Q4 2024 Cipher Mining Inc Earnings Call

This update joining.

Joining me on the call today are Tyler page, Chief Executive Officer, and Edward Ferraro, Chief Financial Officer.

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

This call will also be simultaneously webcast on the Investor Relations section of the company's website and this conference call is the property insight for mining.

Any taping or other reproduction is expressly prohibited without prior consent.

Before we start I would like to remind you that the following discussion as well as our press release and presentation contain forward looking statements, including but not limited to Cypress financial outlook business plans and objectives and other future events and developments, including statements about the market potential of our business operation potential competition, and our goals and strategies.

Forward looking statements and risks in this conference call, including responses to your questions are based on current expectations as of today and safer assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.

Additionally, the following discussion may contain non-GAAP financial measures, we may use non-GAAP measures to describe the way in which we manage and operate our business. We reconcile non-GAAP measures to the mostly directly comparable GAAP measures and you are encouraged to examine those reconciliations which are filed at the end of our earnings release issued earlier this morning.

I will now turn the call over to our CEO Tyler page Tyler.

Thanks Coordinating Hello. This is Tyler page CEO, sorry for minded. Thank you very much for joining our fourth quarter and full year 2024 business update call.

We had an extremely productive fourth quarter, it's safer as we continue the on time execution of the growth and expansion plans discussed on previous calls.

I'd like to begin by substantiated that growth with some key indicators that underscore our immense progress and reflects the successful execution of previously discussed strategic initiatives.

In the fourth quarter, we produced revenues of $42 million and GAAP net earnings of $18 million or adjusted earnings were even stronger we produced adjusted earnings of $51 million for the quarter up $54 million from the prior quarter.

We are very proud of our fourth quarter numbers as they demonstrate our success in executing on our vision of being a low cost producer of bitcoin.

We believe that the relative advantages of being a low cost producer of bitcoin will only increase going forward.

Our key growth achievement in the fourth quarter was the successful upgrade of our Odessa fleet, which grew our total self mining hash rate to $13 five <unk> per second.

We expect to continue to build on this growth in 2025 with our hash rate projected to reach at least 23 exit hedges per second in the third quarter of this year.

This acceleration in 2025 will be driven by the completion of phase one of our 300 megawatt Black Pearl data Center, which we will discuss in further detail shortly.

As one completion at Black Pearl will substantially expand our current operating capacity of 327 megawatts and continue to improve our already impressive fleet wide efficiency of $18 90 joules per Tara <unk>.

Lastly for those newer to the safer story, we are widely recognized for our highly competitive all in weighted average power price of just two seven per kilowatt hour.

As electricity accounts for the large majority of our operating costs are low price is a key driver of our strong and sustainable unit economics.

Ed will give a more detailed breakdown of our numbers during his portion of the call. So I'd like to shift our focus now to an update on our anticipated growth in the coming months and years.

Over the last two quarters, our business model has rapidly evolved from being solely a bitcoin miner to being a developer of HBC datacenters with a natural built in off take via a bitcoin mining for prospective sites.

Our current primary intent for our pipeline of sites is to develop them as HBC data centers, we believe that large scale interconnects available in the next few years are exceedingly rare and valuable and against that backdrop. We have continued to acquire assets and focus more time on this business.

We are excited to announce today that <unk>.

Last week, we acquired 337 more acres of land at our Barbara Lake site, and also signed a memorandum of understanding to potentially expand the scope of the facility.

This expansion would include the Buildout of an additional 500 megawatt data center adjacent to the current 300 megawatt site.

This would result in a total potential capacity of 800 megawatts at Barbara Lake with the additional 500 megawatts of capacity expected to be available in 2029.

With these deals we believe the Barbara Lake site development opportunity has grown much larger than we previously believed and our discussions with potential tenants and financing partners are evolving to reflect this much larger opportunity as we work to finalize the best possible deal for safer.

While HBC is our focus at new sites. We are confident that we can also use our proven expertise in managing power curtailment and producing best in class electricity costs to put the sites to profitable use as bitcoin mining sites as an alternative.

Our bitcoin mining business remains robust and we have continued to work around the clock to develop phase one of black Pearl which remains on track to energize in the second quarter of this year.

We continue to evaluate our options for the remaining 150 megawatts of capacity at the site, including the potential to develop phase II for HBC hosting or bitcoin mining.

We believe that we have found a truly unique niche by opportunistically investing in Greenfield development sites, knowing that we can build and operate HBC datacenters or if a high quality HBC tenant fails to materialize. We can continue to expand our bitcoin mining footprint and put the sites to profitable.

Use.

Our site sourcing team remained busy in the fourth quarter acquiring stingray, a 100 megawatt data center site in West, Texas, which we will discuss in more depth later on the call.

Ciber can maximize the value of our now two eight gigawatt development pipeline with the deep expertise of our construction and operations team.

Our construction team built over 600 megawatts of Hyperscale Datacenters before joining cipher has deep connections throughout the supply chain and can innovate as the datacenter industry continues to evolve rapidly. We are extremely proud of our team which is built for scale and provides a huge competitive advantage in our ongoing discussions with potential tenants.

Yes.

On slide five we provide a portfolio breakdown of our existing megawatt capacity and the expected timeline for scaling our pipeline of managed power capacity. This.

This pipeline is the culmination of the extensive work we have done to source attractive new datacenter sites for future development.

Based on feedback from ongoing conversations with Hyperscale or <unk>, we are confident that our pipeline with access to adequate land in fiber necessary to service HBC customers will allow us to be a market leader in this space.

As a reminder, we have historically acquired sites that have already received interconnection approvals, but we recently expanded our scope.

By getting involved earlier in the development timeline, we avoid broader bidding competitions and source valuable sites that most of our competitors cannot while improving long term visibility for our supply chain and construction functions.

Our options to acquire the Mckesson Nielsen and Mclennan sites. Upon interconnection approval are prime examples of this approach and we anticipate those sites being ready to energize in 2027.

In addition to those purchase options. We also own a 70 megawatt site called readily scheduled to energize in 2027 with the possibility for expansion.

The capacity of these for 2027 sites plus our nearer term <unk> of Black Pearl Barber Lake in Stingray are all reflected in the chart.

Notably all of our sites sit at the center of the major trends, we see influence in the datacenter space in the coming years.

The meteoric growth of increasingly larger AI related HBC data centers and continued adoption of the bitcoin network and related value of bitcoin mining as a flexible load that helps balance power grids.

Again, we believe large scale interconnections available in the next three years are exceedingly rare assets and we are aggressively positioning the company to take advantage of anticipated demand.

All of our pipeline sites have the necessary characteristics for development of HBC data centers, but also sit in locations with demand response programs that would allow us to monetize the flexibility of curtailment used in bitcoin mining operations.

With these sites, we have a lot of optionality, especially given they are staggered energy stations, which is exactly where we like to be positioned.

In front of trends with the potential for massive growth.

While it is too early to predict the exact mix of our business lines across sites Bitcoin mining and HBC infrastructure are complementary and that they have different risks and payoff profiles and even have the potential to converge.

With our robust pipeline, we think safer is uniquely positioned to be best in class in both verticals and our strategy will be guided by our intent to maximize shareholder value over time as we develop our future datacenters at these sites.

While our development pipeline reflects exciting growth opportunities our existing operations continue to serve as a strong foundation for our success.

Across our sites in 2024, we paid an average all in electricity cost of roughly $20281 per bitcoin produced at our data centers.

We are very proud of this number. Please note that when we talk about all intellectual city costs. We mean, the total cost to deliver electricity to our mining rigs. So our numbers include all taxes transmission and other charges and our low numbers dramatically demonstrate our competitive advantage.

On the left side of the slide we show an overview of our production split across Odessa, and our JV data centers, along with our all in electricity cost per bit cleanup sites in 2024.

The chart on the right side of the slide illustrates our rapid expansion in mining capacity recently and going forward.

As you can see we expanded from $9 three exit hedges per second in the third quarter of 2024 to $13 five <unk> per second today and currently expect to produce at least 23 ex hedges per second in the second half of 2025, when we bring phase one of <unk> online.

Next we will review production by site.

Slide eight has a production summary for Odessa facility Odessa is the most significant part of our portfolio as it currently represents approximately 87% of our bitcoin production in January.

As we've noted before Odessa set a new industry benchmark as the first bitcoin mining data center to receive the uptime Institute's stamp of approval from management and operations.

This wholly owned facility operates under a five year fixed price power purchase agreement securing some of the most competitive electricity rates in the industry and reinforcing our cost advantage and operational strength.

As we mentioned earlier in the call.

We are very proud of the successful and on time completion of our fleet upgraded Odessa, which raised our operating hash rate improved our fleet efficiency and further strengthened our track record of delivering on previously outlined plans.

As of January the current operating hash rate at the site is 11, three <unk> per second up from seven one exit hedges per second before the upgrade.

The same approximately 207 megawatts.

Post upgrade Odessa's fleet efficiency stands at 17, six tools per tire Hush.

On this page we also provide the observed all in electricity cost per bitcoin at the site in January which was roughly $20298.

This low cost number illustrates the value of the fleet upgrade as it reflects our first electricity bill for the operations post upgrade.

As we've mentioned many times on past calls it is extremely valuable for safer to have a cheap fixed price of power available on such a large portion of our portfolio.

On slide nine we highlight our joint venture data centers of Alberta Bear and chief.

With the 2020 for expansions at each of bear and Chief the sites have a total power capacity of 120 megawatts and generate approximately $4 four exit hatches per second.

We own 49% of the JV sites and our portion recently generated roughly 13% of our overall bitcoin production.

On this page we also provide the observed all intellectual city cost per bit coin at the sites in the fourth quarter.

Which was roughly $34542.

As a reminder, both bear and chief operate is front of the meter sites. So there are expected seasonal fluctuations with their electricity costs.

Now, let's turn to an update on our development portfolio, we have segmented the development pipeline into near term growth across black Pearl and Barbara Lake and longer term growth across 2026 and 2027.

We are thrilled to share that the construction of phase one of black Pearl remains on track to energize in the second quarter of this year.

Phase one will feature 150 megawatts of air cooled rigs expected to produce over nine five exit hatches per second of hash rate.

We continue to evaluate our options for the remaining 150 megawatts of capacity at the site, including the potential to repurpose phase two of the datacenter for HBC hosting.

Ultimately our final design at the site will depend on what we think will produce the best outcome for our shareholders.

As you can see delivering such a large data center construction project on time requires coordination of hundreds of workers around the clock in the last few months, we made significant advancements at the site, including the commencement of point of interconnection construction the successful manufacturer.

The first substation transformer for the site.

In the near completion of the phase one buildings spanning over 100000 square feet we.

We couldnt be prouder of our team's ongoing commitment and execution.

Slide 13 gives an overview of our Barbara Lakes site, which we acquired in Q3 of last year.

The site has enormous potential for <unk> given its immediately available capacity of 300 megawatts and now 587 acres of surrounding land.

Plus it's already energized substation.

As I mentioned earlier in the call. We recently signed a memorandum of understanding to potentially expand the scope of the facility to include an additional 500 megawatt data center adjacent to the current 300 megawatt site.

This would result in a total potential capacity of 800 megawatts at Barbara Lake.

The additional 500 megawatts of capacity is expected to be available in 2029.

We have already been in discussions for months with multiple potential tenants, who are interested in the site given its optimal setup and timeline to availability.

We have also been discussing financing options with potential financing partners, who are excited to work with us on building an enormous next generation data center at the site.

Given our recent work to expand the scope of the data center. We anticipate these discussions will continue to evolve favorably.

Speaker Change: The opportunity for ciphers HBC business has gotten much larger in the last few days and while it will take time to finalize our path for Barbara Lakes development, we have never been more excited about the commercial potential at the site.

