Q4 2024 Iris Energy Ltd Earnings Call
[inaudible]
[inaudible]
Speaker Change: Good day and welcome to Iron's fiscal year, 2024 Results Conference Call.
Speaker Change: At this time, I'll participate in Sonnalist and Only Mode.
Speaker Change: And I will talk to you after the speaker presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session you will need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Lincoln Tan. Director of Investor Relations. Please go ahead.
Lincoln Tan: Good afternoon to all of our North American participants and good morning to those joining us from Australia. Welcome to Ireland's FY24 results conference call. I'm Lincoln Tan, Director of Investor Relations, and I'm joined today by Daniel Roberts.
Speaker Change: Co-founder and co-CEO, and Belinda Nucifora, CFO. Please note that certain statements that we made during this call may constitute forward-looking statements. These statements are based on certain assumptions and risk factors that could cause actual results to differ materialially from our expectations.
Speaker Change: Listeners to not-place undue reliance on forward-looking information or statements. For further details, please refer to the disclaimer on slide two of the accompanying presentation. Thank you for joining us. I'll now hand the call over to Dan Roberts.
Dan Roberts: Thank you, Lincoln. Welcome, everyone.
Dan Roberts: Good afternoon.
Dan Roberts: So moving through the presentation, obviously this is our four year results, we have a year end of 30 June. So very pleased to report on what's been exciting 12 months for Ireland and it's shareholders. And obviously, yeah.
Speaker Change: a exciting outlook over the coming months and years. So jump in straight into it, disclaimer, please all read it, it's very important.
Speaker Change: and then into a quick overview of where we are as a business, right here, right now. So we're pleased to announce that we have increased our installed capacity between mining.
Speaker Change: to pick D-Necks Hash for the last reported update with 10.5, and we reiterate our original unchanged guidance that we will hit 20 x the hash by the end of next month.
Speaker Change: and 30 extra hash by the end of this year, so we've got three and a half months time.
Speaker Change: 3 months time, Tom Flime. So that's exciting, we're on track and the team's doing an absolutely tremendous job.
Speaker Change: On the AI cloud service front, we continue to build good strong momentum there, month on month, revenue growth, our fleet continues to be fully utilized and the pipeline looks promising to further expand that business and we'll get into that in a little bit more detail.
Speaker Change: In terms of our data centers that are under pining this growth.
Speaker Change: We're up to 300 megawatts now of Energised.
Speaker Change: Commissioned and now operating data centers.
Speaker Change: and that's from a target of 510 megawatts.
Speaker Change: by the end of December. Again, unchanged, reiterating that guidance we continue on the trajectory of where we said we would be. So, all very good, all very positive and again, huge effort from the team, but everything proceeding according to the original plan.
Speaker Change: and then finally, a quick overview of our current power and land portfolio as much as you would be aware. We have 2,300.
Speaker Change: and Ten Megawatts of Secure Grid Connected Capacity.
Speaker Change: and the land to go with that. In addition, we've got over a gigawatt of additional development sites around the world, which we continue to progress. We've even more bigger over the last few months, given the...
Speaker Change: Given the scarcity around power and land and the demand for that, on the pin not only our own growth ambitions, but also potentially to leverage into, I guess, others' growth which we'll get on to shortly.
Speaker Change: So, coming ahead to expand a little bit more on the Bitcoin mining site of the business.
Speaker Change: So again, a little bit of a recap of where we've been Um...
Speaker Change: It was only the beginning of last year, we were operating with 1.7XH, doesn't sound super impressive today, given the numbers that we're talking, but it is good to reflect and for us for me, for will, to congratulate the internal team on the tremendous amount of growth and execution that they've achieved.
Will: in that relatively short time period, so to keep 15XH today.
Will: and to continue on a trajectory to double that again of the coming three months is super exciting.
Will: We also pleased to announce that we have purchased an additional 10XH of latest generation BitMain Minus, the S21XP.
Will: The efficiencies, Thursday and the half-jaws, the terrace, and that will drop our overall fleet efficiency.
Will: based on the 30XH to 15Js per TeraH. So again, very positive positions up very well as a low cost minor, particularly combined with some updates on our power strategy which I'll come to in Texas in a minute.
Will: So again, just re-ease right in, we have retained.
Will: the current 20XH of minor options which are exercised in 2025 which provides us a pathway to expand to 50XH next year. So again 30XH by the end of December.
Will: 50XH next year.
Will: [inaudible]
Will: So...
Will: These miners, they require data centers in real world construction, and again the team continues to perform extremely well in that front.
Speaker Change: You can see the growth since our IPO. In 2021, obviously it was a challenge in period early on, IPO in November 2021 and where the markets went shortly thereafter, but as the markets have recovered, we've been able to capitalise on a lot of the work that we've done in the investment.
Speaker Change: in land, planning, Greek connections, et cetera, to really build some strong cadence and momentum into the end of the year and beyond.
Speaker Change: The team has done a fantastic job in continually trying to challenge how we procure items, how we build, how do we design.
Speaker Change: and that's resulting in us achieving significant efficiencies. The first efficiency is we're now building 25 megawatts, data centers rather than 20 megawatts, data centers, and we're now targeting two of those every month.
Speaker Change: So, 50 megawatts of additional data centre capacity every month is what we're targeting internally, and that's driving significantly rapid expansion as we've seen illustrators in these charts.
Speaker Change: In addition, the other efficiency we're seeing is cost savings, which is always very welcome. So previously, many of you would recall we've been guiding towards $750,000 per megawatt.
Speaker Change: As a result of all these optimizations that we're running.
Speaker Change: We're happy to report that we're now running it around $650,000 to make a lot.
Speaker Change: So again, the guys have reviewed all elements of the built-in design to optimize for both speed and cost without compromising quality. We've worked closely and continuing to deepen our relationships with the supply and network and reduce those lead times, reduce bottlenecks.
Speaker Change: and, again, improving speed and flexibility through construction.
Speaker Change: through internally developed and IP designs around minor rack-in filter banks, etc. So again, we're continuing to challenge how we do things. We're not sitting here complacent. We want to continue to get better and we're going to continue.
Speaker Change: to try and do faster and better than what we're doing today. So that underpins the significant growth pathway, but if you haven't got the power and land, then it's very difficult to grow, which is a great segue onto my next slide.
Speaker Change: We have single side expansion at Children's which we continue to build into, as you can see on the left hand side, it's been a fantastic trajectory to date.
Speaker Change: on the top left that is a picture, an image from August last year. A lot of empty space there, and if you scroll down to the bottom left hand side you can see
Speaker Change: Considerable amount of construction and data center progress. If we look at the image on the right, it shows you a larger perspective of our overall land holding in children, available for us to expand into.
Speaker Change: So based on the current 750 megawatts available at Children's.
Speaker Change: You can see the little green area that we utilize in for our 350 megawatts, which has been built and commissioned over the next four months into the end of December. And then we have a rough guide of where the Nuc 400 megawatts will be located.
Speaker Change: at the moment, the initial plan says for that to be continued to be built for Bitcoin mining as the primary use case, but equally there's more opportunities arising on the AI side, potential co-locations, potential clouds which I'll come to shortly.
Speaker Change: So, an update on our pricing and power strategy for children. So, as many of you were aware in July, our power costs were high. It was the result of a hedge contract that we had in place.
Speaker Change: and historically we have had no choice and a lot of that is down to retail it's being very nervous historically around allowing Bitcoin miners to take spot power.
Speaker Change: The risk with that for them and for the minor is that their catalytic systems fail and do not work when power prices are high. So for example, Erkott to be very volatile, we can see $5,000 per megawatt hour pricing.
Speaker Change: If you are operating during that then you're accruing a considerable liability.
Speaker Change: So, the history of miners in this sector has resulted in retailers being very nervous about that.
Speaker Change: The good thing about July is it brought it to a head. It allowed us to have those conversations on a very assertive basis and points to the demonstrated track record of our catalysis since the scale of who we are now.
Speaker Change: and Arab ability.
Speaker Change: to curtail automatically multiple levels of fail save and successfully negotiate a contract that allows us to take direct spot pricing.
Speaker Change: from the market from August 1st.
Speaker Change: So, very exciting for us. It's been something in our pipeline ever since we launched at Children's. But finally now off the back of the events in July, off for the back.
Speaker Change: of our demonstrated track record in systems. We've been able to successfully negotiate that.
Speaker Change: So the benefit of spot pricing is it allows us to optimize our power costs in real time and simply avoid the high price time period without incurring the costs and risks.
Speaker Change: Associated, we didn't need to need term hedges. So there's one cost of around $7 million to close out the existing hedges, so that it's done. That will be booked as a one off cost in the accounts.
Speaker Change: and August months to date the time of this presentation. Our power price has been 3.1 cents all in at children's, which is quite roughly to about 23,000 dollars per Bitcoin.
Speaker Change: in terms of cost to become mine. So on the right hand side you can see our power prices, the average monthly cost since inception on the left hand side that bar chart shows the 4.3 cents which our EZR average historically actually.
Speaker Change: So, that encompasses all the hedging costs.
Speaker Change: On the right-hand side, the three-and-a-half sense is illustrative of what power price we would have achieved if there was no hedge.
Speaker Change: So simply, if all we did was operate on the same profile with the same contaminant and took spotmarker. Power!
Speaker Change: 3.5 cents would have been the resultant price. So, it's a material cost saving going forward. It gives us a material flexibility to adjust the market conditions going forward.
Speaker Change: at the moment we're able to set our parameters dynamically around where we want to trade power. So if we coin mining profitability increases we're able to increase that threshold to divert more of our electrons into the decoy network.
Speaker Change: Epoly other hand, Bitcoin mining profitability fall.
Speaker Change: We are able to sell more power back into the O'Cott Market.
Speaker Change: Because at that point it's going to be more profitable would do so. So the profit maximization opportunity is only enhanced.
Speaker Change: through this change in our contracting structure. So, a very positive development, something where excited about particularly is we now start to hit real scale at children and get my men to build in a significant amount of additional capacity there over the coming months.
