Q3 2024 Riot Platforms Inc Earnings Call

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Speaker Change: Good day and thank you for standing by. Welcome to Riot Platform's third quarter 2024 earnings conference call.

Speaker Change: Please note that all participants have been placed in listen-only mode until the question and answer session begins following the company's presentation of its prepared remarks. Please also be advised that today's call is being recorded.

Speaker Change: I would now like to hand the conference call over to Phil McPherson, Vice President of Capital Markets and Investor Relations at Riot Platforms. Please go ahead.

Phil Mcpherson: Thank you, Liz. Good afternoon and welcome to Riot Platform's third quarter 2020 Fort Irmese Conference Call.

Speaker Change: My name is Still McPherson, Vice President of Capital Markets and Invest Relations. In joining me on today's call from Riot, our Jason Les CEO Colin Yee CFO, in Jason Chun Executive Vice President and Head of Corporate Development and Strategy.

Speaker Change: On the right investor relations website, you can find our third quarter, 2024 earnings press release and a company earnings presentation, which are intended to supplement today's prepared remarks, and which included discussion of certain non-gap items.

Non-Gap Financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with Gap, and are included as additional clarifying items to aid investors in further understanding the company's third quarter performance.

During today's call we will making forward looking statements regarding potential future events. These statements are based on management's current expectations and assumptions, and are subject to risks and uncertainties.

Speaker Change: Actual results could materially differ.

Speaker Change: Do two factors discussed in today's earnings press release. In comments and responses made during today's call and the risk factor section of our form 10K informs 10Q, including for the quarter ended September 30, 2024, which will be filed later today.

As well as other findings with the Securities and Exchange Commission. With that, I will turn the Call of Regeason Les CEO of Riot Platforms.

Regeason Les: Thank you Phil and good afternoon everyone.

Regeason Les: Ryaf's primary strategic focus has been on developing a leading vertically integrated Bitcoin mining company. Built on the 3G pillars of developing an owning operations of significant scale, being a low-cost producer of Bitcoin and building a balance sheet of strength.

During the third quarter of 2024, we continue to demonstrate success at all three of these pillars.

Ryan increased total deployed hash rate quarter over quarter by 27%. From 22x to hash to 28x to hash, meaning our quarter and target of 28x to hash, and on track to reach 35x to hash by the end of the year.

Speaker Change: The third quarter of 2024 was the first full operational quarter of Big Swim production following the having event, which occurred in late April, and was led to a reduction in the Big Swim Block subsidy from 6.25 to 3.125 Big Swim for Block.

Additionally, global hash rate grew by 40% and sorry 4% quarter over quarter. Both of these events created bearish headwinds for Bitcoin miners in relation to the cost of mine.

The Spiky's events writes cost to mind in the third quarter, aided by our unique power strategy, which is among the lowest cost miners in our industry and was significantly below the average price per Bitcoin during the quarter.

We generated 12.4 million power credits during the quarter, lowering our all-in-cost of power to 3.1 cents per kilowatt hour during the third quarter, while also supported the Texas grid during times of disruption in supply and demand.

Speaker Change: During the third quarter, right also continue to address challenges regarding our operational history. While we are always focused on continued growth, our primary focus at this time is on improving this metric and reaching a standard of operational excellence.

Speaker Change: During the quarter, we completed the redeployment of the large portion of the underperforming miners at Arachios Associates with a nameplate capacity of 3.33XH.

and the subsequent installation of latest generation miners with a name laid to pass to the of 3.6th Exahash from May through September.

This focus on improving operational efficiency is already beginning to show results. And we are pleased to report that through October 29th, right? Bitcoin production for the month was approximately 469 Bitcoin.

Speaker Change: Average operating hash rate through this period was approximately 23 x to hash. And when excluding the first two days of the month when our course can facility was powered down for sub station maintenance, average operating hash rate was approximately 24 x to hash.

Representing an over 85-80% company-wide average utilization rate.

The research is the initial and preliminary results from our focus on achieving operational lifelines. And we believe that when the initiative underway across all of our sites, we are strongly positioned to continue building on this positive moment out.

We were named focus on the growth and enhancement of our fake play by New Justice.

Speaker Change: Wright's focus is maximizing Bitcoin mining results and our strategy is enabling us to execute on this at an unprecedented scale. I would now like to turn the call over to Colin Yee, the CEO of Wright platforms.

Thank you Jason. I'm excited to present Riot's financial results for the third quarter of 2024.

Colin Yee: for ease of reference and something you can always refer back to this slide 5. This presents a snapshot of key financial and operating metrics for the third quarter of 2024. However, let's jump into the details on the following slides.

