade and make very profitable in the current environment, and they cannot. And so I'd say that's the second bucket of opportunities. But I'd say those opportunities have been a little bit more reluctant to move in the past few months, and we'll have to see. Maybe they will become more interesting in the coming weeks and months. And then follow-ups are kind of related to that.

Rodney Tyler Page: That said, there's a second bucket, which is more what you alluded to a little bit more related to the shorter term crunch on existing mining operators, where maybe they have a say in again.

Rodney Tyler Page: Maybe the power setup is decent but they don't have as much access to capital they are private or.

Rodney Tyler Page: For whatever reason, they're having challenges maybe they have debt whatever.

Rodney Tyler Page: And there are rigs might be getting older and so there could be situations, where we find a site. We do have access to new generation rigs, we have access to capital and maybe it's win win because we can get a site that we can upgrade and make.

Rodney Tyler Page: Very profitable in the current environment and they cannot and so I'd say, that's the second bucket of opportunities.

Rodney Tyler Page: But I'd say those opportunities have been a little bit more reluctant to move over the past few months and we'll have to see maybe they maybe they become more interesting in the coming weeks and months.

Joseph Anthony Vafi: Would M&A kind of potentially affect the Black Pearl timeline if, you know, if the right opportunities came up and you wanted to move on M&A could that affect the Black Pearl timeline just thinking about, you know, overall, you know, capital commitments, you know, both organic and inorganic. Thanks a lot, guys. So I think, I guess anything's possible.

Rodney Tyler Page: Okay.

Speaker Change: Great and then.

Joseph Anthony Vafi: Follow up kind of related to that would M&A kind of what could it potentially effect.

Joseph Anthony Vafi: Black Pearl timeline.

Joseph Anthony Vafi: If the right opportunities came up.

Joseph Anthony Vafi: You wanted to to.

Joseph Anthony Vafi: To move on M&A.

Joseph Anthony Vafi: That effect the black Pearl timelines.

Joseph Anthony Vafi: Thinking about overall capital commitment both in organic and inorganic thanks, a lot guys.

Joseph Anthony Vafi: So I think I guess anything's possible, we're very excited about black Pearl and proceeding.

Rodney Tyler Page: We're very excited about Black Pearl and proceeding at full pace. I think maybe the one way that that could be impacted from a strategic planning perspective would be if we did find one of those opportunities where we could add a lot of value by exercising the current Bitmain purchase option we have to upgrade a site. That would then create an opportunity to buy more rigs or think about how we set up the back half of Black Pearl.

Rodney Tyler Page: Full pace on that.

Rodney Tyler Page: I think maybe the one way that that could be impacted from a.

Rodney Tyler Page: Strategic planning perspective would be if we did find one of those opportunities where we could add a lot of value by exercising the current domain purchase option, we have to upgrade our site.

Rodney Tyler Page: That would then created an opportunity to buy more rigs or think about how we set up the back half of black Pearl.

Rodney Tyler Page: It will be interesting to see what happens again with the cost of rigs and what happens with this whole hash price squeeze because that has historically been how the rig manufacturers price their machines, based on the profitability of mining. So we may have a window that stays open to get attractive rig prices, and so perhaps there's a reshuffling of our planning of which rigs go where, and I guess anything's possible depending on whether we do something or not and what that deal might look like if and when we do it. But certainly, the base case and the plan now is to build all of Black Pearl with the rigs we have on our. Got it. Great Thanks a lot, guys. I got nice results.

Rodney Tyler Page: I think.

Rodney Tyler Page: It will be interesting to see what happens again with the cost of rigs and what happens with this whole house price squeeze because that is has historically been how the rig manufacturer's price their machines is based on the profitability of mining.

Rodney Tyler Page: No.

Rodney Tyler Page: Could we may have a window that stays open to get attractive rig prices and so perhaps there is a reshuffling of our planning of which rigs go where.