Speaker Change: So, on to a quick update around our AI cloud service.
Speaker Change: [inaudible]
Speaker Change: So we continue to serve as multiple customers with our 816 Nvidia 8100.
Speaker Change: As you can see on the right hand side
Speaker Change: It's been a really good experience here today since we launched in February, month on month revenue growth.
Speaker Change: Month on Month Growth, in the number of customers that we are serving, which is equally as important.
Speaker Change: The opportunity to get exposure to more players in the industry, more companies doing different applications, approaching their systems, their operations in different ways, being fantastic opportunity for us in the team to service them and continue to build our profile through the industry.
Speaker Change: We've now launched in our GPU pilot at Children's in the second half of this year, which is really exciting. The opportunity to see the flexibility across different jurisdictions, different climates. So we look forward to reporting back on the results of how that goes.
Speaker Change: Paul Sard, recently extended their contract again. That's now expected to roll off at the end of August.
Speaker Change: They're looking to consolidate their cluster.
Speaker Change: or Clusters into...
Speaker Change: a more larger cluster and the pathway they're going down is uh...
Speaker Change: for Strategic Reasons, Common Injality, we're not able to say too much more, and they haven't told us too much more but it has been clear that they remain very positive.
Speaker Change: On Iron, they look forward to continuing the dialogue as their growth.
Speaker Change: Continuous and most importantly, they continue to be one of our best salespeople in the market.
Speaker Change: So the number of testimonials, the number of direct customer referrals that they are providing to us is really helping us continuing to grow that business. So again, it's a testament to the internal team, the systems, the product that we've launched, the ability to look after every customer that comes through our clusters.
Speaker Change: and drive that market awareness word of mouth to ensure that we are recognized as a good operator in this space.
Speaker Change: and Apropylia Remain Strong. So at the end of the August, we look forward to redeploying.
Speaker Change: our capacity that will be freed up from pull side.
Speaker Change: is a number of active conversations going on there.
Speaker Change: We would expect that capacity to be redeployed in relatively swift order, but it may take a little bit of time.
Speaker Change: Following that, we will continue to assess the opportunity to grow that fleet, but we're very mindful of the capital intensity of growing out our GPU fleet. They are expensive.
Speaker Change: and that's not to say that we won't, but equally we're now very focused on things like customer, creditworthiness, the amount of pre-famous, the tenor of contracts, we've proven the concept.
Speaker Change: We've grown the business from a stand-in start six months ago and now really it's about optimizing the capital allocation to this business and we look forward to growing it sustainably and crudently into the future.
Speaker Change: Power and Land. So a quick update and a recap starts on what we have when it comes to power and land.
Speaker Change: We've got 510 megawatts of operating data centers that will be built and online by the end of December this year
Speaker Change: That is part of a 2.3 giga watt, overall portfolio of secured grid connected power. Again, grid connected, been very important. You're directly connected into these large scale transmission lines and get access to wholesale markets.
Speaker Change: We're not behind the meter, we're not reliant on counter-parties, we have our destiny, our own hands, we're connected into public infrastructure and have access to wholesale markets. It's very important in terms of risk management.
Speaker Change: In addition, we continue to develop our one gigawatt global development pipeline, where progressing connection agreements.
Speaker Change: Land Options, Design, Planning Approval, for a variety of sites around the world we look forward to providing further updates on these into course.
Speaker Change: but this power and land really under our ability to continue that hypergrowth profile that we outlined earlier and the growth that we've experienced over the last 18 months to continue building, to continue to deliver share of the value.
Speaker Change: A quick update on other opportunities to monetize this portfolio. So last month July we announced that we had appointed Morgan Stanley to evaluate AI Data Center opportunities for our 1.4 gigawatt West Texas.
Operator: Good day and welcome to Irons' fiscal year. At this time, all participants are on a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded.
Speaker Change: Sohat.
Speaker Change: That process continues to play out with signing NDAs, we're providing information and data room access to interested parties.
Speaker Change: So, that's it, start in!
Speaker Change: It's a process that will take some time, but equally the traction that we're getting early on, the early conversations, the engagement, looks promising that there will be robust conversations around opportunities for that site.
Lincoln Tan: I would now like to hand the conference over to your speaker, Mr. Lincoln Tan, Director of Investor Relations. Please go ahead. Good afternoon to all of our North American participants and good morning to those joining us from Australia.
Speaker Change: Where it ends up, I don't know, but it's exciting to go through the process and the fact that we're engaged with some of the largest companies in the world. Activating this space is optimistic for the asset base that we built in the opportunity set that lies ahead.
Lincoln Tan: Welcome to Irons' FY24 results conference call. I'm Lincoln Tan, Director of Investor Relations, and I'm joined today by Daniel Roberts, co-founder and co-CEO, and Belinda Nucifora, CFO. Please note that certain statements that we made during this call may constitute forward looking statements. These statements are based on certain assumptions and risk factors that could cause actual results to differ materially from our expectations. Listeners do not place undue reliance on forward looking information or statements. For further details, please refer to the disclaimer on slide 2 of the accompanying presentation.
Speaker Change: In addition to these conversations, in conjunction with the existing relationships that we have are also opening up.
Speaker Change: a digital conversation around our existing sites in Canada, in childrens. We're a range of structures that we've been discussed with potential partners around AI cloud services, around co-location and a variety of other options.
Speaker Change: and again to recap the attractiveness of these existing sites is they have Greek-connected power right now. We have the ability to retrofit additional generation and batteries.
Lincoln Tan: Thank you for joining us.
Daniel Roberts: I'll now hand the call over to Dan Roberts. Thank you, Lincoln.
Daniel Roberts: Welcome everyone, and good afternoon. Moving through the presentation, obviously this is our full-year results. We have a year end of 30 June, so very pleased to report on what's been exciting 12 months for Irons and its shareholders, and obviously an exciting outlook over the coming months and years.
Speaker Change: We have the ability to retrofit liquid cooling if that's required and suitable for customer clusters.
Speaker Change: and finally the latency. We've got sub 10 milliseconds from our Texas sites into major hubs.
Speaker Change: There are 1,000 milliseconds in a second.
Speaker Change: We've got 10 milliseconds, so latency is great. It should support a vast variety of applications and really not be a constraining factor. In Canada, 20 milliseconds, still more than sufficient for the majority of the applications that we're seeing.
Daniel Roberts: So jump in straight into it, disclaimer, please all read it, it's very important. And then into a quick overview of where we are as a business right here, right now. So we're pleased to announce that we have increased our installed capacity Bitcoin mining to 15 extra hash. So the last reported update was 10.5, and we reiterate our original unchanged guidance that we will hit 20 extra hash by the end of next month, and 30 extra hash by the end of this year. So about three and a half months time, three months time, time's line.
Speaker Change: So, we look forward to providing further updates on all this in due course into some Q&A at the end at in the meantime. I'll pass over to Belinda to give us an update on the numbers. Thanks Belinda.
Belinda: Thank you Dan and good morning to those in Sydney and good afternoon to those in North America.
Belinda: Thank you for joining us for our four year earnings update, and I'm pleased to report for the year ended 30 June 2024, the adjuster divatar is 54.7 million.
Daniel Roberts: So that's exciting. We're on track, and the team's doing an absolutely tremendous job. On the AALI Cloud service front, we continue to build good strong momentum there, month on month revenue growth. Our fleet continues to be fully utilized, and the pipeline looks probably seem to further expand that business, and we'll get into that in a little bit more detail. In terms of our data centers that are underpinning this growth, we're up to 300 megawatts now of energised, commissioned, and now operating data centers. And that's from a target of 510 megawatts by the end of December. And again, unchanged retraining that guidance, we continue on the trajectory of where we said we would be.
Speaker Change: being a significant year on your increase of 53.3 million in the highest recorded event for the company.
Speaker Change: with Bitcoin mining revenue and accreting from 75 million to 184 million as the average operating cash rate increase from 5.6 to 8.
Speaker Change: to 9.4, resulting in 4,191 Bitcoin mined, and an average realized price of 44K being an 89% increase in price here on sale.
Speaker Change: During the financial years, Dan mentioned we commenced our AI cloud services business and we recorded revenue and relations that business of 3.1 million.
Speaker Change: Average Natalytic Tristic Costs per Bitcoin Mind, increased from 11K to 18.1K, primarily due to the increase in global hash rate and the impact of the harbing event in April 2024.
Daniel Roberts: So all very good, all very positive, and again, huge effort from the team, but everything proceed in according to the original plan.
Daniel Roberts: And then finally, a quick overview of our current power and land portfolio. As most of you would be aware, we have 2,300 and 10 megawatts of secure grid connected capacity, and the land to go with that. In addition, we've got over a gigawatt of additional development sites around the world, which we continue to progress with even more vigour over the last few months, given the... I'm giving the scarcity around power and land and the demand for that to underpin not only our own growth ambitions but also potentially to leverage into I guess others' growth which we'll get on to shortly.
Speaker Change: Now, other costs increased from 38 million to 56 million.
Speaker Change: These include employee benefit expenses of 22 million side expenses of 8.7 million.
Speaker Change: and they include the procurement of Rick, which is consistent with our commitment to utilizing 100% renewable energy.
Speaker Change: We had insurance cost of 7 million, professional fees is 6 million, and we also had our provision 680 in non-refundable sales tax of 6.3, which is an ongoing CRA audit.
Speaker Change: The increase in the effects reflects a large business today, then FY23, including the expansion about children's thought and the commencement of the AI cloud service businesses.
Daniel Roberts: So, jump in the head to expand a little bit more on the Bitcoin mind inside of the business. So again, a little bit of a recap of where we've been. It was only the beginning of last year we were operating with 1.7X ash. It doesn't sound super impressive today given the numbers that we're talking but it is good to reflect and for us, for me, we'll to congratulate the internal team on the tremendous amount of growth and execution that they've achieved in that relatively short time period.
Speaker Change: as we recruit resources to support that growth, which has delivered significant growth during the financial year, and we project that growth to continue overcoming years.