Speaker Change: Slide 14 outlines our expected growth in 2026 and highlights our new site acquisition in Andrews County, Texas called Stingray.

Speaker Change: The site purchased in November features 100 megawatts of front of the meter capacity all necessary regulatory approvals and 250 acres of land adjacent to the transmission assets.

Speaker Change: The site is expected to energize in the second quarter of 2026, which complements our 2025 and 2027 and <unk>.

Speaker Change: Slide 15 outlines our expected massive growth in 2027 across four sites with one six gigawatts of potential power capacity.

Speaker Change: Our reveille site located in Cotulla, Texas is scheduled to energize in 2027 as mentioned it has been approved for 70 megawatts and we have submitted a request for additional capacity.

Speaker Change: Based on early discussions with the transmission service provider. We are optimistic that we can expand the site capacity by the time the site is energized.

Speaker Change: Mikeska mill scene, and mclennan or what we call. The <unk> for short are pending final approvals for interconnection. We expect the results of approval processes for the sites to be finalized. This year, we are targeting approvals for up to 500 megawatts at each site.

Speaker Change: In addition to the interconnections are purchase options on the three <unk> also cover substantial parcels of land at each site. The three <unk> have all the necessary characteristics for development of HBC data centers.

Speaker Change: All of our sites expected to energize in 2027 are located further east than our current sites and some sit closer to major metropolitan areas. We have already received early interest in the sites and our conversations with potential tenants and anticipate that the sites will be in high demand as the calendar continues to roll forward.

Speaker Change: With our two eight gigawatt pipeline and proven track record of execution, we remain confident in our vision of becoming a best in class data center developer for HTC infrastructure, while remaining best in class in Bitcoin mining we've.

Speaker Change: We've consistently demonstrated success in originating the best sites and power deals in bitcoin mining and we look forward to bringing that expertise to the traditional large scale data center market now.

Speaker Change: Now for a review of our financials I will turn it over to our CFO Ed Farrell.

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

Ed Farrell: Before I dive into our financial results I'd like to remind everyone that today I will be discussing our performance for the three month and 12 month periods ending December 31 2024.

2024 was another successful year for safer as we continue to lay the foundation for future growth.

Ed Farrell: We once again demonstrated our ability to execute at a high level highlighted by a minor fleet upgraded Odessa.

Ed Farrell: Ongoing construction at Black Pearl the acquisition of Barbara Lake and as Tyler referenced continuing to make progress on our <unk> initiatives.

Ed Farrell: We also expanded our pipeline of sites securing new opportunities to support long term strategy.

Ed Farrell: Additionally, we strengthened our operational controls enhanced liquidity management and advanced key infrastructure projects.

Ed Farrell: These efforts position us for an exciting and impactful 2025, as we continue to scale and optimize our operations.

Ed Farrell: Before I get into the details I want to take a moment to address a significant milestone for safer.

Ed Farrell: Our recent pipe investment from Softbank.

Ed Farrell: As a reminder, in Q1 of this year Softbank invested $50 million in Cyprus through the purchase of approximately 10 4 million shares of our common stock.

Ed Farrell: This investment strengthens our ability to expand our data center development business.

Ed Farrell: We're excited to welcome Softbank as an investor and look forward to leveraging this relationship to accelerate growth.

Ed Farrell: Slide 17, and 18 give a snapshot, which we provide every quarter of some of our financial metrics on both a sequential and year over year basis.

Ed Farrell: First on slide 17, as Tyler stated earlier, we had a strong fourth quarter as our topline revenue grew 75% quarter over quarter, increasing from $24 million in Q3 to $42 million in Q4.

Ed Farrell: This strong performance was driven by a couple of key factors, including.

Ed Farrell: The successful completion of our Odessa mining rig upgrade completed in Q4, and the continued price appreciation of bitcoin in the quarter.

Again, we reported GAAP net earnings of $18 million or <unk> <unk> per share in Q4, while adjusted earnings came in at $51 million or <unk> 14 per share.

Ed Farrell: We're extremely proud of these results, which we see as a direct result of our team's hard work and our execution, particularly in expanding our self mining history during the fourth quarter.

Ed Farrell: Moving to slide 18.

Ed Farrell: In the fiscal year, we achieved a $24 million increase in revenue compared to 2023.

Ed Farrell: Operating expenses in the current year increased $48 million, primarily driven by depreciation and amortization expense, which I will provide more detail later in my remarks.

Ed Farrell: Thus in 2024, we had a GAAP net loss of $45 billion or a loss per share of <unk> 14.

Ed Farrell: Versus a net loss of $26 million or net loss of <unk> 10 per.

Ed Farrell: <unk> per share in the prior year.

Ed Farrell: Our adjusted earnings increased by $61 million to $107 million versus $46 million in the prior year.

Ed Farrell: This growth drove our adjusted earnings per share from <unk> 17 from 2023 to 30 <unk> in 2024.

Ed Farrell: A key driver of success was the significant hedge rate expansion over.

Ed Farrell: Over the year hedge rate grew by 88% from seven to exit <unk> at the end of 2023.

Ed Farrell: And a half exit hedge at the end of 2024.

Ed Farrell: As I mentioned earlier, our hatch rate growth was driven by a successful fleet upgrade at a desk, where we replaced over 36000, new mining rates.

Ed Farrell: This upgrade as well as the bitcoin appreciation during 2024 had a direct and meaningful impact on our revenue underscoring our strong execution and our ability to scale efficiently.

Ed Farrell: Let's move on to slide 19, and take a deeper look at the numbers.

Ed Farrell: For the fourth quarter, we recorded GAAP net income of $18 million compared to a net loss of $87 million in the prior quarter.

As a reminder, last quarter's results were impacted by a large mark to market loss on our PPA driven by sharp downward shift in the forward curve in the ERCOT market.

Ed Farrell: Whereas this quarter, we had a mark to market gain of $11 million.

Ed Farrell: For the quarter, we mined 492 bitcoin at our wholly owned Odessa data centers generating $42 million revenue at an average price of $84000 per bitcoin.

Ed Farrell: This compares to 396 Bitcoin mining Q3, 2024 at an average price of $61000 per bitcoin, resulting in $24 million in revenue sequential increase of 75%.

Ed Farrell: I would like to point out that our monthly production reports include production from not only Odessa, but.

Ed Farrell: So our 49% share from our joint venture data centers that is included in the equity and losses of equity Investees line item.

Ed Farrell: And the bitcoin equivalent from power sales.

Ed Farrell: On a year over year basis revenues increased 19%, primarily driven by bitcoin price appreciation as well as the previously mentioned rig upgrades that fuels, our hedge rate expansion offset by the having event earlier this year.

Ed Farrell: Our fixed price power remains a critical factor in maintaining attractive unit economics. However, in the current quarter, our cost of revenues increased by 21% sequentially.

Ed Farrell: This increase was primarily driven by our strategic decision to purchase power from the grid during periods when our power provider curtails, our Odessa facility.

Ed Farrell: When this occurs our proprietary tech stack analyzes power cost and our unit economics to determine where the purchasing power at the current market rates would yield a net operating profit for the company.

Ed Farrell: Excluding these instances of drawing power from the grid at higher costs, our cost of revenue remained flat quarter over quarter supported by our fixed price PPA at Odessa.

Ed Farrell: We will discuss the quarterly pricing with BPA.

Ed Farrell: Detail later, but its true value is evident in the low cost fixed price power, which is reflected in our cost of revenues.

Ed Farrell: Now, let's shift our focus to operating expenses.

Ed Farrell: Over quarter compensation and benefits increased by $2 million.

Ed Farrell: Reaching $17 million in Q4, and totaling $61 million 2024.

Ed Farrell: This represents a 14% increase from the previous quarter, and a 6% increase year over year.

Ed Farrell: Throughout the year, we made targeted investments in our team, adding five new employees in Q4 and nine in total for 2024.

Ed Farrell: We remain committed to a strategic opportunistic approach to head count expansion, ensuring that we have the right talent in place to support growth and operational efficiency.

Ed Farrell: Turning to G&A, which includes ICEE.

Ed Farrell: Corporate insurance professional fees occupancy and other public company costs, we saw a 4% increase quarter over quarter.

Ed Farrell: On a year over year basis, G&A expenses rose by $5 million, reflecting a 17% increase primarily driven by higher professional fees and public company costs.

Ed Farrell: The key contributors to this increase with Sarbanes Oxley compliance requirements and expenses related to strategic growth initiatives.

Ed Farrell: Quarter versus quarter, depreciation expense totaled $36 million, representing a 27% increase from the prior quarter and a 73% increase year over year.

Ed Farrell: The quarter over quarter increase was primarily driven by F Q4, upgraded Odessa, where we replace 36000 mining rigs as previously mentioned.

Ed Farrell: The year over year increase was driven by both the Odessa fleet upgrade and our change in accounting policy for mining rate depreciation.

Ed Farrell: As a reminder, we previously depreciate a mining rigs over a five year period. However, given our 2024 fleet upgrades and the rapid efficiency gains of next generation rigs, we determined that a three year depreciation schedule is now more appropriate.

Ed Farrell: Our expectations around hardware upgrade cycles, and our ability to acquire and install more efficient machines have evolved and we believe this should be reflected in the accounting treatment of the entire fleet.

Ed Farrell: This change was implemented in Q2 and applied prospectively.

Ed Farrell: In Q4, we recognized $14 million unrealized gain on the fair value of our between inventory.

Ed Farrell: <unk> to an unrealized loss of $22 million in Q3.

Ed Farrell: Unrealized gains and losses on bitcoin relate to the marking of inventory to market.

Ed Farrell: We also recognized $26 million realized gains on bitcoin during the quarter compared to $20 million in the prior quarter from selling bitcoin.

Ed Farrell: For the year unrealized gains of $11 million for 2024 are related to the increase in our bid point inventory throughout the year and the overall bitcoin price appreciation.

Ed Farrell: This compared to $3 million in the prior year.

Ed Farrell: During 2024, we realized gains of $52 million on bitcoin sales compared to $8 million in the prior year the.

Ed Farrell: The increase was driven primarily by our increased production of bitcoin with Odessa.

Ed Farrell: Operating at full capacity for the entire year.

Ed Farrell: Let's now turn to our non-GAAP measures slide where we reconciled to adjusted earnings.

Ed Farrell: As always I'd like to remind you that adjusting earnings.

Ed Farrell: The impact of depreciation and amortization noncash changes in the fair value of our derivative asset deferred income tax expense the non cash charge in the fair value of the warrant liability share based compensation and nonrecurring gains.

Ed Farrell: These supplemental financial measures are not measurement of financial performance in accordance with U S. GAAP. However, we believe that these non-GAAP measures may be useful to investors for comparing our performance across reporting periods consistently.

Ed Farrell: Internally management uses these non-GAAP financial measures to better understand manage and evaluate our business performance and to facilitate operational decisions.

Ed Farrell: When adjusting our fourth quarter GAAP net income of $18 million, we headed back $33 million for the items I just listed resulting in adjusted net earnings of $51 million for the quarter.

Ed Farrell: This compares to an adjusted net loss of $3 million in the previous quarter.

Ed Farrell: For the full year, we reported a GAAP loss of $45 million, however, adding back $152 million for the reconciling items, primarily driven by depreciation and amortization.

Ed Farrell: Our reported 2024, non-GAAP or adjusted earnings was $107 million.

Ed Farrell: Compared to $46 million in 2023.

Ed Farrell: Now, let's turn our attention to the balance sheet.

Ed Farrell: On slide 21, our total current assets at year end were $168 million, our cash position declined $6 million a decrease of $81 million from the previous year, primarily due to investments made during the year.