Rodney Tyler Page: And I guess anything is possible depending on if we do something or not and what that deal might look like if and when we do it.

Rodney Tyler Page: But certainly the base case and the plan now is to build all of black Pearl with the rigs we have on order.

Rodney Tyler Page: Got it great. Thanks, a lot guys nice results.

Joseph Anthony Vafi: Thank you. One moment for our next question. And our next question comes from Reggie Smith of J.P. Morgan. Your line is open. Hey, good morning, guys.

Speaker Change: Thank you one moment for our next question.

Joseph Anthony Vafi: And our next question comes from Reggie Smith of Jpmorgan your.

Reginald Lawrence Smith: Your line is now open.

Reginald Lawrence Smith: This is a long call, so I'll keep it brief. Thanks for taking the questions. I wanted to ask a follow-up question about AI. And I'm curious how you think, I guess, the AI investment wave could impact the Bitcoin mining industry from the perspective of, will you still be able to build 300 megawatt sites? Do you think you'll need to scale down to get things done? Like, how does this impact, you talked about a little bit, but how does this impact access to power and being able to get approvals? It's a great question.

Reginald Lawrence Smith: Hey, Good morning, guys. This is a long call. So I'll keep it keep it brief thanks for taking the question I wanted to ask a follow up about AI and I'm curious.

Reginald Lawrence Smith: How you think.

Reginald Lawrence Smith: The AI investment wave.

Reginald Lawrence Smith: Impact.

Reginald Lawrence Smith: Okay.

Reginald Lawrence Smith: The mining industry from the perspective of what.

Reginald Lawrence Smith: You still be able to build 300 megawatt sites do you think you'll need to scale down.

Reginald Lawrence Smith: To get things done like how does this impact you talked about a little bit, but how does this impact.

Reginald Lawrence Smith: Just access to power and being able to.

Reginald Lawrence Smith: To get approvals.

Reginald Lawrence Smith: Okay.

Rodney Tyler Page: And I think it might be too early to say, on the one hand, We're looking at a bunch of interesting opportunities, and so I know they exist at least for people that can source them and build from a greenfield site. If there's I do think there's an end of the spectrum within Bitcoin mining that might find it harder to operate. If you are being hosted somewhere, it feels like everyone that's in the hosting business now wants to talk about AI.

Speaker Change: It's a great question and I think it might be too early to say on the one hand.

Rodney Tyler Page: We're looking at a bunch of interesting opportunities and so I know they exist at least for people that can source them and build from a greenfield site.

Rodney Tyler Page: If there is I do think there is.

Rodney Tyler Page: And then the spectrum within bitcoin mining that might find it harder to operate.

Rodney Tyler Page: If you were being hosted somewhere it feels like everyone thats in our hosting business now wants to talk about AI and so you might find a harder place you might be squeezed if youre just.

Rodney Tyler Page: And so you might find a harder place; you might be squeezed if you're just a business that plans to buy Bitcoin mining rigs and plug them into someone else's site. I think if you combine that with, you know, I know AWS had a gigantic purchase of the site at Susquehanna last quarter, and I know Microsoft just announced a big deal, I think it was with Brookfield, to build a lot of data centers for $10 billion.

Rodney Tyler Page: Business that it plans to buy bitcoin mining rigs and plugged them into someone else's site.

Rodney Tyler Page: I think if you combine that with.

Rodney Tyler Page: I know AWS set a gigantic purchase the site at Susquehanna.

Rodney Tyler Page: Last quarter, and I know, Microsoft just announced a big deal I think it was with Brookfield.

Rodney Tyler Page: I mean, the one thing is, for these larger sites, they were, for AI, it requires a much larger amount of CAPEX. Certainly, if it's hyperscalers, they've got the CAPEX to spend and the access to favorable funding rates to also. So I do think, like, it could squeeze that end of the spectrum.

Rodney Tyler Page: So a lot of data centers 10 billion I think the one thing is for these larger sites.

Rodney Tyler Page: For AI.