Speaker Change: We also have increased cost in relation to expanded risk compliance and reporting obligations which come with being a listed Nuc duck company.
Speaker Change: The Association increased from 30.9mm to 51mm, due to the commissioning of assets at children, as well as accelerated depreciation to the S19J Pro Minas scheduled to be sold in quarter once of FY25 due to our recent fleet upgrade.
Daniel Roberts: So to hit 15X ash today and to continue on a trajectory to double that again over the coming three months is super exciting. We also pleased to announce that we've had purchased an additional 10X ash of latest generation bit main minus the S21 XP's. Their efficiency is 13.5 joules per tear ash and that will drop our overall fleet efficiency based on the 30X ash to 15 joules per tear ash. So again, very positive positions are very well at the low cost minor particularly combined with some updates on our power strategy which I'll come to in Texas in a minute.
Speaker Change: [inaudible]
Speaker Change: So right now turned to our cash loads for the year. We had very strong cash loads with a net increase of 3306 million, which resulted in a closing cash position of 404.6 million.
Speaker Change: St. Creason that cash came from primarily operating activities, resulting in that cash for 53, and included 184 million of receipts from our daily liquidation of our Bitcoin mine.
Daniel Roberts: So again, just reuse rate in we have retained the current 20X ash of minor options which are exercised in all in 2025 which provides us a pathway to expand to 50X ash next year. So again, 30X ash by the end of December and 50X ash next year.
Speaker Change: These positive operating cashflowers highlight the quality of our underlining operation and a reinvested to support our ongoing expansion plans.
Speaker Change: Increte in that cash used in investing activities was $499 million and is juicy expansion of the children's data center, as well as our purchase of the Bitcoin.
Speaker Change: Sorry, the bit main is 21 pro and T21 minus as part of their pathway to 30XH in 2024 and 40XH beyond.
Daniel Roberts: So these minors, they require data centers and real world construction and again the team continues to perform extremely well on that front.
Speaker Change: as well as our purchase of the Nvidia H100 GPUs of 816.
Daniel Roberts: You can see the growth since our IPO in 2021 obviously was a challenge in period early on IPO in in November 2021 and where the markets went shortly thereafter. But as the markets have recovered, we've been able to capitalize on a lot of the work that we've done in the investment in land, planning, grid connections etc. It's a job to really build some strong cadence and momentum into the end of this year and beyond.
Speaker Change: Our increased in cash from financing activity, so 782 million, with a sale of 800, 108.1 million shares sold under the ACM and 12.9 million of shares sold under the ACM facility.
Speaker Change: So, might move on to now our balance sheet and as mentioned in our cash flows, we have a very strong closing cash at 30 June of 40.6 million.
Daniel Roberts: The team has done a fantastic job in continually trying to challenge how we procure items, how we build, how we design and that's result in us achieving significant efficiencies. The first efficiency is we're now building 25 MW data centers rather than 20 MW data centers and we're now targeting two of those every month. So 50 MW of additional data center capacity every month is what we're targeting internally and that's driving significantly rapid expansion as we're seeing illustrators in these charts.
Speaker Change: We continue to have no external debt, so no debt facilities and we have strong operating cash laws as discussed on the previous slide.
Speaker Change: A total equity increased to 1 billion with gross proceeds of 823 million from the sale of 121 million shares sold on the ATM and the E-lock.
Speaker Change: This excludes 463,000 shares billed in early July, which raised to further 5.2 million of cash proceeds.
Speaker Change: A first of today, we have a remaining 223 million on our ATM facility. We have a strong balance sheet with total assets of 1.2 billion, which provides flexibility to fund our future growth.
Daniel Roberts: In addition, the other efficiency we're seeing is cost savings, which is always very welcome. So previously, many of you would recall we've been guiding towards $750,000 per megawatt as a result of all these optimizations that we're running. We're happy to report that we're now running at around $650,000 per megawatt. So again, the guys have reviewed all elements of the building design to optimize for both speed and cost without compromising quality. We've worked closely and continuing to deepen our relationships with the supplier network and reduce those lead times, reduce bottlenecks and, again, improving speed and flexibility through construction, through internally developed and IP designs around minor racking, filter banks, etc.
Speaker Change: That's a highlight of the key earnings.
Speaker Change: Highlight for the FY24 year against FY23, I think now we're going to turn to 2 a.
Speaker Change: [inaudible]
Speaker Change: Thank you, as a reminder to ask a question while you stressed R11 on your telephone and wait for your name to be announced. So, withdraw your question, press R11 again. One moment while we compile the Q&A roster.
Speaker Change: [inaudible]
Speaker Change: Our first question comes from the line of Joseph Vassie with can of originuity. Your line is open.
Daniel Roberts: So, again, we're continuing to challenge how we do things, we're not sitting here complacent. We want to continue to get better and we're going to continue to try and do faster and better than what we're doing today.
Joseph Vassie: Hey everyone, good morning, thanks for all the updates here, you know, very thorough. Just, you know, maybe we'll start off, Dan, you know, you did a New York analyst update for us all a few weeks ago.
Daniel Roberts: So that underpins a significant growth pathway, but if you haven't got the power in land, then it's very difficult to grow, which is a great segue onto my next slide. We have single-side expansion at Childress, which we continue to build into. As you can see on the left-hand side, it's been a fantastic trajectory to date. On the top left, that is a picture, an image from August last year. A lot of empty space there, and if you scroll down to the bottom left-hand side, you can see considerable amount of construction and data center progress.
Speaker Change: Anything kind of material such that or incremental to add in the, you know, gusts in both strategies and, you know, how, you know, what's your latest thought here on, you know, attractiveness and decorumining versus, you know, perhaps putting more capex.
Speaker Change: in the hosting side, short term, and now the follow-up.
Speaker Change: Bump.
Speaker Change: Yeah, hi Joe, a few short weeks ago in New York, it was a really good event and appreciate you and the hundred others in the room taking their time, and look at me.
Daniel Roberts: If we look at the image on the right, it shows you a larger perspective of our overall land hold-in in Childress, available for us to expand into. So based on the current 750 megawatts available at Childress, you can see the little green area that we're utilizing for our 350 megawatts, which has been built and commissioned over the next four months into the end of December. And then we have a rough guide as to where the next 400 megawatts will be located.
Speaker Change: Things continue to involve, like every day, every week, will and I learning more of the team and continue to each right now thinking, it doesn't result in materially different decisions, but it's magic, it does start to refine.
Speaker Change: You're thinking what I'll say about Bitcoin Monning is we are in control.
Speaker Change: We're the Marshal of our own destiny. We're 2.3 GW of power. We can plan to build a lot of Bitcoin mining capacity over the coming few years.
Daniel Roberts: At the moment, the initial plan says that to continue to be built for Bitcoin mining as the primary use case, but equally, there's more opportunities arising on the AI side, potential co-location, potential cloud, which I'll come to shortly.
Speaker Change: So that's a fantastic position in the end, particularly when we can do that in a creatively, particularly when capital markets are rewarding all that growth. So that's really exciting because it's something that we can control and plan for.
Speaker Change: on the AI side, so the non-becoin applications.
Daniel Roberts: So an update on our pricing and power strategy for Childress. So as many of you are aware in July, our power costs were high. It was the result of a hedge contract that we had in place. And historically, we have had to hedge. We haven't had no choice. And a lot of that is down to retailers being very nervous historically around allowing Bitcoin miners to take spot power. The risk with that, for them and for the miner, is that their cutout and systems fail and do not work when power prices are high.
Speaker Change: Frankly, the challenge there is you dealing with partners you dealing with counterparts.
Speaker Change: and that takes more time, there's more complexity, there's more nuance.
Speaker Change: The cloud service is essentially a commodity in the sense that you sell in GPU hours online. So we provide a VPN, people login, they use the GPUs for their own purpose.
Daniel Roberts: So, for example, ERCOP can be very volatile. We can see $5,000 per megawatt hour pricing. If you are operating during that, then you're accruing a considerable liability. So the history of minors in this sector has resulted in retailers being very nervous about that.
Speaker Change: and the contracting structure is relatively simple. When it comes to larger scale deals, whether it's on the AI cloud or co-location, or perhaps leasing aside perhaps our sell-in-a-site, if we got the right price.
Speaker Change: Obviously, you're dealing with a different scale and a different set of complexities involving counterparts.
Speaker Change: When we talk to partners or prospective partners, I should say around potentially building them out, data center facilities for them to host their own GPUs in, there's a whole variety of considerations around what those data centers need to look like, the technical specs.
Daniel Roberts: The good thing about July is it brought it to a head. It allowed us to have those conversations on a very assertive basis and points to the demonstrated track record of our Catalan systems, the scale of who we are now, and our ability to tailor automatically multiple levels of sales save and successfully negotiate a contract that allows us to take direct spot pricing from the market, from August 1st. So very exciting for us.
Speaker Change: Things around backup generation, things around chillers, things around how the rack density looks and the internal networking, the software.
Speaker Change: There's a lot to it, and it means that in a few weeks there's not a material I've paid on that because these things take time But the best thing for us that gives us so much excitement about these businesses, we are the masters of our own destiny, where Bitcoin can continue to underwrite
Speaker Change: Significant growth in this business, and this was a plan six years ago when we set the business up, Bitcoin bootstraps the business. We build multi-functional data centers, and then we can leverage into other applications.
Daniel Roberts: It's been something in our pipeline ever since we launched our children, but finally now off the back of the events in July off the back of our demonstrated track record in systems, we've been able to successfully negotiate that. So the benefit of spot pricing is it allows us to optimize our power costs in real time and simply avoid the high-priced time periods without incurring the costs and risks associated with entering into near-term hedges.
Speaker Change: Once we have the opportunity to sign the right time of contract to grow the business in the right way on non-becoin applications. Absolutely, we're going to do it, but equally, it's not like we see it here, it's feeling pressure to do a deal that's suboptimal.
Speaker Change: We're able to really control the throttle both sides of the business in a way that makes sense.
Speaker Change: to thank for that color, Daniel. And then...