Ed Farrell: Including the $68 million purchase of Barbara Lake.

Ed Farrell: $179 million in minor purchases and $82 million for the development of Black Pearl.

Ed Farrell: Fortified by our Bitcoin holdings, our liquidity position as of December 31 remained strong at $98 million consisting.

Ed Farrell: Consisting of $6 million cash and $92 million in bitcoin.

Ed Farrell: Ill quickly cover some additional balance sheet line items as of December 31.

Ed Farrell: Our prepaid expenses amounted to $3 million.

Ed Farrell: <unk> is primarily related to corporate insurance as.

Ed Farrell: As noted earlier, we ended the year with bitcoin balance of $93 million, representing 994 bitcoin held in treasury.

Ed Farrell: This marks an increase from the 780 between held at the end of 2023, which was valued at $33 million.

Ed Farrell: Our philosophy regarding between inventory growth in Treasury management remains unchanged as we've highlighted in previous quarters, we take an opportunistic approach continually evaluating various funding options to support our growth initiatives.

Ed Farrell: Shifting focus to the value of our desktop power contract we account for this as a derivative asset.

Ed Farrell: As we have highlighted in the past this contract provides a meaningful competitive edge, allowing us to operate as a low cost producer we incorporate a third party valuation for this agreement, which is reflected as a derivative asset on our balance sheet and reassessed each reporting period.

Ed Farrell: In essence it represents the in the money value of the contract influenced by time value and prevailing forward power prices at our <unk> facility.

Ed Farrell: As we remind investors each quarter seasonality and gradual expiry of the contract impact the asset pricing and leads to expected fluctuations in quarterly valuation.

Ed Farrell: The unexpectedly mild summer, we experienced in Texas and the corresponding drop in forward power curves, we saw a significant decline in valuation last quarter with a $49 million loss on the asset however.

Ed Farrell: However, this quarter, we sort of $11 million gain as the power markets partially recovered.

Ed Farrell: While there is a substantial fluctuations in reported value. These fluctuations in no way diminished the substantial value and competitive advantage. The contract provides by securing low cost fixed power price at our Delta facility.

As of December 31, this asset was valued at $86 million compared to its valuation of $94 million at the end of 2023.

Ed Farrell: As we progress towards the end of the contract in July of 2027, we expect the value to decline over time.

Ed Farrell: As always fluctuations in the fair value of this contract will impact our GAAP earnings, but we excluded from our adjusted earnings.

Ed Farrell: Other significant assets include property and equipment totaled $481 million.

Ed Farrell: Primarily attributed to our Odessa facility.

Ed Farrell: Within this category mining rigs and related equipment accounted for $342 million.

Ed Farrell: We sold improvements are valued at $138 million.

Ed Farrell: Land to $49 million infrastructure of $28 million and construction in progress of $82 million at Black Pearl.

Ed Farrell: These figures are net of $159 million and accumulated depreciation.

Ed Farrell: Deposits on equipment of $39 million consisted progress statements. We have made in accordance with previously announced mining rig purchases.

Ed Farrell: Additionally, we hold intangible assets totaling $9 million with $7 million attributed to ERCOT approval at black Pearl and the remaining $2 million related to capitalized software.

Ed Farrell: At the end of the fourth quarter, our equity investor interest in <unk>, and chief Jv's and at $54 million and we had operating lease assets of $13 million.

Ed Farrell: We had security deposits totaling $20 million, which primarily represent the oncor deposits related to the construction of the interconnects at various data centers.

Our liabilities increased from 2023, driven by our growth initiatives.

Ed Farrell: Our accounts payable increased $23 million, primarily related to vendor payments for Blackrock construction.

Ed Farrell: Our crude expenses increased to $70 million from $22 million in the prior year, primarily related to payments and mine is related to it with deaths of fleet upgrades.

Ed Farrell: Short term borrowings of $32 million relates to borrowings.

Ed Farrell: Liquidity in the near term, while preserving bitcoin inventory and as an example of our strategic capital management.

Ed Farrell: I'd like to add that subsequent to 12 31, we paid down $15 million of the slope.

Ed Farrell: Finally, I'd like to thank everyone for participating on today's call and as always we look forward to continuously updating you on our growth plans and results over the coming quarters.

Ed Farrell: I'll pause now and Tyler and I are happy to answer your question.

Speaker Change: Thank you if you'd like to ask a question. Please press star one one.

Speaker Change: If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.

Unidentified: Our first question comes from John <unk> with Needham Your line is open.

John: Hey, guys. Thanks for taking my question and congrats on the quarter, obviously always great to see net income going on.

Unidentified: I guess, so first question on the HPE side.

Unidentified: From what I saw it looked like there was some exclusivity with Softbank with the February 2008 date.

Unidentified: Just help us understand that a little bit better.

Unidentified: And then as it relates to HPT I know you said you've had some discussions going on for a couple of months.

Unidentified: Was it more so you had a lot of that hyperscale or interest. So then softbank came around or are you seeing more hyperscale interest since Softbank came in and then just a quick follow up on the bitcoin side of things.

Unidentified: Thanks, John I appreciate the question.

Unidentified: So it's also public that we are under NDA with Softbank. So I'll speak in broad terms, but don't know if I'll be able to get every detail you would like answered given our setup.

Unidentified: But it's fair to say that there is a steady drumbeat of interest, particularly in Barbara Lake. We have also seen interest at black Pearl and ultimately the pipeline I think.

Unidentified: Of the three M sites the ones that are the furthest east at least in discussions have seen a lot of interest so thats mill scene and mclennan.

Unidentified: So generally when we speak to a hyper scaler or similarly, situated potential tenant they'd like to see our entire portfolio as they're doing their own planning for sites and looking at the different variables they would like to check at each potential site.

Unidentified: So there has been a steady drumbeat of interest as far as the exclusivity question that you started with.

Unidentified: We can have discussions with with others, we cant sign a deal with anyone.

Unidentified: But softbank again this is all sort of publicly filed but.

Unidentified: <unk> exclusivity expires. So we have been free to have discussions and I would say in addition to the potential tenants.

Unidentified: A big part of what we're trying to do is lineup financing simultaneously with a tenant.

Unidentified: So that Theres no question that how.

Unidentified: How are we going to pay for an expensive build.

Unidentified: There are lots of big financial firms that are interested in getting more data center exposure and then through some of those discussions they often have an interest or a relationship.

Unidentified: Or a preapproved lease template with Hyperscale orders. So that has also led to some interest as well.

Unidentified: Great.

Unidentified: To be clear on that you cant sign a lease with anyone else until I guess basically what three days from now.

Unidentified: I think it and then the end of this week.

Unidentified: And this week, Okay got it.

Unidentified: And then I mean, it's interesting is because it sounds like maybe something could be coming sooner than later, but I guess and then just.

Unidentified: Quickly on the <unk> side of things and sorry, if I missed this is another one going on as well.

Unidentified: The $2 seven fixed power.

Unidentified: How much time do we have left on that one now and then where do you think rates would go after that.

Unidentified: Yes, so great question.

Unidentified: Our fixed price contracted Odessa runs till the end of July 2027, you've got about two and a half years left on that.

Unidentified: And al mentioned something that was relevant to this quarter and you could see sort of analogous to some seasonality that we see in our front of the meter sites for pricing in Texas with the recent fleet upgraded Odessa.

Unidentified: We came into this last quarter, let me zoom out recall that in our Odessa fixed price contract, we've traded a 5% curtailment option to our power provider annually. So we get a price that's very close to our $2 seven portfolio average 95% of hours in the year, but they.

Unidentified: We are allowed to claw back 5% of those hours it curtail us and then sell power typically on the open market or do maintenance or whatever.

Unidentified: We have recently added the ability that if with these new rigs we've added at Odessa, They produce a higher amount of revenue even with increasing competition on the network I think recently I haven't recalculated. It this morning, but we made about $150 a megawatt hour.

Unidentified: Of revenue with those machines, we now have the ability to also purchase power.

Unidentified: From the market. If we are curtailed so even within that 5% of ours. We can go out if its profitable and we want to buy power for.

Unidentified: $50 or $75 or $100 on the open market if were making $150 revenue it's worth it so.

Unidentified: That's an interesting indicators you didn't think that the answer to your question in two and a half years.

Unidentified: We have had some preliminary discussions with luminaire, our power provider at the site to potentially extend that lease at Odessa.

Unidentified: Remains to be seen what the pricing would look like or if we would even want a fixed price contract I think at the time, we signed at.

Unidentified: Fixed price looked great because the forward curve was lower for power prices looking five years forward I think if we did it today, we would likely do it with something like front of the meter pricing, so floating pricing and we would probably end up doing something about like we've encapsulated in that contract which is curtailing our.

Unidentified: <unk> is the most expensive hours call it roughly 5% of the time I think if we did that in current floating price environments, you would probably see in the low threes three to three and a half cents per kilowatt hour or 30% to $35 megawatt hour.

Unidentified: Obviously, if you ramp up and curtail leave unless you can kind of fix that price where you want if you ran a 100% of the time, you're probably close to I don't know if its probably between 50 and $60 a megawatt hour.

Right now, but it will depend on what power price happened. So the pricing that Odessa, if that were to happen would look more like we've got a bear and chief or what we will have at black Pearl when it starts.

Got it that's very helpful. As always thank you guys. Thanks Tyler.

Speaker Change: Thanks, John.

Speaker Change: Thank you. Our next question comes from Mike Grondahl with Northland Capital markets. Your line is open.

Speaker Change: Hey, guys. This is Logan on for Mike Congrats on the quarter and we said two questions for you guys on the HPE side today.

Speaker Change: First can you provide some color around that.

Speaker Change: <unk> process for phase two of the 150 megawatts at Black Pearl.

Speaker Change: What that profit includes what are you looking for and kind of what can we expect for the timing of that decision. Thanks.

Speaker Change: Thank you that's a great question actually and it's a daily analysis, we're running so with black Pearl.

Speaker Change: Phase one is now on track for Bitcoin mining as we mentioned that'll be running this summer.

Speaker Change: Great I was just in Texas last week at Black Pearl I was on site at Barbara Lake at Odessa.

Speaker Change: It was interesting to be in Texas during the coldest day, they've had for a long time and happy to see that the grid worked very well in.

Speaker Change: Bitcoin mining curtailment was a big part of that so when we think about each PC for phase two.

Speaker Change: A black Pearl it poses an interesting opportunity cost question, because it's going to energize in the second quarter. So if we take a long time, we're missing out on an opportunity to do bitcoin mining there.

Probably really nice profitable rates given that we've got locked in really cheap pricing on rigs with an option, we can exercise with Canaan.

Speaker Change: If we wanted to do that or even by machines in the spot market, depending on where pricing is.

Speaker Change: Or even move our old machines from inventory out there given that it is front of the meter setup, we already are sitting on.

Speaker Change: Hundred and 20 megawatts or so of machines that are older. But you can run them very profitably with lower uptime, and we could spend nothing on rigs for the second half of the site and so that's all a revenue opportunity that would be available to US later this year right in late starting in the late summer.

Speaker Change: However, we have seen a fair amount of inquiry about taking 150 megawatts and making that available.

Speaker Change: For H P C.

Speaker Change: So right now we're prioritizing that because we have us pretty substantial level of interest in financing such a build if we had a tenant for the 150 megawatts, we have a bunch of options, where our cash out would be pretty minimal and we could have participation in those economics, so that's really attractive to us.

Speaker Change: The other long term thing that's really interesting is this site is really impressive I think anyone.

Speaker Change: From the more traditional datacenter space that takes a visit at black Pearl and I hope, we're going to be doing an investor day kind of late this year out there.

