Q2 2025 IREN Ltd Earnings Call
Thank you for standing by and welcome to the I-RAN second quarter fiscal year 2025 results conference call. At this time all participants are in listen-only mode. After the speaker's presentation there will be a question and answer session. To ask a question during this session you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue simply press star 1-1 again. As a reminder today's program is being recorded and now I'd like to introduce your host.
Speaker Change: today's program, Lincoln Tan, Director of Investor Relations. Please go ahead, sir.
Speaker Change: Thank you. We appreciate it. Thank you. Recorded in the United States Government's Office. Edited by the U.S. Department of State. Contributed by the U.S. Department of State. © The U.S. Department of State, 2020. The U.S. Department of State. All rights reserved. U.S. Department of State. United States Department of State.
Speaker Change: Good afternoon to those joining us from North America and good morning to our listeners in Australia. Welcome to IREN's second quarter FY25 results presentation. My name is Lincoln Tan, Director of Investor Relations, and I'm pleased to be joined today by Daniel Roberts,
Speaker Change: co-founder and co-CEO, Belinda Nucifora, CFO, and Kent Draper, chief commercial officer. Before we begin, please note that this call is being webcast live accompanied by a presentation. I'd also like to remind you that some statements made during this call may constitute forward-looking statements.
Speaker Change: These are based on certain assumptions and subject to risks that could cause actual results to differ materially from our expectations.
Speaker Change: Listeners should not place undue reliance on these statements. Please refer to the disclaimer on slide two of the accompanying presentation for further details. With that, let's get started. Over to you, Dan.
Dan: Thanks Lincoln, good afternoon everyone and thank you for dialing in to our Q2 FY25 results presentation.
Sir.
Dan: Straight into the highlights. A record result in Q2, underpinned by some pretty rapid growth over the last six months, 12 months, and low-cost Bitcoin production. So the investments we've made in scale and efficiency over the past 12 months, as you can see, are starting to flow through to our earnings.
$18.9 million of NPAT recorded last quarter.
We expect this continued earnings momentum.
Dan: in tandem with that growth profile, noting that the 31 exa-hash of energised capacity was only achieved at the end of the second quarter, and you can see that the average operating hash rate for the prior quarter was substantially lower than that. So...
Dan: As we continue into ramping up to 50x a hash by the middle of this year, we expect to see those numbers to continue to grow in parallel.
Dan: but these financials are not impacted by any Bitcoin revaluations. We don't hold Bitcoin on our balance sheet, there's no fluctuations in the value of those up or down, sideways and consequently our results reflect the pure profitability of our underlying operations.
Dan: On the growth front, three key initiatives which we'd like to highlight today.
Dan: So firstly we're excited to announce Horizon One. Horizon One is our new 75 megawatt liquid-cooled AI data center to be delivered at Childress this year.
Dan: 75 megawatts of capacity translates to around about 50 megawatts of IT load.
Dan: and what we've seen particularly coming into the start of this year it's increasingly clear that there is a strong market opportunity for us to capitalise on the shortage of liquid cooled data centre capacity.
Dan: So, as many of you would know, the liquid-cooled Blackwell GPUs from NVIDIA are in the process of coming to market, and the required rack densities are continuing to escalate.
Dan: with this generation and subsequent generations of GPUs. So we are future-proofing this deployment. We're designing and building for densities of up to 200 kilowatts per rack, well beyond the 120-130 kilowatt rack density required just for the Blackwell GPUs.
Dan: So we're excited, there appears to be a real scarcity of liquid cooled data centre capacity and we feel that we're in a relatively unique market position to deliver this type of capacity in a relatively short time frame.
Secondly, we're excited to announce the development of Sweetwater 2.
Dan: A new 600 megawatt site that will further strengthen our position in West Texas.
Dan: situated around 28 miles from the 1.4 gigawatt Sweetwater One project and about 39 miles from Abilene.
Dan: This expansion would create a 2 gigawatt data centre hub at Sweetwater, with design work already underway for a direct fibre loop between the two sites.
Dan: We've secured over 500 acres of land, we're in the process of
Dan: of finalising a 600 megawatt grid connection agreement with a target energisation date of around 2028.
Now, one important caveat.
Dan: We always talk about 1s and 0s with grid connection agreements. We do not have one yet. So at the moment, this is a hypothetical project. However, we've chosen to disclose the details today for two key reasons.
Dan: One, this project is in late stage development and we're getting closer to the execution of binding agreements.
Dan: But secondly, the 2 gigawatt data center hub it potentially creates with Sweetwater One is material to the market opportunity we are seeing in West Texas. So while this is still a project under development,
Dan: Sweetwater 2 would provide yet another organic growth pathway for our AI and mining business.
Dan: However, more importantly, expands upon the potential value of the single site AI opportunity at Sweetwater, something that we'll come to a little bit further on in the presentation.
Dan: Finally, let's not forget about the rapid expansion of our Bitcoin mining business.
Dan: Our operations from 31 Exahash today to 52 Exahash this year.
Dan: We're dedicating 75 megawatts of Childress Phase VI to Horizon 1.
Dan: And as a result this adjusts our prior expansion plans from Bitcoin mining from 57 down to 52 exit hash
Dan: But, to reiterate, we remain on track to hit that 50X a hash target by mid this year.
Dan: The 500 plus site team at Childress continues to be well positioned to deliver 50 megawatts every month of data centres.