Rodney Tyler Page: It requires a much larger amount of capex.

Rodney Tyler Page: Certainly if it's hyperscale or they've got the capex spend and the access to favorable funding rates to also.

Rodney Tyler Page: So I do think it could squeeze that end of the spectrum.

Reginald Lawrence Smith: But if anything, again, when I look at our capabilities as a company to source opportunities and kind of manage the process from beginning to end, I think, if anything, it puts a lot more value on what we do as a business. So, you know, we'll have to see how much we get squeezed out at other large sites, but I don't see anything today that suggests we will. And just real quick, just to put a finer point on it in terms of the size of future sites. Like, what's your minimum effective dose?

Rodney Tyler Page: But if anything again, when I look at our capabilities as a company to source opportunities in.

Reginald Lawrence Smith: Manage the process from beginning to end.

Reginald Lawrence Smith: If anything it puts a lot more value on what we do as a business. So we'll have to see how much we get squeezed out at other large sites, but I don't see anything today that suggests we will be.

Reginald Lawrence Smith: And just real quick just to put a finer point on it in terms of like the size of future sites.

Reginald Lawrence Smith: What's kind of.

Rodney Tyler Page: Is it 100 megawatts, 200 megawatts? Like, would you be, like, do you see the industry moving to a place where maybe those are the mechanisms that look for us? Go ahead. I think, generally, we would look at a minimum of 50 typically. And then there's questions around operational synergies, you know, is it in places where we can trade power and monetize the flexibility of our load? Also, operationally, does it work with, you know, where our people are, is it easy to get to, etc.

Reginald Lawrence Smith: Your minimum effective dose is at a 100 megawatts 200 megawatts like would you be like do you see the industry moving to a place where maybe those are how the next I think generally look for.

Rodney Tyler Page: Yeah.

Speaker Change: Got it.

Rodney Tyler Page: So it's a little bit of a dynamic matrix. But in general, I'd say 50 megawatts is where we start to get. That's good. Okay, perfect. I'll follow up with Josh after the quarter.

Rodney Tyler Page: I think generally we would look at a minimum of 50 typically.

Rodney Tyler Page: And then there is questions around operational synergies as it in places, where we can trade power.

Rodney Tyler Page: Monetize the flexibility of our load.

Rodney Tyler Page: Also operationally does it does it work with where our people are or is it easy to get to et cetera. So it's a little bit of a dynamic matrix, but in general I'd say 50 megawatts is where we start to get interested.

Speaker Change: Sounds good okay, perfect I'll follow up with just after the quarter. Thanks, Thanks for taking the question.

Reginald Lawrence Smith: Thanks. Thanks for taking the question. Thank you, one moment. And our last question today comes from Bill Papanastasiou of CIFL. Your line is open.

Bill Papanastasiou: Thank you one moment.

Bill Papanastasiou: And our last question today comes from Bill <unk> of Stifel. Your line is open.

Bill Papanastasiou: Thank you. Congratulations, guys, on the quarter and the attractive unit economics once again. Tyler, for my first question, you spoke about M&A opportunities and how there's been an uptick in the need for some subscale peers to re-strategize their plans. I'm curious to hear where the most appealing opportunities are today. Is it operations that are connected to ERCOT, and would there be any appetite to target other geographies? or is Texas still? you know, your main priority.

Bill Papanastasiou: Thank you congrats guys on the quarter and the attractive unit economics once again.

Bill Papanastasiou: Tyler for my first question.

Bill Papanastasiou: Broke on M&A opportunities and how theres been an uptick in the need for some subscale peers to re strategize their plans.

Bill Papanastasiou: I'm curious to hear what are aware the most appealing opportunities are today.

Bill Papanastasiou: Is it operations that are connected to ERCOT and would there be any appetite to target other geographies.

Bill Papanastasiou: Or is Texas still.

Bill Papanastasiou: Your main priority.