Right phones and operates the largest dedicated Bitcoin mining facility in the world, the Rothfiel facility, where we continue to deploy miners and expand our self mining capacity during the third quarter.

In addition, right continues to add hash rate at our course of accountability, which, when fully developed, will supplant the Roth-Dales facility as the largest dedicated Bitcoin mining facility in the world.

Speaker Change: As a result of the successful development of our course, the Canada facility and ongoing development at our Rockdale facility, right ended the third quarter with an installed hash rate of 28XH, a 159% increase relative to a third quarter of 2023.

Speaker Change: and meeting our guidance for the quarter.

During this quarter, write mine 114 Bitcoin, in line with the 1160 coin we I'm during the third quarter, 2023.

Speaker Change: These results came about in spite of the Bitcoin block subsidy having event, which occurred in April 2024, and the significant increase in the Bitcoin network difficulty, which increased by 59% from the third quarter of 2023.

Consider these events.

and driven by the significant growth in our hashrate capacity expected through the remainder of the year.

We anticipate producing more Bitcoin per day by the end of 2024 than we did in the first quarter of 2024, having not bestanding.

Speaker Change: Ryan ended the third quarter 2024 with 10,427 Bitcoin, and increased the 42% relative to the 7,327 Bitcoin that we held at the end of the third quarter 2023.

Rye continues to retain 100% of all the contradictions in the third quarter.

Speaker Change: In the third quarter 2024, Ry reported total revenue of 84.8 million as compared to 51.9 million for the third quarter 2023. A 65% increase year over year.

This increase was primarily driven by higher Bitcoin prices.

Gross Profit for the Quarter was 24.3 million as compared to Gross Profit of 37.7 million in the third quarter of 2023.

Speaker Change: Non-gap adjusted EBIDA for the quarter with a loss of 3.6 million. As compared to non-gap adjusted EBIDA loss of 3.1 million in the third quarter of 2023.

Wright, a doctor, Pfizer, is the final standard on crypto assets issued in December 2023, under which Wright now recognizes its Bitcoin held up fair value and with it changes in fair value are now recognized in the income.

As a reference, the Bitcoin price at the end of the second quarter in 2024 was $62,678 and the price at the end of the third quarter was $63,330.

Speaker Change: This resulted in a mark to market upward adjustment of 8.6 million in the third quarter.

Speaker Change: Net loss for the quarter was 154.4 million or 54 cents per share compared to net loss of 80 million or 44 cents per share for the same period in 2023.

This quarter's net loss includes non-cash stock-based compensation expense of 30.6 million, unrealized loss of marketable equity securities of 38.1 million, and appreciation and amortization of 60 million.

Speaker Change: At the reminder, beginning in the first quarter of 2024, we adjusted our depreciation schedule for mining hardware from a two year to a three year schedule based on our evaluation of our own operational history.

Well, the third quarter of 2024, get quite mining revenue total 67.5 million. A 116% increase relative to third quarter 2023, get quite mining revenue of 31.2 million.

Speaker Change: Bitcoin mining cost of revenue primarily consists of direct production costs of Bitcoin mining operations, including electricity, labor and insurance, but excluding depreciation and amortization.

Bitcoin mining gross profit for the quarter was 28.4 million representing a margin of 42% as compared to 56.4 million or a margin of 181% in the third quarter of 2023.

Speaker Change: i

In spite of the global network hash rate increasing from an average of 60, 604 x the hash in the second quarter of 2024 to 625 x the hash in the third quarter, a 4% increase.

and the Bitcoin having event in April 2024, writes cost of my Bitcoin in the third quarter, increased by only 40% on a per Bitcoin basis when compared to the previous quarter.

Cost of mine excluding depreciation, this corner total 35,376 dollars per Bitcoin, which power cost amounted to 26,603 dollars per Bitcoin, or 75% of the total cost per Bitcoin.

Quarter-on-over-quarter power costs increase from 2.7% to 3.1% to 4.1% to 4.1% to 4.4% of power was percured of the course of canofy facility at spot market rates.

with proportionally, fewer off-setting power credits than the previous quarter.

We remain pleased with achieving an all-in cost of power, a 3.1-centric kilowatt hour, which remains one of the lowest in the industry.

Direct non-power costs, which include direct labor, minor insurance, minor minor related equipment repairs.

Landleason Related Property Taxes Network Costs and other utility expenses totaled $8,703 or 25% per Bitcoin line.

Down from the second quarter of 2024, when direct non-power costs accounted for 41% of total costs.

This significant drop is a result of right continuing to achieve economies of scale and our operating facilities.

As Riot continues to grow hash rate, we expect to see non-power direct costs as a percentage of total cost per Bitcoin to trend lower.