Dan: In terms of the corporate and funding updates, we're pleased to confirm that U.S. domestic issuer status
and USGAP reporting will commence from half to 2025.
Our balance sheet remains robust.
Dan: We closed our oversubscribed convertible note at the end of 2024 and recently put in place a $1 billion ATM facility to provide flexibility
to fund growth initiatives.
Dan: However, market conditions, as we've all seen, are very dynamic, and we are always looking for ways to optimise our capital structure, and we remain continuing.
to evaluate alternative funding options.
Dan: Finally, in terms of investor distributions, as you can see from this result, there is significant operating free cash flow being generated.
Dan: However, from a capital management perspective, we've made a decision to accelerate our investment into the strategic initiatives that I've outlined, and as a result are deferring the consideration of potential investor distributions.
So into a little bit more detail about Horizon One.
Dan: As mentioned, we are planning to deliver a 75-megawatt liquid-cooled AI data centre within Children's Phase 6, targeting completion the second half of this year.
Dan: That will support a 50 megawatt IT load and include the installation of backup generators and UPS systems for power redundancy.
Dan: Building this as part of Children's Phase 6 you can see on the map in the blue overlay.
Dan: It is designed to support 200 kilowatt rack density, well beyond what's required for the NVIDIA Blackwell GPUs, and consequently with an eye to be able to accommodate future increases in rack density architecture.
Dan: We've been working with a leading global EPC firm to deliver this project and leveraging our existing data centre footprint with an estimated build cost of six to seven million dollars per IT megawatt.
So why? Why are we doing this?
Well, liquid cooling is a key priority for large-scale customers.
Dan: And what we've observed is a very limited availability of liquid-cooled data center capacity able to come online in 2025.
Dan: Meanwhile, the liquid-cooled NVIDIA Blackwell GPUs are expected to ship in more meaningful quantities in the second half of this year.
Speaker Change: IRINN is uniquely positioned to address this growing market demand leveraging our immediate access to power and our existing infrastructure on-site.
Speaker Change: 50 megawatts of IT load is a size that appeals to both smaller as well as larger customers and also caters to NVIDIA's reference architecture, allowing a single cluster of up to 16,000 Blackwell GPUs.
Speaker Change: We have a unique opportunity to move fast in a market which is changing quickly. Horizon One will enhance delivery certainty for customers.
Speaker Change: i.e. it helps them cut through the chicken and egg dilemma by showing them more concrete plans around design and delivery.
Speaker Change: Initially we're focused on Childress and building out a multi-tenant site there.
Speaker Change: We're engaged in meaningful two-way dialogue with a variety of prospective customers.
Speaker Change: noting that again children will be prioritised for multi-tenant co-location in respective AI data centres, preserving the Sweetwater data centre hub and Sweetwater One site for more single-site opportunities which I'll come to later in the presentation.
Speaker Change: So, uniquely, we have this opportunity to continue to scale this approach across our entire portfolio, something which we are actively looking at.
Speaker Change: Noted, of course, that the critical piece, access to the grid connection, the power and the land, is already secured.
Speaker Change: With grid connections already secured, we're seeing it's four to seven years.
to bring these projects from origination into the real world.
Speaker Change: So, the 2 gigawatt Sweetwater data centre hub. We're very excited to announce our new 600 megawatt Sweetwater 2 development.
Speaker Change: We're in the process of finalising the grid connection agreement. As mentioned earlier, it's situated on over 500 acres of land, 28 miles from Sweetwater and approximately 39 miles from Abilene.
Speaker Change: Design work has already commenced on a direct fiber loop between the two data center campuses to support network connectivity and create this two gigawatt data center hub.
Speaker Change: We expect it to energise around 2028 and again, I'll caveat this, it's not signed yet so there's absolutely still risk around this development.
Speaker Change: But the development process has been in the works for some time. We feel it's getting closer to a potential outcome.
Speaker Change: Importantly, in the context of our strategy, how we're thinking about Sweetwater One and the single site, this two gigawatt data centre hub it potentially creates with Sweetwater One is material to the market opportunity we are seeing in West Texas.
Thanks for watching. Bye! Bye!
Speaker Change: In terms of the existing 1.4 gigawatt Sweetwater One project, it's full steam ahead towards energisation in 14 months.
Speaker Change: Procurement is well underway to support energisation of the full 1.4 gigawatt bulk substation and additional primary substations all by April next year.
Speaker Change: As mentioned earlier, we're working with a leading EPC contractor with experience on hyperscale deployments. General site and civil works to support construction are commencing shortly.
Speaker Change: Clearly with the recent market announcements there's an increasing level of focus and interest on West Texas as a data center market.
Speaker Change: Accordingly, this is a very exciting opportunity for IRINN to build one of the largest data centre sites, and maybe hubs, in the world.
Speaker Change: I'll touch a little bit more on how we're thinking about this site strategically later on in the presentation.
large-scale low-cost Bitcoin mining
Speaker Change: So, two key pieces I'd like to reiterate today. One is the scale of our operations, 31 Exahash installed.
Speaker Change: It was on time as we said it would be. We're on track for 50 exahash in five months and then 52 exahash shortly thereafter.
Speaker Change: This delivers economies of scale today and will continue as we continue to expand.
Speaker Change: We've got a demonstrated track record around operations, our uptime and ability to deliver projects on time.
Speaker Change: The second point I'd like to make is we are a low-cost producer.
It supports strong unit economics and ultimately earnings for shareholders.