Rodney Tyler Page: So Texas obviously has a lot of upside for us in that we believe we have a lot of strength in monetizing that very unique characteristic of Bitcoin mining, which is that, you know, it is instantly curtailable. And so in a place like Texas with volatile market-set power prices, there's a lot of value in being able to use a lot of power and then turn it off very quickly. It's a wonderful benefit for us from a return perspective, but it's also about strengthening the grid in general.

Tyler: So, Texas, obviously has a lot of upside for us in that we believe we have a lot of strength and monetizing that very unique characteristic of bitcoin mining which is that.

Rodney Tyler Page: It is instantly curtailed and so in a place like Texas with volatile market set power prices. There is a lot of value in being able to use a lot of power and then turn it off very quickly and thats.

Rodney Tyler Page: It's a wonderful benefit for us from a return perspective, it's also for strengthening the grid in general.

Rodney Tyler Page: That said, we're very concentrated in Texas, so we would love to expand to other geographies, and we have looked at opportunities in other places in the United States and in other countries. But, you know, I think we do want to be mindful of what the risks are in any jurisdiction. We typically start with what the power dynamics are, are there demand response opportunities and ways for us to monetize our flexibility, and then we do a risk assessment of what the jurisdiction is like, both from a, you know, if it's overseas, a rule of law and respective contract, et cetera, property rights perspective, physical environment, you know, is it a good place to operate, computers, et cetera.

Rodney Tyler Page: That said, we're very concentrated in Texas, So we would love to expand to other geographies and we have looked at opportunities in other places in the United States and in other countries.

Rodney Tyler Page:

Rodney Tyler Page: We do want to be mindful of what the risks are at any jurisdiction. We typically start with what the power dynamics or are their demand response opportunities and ways for us to monetize our flexibility.

Rodney Tyler Page: And then we do our risk assessment of what the jurisdiction like both from a if it's overseas or rule of law and respective contract et cetera property rights perspective.

Rodney Tyler Page: Physical environment is it a good place to operate computers etcetera, but in general I think we would love to diversify but we also still think Texas is great and that's a big place you can be diversified within Texas as well.

Rodney Tyler Page: But in general, I think we would love to diversify, but we also still think Texas is great and it's a big place. It can be diversified within Texas as well. Awesome. Thanks for that! And just as a follow-up, may you please remind us again of the power strategy planned at Black Pearl. I'm just curious to hear whether it's going to be as attractive as a BESA, kind of what you're expecting as the average fleet-wide per megawatt cost of power. Sure.

Speaker Change: Awesome, Thanks for that and just as a follow up.

Rodney Tyler Page: Remind us again of the power strategy plan that black Pearl.

Rodney Tyler Page: Just curious to hear whether it's going to be as attractive as the desk.

Speaker Change: Kind of what Youre expecting as the average fleet wide per megawatt costs.

Rodney Tyler Page: Sure.

Rodney Tyler Page: So, the forward curve for power in general in Texas has been going up. You can see that in that even though we keep losing time value on our contract at Odessa, it keeps going up every quarter seemingly in value. But again, what's interesting about Texas is the wide dispersion of those prices and the high volatility of those prices. And so, we would expect Black Pearl to look a lot like Barron, in that it's a front-of-the-meter site.

Speaker Change: Sure so.

Rodney Tyler Page: The forward curve for power in general in Texas has been going up you can see that in that even though we keep losing time value on our contracted Odessa it keeps going up every quarter seemingly in value.

Rodney Tyler Page: But again, what's interesting about Texas is the <unk>.

Rodney Tyler Page: Wide dispersion of those prices in the high volatility of those prices and so.

Rodney Tyler Page: We would expect black Pearl to look a lot like Barrett chief.