Daniel Roberts: So there's one off cost of around $7 million to close out the existing hedges, so that is done. That will be booked as the one off cost in the accounts. And for August month to date, the time of this presentation, our power price has been 3.1 cents all in at children's, which is quite roughly to about $23,000 per big coin in terms of cost for big coin mine. So on the left hand side, you can see our power prices, the average monthly cost since inception.
Speaker Change: You've got a pretty big portfolio now, but you're still kind of inside acquisition mode with a big pipeline.
Speaker Change: You know, it just kind of maybe kind of again talk about your thought process of, you know, further site acquisition given how large your portfolio is now and, you know, cat backs for more site acquisition versus cat backs.
Speaker Change: First sight build out. Thanks a lot guys.
Daniel Roberts: On the left hand side, that bar chart shows the 4.3 cents, which is our average historically actually. So that encompasses all the hedging costs. On the right hand side, the 3.5 cents is illustrative of what power price we would have achieved if there was no hedge. So simply, if all we did was operate on the same profile with the same detailment and took spot market power, 3.5 cents would have been the resultant price.
Speaker Change: Yeah, absolutely. I think things changed so quickly. This is part of the original thesis, the scarcity that we see coming over the next 5-10 to a year.
Speaker Change: the power and land as the well continues to be digitized.
Speaker Change: and look at it was probably only six months that we had endless very skeptical of our ability to ever do it out 600 megawatts at children.
Speaker Change: But the world changes really quickly and it comes back to the original thesis six years ago when Will and I set up this business, which is the dislocation between the digital world and the real world. The real world cannot and will not keep up.
Daniel Roberts: So it's a material cost saving going forward. It gives us material flexibility to adjust to market conditions going forward. At the moment, we're able to set our parameters dynamically around where we want to trade power. So if Bitcoin mining profitability increases, we're able to increase that threshold to divert more of our electrons into the Bitcoin network. If on the other hand, Bitcoin mining profitability falls, we're able to sell more power back into the Urcourt market because at that point, it's going to be more profitable to do so.
Speaker Change: because the digital world moves in these exponential functions. You've got a doctrine curves that go very cool, this insatiable demand, the things that pop up in relative terms overnight, Bitcoin, AI. We don't know what's next.
Speaker Change: But the point is, those demand drivers are exponential, whereas the ability to service in the real world.
Speaker Change: It takes a long time and it takes longer and harder the bigger that digital world gets because they're low hanging fruit gets taken early and then it gets harder and harder and the order of magnitude grows.
Daniel Roberts: So the profit maximisation opportunity is only enhanced through this change in our contractual structure. So very positive developments, something we're excited about, particularly as we now start to hit real scale at children and get momentum building a significant amount of additional capacity there over the coming months.
Speaker Change: To get more power, more land, navigate supply chains, build stuff in the real world, and that's the vision for the business originally, and that's the thesis that's playing out, so we're not going to stop. Absolutely not. I want to giggle what's more of power because I fundamentally believe in 10 years.
Daniel Roberts: So on to a quick update around our AI cloud service. So we continue to service multiple customers with our 816 NVIDIA H100. As you can see on the right hand side, it's been a really good experience year-to-date since we launched in February, month-to-month revenue growth.
Speaker Change: the scarcity dynamic that we're seeing in the market now is nothing compared to what's probably going to come. And we talk about capex. It doesn't really involve capex. But you saw it in land options for $20,000, $30,000 there.
Speaker Change: Yes, we've got a big team internally that costs us a little bit of overheads to go and do that, but most of it is time, relatively small amounts of money, and building up this incredible optionality on a future that we still fundamentally believe in.
Daniel Roberts: Chief, Month on Month Growth in the number of customers that we are serving, which is equally as important. The opportunity to get exposure to more players in the industry, more companies doing different applications, approaching their systems, their operations in different ways, been fantastic opportunity. For us and the team to service them and continue to build our profile through the industry.
Speaker Change: Great. A lot to look forward to. Thanks a lot for those comments again.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: And that will come from the line of Lucas Pipes, wouldn't be Riley Securities, your line is open.
Daniel Roberts: We've now launched in our GPU pilot at Childress in the second half of this year, which is really exciting. The opportunity to see the flexibility across different jurisdictions, different climates, so we look forward to reporting back on the results of how that goes.
Speaker Change: Thank you very much operator, this is Nick Jowls on for Lucas.
Nick Jowls: You've made some key hires related to HPC recently and so I was wondering if you could expand on what these teams are focused on today. Should we see this as a read through for more substantial GPU purchases in the near term? Thank you very much.
Daniel Roberts: Paul's side recently extended their contract again. That's now expected to roll off at the end of August. They're looking to consolidate their cluster or clusters into a more larger cluster, and the pathway they're going down is for strategic reasons. Confidentiality, we're not able to say too much more, and they haven't told us too much more, but it has been clear that they remain very positive on iron. They look forward to continuing the dialogue as their growth continues, and most importantly, they continue to be one of our best sales people in the market. The number of testimonials, the number of direct customer referrals that they are providing to us is really helping us continue to grow that business.
Speaker Change: Um, potentially if we get the right structure, um, I mean my appetite to go and dilute shareholders and take on debt, um, to spend hundreds of millions of dollars on spec, uh, to build out an AI cloud service, business is frankly quite low.
Speaker Change: The market should speak to that and we should be able to negotiate contracts that our minds have the right risk return. We never do another contract because the risk return doesn't make sense, then I'm cool with that as well.
Speaker Change: we're not going to pursue it just for the sake of pursuing it. But as we prove our credentials, we prove our operating performance data and we provide those metrics to customers and we have an increasing amount of...
Speaker Change: that current and past customers providing those referrals as testimonials, I'm optimistic that we're in a really good position.
Daniel Roberts: Again, it's a testament to the internal team, the systems, the product that we've launched, the ability to look after every customer that comes through our clusters, and drive that market awareness, word of mouth, to ensure that we're recognised as a good operator in this space. Our pipeline remains strong.
Speaker Change: to grow that business. So it's something we're really optimistic on, but equally I'm not going to see if you're in just growing for the sake of growing. The investment in people and platform within our business is really important. And we've always said we need to invest ahead of the curve.
Daniel Roberts: At the end of August, we look forward to redeploying our capacity that will be freed up from Paul's side. There's a number of active conversations going on there. We would expect that capacity to be redeployed in relatively swift order, but it may take a little bit of time. Following that, we will continue to assess the opportunity to grow that fleet, but we're very mindful of the capital intensity of growing out our GPU fleet. They are expensive, and that's not to say that we won't, but equally, we're now very focused on things like customer creditworthiness.
Speaker Change: You don't grow a business by focusing on every dollar of your expense line when you grow in an hypergrowth manner. I mean, we're 10x in our Bitcoin mining capacity from 18, 20 months ago, right? We've grown an AI cloud service business that was zero six months ago that's now doing annualised revenue of $15 million service in half dozen customers.
Speaker Change: and the ability to continue investing in people's systems' processes, given the optionality in the business that we've created with all that power and land, the data center design, and the existing team, it's a really valuable investment.
Daniel Roberts: The amount of pre-famous, the tenor of contracts, we've proven the concept, we've grown the business from a standing start six months ago, and now, really, it's about optimising the capital allocation to this business, and we look forward to growing it sustainably and prudently into the future.
Speaker Change: and it covers a whole span of different capabilities from network engineers to AI sales.
Speaker Change: to General Commercial Investment Banking Fund's management background helping us negotiate.
Speaker Change: Perspective structures and large-scale transactions, all the way through to people that have had development experience with batteries, wind and solar. As I said in response to Joe's question, we're not stopping.
Daniel Roberts: Power and land. So a quick update, and a recap perhaps to start on what we have when it comes to power and land. We've got 510 megawatts of operating data centres that will be built and online by the end of December this year. That is part of a 2.3 gigawatt overall portfolio of secured grid-connected power. Again, grid-connected has been very important. You're directly connected into these large-scale transmission lines and get access to wholesale markets.
Speaker Change: We're going to continue pursuing this hypergrowth because we fundamentally believe that the growth and demand for renewable energy power compute is not only not going away, it's really to start at the exponential growth curve.
Speaker Change: and I really appreciate all that color. My follow-up would be, do you have any target levels of prepamence and mind target contract duration and then maybe any additional color you could add around?
Daniel Roberts: Markets. We're not behind the meter. We're not reliant on counterparties. We have our destiny, our own hands. We're connected into public infrastructure and have access to wholesale markets. Very important in terms of risk management.
Speaker Change: the GPU pilot at Children's, the capital spend there, how many incremental GPUs you would add. Thank you very much.
Daniel Roberts: In addition, we continue to develop our one gigawatt global development pipeline. We're progressing connection agreements, land options, design, planning and approval for a variety of sites around the world. We look forward to providing further updates on these in due course, but this power and land really underites our ability to continue that hyper growth profile that we outlined earlier, and the growth that we've experienced over the last 18 months to continue building, to continue to deliver shareholder value.
Speaker Change: So, the hard thing about giving guidance on constructs, like it's a great question, it's really relevant. The hard thing is every situation is slightly different. So, in the base case, we'd love a reasonable proportion of pre-payment.
Speaker Change: We'd love.
Speaker Change: Contractors 1, 2, 3 years and that's got to be the base case target, but equally, every circumstance is different. Every customer is different. There are strategic reasons why you might do something different. For example, it might be a trial, it might be a small opportunity to give them a small cluster.
Daniel Roberts: A quick update on other opportunities to monetise this portfolio. So last month, July, we announced that we had appointed Morgan Stanley to evaluate AI data center opportunities for our 1.4 gigawatt West Texas site. That process continues to play out. We're signing NDAs. We're providing information and data room access to interested parties. That's exciting. It's a process that will take some time, but equally the traction that we're getting early on, the early conversations, the engagement, looks promising that there will be robust conversations around opportunities for that site.
Speaker Change: seen that they've got large growth ambitions and that could be a larger cluster coming thereafter once you've proved yourself. So it's really hard to give specific guidance, but I think we're talking tenors.