Speaker Change: Since announcing our plans in May last year to expand, all of the investments we have been making are starting to flow through to operating efficiency and earnings.
We have best-in-class efficiency at 15 joules per terahash.
Speaker Change: Our spot pricing strategy has delivered actual power prices of $0.03 a kilowatt hour.
where the majority of our operations are today at Childress.
Speaker Change: Finally, you've seen this to start to show in our quarterly earnings, but also in our monthly updates.
Speaker Change: Our hardware profit margin is over 75% now as we've scaled over that 31 exa hash mark
Speaker Change: So, the expansion to 52 Exahash, as we've discussed, allocating 75 megawatts of Childress Phase 6 to support Horizon 1, adjusts our prior mining expansion plan from 57 to 52 Exahash.
To reiterate again, F50 ExoHash
Speaker Change: Target remains on track to be delivered in whole in the next five months.
continuing to build
Speaker Change: 50 megawatts per month of data centers at Childress. The efficiencies that we have with large single-site expansions, 500 people on the site, effectively copy-pasting every single block building. As you can see on the right-hand side, the schematic diagram, that reflects our data center construction status.
Speaker Change: To the extent you're interested, you can continue to track our progress in our monthly updates.
Speaker Change: Our mining economics remain strong. We've seen the materials step up in earnings and cash flow generations as we scale up and on the left hand side of the page you can see some illustrative economics that reflect where we are today and where we expect to go.
Speaker Change: So, the escalating power shortage, and escalating seems to be the only word that we can use given what we're seeing in the market.
Speaker Change: Clearly it's been a very interesting couple of weeks with Stargate and DeepSeek. However, if we look through some of this volatility
Speaker Change: Nothing has changed for us. If anything we've seen an uptick in observed interest in cloud and co-location services.
Speaker Change: AI doesn't live in a vacuum. Humans crave more and more, particularly if it gets cheaper over time.
Speaker Change: and I think the Wikipedia page for Jevons Paradox has never seen so many hits over the last two weeks.
Speaker Change: So on this slide we illustrate two market dynamics that are relatively well documented.
The first
is Hyperscale CapEx, continuously being revised upwards.
Speaker Change: The second is the power scarcity dynamic looking at a 36 gigawatt shortage in data center capacity across the US.
Speaker Change: With over 2 gigawatts of secured grid-connected power and land, this creates a compelling opportunity for IRINN.
Speaker Change: This 2 gigawatts, 2.3 to be precise, is not hypothetical potential megawatts. This is power that is either flowing today or is secured by binding into connection agreements with utilities being delivered by April next year.
Speaker Change: This slide essentially summarises the macro backdrop of the opportunity for us here at IRINN.
Speaker Change: Picks and shovels for the digital age. So just to change tack for a moment and share a bit about our history. Why we are in this position ultimately set the scene for my final slide where I'll discuss our strategic focus.
Speaker Change: Will and I have been setting this platform and gearing up for this market backdrop since day one. There's been no pivot. This has been a deliberate strategy. It can be traced back to our earliest investor presentation, as you can see on the right-hand side, in 2020. A vision which has remained unchanged.
Speaker Change: The value then and the value now is in access to large-scale renewable energy required to power the future of supercomputing. Whether that be Bitcoin mining, whether that be AI,
Speaker Change: Two supertrends that are front of mind right now, as well as whatever comes tomorrow.
Speaker Change: We have delivered on our strategy to bootstrap a large-scale and profitable business.
Speaker Change: with Bitcoin Mining and are continuing to leverage that asset base.
Speaker Change: into new, higher value and new, increasingly interesting use cases such as AI.
Speaker Change: Our team's depth of experience in energy infrastructure, data centres have allowed us to organically develop a leading data centre platform from the ground up.
Speaker Change: and our ability to continue to find and incubate greenfield opportunities and then execute upon them is a very important differentiating factor and an enormous opportunity for us in this power constrained and constantly evolving market.
Speaker Change: Finally, we've covered a lot over the past 20 minutes, so to try and tie it all together and highlight how Will and I are thinking about our strategic priorities.
Speaker Change: The market context as we've covered presents significant opportunities for iron.
The escalating demand for power and liquid-cooled data centre capacity
along with the increasing institutional adoption of Bitcoin.
Speaker Change: If we start with our existing data centers in British Columbia, they continue to mine Bitcoin profitably and generate positive free cash flow.
and how we're thinking strategically about British Columbia.
Speaker Change: Well, firstly, we continue to grow our AI cloud services business in a sensible way.
Speaker Change: currently operating side-by-side with Bitcoin mining. As many of you would have seen in our Prince George Data Center we have Bitcoin mining ASICs securing the Bitcoin network operating right next to latest generation NVIDIA H100 and H200 GPUs.
Speaker Change: providing cloud services to AI clients. This is something that we will continue to explore and it's been pleasing to see even an uptick in observed demand post DeepSeek.
Speaker Change: In addition to that, we're continuing to explore AI co-location opportunities at these sites. Again, that strategy of bootstrapping sites with Bitcoin mining, and then as higher and better value use cases come along, looking to insert them on our infrastructure base.
at Childress.
Speaker Change: Fair to say it's a very exciting data centre campus today and a hive of activity.
Speaker Change: We're growing Bitcoin mining capacity to 52 exahash this year and continuing to generate again significant operating cash flows and profitability from these operations.