Rodney Tyler Page: So it's going to be paying market prices. But, if you effectively recreate what we do at Odessa, which is, you know, recall that in the Odessa contract, our power counterparty has a 5% curtailment option. So, 5% of the time, they can curtail our use to keep the power, and that's because 5% of the time, prices are very elevated in Texas. We create effectively the same thing when we manage the front of the meter site, which is, if we avoid those most expensive times, which is what we do at Bear and Chief, you'll get prices that, you know, we would forecast to be in the mid, call it $0.03 to $0.04 per kilowatt-hour range, $0.03 and a half cents, something like that would be what we would expect.

Rodney Tyler Page: In that it's a front of the meter site.

Rodney Tyler Page: It's going to be paying market prices.

Rodney Tyler Page: But if you effectively recreate what we do at Odessa, which is recall that in the Odessa contract. Our power counterparty has a 5% curtailment option. So 5% of the time they can curtail our use to keep the power and thats because 5% of the time.

Rodney Tyler Page: This is our very elevated in Texas.

Rodney Tyler Page: We create effectively the same thing when we manage the front of the meter site, which is if we avoid those most expensive times.

Rodney Tyler Page: Which is what we do with bear and chief Youll get prices that we would forecast to be in the mid.

Rodney Tyler Page: Call It three to four <unk> per kilowatt hour range.

Rodney Tyler Page: $3 five something like that would be what we would expect.

Rodney Tyler Page: Then, beyond that, being such a large site, it will have opportunities to participate in ancillary services down in Texas, which is making your capacity available for curtailment to the grid operator, and you could potentially get paid quite a bit for doing that. And there's a fair amount of nuance to that, doing it, you know, in day ahead markets or real time. And so, let's call it the active management and trading of that capacity, which we think will produce value above and beyond just avoiding those high prices.

Rodney Tyler Page: And then beyond that being.

Rodney Tyler Page: In such a large site it will have opportunities to participate in ancillary services down in Texas, which is.

Rodney Tyler Page: Making your capacity available for curtailment to the grid, operator, and you can potentially get a paid quite a bit for doing that and there is a fair amount of nuance to that doing it.

Rodney Tyler Page: And day ahead markets are real time.

Rodney Tyler Page: And so let's call it the active management and trading of that capacity, we think will produce value above and beyond just avoiding those high prices and when you net out the payments, we hope to make there.

Rodney Tyler Page: And when you net out the payments we hope to make there, we would hope to drive the overall power price at Black Pearl down to close to what our portfolio average is today. So sub, sub, three. But that will require active management and trading.

Rodney Tyler Page: Wed hope to drive the overall power price at Black Pearl down to close to what our portfolio averages today.

Bill Papanastasiou: And, you know, we won't always get there, but we're confident we will be able to get there. Appreciate the color, and again, congrats on the quarter. Thank you. This concludes our question and answer session. I'd now like to turn it back to Tyler Page for closing remarks. Thank you, everyone, for your time and continued interest in cipher mining. This is the moment we've been waiting for, so we're very excited about all the opportunities we've got in front of us. And I look forward to speaking to you again soon. This concludes today's conference call. Thank you for participating, and you may now disconnect. Thank you for watching!

Rodney Tyler Page: Sub sub <unk>.

Rodney Tyler Page: But that will require active management and trading and we won't always get there, but we're confident we will be able to get there.

Bill Papanastasiou: I appreciate the color and again congrats on the quarter.

Bill Papanastasiou: Thank you. This concludes our question and answer session I'd now like to turn it back to Tyler page for closing remarks.

Rodney Tyler Page: Thank you everyone for your time and continued interest in sight for mining. This is the moment we've been waiting for so we're very excited about all the opportunities. We've got in front of us and I look forward to speaking to you again soon.

Rodney Tyler Page: This concludes today's conference call. Thank you for participating and you may now disconnect.

Bill Papanastasiou: Okay.

Bill Papanastasiou: Okay.

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Bill Papanastasiou: Okay.

Bill Papanastasiou: Okay.

Bill Papanastasiou: [music].

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Bill Papanastasiou: [music].

Bill Papanastasiou: Yes.

Bill Papanastasiou: Okay.

Bill Papanastasiou: [music].