Speaker Change: From the traditional data center space is going to be really impressed with the construction quality at black Pearl and so we would love to have a site that is.

Speaker Change: Literally on one side, it's 150 megawatts of bitcoin mining and on the other side, it's 150 megawatts of HTC.

Speaker Change: And I think we really have this theory that maybe that's where data centers ended up going given the way that bitcoin mining can soak up.

Speaker Change: Extra power et cetera, there's all kinds of <unk> and backup generation optimization curtailment questions and theories that people in this space have that we would love to have a live test case for us so.

Speaker Change: We're running through conversations on HTC, we're lining up the ability to basically not have to put a lot of cash out to do a deal there.

Speaker Change: And talking to potential tenants that said I'd say after a few months if we're not solidly on track with a tenant lined up we will probably proceed with bitcoin mining because that was our original plan for the site. It's an awesome sight for bitcoin mining and Theres, just a pretty big revenue opportunity sitting there for us right away to build that up.

Speaker Change: So that opportunity cost is really what we're weighing everyday against our ongoing discussions and I would expect we'll have direction on that probably by the next earnings call.

Speaker Change: Perfect. Thank you yeah that was very good color.

Speaker Change: And one last one from us new Additionally, kind of expand on the Mou for the additional 500 megawatt data center and the incremental 330000 acres.

Speaker Change: What that means for cipher and whats the ideal timeline and trajectory for Barbara Lake given these recent announcements.

Speaker Change: Sure So so Barbara Lake.

Speaker Change: As an awesome sight, we so there are two separate things. So we closed on the purchase of 337 acres. That's just Cyprus new acreage that is next to the plot. We had right next to the substation that's already energized.

Speaker Change: It already had pretty substantial land, but we're pretty bullish on the opportunity at Barbara Lake.

No matter what the market is doing day to day in terms of fluctuations guessing about the future of large scale datacenters that does not line up with the discussions, we're having which is pretty consistent level of interest from lots of parties in such an opportunity. So we went ahead and bought more land.

Speaker Change: And we own it now 587 acres and again.

Speaker Change: In live discussions on how we will set up an HBC tenant at Barbara Lake.

Speaker Change: Separately.

Speaker Change: Are we announced an Mou, we now have an exclusivity for two months discussing with our friends at priority power and opportunity that they have that is adjacent to our site. So they literally have a draft for interconnection that is available on land next door.

Speaker Change: And given the way these discussions around large data centers seem to be progressing that there is extra value in larger size, where you've got potentially networks data centers across.

Speaker Change: Frankly close areas.

Speaker Change: This opportunity seemed amazing that we've seen some other folks out there talking about stretching datacenters dozens of miles apart and trying to link them. This was an opportunity where literally there's 500 megawatts potentially available right next door.

Speaker Change: And so we are now in discussions with priority to come up with a way to build a 500 megawatt data center that is immediately adjacent to our 300 megawatt data center.

Speaker Change: And hopefully be talking to an end user looking for 800 megawatts of data centers located next to each other and in a very attractive location.

Speaker Change: Perfect. Thank you for clarifying that congrats.

Speaker Change: Congrats on the quarter with a lot of exciting stuff happening right now I'll hop back in the queue. Thanks Luke.

Speaker Change: <unk>.

Reggie Smith: Thank you. Our next question comes from Reggie Smith with Jpmorgan. Your line is open.

Reggie Smith: Hey, Good morning team. This is Charlie on for Ed. Thanks for taking my question.

Tyler Page: Tyler you just touched on this a little bit in the previous question, but thinking about applications for future site for data centers.

Have you seen any change in the type of workloads Counterparties wanted to do at your sites.

Tyler Page: Specifically kind of thinking about demand to use data centers for model training versus inference applications since deep seek and then kind of as a follow up does the type of workload or counterparties during change anything in negotiations or site Capex our funding costs.

Tyler Page: Thanks.

Charlie: Thanks, Charlie that's a great question so I.

Charlie: I would say at the level of discussions we're having with the types of Counterparties, we are speaking to.

Charlie: They have a lot of interest in capacity across different use cases, so we haven't seen necessarily people say oh well. This is for inference. So.

Charlie: The lease is going to be set up differently than we had been discussing.

Charlie: I think what is impacting it more there is definitely I think.

Charlie: Interest in the availability of a datacenter to do all things and sort of if you're solving for the hardest thing that's gonna be inference, given the need for low latency.

Charlie: And so I'd say that does drive the level of interest in the sites. So while I mentioned, we do have interest in black Pearl for example, black Pearl is certainly a little bit more remote than some of the three sites for 2027 sites, we've got on and that drives not necessarily everyone is as interested in <unk>.

Charlie: <unk> Pearl and I'm sort of reading the tea leaves, but my interpretation. There is there they are underwriting to inference and sort of what the best stats possible would be and then.

Charlie: Figuring out where in their own organization to purpose it.

Charlie: Like I said, we still have interested in black Pearl So that doesn't necessarily drive every discussion I think theres interest across several uses.

Charlie: It is hard for me from my seat to read through on like.

Charlie: Whats the future amount of demand for training versus inference, I, probably have no better positioned than anyone else following the industry.

Charlie: Got it understood. Thank you.

Charlie: Thank you we have time for one more question.

Bill: And that question comes from Bill <unk> with <unk>. Your line is open.

Bill: Good morning, gentlemen, thanks for taking my questions and congrats on another strong quarter with continued progress on your AI HBC strategy.

Speaker Change: Tyler for my first question you mentioned earlier in your responses that you are making $150 per megawatt from bitcoin mining at ADESA.

Speaker Change: Pretty attractive and right in line with the core scientific <unk> deal So how should we.

Speaker Change: Think about the terms that you are comfortable to secure with us.

Speaker Change: Hyper scaler counterparty given the robust revenue that youre, earning from bitcoin mining. Thanks.

Speaker Change: So.

Speaker Change: They are very different and complementary businesses I think the biggest thing about bitcoin mining that every investors should understand is that.

Speaker Change: There is both.

Speaker Change: Let's call it a medium term cyclicality to the industry in terms of returns typically and.

Speaker Change: And there is also a long term trend typically so we do have a cycle that's roughly based around the having where we tend to see.

Speaker Change: Price expansion for a stretch after having then you get a peak market and then after having you're typically going to see a pretty big reduction in <unk> price, which is what us miners get paid for bitcoin mining and so while there is a cyclicality and you want to get yourself exposed early in the having cycle.

Speaker Change: Like we have done with Odessa, and we're doing what black Pearl.

Speaker Change: You also need to be aware that while there is a cyclicality across four years across a much longer time periods that hash price tends to decline.

Speaker Change: So there's a couple of things that are very attractive about having an <unk> tenant one of them is that.

Speaker Change: Certainly the conversations we are having I guess not everyone is ran in orienting themselves this way but.

Speaker Change: We are looking at long term leases.

Speaker Change: 15 years.

Speaker Change: And so if you're making a payment that is about what you're making bitcoin mining or even less you know a little bit less than that.

Speaker Change: Having a very creditworthy counterparty that is obligated to pay you that for over a decade has a lot of long term value because hashed price over that time period, probably declines and as the operator of self mining you probably have to do some capex upgrades along the way.

Speaker Change: So that stream of revenues is diversifying and from a payoff profile youre not going to have necessarily the peaks you might have if we get a broad bitcoin adoption period.

Speaker Change: But over long periods, it probably outperforms the bitcoin mining revenue production towards the tail end of the contract. The other thing is that at least at this point in time H P. C. As highly financeable. If you have a lease with a very credit worthy counter party you can go get.

Speaker Change: Bank debt financing at a very cheap rate and finance get get 80% of the money borrowed for the build.

Bitcoin mining certainly on the rigs side, there really is no debt financing market right now.

Speaker Change: And even on the infrastructure often theres not as much interest certainly not like HBC and so that ability to finance is the other thing it's very hard to overcome that advantage, even if your sort of cash revenue returns look similar on the bitcoin mining side.

Speaker Change: That said bitcoin mining is great too because you do have the peaks and it's a little bit more volatile.

Speaker Change: But we're certainly very bullish on bitcoin mining as well, particularly where we are within that typically four year cycle.

Speaker Change: Thanks Tyler.

Speaker Change: Just lastly for me.

Speaker Change: <unk> touched on this in the call, but how should we think about capital expenditures in 2025.

Speaker Change: Going into 2026.

Speaker Change: Sure.

Speaker Change: So I know, we published obviously our financials as of yearend. We took in the Softbank investment in January I think we put out monthly production numbers. So we had.

Speaker Change: At the end of January a thousand 91, bitcoin and inventory and about $60 million in cash.

Speaker Change: Yeah.

Speaker Change: That when we've continued to spend it throughout February on bills and things like that.

Speaker Change: But if we look at the remainder the remaining spend on phase one of Black Pearl is about $200 million that will be paying over the next I don't know six ish months.

Speaker Change: To finish phase one.

Speaker Change: That's about $50 million for the infrastructure and about $150 million for the rigs roughly still to spend so between cash on hand and our.

Speaker Change: Positive cash flows we get out of production we have.

Speaker Change: And easy passed all the money we need to spend for our currently committed expansion on a more opportunistic side. If we were to move to say, hey, bitcoin mining looks great.

Speaker Change: We're going to spend and build out all of black Pearl phase two that probably looks more like.

That'd be about another $260 million or so.

Speaker Change: And for that we know.

Speaker Change: We will have to watch how bitcoin pricing goes and how much revenue, we're making we obviously have lots of capacity. If we wanted to sell equity or raise debt. We have not diluted like a lot of our competitors. We haven't done a convert we haven't done any of that stuff.

Speaker Change: If we had a lot of.

Speaker Change: Conviction in bitcoin mining and building phase two in a few months, that's probably the path. We would look to fund that and that would be the spending we would expect I mean I think what's interesting is when you look at the effects of <unk>.

Speaker Change: Just having a new fleet, it's pretty stark because your cash cash cost starts to scale. If you look at our point in time hash cost right now it's about $29 per person per second per day.

Speaker Change: And Thats against current house costs Bitcoin is off this morning, a little bit, but I think the market's about $53 and so like if I translate that to a cash cost per bit coin for us it's about $49 $5000.

Speaker Change: And those numbers the kind of overhead cash numbers scale really nicely with adding more so we're excited about phase one at black Pearl and then phase II, if we decide to finance that for bitcoin mining sort of easily achievable with a very high return on that investment so good good.

Speaker Change: Asian, if in fact, we don't end up moving forward with HTC on phase II.

Speaker Change: I appreciate the color thanks Tyler.

Thank you. This concludes the question and answer session I'd like to turn the call back over to CEO Tyler page for any closing remarks.

Speaker Change: Thank you very much for joining our call. We are very excited about everything going on in our portfolio and remain excited about all the opportunities. We've got in front of us on both the H P C and the bitcoin mining side and we look forward to updating you with more.

Speaker Change: Concrete updates in the future. Thank you very much.

Speaker Change: Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: [music].

Yes.

Speaker Change: [music].

[music].

Speaker Change: Good day, and welcome to cipher Mining's fourth quarter and full year 2024 business update call. At this time all participants are in listen only mode. After the speaker's presentation there'll be a question and answer session and instructions will be given at that time.

Speaker Change: As a reminder, this call maybe recorded.

Speaker Change: I would like to turn the call over to Courtney night head of Investor Relations. Please go ahead.

Speaker Change: Good morning, and thank you for joining us on this conference call to address cipher Mining's fourth quarter and full year 2020 for business update.

Speaker Change: Joining me on the call today are Tyler page, Chief Executive Officer, and Edward <unk>, Chief Financial Officer.

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

Speaker Change: This call will also be simultaneously webcast on the Investor Relations section of the company's website and this conference call is the property insight for mining.