Speaker Change: However, we're also really excited about delivering Horizon One, our 75 megawatt liquid cooled data centre, to be brought online this year.
The way we think about children strategically is as follows.
Speaker Change: Firstly, once again underwritten by Bitcoin mining, as was the plan five years ago, as is the plan going forward.
Speaker Change: Then utilise the site for higher value use cases as they emerge.
Speaker Change: We believe Liquid Cooling AI Data Centres is likely to be one of those and are accelerating our investment into this space.
Speaker Change: Importantly, from a strategic standpoint, we view Childress as a focus for multi-tenant co-location.
Speaker Change: preserving Sweetwater, which I'll come to in a second, for a potential single site deal and tenant.
Sweetwater
The Sweetwater Dada Tinder Hub.
Speaker Change: So we have terminated the site sale process with Morgan Stanley.
Speaker Change: We're now working with a range of different advisors, brokers and partners on a broader range of opportunities where almost all of those opportunities now involve us retaining long-term ownership of the site.
Speaker Change: Given the scale of the site and the market backdrop of hyperscalers chasing one gigawatt plus single site campuses.
Speaker Change: We are prioritising Sweetwater One as well as the emerging Sweetwater Data Centre Hub for a whole-of-site single tenant co-location opportunity.
Speaker Change: Sweetwater 2 and the potential creation of this 2 gigawatt data center hub in West Texas only goes to further strengthen the strategic opportunity in this area.
Speaker Change: In the meantime, as we continue to explore those conversations, we will retain flexibility to once again bootstrap this site with Bitcoin mining, as we've done with the rest of our portfolio since day one.
Belinda, over to you to cover the financials. Thank you.
Thank you.
Thank you, Dan.
Speaker Change: So good morning to those in Sydney, it's actually a beautiful day, and good afternoon to those in North America.
Speaker Change: Thank you for joining us for our Q2 FY25 Earnings Update. As Dan earlier mentioned, this was a record result. We delivered Bitcoin mining revenue of $113.5 million and operating cash flows of $53.7 million.
An overall net profit after tax of $18.9 million
Speaker Change: Adjusted EBITDA for the quarter increased by $60 million to $62.6 million.
Speaker Change: With the average operating hash rate increasing from 12.2 exahash to 22.6 exahash and we mined 1347 bitcoin at an average realised price of $84.3k.
Speaker Change: So I just noticed my camera may be out, so I'll try and adjust that if possible.
Okay, I think that may be back on.
Speaker Change: NET's electricity costs remained relatively flat for the quarter at $28.9 million with the increased megawatt usage at Childress offset by lower costs per megawatt due to the transition to a spot pricing strategy in August 2024.
Speaker Change: As such, the average net electricity cost per bitcoin mined decreased from $35.4k versus $21.4k.
Speaker Change: The Cospace reflects a business today that is delivering significant growth and projecting continued expansion over the coming years.
Thank you very much.
Moving on to cash flows.
Speaker Change: Closing cash at bank at 31st of December 2024 was $427.3 million with receipts from Bitcoin mining activities of $113.6 million and AI cloud services of $3.5 million.
Speaker Change: increase in electricity payments of negative 3.5 million reflecting continued expansion at Childress with Commission capacity increasing from 200 megawatts to 350 megawatts during the quarter
Speaker Change: Decrease in net used cash used in investing activities of 270 mil due to a decrease of mining hardware primarily due to significant milestones payments made in the previous quarter.
Speaker Change: There was an increase in net cash from financing activities of $372.3 million with $311.7 million net proceeds from the convertible notes.
Speaker Change: and $63.7 million increase in their ATM proceeds during the quarter.
Speaker Change: Since the balance date, a further $50.4 million of net ATM proceeds have been received, and the total current number of ordinary outstanding shares is approximately $219 million.
Now moving on to the balance sheet.
Speaker Change: During the quarter, total assets increased by approximately $500 million to $1.9 billion as of 31 December 2024, providing a strong balance sheet to support our future growth opportunities.
Speaker Change: On 6 December 2024, we issued a $440 million convertible note with an annual interest rate of 3.25%, which is due to mature on June 15, 2023 unless earlier purchase redeemed or converted.
Speaker Change: Concurrently to the convertible note, we entered into a cap call transaction of $44.0 million and a prepaid forward of $73.7 million.
Speaker Change: As IRM currently reports under international financial reporting standards, the convertible note embedded derivatives and financial assets have been brought to account at their fair value at exception and revalued at the reporting date at fair value through profit and loss.
Speaker Change: As IRNN transitions to US GAAP reporting from 1 July 2025, the accounting for the convertible notes will be reassessed, as well as the CAP, call, transaction and prepaid forward, in line with the applicable US GAAP standards.
Speaker Change: total equity increased to 1.3 billion with the sale of 25.3 billion shares during the quarter ending December 31st 2024
Lincoln Tan: I think now we're turning over back to Lincoln for the start of Q&A.
Lincoln Tan: And we'll go with our first question. Our first question comes from the line of Joseph Affee from Canticore. Your question, please.
Joseph Affee: or being ready later this year. I was wondering if you could kind of talk about
Speaker Change: CapEx and where that stands at Horizon 1 and you know kind of what you've learned especially with this rack density that you're building there and then I'll have a quick follow-up.
Kent, would you like to take this one?