Speaker Change: 12 months plus ideally perhaps a bit longer and several months of pre-famous if not a little bit more but again please don't hold me to that because
Speaker Change: We want to remain flexible to make the right decisions and circumstances are always unique when it comes to the decision.
Speaker Change: I certainly won't hold you to it but congratulations to you and the team so far and continue best of luck.
Daniel Roberts: Where it ends up, I don't know, but it's exciting to go through the process and the fact that we're engaged with some of the largest companies in the world. Active in this space is optimistic for the asset base that we've built and the opportunity set that lies ahead.
Speaker Change: Thank you, one moment for our next question.
Speaker Change: and that will come from the line of Paul Golding with Macquarie. Your line is open.
Daniel Roberts: In addition, these conversations in conjunction with existing relationships that we have are also opening up additional conversation around our existing sites in Canada, in Childress, where a range of structures have been discussed with potential partners around AI cloud services, around co-location and a variety of other options. Again, to recap, the attractiveness of these existing sites is they have grid connected power right now. We have the ability to retrofit additional generation and batteries. We have the ability to retrofit liquid cooling if that's required and suitable for customer clusters.
Speaker Change: Thanks for watching!
Paul Golding: Thank you so much. Just a couple for me first on the...
Paul Golding: Full-side capacity that sounds like you're going back to markets with to find a client for it. Could you speak a bit to how you're deciding between going back to...
Speaker Change: Single customer to take a significant swath of this capacity versus putting it on the market for on demand. Customers to use, how do you think about that equation now that this will become available at the end of the month?
Paul: Yeah, it's great questions and we think about this a lot Paul and the short answer is we want to do all of it and retain flexibility And it's kind of funny like, you know, Paul's side extent of the contract again that was due, so they doubled down and extended a couple of times now, but the last one to roll off was earlier this month and they extended again to the end of August
Daniel Roberts: Finally, the latency. We've got some 10 milliseconds from our Texas sites into major hubs. There are a thousand milliseconds in a second. We've got 10 milliseconds, so latency is great. It should support a vast variety of applications and really not be a constrained factor. In Canada, 20 milliseconds. Still more than sufficient for the majority of the applications that we're seeing.
Speaker Change: and then they said, oh, when we're consolidating elsewhere and gave us a little bit of color, but essentially it makes sense from their side. And initially, I actually was off. That's pretty disappointing. We enjoyed working with full side. They were great name. They've been a great...
Daniel Roberts: So we look forward to providing further updates on all this in due course into some Q&A at the end.
Speaker Change: and I think for more genius business, but the funny thing is, now having that available capacity immediately is like me up all the opportunity to pursue other avenues and provide people. The opportunity is to use a small amount of these 500 GPUs that become available.
Belinda Nucifora: But in the meantime, I'll pass over to Belinda to give us an update on the numbers. Thanks, Belinda. Thank you, Dan.
Belinda Nucifora: Good morning to those who did me and good afternoon to those in North America. Thank you for joining us for our full year earnings update. Now, please report to the year ended 30 June 2024. The adjusted EBITDA is 54.7 million being a significant year on your increase of 53.3 million and the highest recorded EBITDA for the company, with Bitcoin mining revenue and increasing from $75 million to $184 million as the average operating cash rate increased from $5.6 for hash to $9.4, resulting in $4,191 Bitcoin mined and an average realised price of $44K being an $89% increase in price year-on-year.
Speaker Change: as a segue of hopeful pathway to deploying large-scale capacity with it, so it didn't
Speaker Change: and the positivity coming out of it and then in terms of long-term contracts for Spart and On Demand, we're pursuing both, so we're developing a digital on-demand.
Speaker Change: Software capabilities internally, we're looking to provide some of that.
Speaker Change: in the market at the moment.
Speaker Change: but equally in parallel with pursuing longer-term contracts. So just getting that mix, ride and retaining this leg stability.
Speaker Change: Do I need to have in thousands of GPUs operating on an on-demand basis, you know, need turn, where we've got customers cycling through on a lifetime basis.
Speaker Change: Not a huge contract, thank for it no, but do we want to continue building the capability, continue service in that market, learning about the depth of that market of what it might look like in the future, absolutely.
Belinda Nucifora: During the financial years, Dan mentioned we commenced our AI cloud services business and we recorded revenue in relation to that business of $3.1 million. Average net electricity costs per Bitcoin mined increased from $11K to $18.1K, primarily due to the increase in global hash rate and the impact of the harbing event in April 2024. Our other costs increased from $38 million to $56 million. These include employee benefit expenses of $22 million, side expenses of $8.7 million, and these include the procurement of REX which is consistent with our commitment to utilising 100% renewable energy.
Speaker Change: Thanks, Dan, and then just one more on the data centers themselves, the structures that sounds like you've iterated on the design in Texas, you're now down to a $650,000 per megawatts cost, and you've got an extra five megawatts.
Speaker Change: for structure. Could you give some extra color around?
Speaker Change: What is enabling that extra five megawatts? Is that something where you can go retroactively to the six or so buildings that you've already constructed and flow that through there as well on a like for like basis or is this more of just a go forward? Thank you.
Belinda Nucifora: We had insurance costs of $7 million, professional fees of $6 million, and we also had our provision for Canadian non-refundable sales tax of $6.3 which is an ongoing CRA audit. The increase in the OPEX reflects a larger business today than FY23, including the expansion of our children's site and the commencement of the AI cloud services businesses. As we recruit resources to support that growth, which has delivered significant growth during the financial year, and we project that growth to continue overcoming years.
Speaker Change: Yeah, sure, that's just to go forward. I mean, all these existing 20-megapilians were designed for 20-megapilians.
Speaker Change: the fallback of the size, the low-voltage electricals, the network cables, et cetera, so they're optimized for 20 megawatts.
Speaker Change: So, simply, the 25th Megawatt design is just a big aversion of the 20 Megawatt's with some increases in density, efficiency, et cetera, and the way that we do it, but really it's a good go forward.
Belinda Nucifora: We also have increased costs in relation to expanded risk compliance and reporting obligations which come with being a listed NASDAQ company. Depreciation increased from $30.9 million to $51 million due to the commission of assets at children, as well as accelerated depreciation for the S19J pro-minors schedule to be sold in quarter-1 of FY25 due to our recent fleet upgrade.
Speaker Change: Fingers allowed us to save a material amount of capex on the data centers and also build out megawatts on a faster basis.
Speaker Change: is even larger than 25 megawatts on the table, or 25, what we should expect for the foreseeable future.
Speaker Change: Everything's always on the table full. So we're looking at that and a lot of other options that to now, we're pretty happy with 25 megawatts. We'll keep punching them out and grow into it, but there's absolute, there's a lot of...
Belinda Nucifora: So I might now turn to our cash loads for the year. We had very strong cash loads with a net increase of $336 million which resulted in a clothing cash position of $404.6 million. That increase in net cash came from primarily operating activities resulting in net cash for $53 and included $184 million of receipt from our daily liquidation of our Bitcoin mind. These positive operating cash loads highlight the quality of our underlying operations and are reinvested to support our ongoing expansion plans.
Speaker Change: Innovation Challenge ideas being worked on in the background so I would expect there's not to sit still and just be sitting on that one design for the long term.
Speaker Change: Great, thanks so much for your resolution.
Speaker Change: Thanks for watching!
Speaker Change: Thank you, one moment for our next questions.
Speaker Change: And that will come from the line of Mike Colony's with H.C. Wayne Wright, your line is open.
Belinda Nucifora: Increased in net cash used in investing activities was $499 million and is due to the expansion of the children's data center, as well as our purchase of the Bitcoin, sorry, the Bitcoin S21 pro-MT21 minors as part of our pathway to $30 extra hash in 2024 and $40 extra hash beyond. As well as our purchase of the NVIDIA H100 GPUs of 816. Our increase in cash from financing activities was $782 million, with a sale of $808.1 million shares sold under the ATM, and $12.9 million of shares sold under the E-Loc facility.
Speaker Change: Good morning, Dan and team and congrats on all the progress and the children's first ones for me. You guys always have a really great perspective on some of these market dynamics. So be great to get your outlook for haspricence here, which as we know have been really trending around all time lows. Do you think we bottomed out here? When do you think we can reasonably see a breakout above this foreign hascense pro-terror hash range?
Dan Roberts: Thanks Mike, Edie questions. It's a big world out there and there's a lot of different miners and all of got their own kind of constructures, availability of capital power land and it just gets fed into that equation. So the key driver.
Speaker Change: is the price of Bitcoin, right? Bitcoin rallies, hash fries.
Speaker Change: Sky Rockers, and everyone's making money and everyone's...
Belinda Nucifora: So, might move on to now our balance sheet, and as mentioned in our cash flows, we have a very strong closing cash at $30 June of $404.6 million. We continue to have no external debt, so no debt facilities, and we have strong operating cash flows as discussed on the previous slide. Our total equity increased to $1 million, with the growth proceeds of $833 million from the sale of $121 million shares sold under the ATM and the E-Loc.
Speaker Change: Scramlin' to invest in and bring online work capacity. So that is the absolute key drama. What the price of Bitcoin does day to day? I've got no idea. What it does long term feels like it's inevitable. It's going significantly higher. So the key for our business is...
Speaker Change: Positioning that we can survive.
Speaker Change: Extended periods where the Bitcoin process isn't that exciting and be really well positioned when it does.
Speaker Change: It does run. So, when you look at our cost per Bitcoin mine at Children's this month in the low 20s per coin mine, the increases in efficiency come in. We're on good growth profit margins, we're feeling good at the current Bitcoin price levels.
Belinda Nucifora: This excludes $463,000 shares sold in early July, which raised a further $5.2 million of cash proceeds. According to today, we have a remaining $223 million on our ATM facility. We have a strong balance sheet with total assets of $1.2 billion, which provides flexibility to fund our future growth.
Speaker Change: Now, it's a good business, that's why we continue with more capital in, it's a creative, it's generating significant cash flow, but not everyone can do it, and that's part of the hurdle, and I guess the most that we've got and the opportunity and challenge for others in this space.