Speaker Change: The End

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Rides Engineering Business carried out through Rides Holy Owned Suciterate ESS Metron reported revenue of 12.6 million in the third quarter 2024 as compared to 15.5 million for the same three month period in 2023. A decrease of 2.9 million.

This decrease was primarily attributable to one large government contract that had taken longer than anticipated to complete due to supply chain constraints.

This resulted in an engineering gross loss for the quarter of 0.9 million as compared to gross profit of 2.3 million for the third quarter of 2023.

Park Custom Electrical Products such as Switchier and Power Distribution Centers are important components in data center development and in power generation and distribution facilities.

and there has been increased demand for these products due to the continued increase in data center construction by developers, as well as the continually increasing worldwide demand for power.

At the end of the third quarter, this large government contract finally shipped, freeing up approximately one-third of our warehouse capacity and allowing this division to get back to work on higher margin contracts.

Speaker Change: Ridescash SGNA expense for the third quarter was 36.4 million.

This cash SGNA expense figure includes one time M&A and one time litigation related to expenses of 4 million and 4.9 million respectively.

which puts our RunRake Cash SGNA for the third quarter at 27.5 million in line with our previous guidance of 25 to 27 million per quarter.

Particularly when factoring in additional costs from Kentucky, which added a little over 700,000 in additional general business and compensation expenses in the third quarter.

For the fourth quarter of 2024, we expect Runray Cash Fest Unite to come out in the 27-millionth of 30 million range.

M&A and legal expenses are challenging to forecast, but based on current litigation activity levels, we anticipate litigation expenses in the fourth quarter will be significantly elevated relative to the third quarter.

I will now turn the call back over to Jason Les.

Jason Les: Thank you, Colin.

With Riot's recent expansion in the Kentucky, we now have a direct pathway to two gigawatts of total power capacity and are well on our way to securing a nut capacity to achieve our growth target of 100-500.

The pipeline that will ultimately enable this growth consists of 770 watts of capacity at a rocket facility, 1 gig a watt of capacity at our course of canopy and more than 300 megawatts in Kentucky.

Today, we are pleased to announce we have initiated the full second phase development of the course of Canada Authority, which will add 600 million walks of capacity when complete and take the site to one give a walk of capacity.

We have polyp orders for the long-dings nut station equipment and expect the development to be fully completed in 2020-6.

Riot has long striped to provide clear guidance on a growth plan, and just as importantly, where we anticipate this growth will come from.

We believe that providing visibility, not just overall growth plan, but also on the specific path to achieve our growth plan is a vital element in demonstrating the credibility of any Bitcoin miners growth forecast.

Jason Les: Through our vertically integrated strategy, we have developed multiple pipelines of organic growth opportunities available for us to pursue.

Jason Les: These expansion opportunities are at a various stages of development and can be prioritized or pushed back based on our assessment of the optimal distribution of resources for our portfolio of infrastructure at any given time.

Going forward, we intend to present our group targets on a more conservative basis. Based on a higher degree of confidence and internal prioritization level relative to a prior methodology.

We believe that this approach will position us to more confidently meet and exceed expectations.

There's work and we've just revised the approach in mind. We are revising our Hasher Groups 4Test for 2024 and 2025.

For 2024, we now estimate a year-in-sold hash rate of 35 x 2 hash. That's slightly from our prior guidance of the 360 hash.

This adjustment is primarily driven by a 1.8XHD crease and expected HASHRAG growth in Kentucky, which is being pushed back into 2025.

Offset by a 1.1XH increase in the expected HACROW at our rock field facility, resulting from initiative underway to improve our operational efficiency.

Jason Les: More specifically, we have accelerated and converted our microBT perks orders are 2025 in 2024, with the plan delivery of approximately 8XH of M6D miners in the fourth order of this year.

Since our large scale deployment of micro BT and 16 miners, this summer at Rothtail, we have seen significant improvements in off-road enough time.

One of our buildings entirely utilizing only M50 miners, operated at over 95% uptime, even during the hottest period of the summer, excluding only curious the power strategy for ladies for combat.

Jason Les: These new miners to be delivered will replace all of the old generation machines with two of our air cooled buildings.

which will be redeployed across other locations. Thus, increasing the rocket facilities total hatch rate to 16XH and further improving our fleet wide efficiency to 21.4 joules per carahatch by the year end.

closing out 2024. We remain on track to fully complete the first 400-megawatts date of our course of Canada facility by year end.

All critical equipment has been deployed and we are in the process of commissioning the final systems of this development.

For 2025, we are lowering our year-end exit hash rate forecast from 56X to 457X to hash.

We are taking a more cautious approach relative to prior guidance driven by long-term time-subsciption equipment for course-to-canner as a result of which we now expect two buildings to come online in 2025 versus our previous expectation of three buildings.