Kent Draper: Yeah, happy to jump in there. So we have some guidance that Dan mentioned within the presentation itself around the CAPEX levels that we're seeing
Kent Draper: Importantly, on our side, we are able to utilise a lot of the existing data centre architecture, which means that we believe we're able to deliver this liquid cooled capacity at very effective cost.
per megawatt, but still with all of the key redundancy.
Kent Draper: and other features that ultimate end-users of that capacity would expect to see.
Kent Draper: We've also, it's worth noting, and we've discussed it in prior calls as well,
Kent Draper: already been ordering many of the long lead items associated with that build out as well.
Kent Draper: So, as we do with all of our build-out, whether it's on the Bitcoin mining side or on the AI data centre side, making sure that we are well ahead of the curve in terms of ordering those long lead items.
Thank you.
Speaker Change: Great, that's great color and thanks for that update, Kent. Maybe we talk a little bit on Sweetwater, you know, clearly a very ambitious project with the update that we heard here about adding Sweetwater 2 to Sweetwater 1 and the fiber loop interconnect.
Speaker Change: And I know, Dan, you also mentioned that, you know, the agreement you had with Morgan Stanley or the...
It is now
Speaker Change: Kind of moving to the next phase where you're in different kinds of discussions
Speaker Change: Two gigawatts, quite of an ambitious big data center, which would probably be used for AI and just, I know you've had probably a lot of discussions with a lot of players in the space at a high level.
Speaker Change: this would be like massive and so just trying to get a feel for demand out there amongst hyperscalers or other players around 2 gigawatts and what you're hearing at kind of at a high level. Thanks a lot.
Yeah, no, thanks, Joe. Um, look...
Speaker Change: We were called far less polite terms than ambitious six years ago when we first suggested that the future of data centers may not all be in metropolitan areas because maybe there wouldn't be enough power there.
So I think if you fast forward to today...
suggesting that
Speaker Change: A 2 gigawatt data center hub may be viable in the context of the market backdrop or the announcements being made including people with objectives far greater than 2 gigawatts.
Speaker Change: I don't think it's ambitious. I think it's entirely realistic and reflective of where the market is
today. We have been surprised coming into 2025.
Speaker Change: just over that kind of Christmas holiday period, just the step-up in intensity in this sector.
Speaker Change: and I think, I can't think of many of any hyperscalers that we're not talking to that aren't interested in one gigawatt plus.
campuses that can be delivered in the next few years.
Speaker Change: The market absolutely seems to be there. We're in a lot of it active conversations But again, I'm going to temper all of this because it's ones and zeros You either do a deal or you don't and we've got the ultimate backstop of building out bootstrapping with Bitcoin mining and preserving that single site
Speaker Change: opportunity where the value of having clusters all contained geographically on one campus seems to be quite powerful from these hyperscalar perspectives. So it's interesting, I wouldn't call it ambitious, I can call it entirely realistic. Yes, there's risk around Sweetwater too and getting the final signatures.
Yeah, I'm excited.
Speaker Change: That's great. That's a great update. It's a great path forward and thanks for the update.
Thank you. Bye.
Speaker Change: Thank you. And our next question comes from the line of Greg Lewis from BTIG. Your question please.
Greg Lewis: Yeah, hey, thank you and good afternoon, or good morning, and thanks for taking my questions. Yeah, I guess my first one, Daniel, was around, you know, the update at
Greg Lewis: at Sweetwater with the incremental 600 megawatts. You know, I guess a couple questions around that.
Greg Lewis: You know, and I guess the first one is, you know, you're looking to potentially re-energize in 2000 or energize in 2028. You know, when did we have to get start getting in the queue to even be able to try to get on
Greg Lewis: that track to 2020 and realizing we don't have the approvals yet and there's still work to do, but I'm just kind of curious as you see that, to even be able to kind of talk to the 600 megawatts, and then kind of, has that changed, i.e., if we were to kind of get in the queue today?
you know, what would that look like?
Greg Lewis: A thousand percent. It's actually extraordinary how hard this is. To give you some context, we received a draft connection agreement for that site following completion of the studies in July last year.
Greg Lewis: So, where are we? February. How many months is that? Trying to get signatures on a document. It is...
Greg Lewis: so different to how it was 12, 18 months ago. I don't know how all these megawatts are going to be developed going forward. We've obviously got our multi-gigawatt development pipeline, including sites in Texas as well as globally and broader in North America.
the congestion
Greg Lewis: the difficulty in actually getting these projects over the line and crossing that zero and one barrier to having a project that you can actually build out on it's actually extraordinary the way we're seeing it at the moment so we'll continue to push
Greg Lewis: We almost didn't disclose Sweetwater 2 today but we are getting close, we feel like we're getting close and it is material.
Greg Lewis: to how we think about Sweetwater. One, in the context of the broader market dynamic we're seeing in West Texas but absolutely there's risk around any megawatts that aren't contracted and we are living and breathing that every single day. I don't know, Kent, if you've got anything you'd like to add to that?
Speaker Change: And the other thing I would add, as Dan mentioned, the process has taken a long time for that project and that was connection requests that we submitted over a year ago now.
Speaker Change: For projects that have been submitted in more recent months, we know that there has been a massive increase in the number of applications.
Speaker Change: So, you know, anything that has been submitted in the very recent number of months is going to take incrementally longer than what we saw for that Sweetwater 2 site, so it is becoming increasingly difficult.
Speaker Change: Okay, great, great. Thank you for that. And my other one was around, you know, just kind of looking for color and it's.