Speaker Change: Keeping or other reproduction is expressly prohibited without prior consent.

Speaker Change: Before we start I'd like to remind you that the following discussion as well as our press release and presentation contain forward looking statements, including but not limited to Vipers financial outlook business plans and objectives and other future events and developments, including statements about the market potential of our business operation potential competition and our bolt on strategy.

Speaker Change: Forward looking statements and risks in this conference call, including responses to your questions are based on current expectations as of today and safer assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.

Speaker Change: Additionally, the following discussion may contain non-GAAP financial measures, we may use non-GAAP measures to describe the way in which we manage and operate our business. We reconcile non-GAAP measures to the mostly directly comparable GAAP measures and you are encouraged to dampen those reconciliations which are filed at the end of our earnings release issued earlier this morning.

Speaker Change: I will now turn the call over to our CEO Taylor page Tyler.

Speaker Change: Thanks Coordinating Hello. This is Tyler page CEO of <unk>. Thank you very much for joining our fourth quarter and full year 2024 business update call.

Speaker Change: We had an extremely productive fourth quarter, it's safer as we continue the on time execution of the growth and expansion plans discussed on previous calls.

Speaker Change: I'd like to begin by substantiated that growth with some key indicators that underscore our immense progress and reflects the successful execution of previously discussed strategic initiatives.

Speaker Change: In the fourth quarter, we produced revenues of $42 million and GAAP net earnings of $18 million or adjusted earnings or even stronger we produced adjusted earnings of $51 million for the quarter up $54 million from the prior quarter.

Speaker Change: We are very proud of our fourth quarter numbers as they demonstrate our success in executing on our vision of being a low cost producer of bitcoin.

Speaker Change: We believe that the relative advantages of being a low cost producer of bitcoin will only increase going forward.

Speaker Change: Our key growth achievement in the fourth quarter was the successful upgrade of our Odessa fleet, which grew our total self mining hash rate to $13 five exit hedges per second.

Speaker Change: We expect to continue to build on this growth in 2025 with our hash rate projected to reach at least 23 exit hedges per second in the third quarter of this year.

This acceleration in 2025 will be driven by the completion of phase one of our 300 megawatt Black Pearl data Center, which we will discuss in further detail shortly.

Speaker Change: As one completion at Black Pearl will substantially expand our current operating capacity of 327 megawatts and continue to improve our already impressive fleet wide efficiency of $18 90 joules per Terre Haute.

Speaker Change: Lastly for those newer to the safer story, we are widely recognized for our highly competitive all in weighted average power price of just two seven per kilowatt hour.

Speaker Change: As electricity accounts for the large majority of our operating costs are low price is a key driver of our strong and sustainable unit economics.

Speaker Change: Ed will give a more detailed breakdown of our numbers during his portion of the call. So I'd like to shift our focus now to an update on our anticipated growth in the coming months and years.

Speaker Change: Over the last two quarters, our business model has rapidly evolved from being solely a bitcoin miner to being a developer of HBC data centers with a natural built in offtake via bitcoin mining for prospective sites.

Speaker Change: Our current primary intent for our pipeline of sites is to develop them as HBC data centers, we believe that large scale interconnects available in the next few years are exceedingly rare and valuable and against that backdrop. We have continued to acquire assets and focus more time on this business.

Speaker Change: We are excited to announce today that last week, we acquired 337 more acres of land at our Barbara Lake site, and also signed a memorandum of understanding to potentially expand the scope of the facility.

Speaker Change: This expansion would include the Buildout of an additional 500 megawatt data center adjacent to the current 300 megawatt site.

Speaker Change: This would result in a total potential capacity of 800 megawatts at Barbara Lake with the additional 500 megawatts of capacity expected to be available in 2029.

Speaker Change: With these deals we believe the Barbara Lake site development opportunity has grown much larger than we previously believed and our discussions with potential tenants and financing partners are evolving to reflect this much larger opportunity as we work to finalize the best possible deal for safer.

Speaker Change: While HBC is our focus at new sites. We are confident that we can also use our proven expertise in managing power curtailment and producing best in class electricity costs to put the sites to profitable use as bitcoin mining sites as an alternative.

Speaker Change: Our bitcoin mining business remains robust and we have continued to work around the clock to develop phase one of black Pearl which remains on track to energize in the second quarter of this year.

Speaker Change: We continue to evaluate our options for the remaining 150 megawatts of capacity at the site, including the potential to develop phase II for HBC hosting or bitcoin mining.

Speaker Change: We believe that we have found a truly unique niche by opportunistically investing in Greenfield development sites, knowing that we can build and operate HBC data centers or if a high quality HBC tenant fails to materialize. We can continue to expand our bitcoin mining footprint and put the sites to profitable.

Speaker Change: Yes.

Speaker Change: Our site sourcing team remained busy in the fourth quarter acquiring stingray, a 100 megawatt data center site in West, Texas, which we will discuss in more depth later on the call.

Speaker Change: Ciber can maximize the value of our now two eight gigawatt development pipeline with the deep expertise of our construction and operations team are.

Speaker Change: Our construction team built over 600 megawatts of Hyperscale Datacenters before joining cipher has deep connections throughout the supply chain and can innovate as the datacenter industry continues to evolve rapidly. We are extremely proud of our team which is built for scale and provides a huge competitive advantage in our ongoing discussions with potential tenant.

Speaker Change: <unk>.

Speaker Change: On slide five we provide a portfolio breakdown of our existing megawatt capacity and the expected timeline for scaling our pipeline of managed power capacity. This.

Speaker Change: This pipeline is the culmination of the extensive work we have done to source attractive new datacenter sites for future development.

Speaker Change: Based on feedback from ongoing conversations with Hyperscale or <unk>, we are confident that our pipeline with access to adequate land in fiber necessary to service HBC customers will allow us to be a market leader in this space.

Speaker Change: As a reminder, we have historically acquired sites that have already received interconnection approvals, but we recently expanded our scope.

Speaker Change: By getting involved earlier in the development timeline, we avoid broader bidding competitions and source valuable sites that most of our competitors cannot while improving long term visibility for our supply chain and construction functions.

Speaker Change: Our options to acquire the Mckesson Nielsen and Mclennan sites. Upon interconnection approval are prime examples of this approach and we anticipate those sites being ready to energize in 2027.

Speaker Change: In addition to those purchase options. We also own a 70 megawatt site called <unk> scheduled to energize in 2027 with the possibility for expansion.

Speaker Change: The capacity of these for 2027 sites plus our nearer term <unk> of Black Pearl Barber Lake in Stingray are all reflected in the chart.

Speaker Change: Notably all of our sites sit at the center of the major trends, we see influence in the datacenter space in the coming years.

Speaker Change: The meteoric growth of increasingly larger AI related HBC data centers and continued adoption of the bitcoin network and related value of bitcoin mining as a flexible load that helps balance power grids.

Speaker Change: Again, we believe large scale interconnections available in the next three years are exceedingly rare assets and we are aggressively positioning the company to take advantage of anticipated demand.

Speaker Change: All of our pipeline sites have the necessary characteristics for development of HBC data centers, but also sit in locations with demand response programs that would allow us to monetize the flexibility of curtailment used in bitcoin mining operations.

Speaker Change: With these sites, we have a lot of optionality, especially given they are staggered energy stations, which is exactly where we like to be positioned.

Speaker Change: In front of trends with the potential for massive growth.

Speaker Change: While it is too early to predict the exact mix of our business lines across sites Bitcoin mining and HBC infrastructure are complementary and that they have different risks and payoff profiles and even have the potential to converge.

Speaker Change: With our robust pipeline, we think safer is uniquely positioned to be best in class in both verticals and our strategy will be guided by our intent to maximize shareholder value over time as we develop our future datacenters at these sites.

Speaker Change: While our development pipeline reflects exciting growth opportunities our existing operations continue to serve as a strong foundation for our success.

Speaker Change: Across our sites in 2024, we paid an average all in electricity cost of roughly $20281 per bitcoin produced at our data centers.

Speaker Change: We are very proud of this number. Please note that when we talk about all intellectual city costs. We mean, the total cost to deliver electricity to our mining rigs. So our numbers include all taxes transmission and other charges and our low numbers dramatically demonstrate our competitive advantage.

Speaker Change: On the left side of the slide we show an overview of our production split across Odessa, and our JV data centers, along with our all in electricity cost per bit cleanup sites in 2024.

Speaker Change: The chart on the right side of the slide illustrates our rapid expansion in mining capacity recently and going forward.

Speaker Change: As you can see we expanded from nine three exit hedges per second in the third quarter of 2024 to $13 five <unk> per second today and currently expect to produce at least 23 ex hedges per second in the second half of 2025, when we bring phase one of <unk> online.

Speaker Change: Next we will review production by site.

Speaker Change: Slide eight has a production summary for our Odessa facility Odessa is the most significant part of our portfolio as it currently represents approximately 87% of our bitcoin production in January.

Speaker Change: As we've noted before Odessa set a new industry benchmark as the first bitcoin mining data center to receive the uptime Institute's stamp of approval for management and operations.

Speaker Change: This wholly owned facility operates under a five year fixed price power purchase agreement securing some of the most competitive electricity rates in the industry and reinforcing our cost advantage and operational strength.

Speaker Change: As we mentioned earlier in the call.

Speaker Change: We are very proud of the successful and on time completion of our fleet upgraded Odessa, which raised our operating hash rate improved our fleet efficiency and further strengthened our track record of delivering on previously outlined plans.

Speaker Change: As of January the current operating hash rate at the site is 11, three <unk> per second up from seven one exit hedges per second before the upgrade using the same approximately 207 megawatts.

Speaker Change: Post upgrade Odessa's fleet efficiency stands at 17, six tools per tire Hush.

Speaker Change: On this page we also provide the observed all in electricity cost per bitcoin at the site in January which was roughly $20298.

Speaker Change: This low cost number illustrates the value of the fleet upgrade as it reflects our first electricity bill for the operations post upgrade.

Speaker Change: As we've mentioned many times on past calls it is extremely valuable for safer to have a cheap fixed price of power available on such a large portion of our portfolio.

Speaker Change: On slide nine we highlight our joint venture data centers of the Alberta Bear and chief.

Speaker Change: With the 2020 for expansions at each of bear and Chief the sites have a total power capacity of 120 megawatts and generate approximately $4 four exit hatches per second.

Speaker Change: We own 49% of the JV sites and our portion recently generated roughly 13% of our overall bitcoin production.

Speaker Change: On this page we also provide the observed all intellectual city cost per bit coin at the sites in the fourth quarter.

Speaker Change: Which was roughly $34542.

Speaker Change: As a reminder, both bear and chief operate is front of the meter sites. So there are expected seasonal fluctuations with their electricity costs.

Speaker Change: Now, let's turn to an update on our development portfolio, we have segmented the development pipeline into near term growth across black Pearl and Barbara Lake and longer term growth across 2026 and 2027.

Speaker Change: We are thrilled to share that the construction of phase one of black Pearl remains on track to energize in the second quarter of this year.

Speaker Change: Phase one will feature 150 megawatts of air cooled rigs expected to produce over $9 five exit hatches per second of hash rate.

Speaker Change: We continue to evaluate our options for the remaining 150 megawatts of capacity at the site, including the potential to repurpose phase two of the data center for HBC hosting.

Speaker Change: Ultimately our final design at the site will depend on what we think will produce the best outcome for our shareholders.

Speaker Change: As you can see delivering such a large data center construction project on time requires coordination of hundreds of workers around the clock in the last few months, we made significant advancements at the site, including the commencement of point of interconnection construction the successful manufacturer.

Speaker Change: The first substation transformer for the site.