This change accounts for approximately 4X-2-2 of the lower guidance. Additionally, we're pushing out some of the expected Kentucky Extension for 2025 in 2022 and 2022 7.

We now expect the initial phase of the Colin Road facility to come online in 2020-26 with subsequent phases coming online in the following year. This change will result in approximately 8.8x and hash of 2025 growth now being pushed out in the 2022-26 in 2022.

In 2023, Riot made the strategic decision to enter a long-term purchase agreement with Mike Rubie T. With an option to purchase an additional 75XHS with a price ceiling of $16.40 per carer hash.

2021. We have received and deployed a majority of the Minus from our National Purpose Warriors and have been extremely pleased with the results of both the purpose of building a Merjum model that course the Canada and Air Force model at Rockdale.

Jason Les: We have seen a significant improvement in operating up time with these machines and we are leveraging what we have learned to improve operations across all our facilities.

With the most recent appointments, Ryaf played efficiency now stands at 23 Jules for TerraHash. Today, our orders for new miners from micro BT have been received at or ahead of schedule. As we have now received approximately 90,000 miners with the vast majority already deployed.

As additional newest generation mining from micro BTRC's employees, rice total clear efficiency is expected to improve to 20.3 joules per terror hash in 2025.

Wright, Balant Cheat String, enables us to commit to growth in investment that will allow us to achieve a Hatch-Rake growth target for 2025, a 46.7xH.

We now anticipate tap expanding of approximately 653 million over the next five quarters to end of 2025. We're reduced from our prior guidance of 713 million based on our latest growth forecast.

It is important to note that some of our half-expand in 2025 will also be sitting the foundation for future growth in 2026 and beyond.

As an example, approximately 50 million of additional four-seconded Catholics in 2025, it's four are 600 megawatts of station, which will ensure that we can provide sufficient power to future developments on Sunday.

Mainz painting is strong liquidity position, allows for it to continue to make long-term decisions that would yield results well into the future.

Wright's vision is to be the world's leading Bitcoin-driven infrastructure platform. In achieving this vision, we are in the process of completing a 181% increase in deployed and has three in 2024.

For this position enough, to mine more Bitcoin for day post-tadding than we were prior.

We also continue to realize one of the industries lowest cost of mine at 35,376 dollars per week during the quarter.

In more e-tours our vision, our objective is to leverage our cost of the initiatives and efficiency over our growing scale into the coming years.

Over the past few quarters, the demand for power assets by both Bitcoin miners and now AI-86 companies has grown significantly.

There is a notable sensitive urgency for power access in 2025, with AI-HBC companies willing to pay a premium for timely access at a track of sites.

Longer term, we continue to see a room bus pipeline of energy assets available to us.

And if we remain highly at this, it continues to evaluate opportunities to enhance our pipeline of power capacity, well-inches of future.

Ryan will continue to monitor industry trends and make decisions that provide the greatest benefit to our shareholders, while also seeing focus on our long-term goal of reaching 100x to hash in total self-mining hash rate.

We are incredibly excited about what riots accomplishes this year. And we look forward to executing our state of goals and reporting to you on our progress and success.

Jason Les: Thank you all for listening to our presentation. You would now like to open the call for questions. Operator.

As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

Please stand by when we compile the Q&A roster.

Jason Les: i

Our first question comes from a line of Mike Cohen, with HC Wayne Wright.

Good afternoon, guys and congratulations on all the hash rate expansion over the past couple quarters. I live a good to see. First one for me, maybe Jason, you know, you're pointing this out a bit on the call here, but you know, just evaluating the numbers for September. Obviously, there's been a pretty big delta between rights, the point hash rate and average operating hash rate in recent months.

and I can appreciate that you're rapidly energizing new miners and actively curtailing over the summer months. But going forward, you know, how should investors really think about riots, utilization rate?

Jason Les: So...

Speaker Change: As we talked about in the prepared remarks here, we are super focused on achieving operational excellence. To us, this means large scale operations running in a safe and compliant matter at a high-up time.

Jason Les: Currently, we're aiming to achieve greater than 95% average utilization of deployed hashtray, not as excluding periods of procurement related to power strategy.

of course as you touch on my, this is not an overnight fix but we have been very, very pleased with the rapid improvements that we've been seen. So previously, Riot was reporting hashrate utilization and the months in the 60-70% range and now for the most recent month were over 80%.

Jason Les: We believe with the continued growth at Rockdale, I don't know, sorry, the continued growth at Horses of Canada, where very pleased the new systems and other operating units combined with the ongoing work at Rockdale, the other big touch-stone, where installing the M6B winers there.

[inaudible] So not only the next fifth but our goal is to get to greater than 95% average utilization of our time.