Speaker Change: So, I'll tell you that Hashrot Hashrot Hashrot hashrot.
Speaker Change: Wants to grow, then you need the price of Bitcoin to move, and then people will try and build into it, but the challenge is how you do that. So, we're probably at 20 to 25 gigawatts of power globally today dedicated to Bitcoin mining capacity.
Belinda Nucifora: That's a highlight of the key earnings highlights for the FY24 year against FY23.
Operator: I think now we're going to turn to Q&A. Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, press star 11 again. One moment while we compile the Q&A roster.
Speaker Change: That's no small feat, I think the global data tin in the industry may be
Speaker Change: in the latest numbers. But that is a lot of power. And the whole thing comes back to the, I keep repeating around the digital world, digital world, real world, this, this location. You can't think you think it is in respond.
Daniel Roberts: Our first question comes from the line of Joseph Vassi with Dan. You did a New York analyst update for us all a few weeks ago. Anything kind of material since then, or incremental to add in both strategies. What's your latest thoughts here on attractiveness and Bitcoin mining versus perhaps putting more catbacks into the hosting side short term and now the follow-up? Yeah, hi, Joe. A few short weeks ago in New York.
Speaker Change: 2, the exponential functions that are moving in the digital world and if you look at a price of Bitcoin today, Bitcoin happens to double.
Speaker Change: Over the coming period, then how do you possibly find 20 to 25 gigawatts of power in any time frame that's in the short medium term to try and normalise mining profits or the hash price to where it is today, so that's the whole opportunity. In Sainer, expect the hash.
Speaker Change: Hashtag, the global network to grow, but it's getting harder to grow because of that access to power and land and really it's...
Speaker Change: is pulling more going to be growing through a function of increased efficiency on the chip side, which again is going to be slow against going to require capital, not all miners have access to that capital.
Speaker Change: I appreciate the color there. And you started in your July production of date that there were some T-21 minor performance issues which we've seen with a couple other minor, as well, just to be specifying what those issues were for you and how much extra hash is being replaced in one bit name should get those replacements to you.
Daniel Roberts: It was a really good event and I appreciate you and the hundred others in the room taking the time. Look, things continue to involve, like every day, every week, Will and I are learning more of the team and continue to iterate our thinking. It doesn't result in materially different decisions but at the margins, it does start to refine. You're thinking what I will say about Bitcoin mining is we are in control.
Speaker Change: Yes, and...
Speaker Change: So I'm not sure how granular we've been on the details and being made a really good partner of ours so I'm reluctant to speak to you negatively about them because
Speaker Change: that made fantastic for us over a long term, but there were some manufacturing defects around heat sinks and the ability to operate in the higher temperatures. And just in general construction and assembly quality relative to their high standards that we see across.
Daniel Roberts: We're the muscles of our own destiny. With 2.3 gigawatts of power, we can plan to build a lot of Bitcoin mining capacity over the coming few years. So that's a fantastic position to be in, particularly when we award him for that growth. So that's really exciting because it's something that we can control and plan for. On the AI side, so the non-Bitcoin application. Jones. Frankly, the challenge there is you're dealing with partners, you're dealing with counter parties, and that takes more time.
Speaker Change: Other units, but again, testament to BitMame, their response times, and then...
Speaker Change: Accepting this issue and taking a hundred-severance of responsibility for his being fantastic. So again, if I make mistakes, I make mistakes all the time, there's always issues with how you're responding to how you fix things, and be made of being absolutely fantastic.
Daniel Roberts: There's more complexity, there's more nuance. The cloud service is essentially a commodity in the sense that you're selling GPU hours online, so we provide a VPN, people log in, they use the GPUs for their own purpose, and the contracting structure is relatively simple. When it comes to large scale deals, whether it's on the AI cloud, or co-location, or perhaps leasing aside, perhaps our selling aside, if we've got the right price, obviously you're dealing with a different scale and a different set of complexities involving counter parties, so when we talk to partners, or prospective partners, I should say, around potentially building them out, data center facilities for them to host their own GPUs in, there's a whole variety of considerations around what those data centers need to look like, the technical specs, things around backup generation, things around chillers, things around how the rack density looks, and the internal network in the software.
Speaker Change: to round about potentially one-and-a-half exit hash shift capacity and that is being replaced lifetime. So you will expect to see that results over the coming months.
Speaker Change: Great, thanks for taking my questions down.
Speaker Change: One moment for our next question.
Speaker Change: And that will come from the line of Joe Flynn with Compass Point Research, your line is open.
Speaker Change: Thanks for the question regarding the 1.4 gigo at West Texas site.
Joe Flynn: and I imagine the past, you know, you've been chipping away at the gap back there, but he provides some color on what it actually is on site, whether there be no transformers, the substation, Longal fiber, etc. and also if there's any remaining or got approval, thanks.
Speaker Change: So there's nothing on site at the moment. It's a greenfield site where in the design planning phase around mapping out how we will build there. That part of us coming to market on that site with Morgan Stanley is where at that decision point now where energisation isn't far away.
Daniel Roberts: So there's a lot to it, and it means that in a few weeks there's not a material update on that because these things take time, but the best thing for us that gives us so much excitement about this business is we are the masters of our own destiny where Bitcoin can continue to underwrite significant growth in this business, and this was a plan six years ago when we set the business up, Bitcoin bootstraps the business, we build multi-functional data centers, and then we can leverage into other applications. Once we have the opportunity to sign the right type of contract to grow the business in the right way on non-Bitcoin applications, absolutely we're going to do it, but equally it's not like we sit here feeling pressure to do a deal that's sub-optimal, where I was to really control and throttle both sides of the business, why that makes sense.
Speaker Change: and the utilities working on that energisation in 2016.
Speaker Change: Network Substations, so in relative terms it's not an overly complicated connection so they're working through.
Speaker Change: The Construction and Procurement Processes.
Speaker Change: and then for us it's really designed at this stage and coming to mark it now is because we need to crack on with it. We need to make decisions because the real world takes time and there's long lead items. So we're thinking already and working through the process for procuring high voltage transformers and key lead items.
Speaker Change: but there's nothing material to report at this particular juncture.
Daniel Roberts: Sure, thanks for that color, Dan. And then you've got a pretty big portfolio now, but you're still kind of in site acquisition mode with a big pipeline. It's just kind of, maybe you can again, talk about your thought process of further site acquisition given how large your portfolio is now, and CapEx for more site acquisition versus CapEx for site build out. Thanks a lot guys. Yeah, absolutely. I mean, things change so quickly, and this is part of the original thesis, the scarcity that we see come in over the next 5, 10, 20 years, the power and land of the world continues to be digitized.
Speaker Change: and the focus on that, you know, in your conversations with Morgan Stanley and potential customers or deal structures. I mean, have you seen kind of valuations, you know, from much just...
Speaker Change: D'Or per megawatt basis start to improve in areas like West Texas and I just I think
Speaker Change: and you've come on, there will be great.
Speaker Change: Yes, I've got nothing to say. We're just not at that point with the Morgan Stanley process. We've had come in deicated conversations around.
Speaker Change: What co-location an AI cloud looks like at a smaller scale, at one point.
Daniel Roberts: And look, it was probably only six months that we had, and that's very skeptical of our ability to ever build out 600 megawatts at children, but the world changes really quickly. And it comes back to the original thesis six years ago when Will and I set up this business, which is the dislocation between the digital world and the real world. The real world cannot and will not keep up, because the digital world moves in these exponential functions.
Speaker Change: Paul Gigawitz, but the reality is it's such a dynamic market you look at pallets.
Speaker Change: Kind of evolved over the last six to nine months, every month that goes by.
Speaker Change: the whole sector is thinking about how real these power and land.
Speaker Change: Scared to be dynamic.
Speaker Change: What are these things worth?
Speaker Change: What's the price that I'm willing to pay so?
Speaker Change: Again, we've seen market benchmarks and there's a couple of them out there, which, you know, we can point too and others can point too, which are informative in these negotiations and discussions, but again it's, it's so dynamic that really from our perspective it's just looking at every opportunity on its face and saying, well.
Daniel Roberts: You've got adoption curves that go vertical, this insatiable demand for things that pop up in relative terms overnight, Bitcoin, AI. We don't know what's next, but the point is, those demand drivers exponential, whereas the ability to serve us in the real world, it's hard, and it takes a long time, and it takes longer and harder, the bigger that digital world gets, because the low hanging fruit gets taken early, and then it gets harder and harder, and the order of magnitude grows, to get more power, more land, navigate supply chains, build stuff in the real world, and that's the vision for the business originally, and that's the thesis that's playing out.
Speaker Change: does the return makes sense if we're allocating capital. If we're not allocating capital, what's the opportunity cost of giving up that power?
Speaker Change #100: and Land Recognition. We've got a lot of it. We've got a lot more coming with our development pipeline.
Speaker Change #100: So, I can't, yeah, I wish I could give more colour but it's nuanced, it's dynamic.
Speaker Change #100: and until we get to that actual decision point, it's really hard to give.
Speaker Change #100: Firm Gardens because whatever I say it will be wrong, like an exe reality, everything's just so dynamic.
Speaker Change #100: and I'm just going to say thanks for the questions.
Speaker Change #100: Thank you, one moment for our next question.
Brett Noblock: And that will come from the line of Brett Noblock with Canter Fitzgerald, your line is open.
Daniel Roberts: So we're not going to stop. Absolutely not. I want to giggle what's more of power, because I fundamentally believe in 10 years, the scarcity dynamic that we're seeing in the market now is nothing compared to what's probably going to come. And we talk about CapEx, it doesn't really involve CapEx, like you sign in land options for $20,000 here, $30,000 there. Yes, we've got a big team internally that costs us a little bit of overheads to go and do that, but most of it is time, relatively small amounts of money, and building up this incredible optionality on a future that we still fundamentally believe in. Great. I'll have to look forward to. Thanks a lot for those comments, Dan. Thank you. One moment for our next question.
Brett Noblock: Hey guys, thanks for taking my question and congrats on the quarter and thanks for all of the updates. Let me start with the new Tanaka Sash of the main mining machines. Should we have those machines plugged in this year or those machines can be plugged in next year?