Speaker Change: In the near completion of the phase one buildings spanning over 100000 square feet.

Speaker Change: We couldnt be prouder of our team's ongoing commitment and execution.

Speaker Change: Slide 13 gives an overview of our Barbara Lakes site, which we acquired in Q3 of last year.

Speaker Change: The site has enormous potential for <unk> given its immediately available capacity of 300 megawatts and now 587 acres of surrounding land.

Speaker Change: Plus it's already energized substation.

Speaker Change: As I mentioned earlier in the call. We recently signed a memorandum of understanding to potentially expand the scope of the facility to include an additional 500 megawatt data center adjacent to the current 300 megawatt site.

Speaker Change: This would result in a total potential capacity of 800 megawatts at Barbara Lake.

Speaker Change: The additional 500 megawatts of capacity is expected to be available in 2029.

Speaker Change: We have already been in discussions for months with multiple potential tenants, who are interested in the site given its optimal setup and timeline to availability.

Speaker Change: We have also been discussing financing options with potential financing partners, who are excited to work with us on building an enormous next generation data center at the site.

Speaker Change: Given our recent work to expand the scope of the data center. We anticipate these discussions will continue to evolve favorably.

Speaker Change: The opportunity for ciphers HBC business has gotten much larger in the last few days and while it will take time to finalize our path for Barbara Lakes development, we have never been more excited about the commercial potential at the site.

Speaker Change: Slide 14 outlines our expected growth in 2026 and highlights our new site acquisition in Andrews County, Texas called Stingray.

Speaker Change: The site purchased in November features 100 megawatts of front of the meter capacity all necessary regulatory approvals and 250 acres of land adjacent to the transmission assets.

The site is expected to energize in the second quarter of 2026, which complements our 2025 and 2027 and <unk>.

Speaker Change: Slide 15 outlines our expected massive growth in 2027 across four sites with one six gigawatts of potential power capacity.

Speaker Change: Our reveille site located in Cotulla, Texas scheduled to energize in 2027 as mentioned it has been approved for 70 megawatts and we have submitted a request for additional capacity.

Speaker Change: Based on early discussions with the transmission service provider. We are optimistic that we can expand the site capacity by the time the site is energized.

Mikeska mill scene, and mclennan or what we call. The three <unk> for short are pending final approvals for interconnection. We expect the results of approval processes for the sites to be finalized. This year, we are targeting approvals for up to 500 megawatts at each site.

Speaker Change: In addition to the interconnections are purchase options on the <unk> also cover substantial parcels of land at each site. The three <unk> have all the necessary characteristics for development of HBC data centers.

Speaker Change: All of our sites expected to energize in 2027 are located further east than our current sites and some sit closer to major metropolitan areas. We have already received early interest in the sites and our conversations with potential tenants and anticipate that the sites will be in high demand as the calendar continues to roll forward.

Speaker Change: With our two eight gigawatt pipeline and proven track record of execution, we remain confident in our vision of becoming a best in class data center developer for HTC infrastructure, while remaining best in class and Bitcoin mining we've.

Speaker Change: We've consistently demonstrated success in originating the best sites and power deals in bitcoin mining and we look forward to bringing that expertise to the traditional large scale data center market now.

Speaker Change: Now for a review of our financials I will turn it over to our CFO Ed Farrell.

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

Ed Farrell: Before I dive into our financial results I'd like to remind everyone that today I will be discussing our performance for the three month and 12 month periods ending December 31 2024.

Ed Farrell: 2024 was another successful year for safer as we continue to lay the foundation for future growth.

Ed Farrell: We once again demonstrated our ability to execute at a high level highlighted by a minor fleet upgraded Odessa.

Tyler Page: Ongoing construction at Black Pearl the acquisition of Barbara Lake and as Tyler referenced opinion to make progress on our <unk> initiatives.

Tyler Page: We also expanded our pipeline of site securing new opportunities to support long term strategy.

Tyler Page: Additionally, we strengthened our operational controls enhanced liquidity management and advanced key infrastructure projects.

Tyler Page: These efforts position us for an exciting and impactful 2025, as we continue to scale and optimize our operations.

Tyler Page: Before I get into the details I want to take a moment to address a significant milestone for safer.

Tyler Page: Our recent pipe investment from Softbank.

Tyler Page: As a reminder, in Q1 of this year Softbank invested $50 million in ciphers through the purchase of approximately 10 4 million shares of our common stock.

This investment strengthens our ability to expand our data center development business.

Tyler Page: We're excited to welcome Softbank as an investor and look forward to leveraging this relationship to accelerate growth.

Tyler Page: Slide 17, and 18 give a snapshot, which we provide every quarter of some of our financial metrics on both a sequential and year over year basis.

Speaker Change: First on slide 17, as Tyler stated earlier, we had a strong fourth quarter as our topline revenue grew 75% quarter over quarter, increasing from $24 million in Q3 to $42 million in Q4.

Speaker Change: This strong performance was driven by a couple of key factors, including.

Speaker Change: The successful completion of our Odessa mining rig upgrades completed in Q4, and the continued price appreciation of big client in the quarter.

Speaker Change: Again, we reported GAAP net earnings of $18 million or <unk> <unk> per share in Q4, while adjusted earnings came in at $51 million or <unk> 14 per share.

Speaker Change: We're extremely proud of these results, which we see as a direct result of our team's hard work and our execution, particularly in expanding our self mining history during the fourth quarter.

Speaker Change: Moving to slide 18.

Speaker Change: In the fiscal year, we achieved $24 million increase in revenue compared to 2023.

Speaker Change: Operating expenses in the current year increased $48 million, primarily driven by depreciation and amortization expense, which I will provide more detail later in my remarks.

Speaker Change: Thus in 2024, we had a GAAP net loss of $45 billion or a loss per share of <unk> 14 versus a net loss of $26 million or net loss per.

Speaker Change: <unk> per share in the prior year.

Speaker Change: Our adjusted earnings increased by $61 million to $107 million versus $46 million in the prior year.

Speaker Change: This growth drove our adjusted earnings per share from 17 in 2023 30 <unk> in 2024.

Speaker Change: A key driver of success was the significant hash rate expansion over.

Speaker Change: Over the year hedge rate grew by 88% from seven two eggs hash at the end of 2023 is 13 five exit hedge at the end of 2024.

Speaker Change: As I mentioned earlier.

Speaker Change: Rate growth was driven by a successful fleet upgraded Odessa, we replaced over 36000, new mining rates.

Speaker Change: This upgrade as well as bitcoin appreciation during 2024 had a direct and meaningful impact on our revenue underscoring our strong execution and our ability to scale efficiently.

Speaker Change: Let's move on to slide 19, and take a deeper look at the numbers.

Speaker Change: For the fourth quarter, we recorded GAAP net income of $18 million compared to a net loss of $87 million in the prior quarter.

Speaker Change: As a reminder, last quarter's results were impacted by a large mark to market loss on our PPA driven by sharp downward shift in the forward curve in the ERCOT market.

Speaker Change: Whereas this quarter, we had a mark to market gain of $11 million.

Speaker Change: For the quarter, we mined 492 bitcoin at our wholly owned Odessa data centers generating $42 million revenue at an average price of $84000 per bitcoin.

Speaker Change: This compares to 396 bitcoin mined in Q3 2024 at an average price of $61000 per bitcoin, resulting in $24 million in revenue sequential increase of 75%.

Speaker Change: I would like to point out that our monthly production reports include production from not only Odessa, but also our 49% share from our joint venture data centers that is included in the equity and losses of equity Investees line item and the bitcoin equivalent from power sales.

On a year over year basis revenues increased 19%, primarily driven by bitcoin price appreciation as well as the previously mentioned rig upgrades that fuels, our hedge rate expansion offset by the having event earlier this year.

Our fixed price power remains a critical factor in maintaining attractive unit economics. However, in the current quarter, our cost of revenues increased by 21% sequentially.

Speaker Change: This increase was primarily driven by our strategic decision to purchase power from the grid during periods when our power provider curtails, our Odessa facility.

Speaker Change: When this occurs our proprietary tech stack analyzes power cost and our unit economics to determine whether purchasing power at the current market rates would yield a net operating profit for the company.

Speaker Change: Excluding these instances of drawing power from the grid at higher costs, our cost of revenue remained flat quarter over quarter supported by our fixed price PPA at Odessa.

Speaker Change: We will discuss the quarterly pricing of the PPA or.

Speaker Change: More detail later, but its true value is evident in the low cost fixed price power, which is reflected in our cost of revenues.

Speaker Change: Now, let's shift our focus to operating expenses.

Speaker Change: Order over quarter compensation and benefits increased by $2 million, reaching $17 million in Q4 and totaling $61 million 2024.

Speaker Change: This represents a 14% increase from the previous quarter, and a 6% increase year over year.

Speaker Change: Throughout the year, we made targeted investments in our team, adding five new employees in Q4 and nine in total for 2024.

Speaker Change: We remain committed to a strategic opportunistic approach to head count expansion, ensuring that we have the right talent in place to support growth and operational efficiency.

Turning to G&A, which includes.

Speaker Change: Corporate insurance professional fees occupancy and other public company costs, we saw a 4% increase quarter over quarter.

Speaker Change: On a year over year basis, G&A expenses rose by $5 million, reflecting a 17% increase primarily driven by higher professional fees and public company costs.

Speaker Change: The key contributors to this increase with Sarbanes Oxley compliance requirements and expenses related to strategic growth initiatives.

Quarter versus quarter, depreciation expense totaled $36 million, representing a 27% increase from the prior quarter and a 73% increase year over year.

Speaker Change: The quarter over quarter increase was primarily driven by F Q4, upgraded Odessa, where we replace 36000 mining rigs as previously mentioned.

Speaker Change: The year over year increase was driven by both the Odessa fleet upgrade in our change in accounting policy for mining rate depreciation.

Speaker Change: As a reminder, we previously depreciate a mining rigs over a five year period. However, given our 2024 fleet upgrades and the rapid efficiency gains of next generation rigs, we determined that a three year depreciation schedules now more appropriate.

Speaker Change: Our expectations around hardware upgrade cycles, and our ability to acquire and install more efficient machines have evolved and we believe this should be reflected in the accounting treatment of the entire fleet.

Speaker Change: This change was implemented in Q2 and applied prospectively.

Speaker Change: In Q4, we recognized $14 million unrealized gain on the fair value of our between inventory.

Speaker Change: <unk> to an unrealized loss of $22 million in Q3.

Speaker Change: Unrealized gains and losses, a bit relate to the marking of inventory to market.

Speaker Change: We also recognized $26 million of realized gains on bitcoin during the quarter compared to $20 million in the prior quarter from selling bitcoin.

Speaker Change: For the year unrealized gains of $11 million for 2024 are related to the increase in our bid point inventory throughout the year and the overall bitcoin price appreciation.

Speaker Change: This compared to $3 million in the prior year.

Speaker Change: During 2024, we realized gains of $52 million on bitcoin sales compared to $8 million in the prior year the.

Speaker Change: The increase was driven primarily by our increased production of bitcoin with Odessa.

Speaker Change: Operating at full capacity for the entire year.

Speaker Change: Let's now turn to our non-GAAP measures slide where we reconciled to adjusted earnings.

Speaker Change: As always I'd like to remind you that adjusting earnings.

Speaker Change: The impact of depreciation and amortization noncash changes in the fair value of our derivative asset deferred income tax expense the noncash charge in the fair value of the warrant liability share based compensation and nonrecurring gain.

Speaker Change: These supplemental financial measures are not measurement of financial performance in accordance with U S. GAAP. However, we believe that these non-GAAP measures may be useful to investors for comparing our performance across reporting periods consistently.

Speaker Change: Internally management uses these non-GAAP financial measures to better understand manage and evaluate our business performance and to facilitate operational decisions.