That's great. That's great. And next week for me, obviously you guys have tremendous organic growth opportunities, due course of can over the next couple years here. But just curious, you're appetite for additional M&A here. If you could just speak to what you're seeing in the market right now for deals on both the private and public side.

Sure, let me turn that question over to Jason Chomp. Hey Mike, thanks for the question. Just to address that point.

Jason Chomp: I think we continue to see a very robust flow of the opportunities both on the public and private side but I would say in particular on the private side as it comes to private miners.

I believe the challenging hash price conditions, both having alongside a lack of access to capital and general need to upgrade agent's fleet. Appeared to be driving greater capitulation among some of the private miners in particular, so we're very active in exploring all the opportunities.

I give an opposition in the industry where one of the natural bitters are usually one of the first calls to see opportunities. Got a large corporate development team that's very active in exploring these?

I think overall we continue to be very disciplined and how we think about when, when is the right time to pursue additional deals beyond the one that we announced earlier this summer.

Great, thank you for taking my questions.

Our next question comes from the line of Darren Uptie with Roth.

Hey guys, thanks for your questions.

First one I guess Jason, you comments about improved utilization outside of just the M-16 new machines is there anything from a like the just to call the best practice that you're doing that's improving utilization or is it just the exclusive machine?

Speaker Change: Not the format.

Yeah, during there's a...

Huge number of projects that we've had underway to improve this utilization. Of course, we're pleased with the results that we've seen from these line-ups.

Jason Chomp: But there's a whole host of things that we've been implementing on our continuing implement. We're improving our intellectual infrastructure, we're making tweaks to how our cooling works. We're improving our on-the-ground organization around minor repair and support. We have...

Rand up our analytics, software capability, we're monitoring operations on a very detailed level now. It's allowed me to respond to things clicker and address things clicker.

You put a lot of expertise at play here in order to improve with this metric. So, the new miners certainly melt at the big part of it, but there are...

Jason Chomp: 10s, not 100 projects that have been under way over the course of 2024, in order to really focus on getting right to the state of operational excellence, getting the 2025 operating very strong.

Gaudet, and I guess I'd be remiss if not asking this question as soon as somebody else will. You know, as it pertains to course the can on the additional 600 megawatts. I mean, as it stands today, are you still exclusively thinking that's all going to be spoken for in terms of Bitcoin mining or do you have other aspirations used that powerful for you? Thanks.

Speaker Change: We're building 600 megawattages in the upper class. We have course sets of sources of such stations, so that's pretty new energy that can be used for most uses.

Right now, our plans are for that to use for that to be used for Bitcoin mining.

We are open to opportunities to allocate that capacity in another way that's best for shareholders, that's just better economics.

So we alluded to earlier, up several weeks ago that we've begun receiving some interest in capacity, particularly capacity that could be available in 2025.

and these discussions are preliminary, but they're ongoing. So if there's a good opportunity to make a good deal for power, we are going to pursue that. But as of right now, the course is expanding to Cremany and Hustrate.

Great, thanks for the insight.

Speaker Change: The End.

Speaker Change: i

Speaker Change: Our next question comes from a line of Greg Lewis with BTIG.

Speaker Change: The End

The End

Greg, you're like me, be on mute.

Speaker Change: The End

Speaker Change: The End

Speaker Change: can be able to move on to the next one operator who can reach you in.

Our next question comes from Paul Golding with the query.

Paul Golding: Thanks so much and congrats on the hash rate growth. Just wanted to ask a couple of questions here. One housekeeping question on.

The Substation Maintenance that you called out at the beginning of the month is that something that was driven by the utility and it's factored into your $12 million demand response credits or that something that didn't factor into financials.

and then...

I'm sorry interrupt you, please. No, no, that was my follow-up son related to go ahead.

Speaker Change: Okay, it was purely engineering. It wasn't a standard manner response at a action. It was planned and scheduled, our internal teams arrived in a list.

Speaker Change: Thanks, Jason.

Speaker Change: I wanted to ask you to talk specifically about ESS Metron and the...

Speaker Change: Cassidy of that.

Speaker Change: That's the city area being utilized on government contracts. How do you think more broadly about the SS Metro on utilization on third party deals versus the vertically integrated infrastructure as you build out your capacity? Is there a marginal benefit to one or the other? How are you thinking about that holistically?

Speaker Change: So, Riot is actually a fairly small customer out of ESS metrones. As you can imagine, there's so much to be discussed with their equipment right now, building out other types of data centers, generation applications, etc. So,

It is not too much of a big difference take decision that they have to make. We don't have to in key durability to pursue all the other.

Jobs, they have a Q-duck fair. They're really valuable to us getting disability and supply chain, reducing our cost of bills. And when we do have to make quick modifications, the technology is changing for pivoting how it is.