Speaker Change: realize things are evolving on a daily basis. But you mentioned that $6 to $7 million per megawatt.
Speaker Change: It's our understanding that a lot of the grid and the power equipment that's going to need to be sourced comes, you know, maybe comes from Mexico or, you know, definitely inside NAFTA. And so as we think about that six to seven million, in the event that there are tariffs,
Speaker Change: You know, I don't know how we can, I don't know if you want to talk about...
Speaker Change: maybe, when we think about that six to seven million, is there any way to kind of frame out how much of it's imported without getting specific price numbers, maybe how much of it's imported? And yeah, I guess that's kind of curious how that could be changing, at least in the...
in over the next few quarters.
Speaker Change: Yeah, I'm happy to jump in there, Dan. So yeah, it is obviously a very dynamic environment at the moment, you know, changing on an almost daily basis.
Speaker Change: and, yes, it's something that we continue to monitor going forward. There is the potential for higher construction costs.
Speaker Change: We do have a very diversified supply base, so not everything today is coming in from the countries that have been announced as potential targets for increased tariffs.
Speaker Change: So, yeah, we do feel like we're in a good position to handle it.
Speaker Change: and, of course, anything that does get implemented is likely to hit all other providers as well. So, yeah, I think it would be felt across the industry rather than something that...
Speaker Change: is very specific to us, but yeah, we have been working on diversification of our supply base.
Speaker Change: for a long time to make sure that we always have alternate providers in place and while we didn't obviously envisage the specific tariffs and things like that, it was very much with multiple different scenarios in mind.
Thank you. Thank you.
Speaker Change: Okay, thank you very much for the time and have a great day.
Speaker Change: Thank you. And our next question comes from the line of Darren Aftahee from Roth. Your question, please.
Darren Aftahee: Yeah, hey guys, thanks for taking my questions and nice job on the progress, just two if I may. I know in the past you guys have always talked about looking at ROIs from the lens of, you know, the cost to build an exit hash with Bitcoin and kind of the ascribed value the market gives you.
Darren Aftahee: I'm just sort of curious what calculus you kind of went through with Horizon 1 in terms of kind of reducing the the five eggs of hash and deciding to build the 75 megawatt HPC HPC Endeavor was that more of just always planned and now you're kind of formally announcing it or something kind of change and what you're seeing
Darren Aftahee: Yeah, hi Darren. Appreciate all your support. Look, we deliberately didn't put numbers in the presentation because none of us know. This is unique. Like, liquid-cooled data centre capacity just doesn't really exist at scale and there's no real market.
Darren Aftahee: for it. What we do know and can see is traditional co-location rates and co-location rates for capacity that isn't necessarily liquid cooled for 75
Darren Aftahee: And I think when you run those numbers against a backdrop of CapEx of 6 to 7 million,
Darren Aftahee: utilizing that capacity and I think the decision goes more broadly and it's more strategic it's saying like if you step back you've got Bitcoin we know where that's at it's a great business but we are so uniquely positioned from a strategic perspective to capitalize on this AI
thematic and build out something that is relatively unique.
Darren Aftahee: Obviously, if AI fizzles out and becomes nothing, then the facility, you know, we might have to repurpose it for Bitcoin mining or another use case. But I think the conviction we're seeing in AI at a macro level and the lack of ability of the current market and, I guess, those mini micro data centers in metropolitan areas to service these types of capacities.
It just seems...
are really obvious.
Darren Aftahee: opportunity for us where I would expect will generate strong returns.
Darren Aftahee: Not just from the 75 megawatts, but what it then unlocks strategically for our platform and how it helps us
Darren Aftahee: in the conversations that we're having around Sweetwater and the potential monetisation pathway.
Darren Aftahee: there, because all of a sudden we've now got a liquid-cooled AI data center design signed up by global engineering firms that we're building.
Darren Aftahee: it creates, it's real, it's happening. So I think the strategic value to the platform beyond the discrete economics from 75 megawatts of Horizon One is incredibly powerful.
Speaker Change: And I think in addition to that Darren, what we've really seen is the demand side of things crystallizing over recent times.
Speaker Change: Historically, obviously Blackwell's were announced and everybody had an eye towards liquid cooled data centres, but what we are seeing now is demand from a number of different customer segments and in particular customers that have already placed orders.
Speaker Change: and so they absolutely need liquid cooled capacity in order to house those GPUs.
Speaker Change: And we're seeing, as I said, that range coming from a range of different customer types, whether it's, you know, large hyperscalers, the neoclouds.
Speaker Change: enterprise customers as well and that for us has really helped crystallize our decision-making that the time is right to make that investment in this capacity.
Speaker Change: That's helpful. Just one more if I may. I know you mentioned there's there's some risk to getting it across the goal line, but like what's the strategic benefit of you guys announcing Sweetwater 2? Is this more customer focused or is there something else you mind indulging us? Thanks.
Speaker Change: Yeah, look, it is very close, but I also think it's material for our investors to be aware that this project exists because, A, it provides context to our strategy with Sweetwater One and the single site.
Speaker Change: opportunity that we're seeing but be it's material in the context of the broader market thematic and what's happening with this chase
Speaker Change: for multi-gigawatt data center campuses, particularly in West Texas, to build out these AI clusters. So, yes, ordinarily we don't disclose development.
Speaker Change: details, because there is risk, but given it is late stage, given its materiality connected to the rest of our business, we thought it appropriate to bring investors into the folder and share a little bit more about this specific site.