Speaker Change: When adjusting our fourth quarter GAAP net income of $18 million, we headed back $33 million for the items I just listed resulting in adjusted net earnings of $51 million for the quarter.

Speaker Change: This compares to an adjusted net loss of $3 million in the previous quarter.

Speaker Change: For the full year, we reported a GAAP loss of $45 million, however, adding back $152 million for the reconciling items, primarily driven by depreciation and amortization.

Speaker Change: Our reported 2024, non-GAAP or adjusted earnings was $107 million.

Speaker Change: Compared to $46 million in 2023.

Speaker Change: Now, let's turn our attention to the balance sheet.

Speaker Change: On slide 21, our total current assets at year end were $168 million.

Speaker Change: Our cash position declined $6 million, a decrease of $81 million from the previous year, primarily due to investments made during the year.

Speaker Change: Including the $68 million purchase of Barbara Lake.

Speaker Change: $179 million in minor purchases and $82 million for the development of Black Pearl.

Speaker Change: Fortified by our Bitcoin holdings, our liquidity position as of December 31 remained strong at $98 million consisting.

Speaker Change: Consisting of $6 million cash and $92 million in bitcoin.

Speaker Change: Ill quickly cover some additional balance sheet line items as of December 31.

Speaker Change: Our prepaid expenses amounted to $3 million.

Speaker Change: <unk> is primarily related to corporate insurance as.

As noted earlier, we ended the year with bitcoin balance of $93 million, representing 994 bitcoin held in treasury.

Speaker Change: This marks an increase from the 780 bitcoin held at the end of 2023, which was valued at $33 million.

Speaker Change: Our philosophy regarding between inventory growth in Treasury management remains unchanged as we've highlighted in previous quarters, we take an opportunistic approach continually evaluating various funding options to support our growth initiatives.

Speaker Change: Shifting focus to the value of our desk power contract we account for this as a derivative asset.

Speaker Change: As we have highlighted in the past this contract provides a meaningful competitive edge, allowing us to operate as a low cost producer.

Speaker Change: We incorporate a third party valuation for this agreement, which is reflected as a derivative asset on our balance sheet and reassessed each reporting period.

Speaker Change: In essence it represents the in the money value of the contract influenced by time value and prevailing forward power prices at our Delta facility.

Speaker Change: As we remind investors each quarter seasonality and gradual expiry of the contract impact the asset pricing and leads to expected fluctuations in quarterly valuation.

Speaker Change: Given the unexpectedly mild summer, we experienced in Texas and the corresponding drop in forward power curves, we saw a significant decline in valuation last quarter with a $49 million loss on the asset.

Speaker Change: However, this quarter, we saw $11 million gain as the power markets partially recovered.

Speaker Change: While there is a substantial fluctuations in reported value. These fluctuations in no way diminished the substantial value and competitive advantage. The contract provides by securing low cost fixed power price at our ADESA facility.

Speaker Change: As of December 31, this asset was valued at $86 million compared to its valuation of $94 million at the end of 2023.

Speaker Change: As we progress towards the end of the contract in July of 2027, we expect the value to decline over time.

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

Speaker Change: Other significant assets include property and equipment totaled $481 million.

Speaker Change: Primarily attributed to our Odessa facility.

Speaker Change: Within this category mining rigs and related equipment accounted for $342 million.

Speaker Change: We sold improvements are valued at $138 million.

Speaker Change: Land to $49 million infrastructure of $28 million.

Speaker Change: And construction in progress of $82 million at Black Pearl.

Speaker Change: These figures are net of a $159 million and accumulated depreciation.

Speaker Change: Deposits on equipment of $39 million consisted progress David we have made in accordance with previously announced mining rig purchases.

Speaker Change: Additionally, we hold intangible assets totaling $9 million with $7 million attributed to ERCOT approval at black Pearl and the remaining $2 million related to capitalized software.

Speaker Change: At the end of the fourth quarter, our equity investor interest in <unk>, and chief Jv's and at $54 million and we had operating lease assets of $13 million.

Speaker Change: We had security deposits totaling $20 million, which primarily represent the oncor deposits related to the construction of the interconnects at various data centers.

Speaker Change: Our liabilities increased from 2023, driven by our growth initiatives.

Speaker Change: Our accounts payable increased $23 million, primarily related to vendor payments for black construction.

Speaker Change: Our crude expenses increased to $70 million from $22 million in the prior year, primarily related to payments and mine is related towards with deaths of fleet upgrades.

Speaker Change: Short term borrowings of $32 million relates to borrowings.

Speaker Change: Provides liquidity in the near term, while preserving bitcoin inventory and as an example of our strategic capital management.

Speaker Change: I'd like to add that subsequent to 12 31, we paid down $15 million at this level.

Speaker Change: Finally, I'd like to thank everyone for participating on today's call and as always we look forward to continuously updating you on our growth plans and results over the coming quarters.

Tyler Page: I will pause now and Tyler and I are happy to answer your question.

Speaker Change: Thank you if you'd like to ask a question. Please press star one one.

If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.

Speaker Change: Our first question comes from John <unk> with Needham Your line is open.

Speaker Change: Hey, guys. Thanks for taking my question and congrats on the quarter, obviously always great to see net income going on.

Speaker Change: I guess, so first question on the HPE side.

Speaker Change: Sure.

Speaker Change: What I saw it looks like there was some exclusivity with Softbank with the February 2008 date.

Speaker Change: Just help us understand that a little bit better.

Speaker Change: And then as it relates to HPT I know you said you've had some discussions going on for a couple of months.

Speaker Change: Was it more so you had a lot of that hyperscale or interest. So then softbank came around or are you seeing more hyperscale interest since Softbank came in and then just a quick follow up on the <unk> side of things.

Speaker Change: Thanks, John I appreciate the question.

Speaker Change: So it's also public that we are under NDA with Softbank. So I'll speak in broad terms, but don't know if I'll be able to get every detail you would like answered given our setup.

Speaker Change: But it.

Speaker Change: It's fair to say that there is a steady drumbeat of interest, particularly in Barbara Lake. We have also seen interest at black Pearl and ultimately the pipeline I think.

Speaker Change: The of the three M sites the ones that are the furthest east at least in discussions have seen a lot of interest so thats mill scene and mclennan.

Speaker Change: So generally when we speak to a hyper scaler or similarly, situated potential tenant they'd like to see our entire portfolio as they're doing their own planning for sites and looking at the different variables they would like to check at each potential site.

Speaker Change: So there has been a steady drumbeat of interest as far as the exclusivity question that you started with.

Speaker Change: We can have discussions with with others, we cant sign a deal with anyone but softbank again. This is all sort of publicly filed but until that exclusivity expires. So we have been free to have discussions and I would say in addition to the potential tenants.

Speaker Change: A big part of what we're trying to do is lineup financing simultaneously with the tenant.

Speaker Change: So that Theres no question that.

Speaker Change: Are we going to pay for an expensive build.

Speaker Change: There are lots of big financial firms that are interested in getting more data center exposure and then through some of those discussions they often have an interest or a relationship or a preapproved lease template with hyper scaler. So that has also led to some interest as well.

Great. So just to be clear on that you cant sign a lease with anyone out until I guess basically what three days from now.

Speaker Change: I think at the end of this week.

Speaker Change: And this week, Okay got it.

Speaker Change: And then <unk>.

Speaker Change: The thing is because it sounds like maybe something could.

Speaker Change: We come in sooner than later.

Speaker Change: I guess and then just.

Speaker Change: Quickly on the <unk> side of things and sorry, if I missed this is another one going on as well.

Speaker Change: The $2 seven fixed power.

Speaker Change: How much time do we have left on that one now and then where do you think rates would go after that.

Speaker Change: Yes, so great question, our fixed price contracted Odessa runs till the end of July 2027, you've got about two and a half years left on that.

Speaker Change: And al mentioned something that was relevant to this quarter and you could see sort of analogous to some seasonality that we see in our front of the meter sites for pricing in Texas with the recent fleet upgraded Odessa.

Speaker Change: Came into this last quarter, let me zoom out recall that in our Odessa fixed price contract, we've traded a 5% curtailment option to our power provider annually. So we get a price that's very close to our $2 seven portfolio average 95% of hours in the year, but they are.

Speaker Change: We're allowed to claw back 5% of those hours it curtail us and then sell power typically on the open market or do maintenance or whatever.

Speaker Change: We have recently added the ability that if with these new rigs we've added at <unk>.

Speaker Change: Yes.

Speaker Change: They produce a higher amount of revenue even with increasing competition on the network I think recently I haven't recalculated. It this morning, but we made about $150 a megawatt hour.

Speaker Change: Of revenue with those machines, we now have the ability to also purchase power.

Speaker Change: From the market. If we are curtailed so even within that 5% of ours. We can go out if its profitable and we want to buy power for.

Speaker Change: $50 or $75 or $100 on the open market if were making a $150 revenue it's worth it so.

Speaker Change: That's an interesting indicators you didn't think that the answer of your question in two and a half years.

Speaker Change: We have had some preliminary discussions with luminaire, our power provider at the site to potentially extend that lease at Odessa.

Speaker Change: Remains to be seen what the pricing would look like or if we would even want a fixed price contract I think at the time, we signed it.

Speaker Change: Fixed price looked great because the forward curve was lower for power prices looking five years forward I think if we did it today, we would likely do it with something like front of the meter pricing, so floating pricing and we would probably end up doing something about like we've encapsulated in that contract which is curtailing our.

Speaker Change: <unk> is the most expensive hours call it roughly 5% of the time I think if we did that in current floating price environments, you would probably see in the low threes three to three and a half cents per kilowatt hour or 30% to $35 megawatt hour.

Speaker Change: Obviously, if you ramp up and curtail leave unless you can kind of fix that price where you want if you ran 100% of the time, you're probably close to I don't know its probably between 50 and $60 a megawatt hour.

Speaker Change: Right now, but it will depend on what power price happened. So the pricing that Odessa, if that were to happen would look more like we've got at bear and chief or what we will have at black Pearl when it starts.

Speaker Change: Got it that's very helpful. As always thank you guys. Thanks Tyler.

John: Thanks, John.

Speaker Change: Thank you. Our next question comes from Mike Grondahl with Northland Capital markets. Your line is open.

Speaker Change: Hey, guys. This is Logan on for Mike Congrats on the quarter and we said two questions for you guys on the HPE side today.

Speaker Change: First can you provide some color around that.

Speaker Change: <unk> process for phase two of the 150 megawatts at Black Pearl kind.

Speaker Change: Kind of what that process includes what are you looking for and kind of what can we expect for the timing of that decision. Thanks.

Speaker Change: Thank you that's a great question actually.

Speaker Change: Daily analysis, we're running so with black Pearl.

Speaker Change: Phase one is now on track for Bitcoin mining as we mentioned that'll be running this summer.

Speaker Change: It'll be great I was just in Texas last week at Black Pearl I was on site at Barbara Lake out of ADESA.

Speaker Change: It was interesting to be in Texas during the coldest day, they've had for a long time and happy to see that the grid worked very well in.

Speaker Change: Bitcoin mining curtailment was a big part of that so when we think about each PC for phase two.

Speaker Change: Black Pearl it poses an interesting opportunity cost question, because it's going to energize in the second quarter.

Speaker Change: So if we take a long time, we're missing out on an opportunity to do bitcoin mining there.

Speaker Change: It probably really nice profitable rates given that we've got locked in really cheap pricing on rigs with an option, we can exercise with Canaan if.

Speaker Change: We wanted to do that or even by machines in the spot market, depending on where pricing is.

Speaker Change: Even move our old machines from inventory out there given that it is front of the meter setup. We are already are sitting on.