Speaker Change: Session Attronics have worked with us very quickly. Probably a lot more flexible than they would be with third party customers, because it's all in the family together.

So with that government contract now being shipped out at the end of the third quarter, this is freed up significant manufacturing capacity for this engineering division.

That's great because they can get back on track towards prior revenue and gross margin of levels.

In this industry, the fourth quarter is typically slower for engineering division results, but with this new capacity that's now available, we are going to begin working in higher market contracts that will start seeing folks and a work dot in the first quarter of 225.

Speaker Change: John, thanks and if I could just sneak one quick one in here at the end, anything specific to call out as a key driver of the Kentucky timeline adjustment for the, I believe it's 1.8x2 hash you noticed. Thanks.

Speaker Change: So, um...

All of the plant-type lines support growth and Kentucky, remain intact. So, nothing seems canceled or really just moving around. Touch not right at the portfolio of assets and for...

Not denizing that portfolio based on what makes the most sense for the polling scheme in front of us.

Speaker Change: The only reason that that broken Kentucky has been pushed out was so we can spend some extra time in order to maximize the power capacity that we get, but also ensuring that we're getting the best possible economics. So in this short, typically a matter of prioritizing quality, we'll continue.

Thanks so much. Thank you for all.

Thank you.

Speaker Change: Our next question will come from Joe Flynn, from Compass Point and Research in Trading. Your line is open.

Speaker Change: The End

Hi guys thanks for the question

Joe Flynn: I hope you could provide word details into the continued increases in SGANA, which you have driven it at one time items. But it looks like that's still in over into the fourth quarter. I guess on the litigation front, what is the status of litigation on the hosting counterparties as that continues to be a gross profit drag on the business?

Yeah, thanks, so I'll start backward. So, it can't provide any updates on the litigation. We can't really comment on it on litigation, but these cases are still ongoing.

Joe Flynn: We have been speaking to the cash gene A. We have been extremely active in M&A during 2024. And so, we see an orphanage, the closing of the acquisition of Block Mining resulted in 3 million of expenses.

Joe Flynn: Being an expense under that acquisition related costs, fuck it.

and for M&E deals that have not closed such as activities related to our engagement with Bitfarms. We took a Bitfarms example and of course we incurred approximately 4 million in one-time cost and those are cost by our financials under G&A.

As you noted, we're also had elevated expenses due to ongoing litigation. This is with Legacy Hosting customers that we inherited from the Winston acquisition in 2021.

Joe Flynn: Now, what you think is important here is that on a run rate basis, when you remove one time, M&A, and litigation related expenses for the quarter, our cash S-G-N-A came in at 26th and a half million, which is in line with our previous guidance and noting this includes 700,000 cash S-G-N-A costs.

Joe Flynn: in Business and Compensation expenses, as well as the Kentucky Acquisitions.

and following those operations. So we do expect this litigation costs to be elevated in the fourth quarter, unfortunately.

Joe Flynn: But these are...

Kempory and Nature, they're not relative to a runway to operate in our business on an ongoing level. So, the ones we're important to have to correct now and we're looking forward to having behind us open to the budget.

The End

Thanks and I'll take back off for earlier question.

Speaker Change: It sounded like we would be open to all options regarding the 600 megawatts update. Just curious if you started conversations with an even if early with potential.

HBC counterparties and you know, or if going forward and building that could set 600 mega off-substition could that lead to increased activity. Thanks.

Our belief is more power capacity is more optionality and the exclusion of demand at the age to see only makes that optionality more valuable. So, unlike I noted earlier, these discussions are still preliminary, but they are ongoing. We're trying to see if there's a good deal that can be tracked here to monitor the capacity. That's an improvement over Bitcoin money.

is that reaches a conclusion that will certainly update the market, but we are at least that it encouraged by the fact that we've seen interest in multiple parties.

Alright, thanks, let's all be ready.

Our next question comes from Bill Papa Nostazio with Stevel.

Good evening, gentlemen. Thanks for taking my questions for the first one. I just want to touch on ESS Metron.

Speaker Change: Curious whether you're able to quantify this demanding growth.

and recent quarters from the AI HPC in space.

Can you share some color on how scalable it is as Metro on is today and it's ability to satisfy this growth and demand.

I would say forward these type of services there is a lot of demand. ESS is limited by the size of that facility and looks.

The workers in the coming, the mainly the size of the facility available for community faction there. And there.

There are interest in jobs that they will accept delivery times, wait for out, just to get on the line for equipment at this point.

So while there's a lot of demand for immediate growth, there are many companies planning for growth many years into the future and they just want to get in line right now for when that capacity increases.

I don't have a forecast for you of...