Thanks, guys. Best of luck.
Speaker Change: Thank you, and our next question comes from the line of Brett Knobloch from Cantor Fitzgerald. Your question please.
Brett Knobloch: Hi guys, thanks for taking my questions and congrats on the print.
Speaker Change: I guess, you know, the whole sector kind of fell off following Deep Seek. I think in your prepared remarks you talked about maybe interest or demand picking up post that.
Speaker Change: Does that factor into maybe why you guys are announcing Horizon 1 after maybe just only recently kind of upping your hash guidance from 52 to 57 by end of the year?
Speaker Change: Yeah, I think as Dan mentioned earlier that that's right and we've seen it both on the cloud and the co-location side so it's not not just one area that it that it's limited to but yes it absolutely does factor into the thinking and as I mentioned we have seen a large uptick
Speaker Change: in demand for liquid cooled capacity and the timelines that people are wanting that demand on are something that we feel very well prepared to deliver upon and that we have a competitive advantage in.
Speaker Change: because we don't think there are many others that are going to be able to deliver liquid-cooled capacity on that same
Speaker Change: timeline, so particularly 2025 but even into the early parts of 2026, you know, still seeing a shortage of supply going out that far.
Speaker Change: Probably that's helpful. And then, is one way of thinking of Verizon as it's almost like a model home, showcasing who would be the big tenants at Sweetwater, like what you can build and design, and kind of giving them confidence for doing that same exact thing, but on a much larger scale.
Speaker Change: Yeah, I think that's certainly part of the benefit of it. If you look at our executive management team and board.
Speaker Change: We've got a very long history of successful delivery of large infrastructure.
Speaker Change: projects so in the in the many billions of dollars. So you know we certainly have the expertise and capability internally. I think we've proven that out to a large extent with the build out of the Bitcoin mining side of the business.
Speaker Change: and as I've discussed in previous calls the fact that we're building out 50 megawatts of data centers a month.
Speaker Change: is, to many people that we talk to in the industry, a massive surprise, but we've been doing that for many months now and continue to deliver at that clip.
Speaker Change: albeit acknowledging that that is a different type of infrastructure to liquid-cooled. So I think the fact that...
Speaker Change: were able to build out Horizon One at the children's site is just a further demonstration of our internal capabilities. So yeah I think it absolutely assists with all of those.
Speaker Change: conversations and you know many of those are, as Dan alluded to earlier, sort of taking more of the path of us having an ongoing ownership interest in the infrastructure itself and so you know further demonstration of our capabilities
is certainly useful.
Perfect, really appreciate it guys, congrats.
Thank you.
Thank you and our next question comes from the line
Thank you.
of Stephen Galgoa from Jones Trader. Your question please.
Hi Dan, Belinda, Kent
Speaker Change: My question relates to investor concerns around potential HVC monetization of Sweetwater One. I think there are two large ones. One, the site's suitability for inference compute. And two, single tenants like hyperscalers' willingness to do a deal with a Bitcoin miner given sort of this perception that there's more balance sheet risk.
Speaker Change: Could you address sort of the validity of these concerns in your view and as your desire to retain ownership of the land potentially adversely impacted conversations with hyperscalers for a deal at the site? Thank you.
Thank you.
Speaker Change: Hi Steven, good to see you. Frankly, I think the world's moved past both of those two issues and I'm surprised that we're still talking about. The suitability of West Texas for AI training and inference.
Speaker Change: Yep, I get it. People asked questions 6-12 months ago and we continued to...
Speaker Change: put forward the fundamentals and actually break down the narrative that was being promoted. But I think we fast forward to today and you're seeing the announcements in the market, the intentions of all these trillion dollar companies and people spending hundreds of billions of dollars.
Speaker Change: The question is to whether you can run inference for AI out of West Texas Yeah, I don't think it's really worth addressing to be frank. The question around whether people will engage a Bitcoin miner
Speaker Change: to build our AI data center capacity. Again, I feel like we're going over old ground. Let's go back five years ago. We're not a Bitcoin mining company. We've never done.
Speaker Change: different applications like we are operating again like I feel like a broken record we've been operating for 12 months now
Speaker Change: NVIDIA GPUs right next to Bitcoin miners in the same data centers we have ever built and owned at all of our facilities so
Speaker Change: Honestly, I don't hear these investor concerns, I feel like we've addressed them pretty comprehensively.
Speaker Change: and we'll just focus on the next steps which is monetising the portfolio.
Thanks, Dan.
Speaker Change: Thank you, and our next question comes from the line of Joe Flynn from Compass Point Research. Your question please.
Hi guys, thanks for the question.
Speaker Change: Since the last business update three weeks ago, what would you say is the biggest factor that led to the decision to build out the remaining incapacitated children?
Speaker Change: AIHPC, would you characterize that more as a spec build or do you have any like maybe soft commitments or interests for ultimately, you know, sign that capacity to customers?
Thank you. Thank you. Thank you.
Kent, would you like to talk to this one?
Kent Draper: Yeah, sure. So, you know, touched on earlier, we're seeing this, you know, dynamic where the demand side is really starting to colour less in terms of the requirement for liquid cooled.
Kent Draper: data centers, so that is a part of it, as Dan mentioned earlier as well, the return side of it.
Kent Draper: It looks very attractive given where we're able to deliver that capacity in terms of a capex basis.