B.C.: I'm B.C.
Speaker Change #103: So, keep out of that negotiation with Toronto Insure that there'll be delivered this year Some of it might be a little bit tight going into December, but that's a good challenge for us.
Speaker Change #104: The whole idea of that additional purchase was to bring forward into this year, given that where
Speaker Change #104: Making the investment decision to go to 30XH, we're fully funded to do so, and then the ability to roll the existing optionality, the existing 20XH options into next year, and I guess kick the can on that decision point, was a key part of that decision force.
Daniel Roberts: And that will come from the line of Lucas Pipes with me, Riley Securities. Your line is open. Thank you very much, operator. This is Nick Jowls on for Lucas. You've made some key hires related to HPC here recently, and so I was wondering if you could expand on what these teams are focused on today. Should we see this as a read through for more substantial GPU purchases in the near term? Thank you very much.
Speaker Change #105: Awesome. I appreciate that. And then on the...
Speaker Change #106: A.I.F.Pilot at Children's New York Secondary Finition, the second half of this year. You may be just first broadly talk about what type of kind of returns your things from what you're doing right now on B.C. How much do you spend on the GPUs and I guess just...
Daniel Roberts: Potentially, if we get the right structure, I mean, my appetite to go and dilute shareholders and take on debt to spend hundreds of millions of dollars on spec to build out an AI cloud service business is frankly quite low. The market should speak to that, and we should be able to negotiate contracts that in our minds have the right risk return. If we never do another contract because the risk return doesn't make sense, then I'm cool with that as well.
Speaker Change #107: talks through the return dynamics of that business and maybe just another follow-up on the size of this pilot. We expect something similar in size to what you guys are doing to be saying.
Speaker Change #108: Yeah, and apologies to Nuci actually asked me about this earlier from the early and I forgot to answer it So, the size of the pilot in BC is small, like it's it's
Daniel Roberts: We're not going to pursue it just for the sake of pursuing it. But as we prove our credentials, we prove our operating performance data, and we provide those metrics to customers, and we have an increasing amount of current and past customers providing those referrals, those testimonials. I'm optimistic that we're in a really good position to grow that business. So it's something we're really optimistic on, but equally, I'm not going to sit here and just grow for the sake of growing.
Speaker Change #109: 16 GPUs, I think so, just under $1 million worth.
Speaker Change #109: and look, we're looking to start training and utilising it, even as we so that's happening.
Speaker Change #109: So I took time, we'll learn a lot very quickly around that, but in terms of the return decision, again, it's pretty much unchanged from prior guidance in the sense that you're looking at roughly two paybacks on these GPUs.
Daniel Roberts: The investment in people and platform within our business is really important, and we've always said we need to invest ahead of the curve. You don't grow a business by focusing on every dollar of your expense line when you're growing in a hyper-grote manner. I mean, we're 10x in our Bitcoin mining capacity from 18-20 months ago, right? We've grown an AI cloud service business that was 0-6 months ago that's now doing annualized revenue of $15 million service in half a dozen customers, and the ability to continue investing in people's systems processes, given the optionality in the business that we've created with all that power and land, the data center design, and the existing team.
Speaker Change #109: May be it's extended a little bit to 24 to 30 months for the H-100s as
Speaker Change #109: The Blackwell's the H200 start to come to market, so you've seen that impact a bit of technology coming through.
Speaker Change #109: But again, it's going to, you've got to weigh up that break even point in terms of the capics.
Speaker Change #109: Against how much capital we put in the work, I, there are the pre-timers at work.
Speaker Change #109: and what's the contractiner, what's a level of risk behind that contract, etc. So, by the time I say, it looks like a great business, the need to pay back, but you've got to get the contract in structure right. You've got to be mindful of the demand. And...
Daniel Roberts: It's a really valuable investment for us, and it covers a whole span of different capabilities from network engineers to AI sales to general commercial investment banking funds management backgrounds helping us negotiate prospective structures and large-scale transactions all the way through to people that have had development experience with batteries, wind, solar. As I said in response to Joe's question, we're not stopping. We're going to continue for renewable energy power compute. He's not only not going away, it's really just started the exponential growth curve.
Speaker Change #110: You know, it's an uncertain world, so far as AI training and the demand for these GPUs over the coming years, and all sounds that looks really exciting.
Speaker Change #110: We think we're on that exponential curve and we probably are inevitably at some point but there's always bumps in the road so we don't want to be caught out there and then on the supply side the impact of new technology coming to market.
Speaker Change #110: and the efficiency of these GPUs. Again, you just don't want to get caught holding a whole bunch of older GPUs where the revenue profile of those GPUs falls a little bit faster than what you're expecting.
Speaker Change #111: Perfect, thank you guys really appreciate it.
Speaker Change #112: Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to co-founder and co-CEO, Mr. Dan Roberts.
Daniel Roberts: Joseph. Dan, I really appreciate all that color.
Daniel Roberts: My follow-up would be, do you have any target levels of prepayments in mind, target contract duration, and then maybe any additional color you could add around the GPU pilot at Childress, the capital spend there, how many incremental GPUs you would add? Thank you very much. So, the hard thing about giving guidance on contract structure, like it's a great question that's really relevant, the hard thing is every situation is slightly different. So, at the base case, we'd love a reasonable proportion of prepayment, we'd love contract terms one, two, three years, and that's got to be the base case target, but equally, every circumstance is different, every customer is different, there are strategic reasons why you might do something different.
Dan Roberts: Thank you, I feel like I've done a lot of talking and sorry, Lincoln Belinda, but thank you very much for dialing in. It's been a great 12 months behind us, but probably a more exciting, three to six.
Speaker Change #113: Month's applause ahead of us, we feel like we're in a really good position, a billion plus of equity on the balance sheet, $400 million of cash, zero debt, so a really robust.
Daniel Roberts: For example, it might be a trial, it might be a small opportunity to give them a small cluster, seeing that they've got large growth ambitions and there could be a larger cluster coming thereafter once you prove yourself. So, it's really hard to give specific guidance, but I think we're talking tenors, twelve months plus, ideally, and perhaps a bit longer, and several months of prepayment, if not a little bit more, but again, please don't hold me to that, because we want to remain flexible and make the right decisions, and circumstances are always unique when it comes to these decisions. Dan, I certainly won't hold you to it, but congratulations to you and the team so far and continue best of luck. Thank you.
Speaker Change #113: Basic Platform, and we continue to prove our ability to grow significantly, I mean we've grown our Bicoid Mining capacity 8x since the start of the last year.
Operator: One moment for our next question.
Speaker Change #114: We've built up two and a half eggs since the start of the year and we're going to another two eggs.
Speaker Change #114: again in the next four months all fully funded. So to go from 1.7XH, start a last year to 30XH at the end of the year, it's just great. Like we're super excited about it.
Speaker Change #114: but for us, 2025 is not far away and the world doesn't end on 31 December.
Speaker Change #114: So the opportunity to grow.
Speaker Change #114: Substantially into next year and beyond, both on Bitcoin mining and the AI side of the business is something we're really excited about, so appreciate everyone's support, thanks for dialing in, and have a good evening.
Speaker Change #115: This concludes today's program. Thank you all for participating. You may now disconnect.
Daniel Roberts: And now we'll come from the line of Paul Golding with Macquarie, your line is open. Thanks so much. Just a couple for me, first on the full-side capacity that sounds like you're going back to markets to find a client for it. Could you speak a bit to how you're deciding between going back to a single customer to take a significant swath of this capacity versus putting it on the market for on-demand customers to use?
Daniel Roberts: How do you think about that equation now that this will become available at the end of the month? Yes, great question. And we think about this a lot, Paul, and the short answer is we want to do all of it and retain flexibility. And it's kind of funny, like the full-side extent of the contract again that was due, so they've doubled down and extended a couple of times now, but the last one to roll off was earlier this month and they extended it again to the end of August.
Daniel Roberts: And then they said, oh, we're consolidating elsewhere and gave us a little bit of colour, but essentially, it makes sense from their side. And initially our reaction was, oh, that's pretty disappointing. We've enjoyed working with full-side. They're a great name. They've been a great thing for launching this business, but the funding he is now having that available capacity immediately is opening up all the opportunity to pursue other avenues and provide people the opportunity to use a small amount of these 500 GPUs that become available as a segue and hopeful pathway to deploying larger scale capacity with it.
Daniel Roberts: So it didn't happen, and a bit of positivity coming out of it. And then, in terms of long-term contracts, first spot and on demand, we're pursuing both. So, we're developing additional on demand, software capabilities internally. We're looking to provide some of that into the market at the moment, but equally in parallel, we're pursuing longer-term contracts. So, just in that mix, ride and retain in the flexibility. Do I envisage having thousands of GPUs operating on an on-demand basis in the near-term, where we've got customers cycling through on a lifetime basis and not a huge contract bank for it? No, but do we want to continue building the capability, continuing servicing that market, learning about the depth of that market of what it might look like in the future? Absolutely.
Daniel Roberts: Thanks, Dan. And then, just one more on the data centers themselves, the structures, it sounds like you've iterated on the design in Texas. You're now down to a $650,000 per megawatt cost, and you've got an extra five megawatt for structure. Could you give some extra color around what is enabling that extra five megawatts? Is that something where you can go retroactively to the six or so buildings that you've already constructed and flow that through there as well, on a like-for-like basis, or is this more of just a go-forward?
Daniel Roberts: Thank you. Yeah, I just want to go forward. I mean, all these existing 20 megawatt buildings were designed for 20 megawatts. So the form back to the size, the low voltage electricals, the network cables, et cetera. So they're optimized for 20 megawatts. So simply the 25 megawatt design is just a bigger version of the 20 megawatts, with some increases in density, efficiency, et cetera, and the way that we do it. But really, it's a go-forward thing that's allowed us to save a material amount of X on the data centers, and also build out megawatts on a faster basis.