How we can increase the capacity of right now, obviously that is something that we think about in order to fully capture this opportunity available. And unfortunately, I do not, I don't have a number four you to quantify what the demand is, but I can tell you it's a very robust demand. And the limiting factor for us is really just the size of that facility and how much equipment we can fit on that factory floor basically.

So we're looking at opportunities with respect to capacity because that would enable us to increase the revenue profile at this point.

That's great, thank you, helpful. And then for the second one, you know, following the settlement agreement with Bitfarm's.

We believe as a result of our engagement with good firms a number of positive corporate governance changes have been made and today bit farms is a much different company than it was at the start of this year and we think this is a change that benefits all shareholders and will help with farms will be successful.

Speaker Change: We now have entered into a settlement agreement there.

Speaker Change: No other.

Speaker Change: Attempts to corporate governance changes that could even possibly be made for some time.

With respect to our current position.

Obviously, I mean, we've touched on before is in.

Speaker Change: In these type of deals the counterparty quality is incredibly important.

Speaker Change: So.

We've been having discussions with.

Those counterparties that we believe are blue chip and have the capital and credibility to bolster our long term agreements.

And I think riots reputation and image of having so much power capacity is what's resulting investing these unsolicited offers for really significant amounts of power capacity. The interest that we're seeing is for hundreds of megawatts not necessarily small amounts.

Thanks, very much appreciate it guys.

Thanks Robert.

Our next question comes from Mike Grondahl with Northland capital markets.

Mike Grondahl: Hey, guys have been going on for Mike.

Mike Grondahl: Super quickly for me can you provide some more color on the power curtailment strategy and is it safe to assume the reasoning for the decline in our curtailment revenue on a year over year basis is mostly due to lighter demand.

Good question, so Ara, but so the power strategy has a few main components.

One for our power that's unhedged.

Mike Grondahl: Simply want to curtail.

Mike Grondahl: <unk> power on the spot market is above our breakeven levels and what's great about Texas. The abundance of energy. There we are really able to achieve a very good cost of power.

Mike Grondahl: Only curtailing a few percentage of the year in fact, we back tested the breakeven price for an M 66 F miner and back test it over 2023 energy prices in Texas, and the weaker tail three 4% of the time, we're able to get a $31 per megawatt hour all in cost of power now.

Mike Grondahl: While our opportunities.

Mike Grondahl: Finally combination of valuation operational excellence.

And operating in a jurisdiction that we want to be.

I think the last comment I'll have to that question. That's your question Lucas is.

Although we did recently completed transit transaction. This past summer the only thing that precludes us from closing another deal is finding the right opportunities. So we're very open to M&A. We are actively exploring opportunities to help supplement our large organic growth pipeline.

Speaker Change: Thank you, Jason and Chase and a quick follow up on this theme.

Mike Grondahl: First day.

Do you find yourself competing.

Hyper scaler.

AI H PC leaning organizations or not.

Mike Grondahl: And secondly.

When you screen for acquisitions, thus AI HBC factor in or are you really more focused on the PTC side. Thank you.

Speaker Change: I'll take it.

Speaker Change: Lucas So there is a competition with AI HBC companies on some assets.

Speaker Change: Our advantage is the universe of assets that work for bitcoin mining is much larger than that of assets that work for AIA HBC, so really talking about locations and quality different sites and some areas, maybe very very remote and very difficult to build maybe it takes more time to go to HCC.

Speaker Change: Mining can work.

Clicker, there are cases, where people are building a bitcoin mining facilities in their remote locations and using just telephone internet in order to add internet to those obviously, that's not going to work for in HBC.

Data center. So the fact that this universe of assets.

That works.

Speaker Change: When combined with assets that work for AI HBC companies.

Speaker Change: We have an advantage over them in securing additional power capacity.

I would not say, we're necessarily looking at AI HBC companies, specifically, but when we're looking at power assets. We are thinking about the optionality that it gives us.

And if they are potentially assets that we could strike a deal with with NII operator. The key point is we're trying to get access to power.

Speaker Change: Okay.

Speaker Change: Jason Jason Thanks, again for the color and all the best of luck. Thank.

Speaker Change: Thank you Lucas.

Speaker Change: Sure.

Our next question comes from the line of Reggie Smith.

Reggie Smith: With Jpmorgan.

Hey, guys. Thanks for taking my question most of mine have been here I was just curious.

Just one of your larger competitors recently.

Both comments about kind of pausing Greenfield development.

Using proceeds to buy bitcoin directly in the kind of side of hedge price and things like that.

Speaker Change: The company has a different.

Asset base and land base.

And I was just curious how you think about.

The decision to buy bitcoin to build sites and things like that within the context of house price and whether that kind of weighs into your <unk>.