Kent Draper: There are people talking about liquid cool capacity and having the ability to deliver it But they don't have long lead items on order. They haven't, they're not advanced with their designs
They haven't started making any plans for construction.
Kent Draper: and so we think by actually catalyzing the construction and announcing this to the market.
Kent Draper: and demonstrating the tangible path towards delivering this capacity, that will help with a lot of the customer conversations that we're having. So it's certainly not just an on-spec build, but again, we don't want to...
Kent Draper: get people overexcited that there's a customer contract, you know, about to land a week or two away, but there are, you know, a lot of good conversations that we're having and seeing interest from a lot of different customer segments for this type of capacity.
Please see the complete disclaimer at https://sites.google.com
Thank you. Thank you.
Does that answer your question?
Kent Draper: Yes, sorry. And on the financing component, you know, you're originally going to, you know, we're going to use the ATM to build out the remaining capacity at Children's. Do you think there's opportunities to, you know, like, that finances at the project level?
And, yeah, thanks.
Speaker Change: At a more general level, as Dan mentioned earlier, we are looking to multiple different sources of financing. We do have the ATM in place.
Speaker Change: overall, but one of the things we do like about the potential co-location side of the business is the ability to project finance it.
Speaker Change: and attract different forms of financing. So once you catalyse a customer contract, they generally take the nature of 5, 10, 15 year, so very long-term contracts.
Speaker Change: that lend themselves very well to project debt financing. So that absolutely is a possibility going forward in terms of the way that we finance this sort of build-out.
Sorry, and one more.
Speaker Change: What would you guys estimate the remaining catbacks to complete the 1.4 gigawatt substation by April?
and I guess longer term, I mean...
Speaker Change: In regards to your conversations, are you considering partnering with a financing provider or doing a JV or anything like that?
Thanks.
and Daniel Roberts. Thank you. Thank you.
Speaker Change: In terms of the specific capex for the substation, we haven't disclosed but substations are generally in the tens of millions, so well and truly covered by existing sources of capital, operating cash flow.
Speaker Change: In terms of financing partners, ultimately these deals come down to the customer side, the revenue line. If you get that, the financing will fall into place.
Speaker Change: Will and I are pretty sceptical of JVs and partnerships etc because my view and it's been a long-term held view across a variety of businesses is that all you're doing is kicking the can on difficult decisions.
because a JV
Speaker Change: partnership, a co-owned vehicle, all you're doing is saying we don't know how to make decisions today so therefore we're going to have a governance arrangement to make those decisions down the track.
Speaker Change: And as you'd see throughout our business history, it's all about controlling our own destiny and being able to move quickly and nimbly to take advantage of the opportunities.
Speaker Change: Do we ever bring in an equity investor into a project company? Never say never, but our bias is always going to be to control the financing structures and governance of the underlying project.
Speaker Change: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Dan Roberts, CEO, for any further remarks.
Speaker Change: Thank you. Maybe just to spend two minutes addressing a couple of questions on Twitter or NowX as we've got a bit of a community there that I'd like to give a shout out to and the level of analysis there.
Speaker Change: is pretty healthy. So just to run through a couple of their questions. Agripper Investments, could you provide more detail on the financing strategy for Horizon One, ATM versus debt?
Kent Draper: As Kent mentioned, the financing strategy is flexible. The $1 billion ATM obviously underwrites certainty in our ability to deliver these.
Kent Draper: but the opportunity to layer in debt and project finance into AI data centres against customer contracts.
Kent Draper: is real. Equally, we continue to look at the convertible note market, we continue to look at other forms of capital.
Kent Draper: So, the expectation should absolutely not be that that ATM is the sole source in our focus of financing going forward, but it does provide something that we can count on to underwrite these growth ambitions.
Kent Draper: Could you please clarify the unrealized gain loss on financial instrument in the P&L, the $12.9 million? That's just changing fair value of the convertible notes.
A couple more.
Kent Draper: Why not HODL some of the mined Bitcoin from HODL15 Capital? We've outlined this before. We don't believe in diluting shareholders to put Bitcoin on our balance sheet. You guys can buy it yourselves.
Speaker Change: Will we convert to a rater, suggested by Wolf and someone else?
Speaker Change: Not at this stage. We see value creation more in the data center development and operations rather than being a landlord
Speaker Change: How long is the sale process from start to onboarding a client into a data centre? It's a bit, how long is a piece of string? Sorry James, it depends.
Speaker Change: on the client and the situation, why did Morgan Stanley step out of the sale process, they didn't step out, they were terminated.
We believe Al
Opportunity is best served by dealing elsewhere.
Speaker Change: What's the best place to get food near Childress? The Plaza has fantastic Mexicans. So anyway, let's wrap that up. Thanks for all the support on Twitter.
Speaker Change: To wrap up our Q2 2025 earnings call, thank you for listening in, we're really excited.
The three key initiatives.
Speaker Change: One, continuing to expand our Bitcoin mining, which we're seeing flow through to robust earnings and operating cash flow.
to the development of our Sweetwater Data Centre.
Speaker Change: project and hopefully meet projects in forming a potential two gigawatt
Data Center Hub in West Texas.
the opportunity to pursue
a single sign, single.
Speaker Change: site tenant for that facility, but ultimately underwrite through Bitcoin mining in the meantime. And then finally, our expansion into liquid cooled AI data center capacity with the announcement of Horizon One, which we're really excited to deliver on this year. So thank you everyone for dialing in. Have a good evening.