Daniel Roberts: Great. Is even larger than 25 megawatts on the table, or 25 what we should expect for the foreseeable future? Everything's always on the table. So we're looking at that and a lot of other options. But for now, we're pretty happy with 25 megawatts. We'll keep punching them out and grow into it. But there's, absolutely, there's a lot of innovation, challenge ideas being worked on in the background. So I would expect us not to sit still and just be sitting on that one design for a long time.
Operator: Great. Thanks so much, thank you, congratulations. Thank you. One moment for our next question.
Daniel Roberts: And that will come from the line of Mike colonies with HC Wainwright. Your line is open. Hi, good morning, Dan and team, and congrats on all the progress and our children's first ones for me. You guys always have a really great perspective on some of these market dynamics. It would be great to get your outlook for hash prices here, which as we know have been really trending around all time lows. Do you think we've bottomed out here?
Daniel Roberts: And when do you think we can reasonably see a breakout above this foreign half sense per tarot hash? E.D. Questions. It's a big world out there and there's a lot of different miners and all have got their own kind of constructors, availability of capital power land and it just gets fed into that equation. So the key driver is the price of Bitcoin, right? Bitcoin rallies, hash price, skyrockets and everyone's making money and everyone's scrambling to invest and bring online more capacity.
Daniel Roberts: So that is the absolute key driver. What the price of Bitcoin does day-to-day, I've got no idea. What it does long-term feels like it's inevitable that's going significantly higher. So the key for our business is position in that we can survive extended periods where the Bitcoin price isn't that excited and be really well positioned when it does run. So when you look at our cost per Bitcoin mine at children's this month in the low 20s per coin mine, the increases in efficiency come in.
Daniel Roberts: We're on good growth profit margins, we're feeling good at the current Bitcoin price levels. Now it's a good business, that's why we're continuing to put more capital in, it's a creative, it's generating significant cash flow but not everyone can do it and that's part of the hurdle and I guess the most that we've got and the opportunity and challenge for others in this space. So ultimately if that hash price wants to grow then you need the price of Bitcoin to move and then people will try and build into it but the challenge is how you do that.
Daniel Roberts: So we're probably at what 20 to 25 gigawatts of power globally today dedicated to Bitcoin mining capacity. That's no small feat. I think the global data send in the industries maybe 25 to 30 I haven't seen the latest numbers but that is a lot of power and the whole thing comes back to that thing I keep repeating around the digital world dislike, digital world real world dislocation. You can't stick your fingers and respond to the exponential functions that are moving in the digital world and if you look at the price of Bitcoin today, Bitcoin happens to double over the coming period.
Daniel Roberts: Then how do you possibly find 20 to 25 gigawatts of power in any time frame that's in the short medium term to try and normalize mining profits or the hash price to where it is today. So that's the whole opportunity. Insana expect a hash rate, the global network to grow but it's getting harder to grow because of that access to power and land and really it's probably more going to be growing through a function of increased efficiency on the chip side which again is going to be slow, again it's going to require capital not all miners have access to that capital.
Daniel Roberts: Got it. I appreciate the color there and you started in your July production update that there were some T21 miner performance issues which we've seen with a couple other miners as well. Just curious if you can specify what those issues were for you and how much extra hash is being replaced in when BitNin should get those replacements to you. Yeah, I'm not sure how granular we've been on the details and BitNin are a really good partner of ours so I'm reluctant to speak too negatively about them because they've been fantastic for us over a long term but there were some manufacturing defects around heat sinks and ability to operate in the higher temperatures and just general construction and assembly quality relative to their high standards that we see across other units but again testament to BitMain their response times and then accepting this issue and taking 100% responsibility for it has been fantastic so again if I make mistakes I make mistakes all the time there's all these issues it's how you're responding to how you fix things and BitMain have been absolutely fantastic it's to round about potentially one and a half extra hash of capacity and that is being replaced lifetime so you'll expect to see that resolved when they come in. Great. Thanks for taking my questions, Dan. One moment for our next question.
Daniel Roberts: And that will come from the line of Joe Flynn with Compass Point Research. Your line is open. Hi, thanks for the question. The question regarding the 1.4 gigawatt West Texas site. And you mentioned the past, you know, you've been chipping away at the gap back there, but he provides some color on like what actually, you know, is on site, whether there be no transformers, the substation, long old fiber, etc. And also if there's any remaining or cut approvals, thanks.
Daniel Roberts: So there's nothing on site at the moment. It's a greenfield site wearing the design planning phase around mapping out how we will build there. But part of us coming to market on that site with Morgan Stanley is we're at that decision point now where energisation isn't far away. And the utility is working on that energisation. It's into an existing network substation. So in relative terms, it's not an overly complicated connection. So they're working through their construction and procurement processes.
Daniel Roberts: And then for us, it's really designed at this stage. And coming to market now is because we need to crack on with it. We need to make decisions because the real world takes time and there's long lead items. So we're thinking already and working through the process for procuring high voltage transformers and key lead items. But there's nothing material to report at this particular juncture.
Daniel Roberts: And if we could just cover on that, like, you know, in your conversations with Morgan Stanley and potential customers or deal structures, whenever you've seen kind of valuations, you know, from just dollar per megawatt basis, start to improve in areas like West Texas. And I just anything you've come in on there would be great. Yeah, I've got nothing to say. We're just not at that point with the Morgan Stanley process. We've had kind of indicative conversations around what co-location and AI cloud looks like at a smaller scale than 1.4 gigawatts.
Daniel Roberts: But the reality is it's such a dynamic market. You look at how it's kind of evolved over the last six to nine months. Every month that goes by, the whole sector is thinking about, well, how real is this power and land scarcity dynamic? What are these things worth? What's the price that I'm willing to pay? So again, we've seen market benchmarks and there's out there which we can point to and others can point to which are informative in these negotiations and discussions.
Daniel Roberts: But again, it's so dynamic that really from our perspective, it's just looking at every opportunity on its face and saying, well, does the risk return make sense if we're allocating capital? If we're not allocating capital, what's the opportunity cost of giving up that power and land, recognising we've got a lot of it, we've got a lot more coming with our development pipeline. So I wish I could give more colour, but it's nuanced, it's dynamic and until we get to that actual decision point, it's really hard to give firm guidance because whatever I say will be wrong. That's the reality, everything's just so dynamic.
Operator: Thank you.
Brett Knoblauch: One moment for our next question and that will come from the line of Brett Knoblauch with Cancer Fitzgerald. Your line is open. Yeah, thanks for taking my question and congrats on the quarter and thanks for all the updates. Maybe starting with the new 10XHash of FitNane mining machines. Should we have those machines being plugged in this year or those machines being plugged in next year? OK, this year. So keep out of that negotiation with trying to ensure that they'll be delivered this year.
Brett Knoblauch: Some of it might be a little bit tight going into December, but that's a good challenge for us. But the whole idea of that additional purchase was to bring it forward into this year given that we're making the investment decision to go to 30XHash, we're fully funded to do so. And then the ability to roll the existing optionality, the existing 20XHash of options into next year. And I guess kick the can on that decision point was a key part of that decision for us.
Daniel Roberts: Awesome. I appreciate that.
Daniel Roberts: And then on the AI PC pilot at Childress that you're expecting to finish in the second half of this year. Maybe just first broadly talk about what type of kind of returns you're seeing from what you're doing right now in BC. How much do you spend on the GPUs and I guess just talk through the return dynamics of that business and maybe just another follow up on the size of this pilot.
Daniel Roberts: Should we expect something similar in size to what you guys are doing in BC? Yeah. And apologies to Nick, he actually asked me about this earlier from B. Riley and I forgot to answer it. So the size of the pilot in BC is small, like it's 16 GPUs I think, so just under a million dollars worth. And look, we're looking to start training and utilise in it imminently. So that's happening. So that's exciting.
Daniel Roberts: We'll learn a lot very quickly around that. But in terms of the return decision, again, it's pretty much unchanged from prior guidance in the sense that you're looking at roughly to your paybacks on these GPUs. Maybe it's extended a little bit to 24 or 30 months for the H-100s as the black wells, the H-200s start to come to market. So you've seen that impact of better technology coming through. But again, it's going to you've got to weigh up that break even point in terms of the graphics against how much capital we put into work.
Daniel Roberts: IE, there are other prepayments at work. What's the contract tenor? What's the level of risk behind that contract, etc. So both primacy, it looks like a great business, the new term paybacks, but you've got to get the contract instructor right. You've got to be mindful of the demand. And it's an uncertain world so far as AI training and the demand for these GPUs over the coming years. It all sounds and looks really exciting.
Daniel Roberts: And we think we're on that exponential curve and we probably are inevitably at some point. But there's always bumps in the road so we don't want to be caught out there. And then on the supply side, the impact of new technology coming to market, deterioration and the efficiency of these GPUs. Again, you just don't want to get caught holding a whole bunch of older GPUs where the revenue profile of those GPUs falls a little bit faster than what you're expecting. Thank you.
Operator: I'm showing no further questions in the queue at this time.
Daniel Roberts: I would now like to turn the call back over to co-founder and co-CEO, Mr. Dan Roberts. Thank you. I feel like I've done a lot of talking and sorry, Lincoln Belinda. But thanks everyone for dialing in. It's been a great 12 months behind us, but probably a more exciting three to six months plus ahead of us. We feel like we're in a really good position. Billion plus of equity on the balance sheet, $400 million of cash, zero debt, so a really robust base platform.
Daniel Roberts: And we continue to prove our ability to grow significantly. I mean, we've grown our Bitcoin mining capacity 8X since the start of last year. We've built it two and a half X since the start of this year. And we're going to another 2X again in the next four months, all fully funded. So to go from 1.7X a hash, start of last year to 30X a hash at the end of this year, it's just great.
Daniel Roberts: Like we're super excited about it. But for us, 2025 is not far away and the world doesn't end on 31 December. So the opportunity to grow substantially into next year and beyond both on Bitcoin mining and the AI side of the business is something we're really excited about. So appreciate everyone's support. Thanks for dialing in and have a good evening.
Operator: This concludes today's program. Thank you all for participating. You may now disconnect. Thank you.