Your capital allocation decisions.

Speaker Change: Yeah. Thanks Rajeev so.

First and foremost as part of this vertical integrated strategy, we prioritize.

Building, a portfolio and a pipeline of assets. So we can act on and how and when we monetize those.

Speaker Change: Really upped our discretion.

Of course in recent years.

Speaker Change: The deep <unk>.

Priority in the.

Opportunity has been to build out those assets.

For bitcoin mining.

We think by what we've demonstrated is a low cost producer.

Speaker Change: <unk>.

With our.

One of our one of the industry's lowest cost of power three one cents per kilowatt hour for the third quarter of 2024 here.

Our best method of accumulating bitcoin is to leverage that power efficiency over a wide scale and effectively.

Being able to procure bitcoin at a discount to the market price.

Speaker Change: Our.

Speaker Change: Cost of mine for the quarter, including a power and on the ground operations expenses was $35376 per bitcoin not considerably less than what the market price of bitcoin was during the period.

We think by being a low cost producer with this industry, leading power strategy that is the best way for us to get exposure to that client.

Of course, we're a big point company. So any one buying bitcoin any institution is exciting to US everyone has a different take on how they prioritize their capital.

We are using the low cost of power.

<unk> got to work showing the benefits of their 2019.

If I can ask a quick follow up on that I totally appreciate.

<unk> low cost of mining.

One of the things that we've been kind of talking about is not just the cost of mine but.

Speaker Change: The time it takes to mine the amount of corn can you talk a little bit about maybe how that how you consider or think about the time.

Presumably you kebab, recalling today or you could mine the corner Theres some time.

The differential there.

Speaker Change: How does how does that play into your calculus if at all.

Well I think what bitcoin mining affords is really a mechanism for averaging in bitcoin over a period of time.

Just the price of Bitcoin went down.

Globally in most cases it when it goes down for a prolonged period of time network difficulty responds as the higher cost producers falloff and then.

Our remaining between at a lower price. This is a dynamic we saw if you take care.

One to go into the bear market.

Speaker Change: In 2023.

Speaker Change: Cost of mine fluctuated around changes in that difficulty.

Speaker Change: So.

Speaker Change: With bitcoin mining, what you're doing is you're positioning yourself to.

Average in over time, instead of picking one price and saying okay.

The capex that I was slowed out into building out a facility a new operation ongoing to load into fixed one at this price and youre instead.

Kind of smoothing out and Derisking, what that exposure would be it also allows us to be there when the.

Bitcoin price appreciates, when the economics, and bitcoin mining suddenly and unpredictable explode, and then where they're already set in place operation no lag in deploying new hash rate in order to capture that opportunity. So I think the short answer to your question Richie.

Comes down to your time do you want to average in over time or do you want to take a swing right now we think with our cost efficiencies. It makes the most sense and is perhaps less risky to average in over time.

That actually makes a lot of sense.

Speaker Change: If I could sneak one more and I know you guys have talked about HBC.

And now again Tonight, but I was curious.

Look at your you had to say.

And then being located so close to Dallas and Austin I was just curious whether or not that.

It has come up as like a.

Speaker Change: Asset or a key feature of your sites and discussing obviously the scale of them as well, but like when discussing HBC with potential.

Partners are now just I'm just curious because it seems like you guys are really good location, but maybe.

Speaker Change: Im overestimated mass I don't know if you've heard that echoed as well in your discussions.

Speaker Change: Yeah.

Speaker Change: Yes that is a good good question Rajeev.

Those locations near the Metro major Metropolitan is an advantage first off for getting people. It takes an army of people to operate these large sites, whether it's bitcoin mining Orbitz AI HBC data centers, you want high quality people there.

Speaker Change: And.

If you are near a bigger cities like Dallas or Austin. They are more nearby, particularly if you look at our Rockville facility Theres, a tremendous amount of development in that area, particularly with Samsung foundry that is being built there theres a lot more talent is coming in around there also as a result of being near these large.

<unk>, there's multiple fiber entered in options, so that mix, that's an attractive quality to potential.

Potential AI HBC data centers as well.

We also near some of those locations to already exist large tech companies and.

That just is furthermore.

Value to potential counterparties, so we want to build around that so major metropolitan had been.

Seem to be an attractive quality.

Got it.

Speaker Change: Okay. Thank you.

Speaker Change: Yes.

That concludes today's question and answer session I would like to turn the call back to Phil Macpherson for closing remarks.

Phil Mcpherson: Thank you operator, we'd like to thank everybody for joining our REIT platforms on the third quarter of 24.

Earnings call, we look forward to updating you on future developments and we're always available for your questions. We will see you early next year for the year end. Thank you.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: Okay.