Speaker Change: 120 megawatts or so of machines that are older. But you can run them very profitably with lower uptime, and we could spend nothing on rigs for the second half of the site and so that's all a revenue opportunity that would be available to US later this year right in late starting in the late summer.

Speaker Change: However, we have seen a fair amount of inquiry about taking 150 megawatts and making that available.

Speaker Change: For H P C.

Speaker Change: So right now we're prioritizing that because we have a pretty substantial level of interest in financing such a build if we had a tenant for the 150 megawatts, we have a bunch of options, where our cash out would be pretty minimal and we could have participation in those economics, so that's really attractive to us.

Speaker Change: I think the other long term thing that's really interesting is.

Speaker Change: This site is really impressive I think anyone.

Speaker Change: From the more traditional datacenter space that takes a visit at black Pearl and I hope, we're going to be doing an investor day kind of late this year out there anyone from the traditional data center space is going to be really impressed with the construction quality at black Pearl and so we would love to have a site that is.

Literally on one side, it's 150 megawatts of bitcoin mining and on the other side, it's 150 megawatts of HTC.

And I think we really have this theory that maybe that's where datacenters ended up going given the way that bitcoin mining can soak up.

Speaker Change: Extra power et cetera, there's all kinds of <unk> and backup generation optimization curtailment questions and theories that people in this space have that we would love to have a live test case for us so.

We're running through conversations on HTC, we're lining up the ability to basically not have to put a lot of cash out to do a deal there and talking to potential tenants that said I'd say after a few months if we're not solidly on track with a tenant lined up will probably proceed with bitcoin mining.

Speaker Change: Because that was our original plan for the site, it's an awesome sight for bitcoin mining and Theres, just a pretty big revenue opportunity sitting there for us right away to build that out so that opportunity cost is really what we're weighing everyday against our ongoing discussions and I would expect we will have direction on that probably by the next earnings call.

Speaker Change: Perfect. Thank you yeah that was very good color.

Speaker Change: Then one last one from us.

Speaker Change: Additionally, and kind of expand on the Mou for the additional 500 megawatt data center and the incremental 337 acres.

Speaker Change: What that means for cipher and whats the ideal timeline and trajectory for Barbara Lake given these recent announcements.

Speaker Change: Sure So so Barbara Lake.

Speaker Change: As an awesome sight.

So there are two separate things. So we closed on the purchase of 337 acres. That's just ciphers new acreage that is next to the plot. We had right next to the substation that's already energized.

Speaker Change: We had already had pretty substantial land, but we're pretty bullish on the opportunity at Barbara Lake.

Speaker Change: No matter what the market is doing day to day in terms of fluctuations guessing about the future of large scale datacenters that does not line up with the discussions, we're having which is pretty consistent level of interest from lots of parties in such an opportunity. So we went ahead and bought more land.

Speaker Change: And we own it now 587 acres.

Speaker Change: Again in live discussions on how we will set up an HBC tenant at Barbara Lake.

Speaker Change: Separately.

Speaker Change: Are we announced an Mou, we now have an exclusivity for two months discussing with our friends at priority power and opportunity that they have that is adjacent to our site. So they literally have a draft for interconnection that is available on land next door.

Speaker Change: And given the way these discussions around large data centers seem to be progressing that there is extra value in larger size, where you've got potentially networks data centers across.

Speaker Change: Frankly close areas.

Speaker Change: This opportunity seemed amazing that we've seen some other folks out there talking about stretching datacenters dozens of miles apart and trying to link them. This was an opportunity where literally there's 500 megawatts potentially available right next door.

So we are now in discussions with priority to come up with a way to build a 500 megawatt data center that is immediately adjacent to our 300 megawatt data center and hopefully be talking to an end user looking for 800 megawatts of data centers.

Speaker Change: <unk> next to each other and in a very attractive location.

Speaker Change: Perfect. Thank you for clarifying that.

Speaker Change: Congrats on the quarter with a lot of exciting stuff happening right now I'll hop back in the queue. Thanks Luke.

Speaker Change: <unk>.

Speaker Change: Thank you our next question comes.

Reggie Smith: Ms from Reggie Smith with Jpmorgan Your line is open.

Hey, Good morning team. This is Charlie on for Edward Thanks for taking my question.

Speaker Change: Tyler you just touched on this a little bit in the previous question, but thinking about applications for future site for data centers.

Speaker Change: Have you seen any change in the type of workloads Counterparties wanted to do at your sites.

Speaker Change: Specifically kind of thinking about demand to use data centers for model training versus inference applications since deep seek and then kind of as a follow up does the type of workload or counterparties during change anything in negotiations or site capex or funding costs.

Speaker Change: Thanks.

Charlie: Thanks, Charlie that's a great question so.

Charlie: I would say that the level of discussions we're having with the types of Counterparties, we are speaking to.

Charlie: I have a lot of interest in capacity across different use cases, so we havent seen.

Charlie: People say Oh, well this is for inference so.

Charlie: The lease is going to be set up differently than we had been discussing.

Charlie: I think what is impacting more there is definitely I think.

Charlie: Interest in the availability of a datacenter to do all things and sort of if you're solving for the hardest thing that's going to be inference, given the need for low latency.

Charlie: And so I'd say that does drive the level of interest in the sites. So while I mentioned, we do have interest in black Pearl for example, black Pearl is certainly a little bit more remote than some of the three sites. The 2027 sites, we've got on and that drives not necessarily everyone is interested in <unk>.

Charlie: <unk> Pearl and I'm sort of reading the tea leaves, but my interpretation. There is there they are underwriting to inference and sort of what the best stats possible would be and then.

Charlie: Figuring out where in their own organization to purpose. It like I said, we still have interested in black Pearl So that doesn't necessarily drive every discussion I think theres interest across several uses it is hard for me from my seat to read through on like.

Charlie: Whats the future amount of demand for training versus inference, I, probably have no better positioned than anyone else following the industry.

Speaker Change: Got it understood. Thank you.

Speaker Change: Thank you we have time for one more question.

Speaker Change: And that question comes from Bill <unk> with <unk>. Your line is open.

Speaker Change: Good morning, gentlemen, thanks for taking my questions and congrats on another strong quarter with continued progress on our AI HBC strategy.

Tyler Page: Tyler for my first question you mentioned earlier in your responses that youre, making a $150 per megawatt from bitcoin mining at ADESA.

Tyler Page: Pretty attractive and right in line with the core scientific core we deal.

Speaker Change: So how should we think about the terms that you are comfortable to secure with hyper scaler counterparty given the robust revenue that youre, earning from bitcoin mining. Thanks.

Tyler Page: So.

They are very different and complementary businesses I think the biggest thing about bitcoin mining that every investors should understand is that.

There is both.

Tyler Page: Let's call it a medium term cyclicality to the industry in terms of returns typically and.

Tyler Page: And there is also a long term trend typically so we do have a cycle that's roughly based around the having where we tend to see.

Tyler Page: Price expansion for a stretch after having then you get a peak market and then after having you're typically going to see a pretty big reduction in <unk> price, which is what us miners get paid for bitcoin mining and so while there is a cyclicality and you want to get yourself exposed early in the having cycle.

Tyler Page: Like we have done with Odessa, and we're doing with black Pearl.

Tyler Page: You also need to be aware that while there is a cyclicality across four years across a much longer time periods that hash price tends to decline and so there's a couple of things that are very attractive about having an <unk> tenant one of them is that.

Tyler Page: Certainly the conversations we are having I guess not everyone is ran in orienting themselves this way but.

Tyler Page: We are looking at long term leases.

Tyler Page: 15 years.

Tyler Page: And so if you're making a payment that is about what you make in bitcoin mining or even less little bit less than that.

Tyler Page: Having a very creditworthy counterparty that is obligated to pay you that for over a decade has a lot of long term value because hashed price over that time period, probably declines and as the operator of self mining you probably have to do some capex upgrades along the way.

Tyler Page: So that stream of revenues is diversifying and from a payoff profile youre not going to have necessarily the peaks you might have if we get a broad bitcoin adoption period.

Tyler Page: But over long periods, it probably outperforms the bitcoin mining.

Tyler Page: Revenue production towards the tail end of the contract. The other thing is that at least at this point in time.

Tyler Page: <unk> is highly financeable, if you have a lease with a very credit worthy counter party you can go get bank debt financing at a very cheap rate and finance get get 80% of the money borrowed for the build.

Speaker Change: Bitcoin mining certainly on the rigs side, there really is no debt financing market right now.

Speaker Change: And even on the infrastructure often theres not as much interest certainly not like HBC and so that ability to finance is the other thing it's very hard to overcome that advantage, even if your sort of cash revenue returns look similar on the bitcoin mining side.

Speaker Change: That said bitcoin mining is great too because you do have the peaks and it's a little bit more volatile.

Speaker Change: But we're certainly very bullish on bitcoin mining as well, particularly where we are within that typically four year cycle.

Speaker Change: Thanks Tyler.

Speaker Change: Just lastly for me.

Speaker Change: Apologies if you've touched on this in the call, but how should we think about capital expenditures in 2025 going into 2026.

Speaker Change: Sure.

Speaker Change: So I know, we published obviously our financials as of yearend. We took in the Softbank investment in January I think we put out monthly production numbers. So we had.

Speaker Change: At the end of January a thousand 91, bitcoin and inventory and about $60 million in cash.

Speaker Change: Yeah.

Speaker Change: That when we've continued to spend it throughout February on bills and things like that.

Speaker Change: But if we look at the remainder the remaining spend on phase one of Black Pearl is about $200 million that will be paying over the next I don't know six ish months.

Speaker Change: Finished phase one that's about $50 million for the infrastructure and about $150 million for the rigs roughly still to spend so between cash on hand and our.

Speaker Change: Positive cash flow as we get out of production we have.

Speaker Change: An easy passed all the money we need to spend for our currently committed expansion on the more opportunistic side. If we were to move to say, hey, bitcoin mining looks great.

Speaker Change: We're going to spend and build out all of black Pearl phase II that probably looks more like.

Speaker Change: That'd be about another $260 million or so.

Speaker Change: And for that.

Speaker Change: We will have to watch how bitcoin pricing goes and how much revenue, we're making we obviously have lots of capacity. If we wanted to sell equity or raise debt. We have not diluted like a lot of our competitors. We haven't done a convert we haven't done any of that stuff.

Speaker Change: If we had a lot of.

Speaker Change: Conviction in bitcoin mining and building phase two in a few months, that's probably the path. We would look to fund that and that would be the spending we would expect I mean I think what's interesting is when you look at the effects of <unk>.

Speaker Change: Having a new fleet, it's pretty stark because your cash cash cost starts to scale. If you look at our point in time hash cost right now it's about $29 per <unk> per second per day.

Speaker Change: And that's against current has cost the coin us off this morning, a little bit, but I think the market's about $53 and so like if I translate that to a cash cost per bit coin for us it's about $49 $5000.

Speaker Change: And those numbers the kind of overhead cash numbers scale really nicely with adding more so we're excited about phase one at black Pearl and then phase II, if we decide to finance that for bitcoin mining sort of easily achievable with a very high return on that investment so good good.

Speaker Change: Asian, if in fact, we don't end up moving forward with HTC on phase II.

Speaker Change: I appreciate the color thanks Tyler.

Speaker Change: Thank you. This concludes the question and answer session I'd like to turn the call back over to CEO Tyler page for any closing remarks.

Speaker Change: Thank you very much for joining our call. We are very excited about everything going on in our portfolio and remain excited about all the opportunities. We've got in front of us on both the HTC and the bitcoin mining side and we look forward to updating you with more.

Speaker Change: Concrete updates in the future. Thank you very much.

Speaker Change: Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.