Q2 2026 Hut 8 Corp Earnings Call
Speaker #1: Asher Genoot, and our CFO, Sean Glennan. Following the presentation, we will open the line for questions. This event is being recorded and a transcript will be made available on our website.
Speaker #1: In addition to the press release issued earlier today, a full quarterly report on Form 10-Q is available at hut8.com, and our EdGo profile at stt.gov and on our Cedar Plus profile at cedarplus.ca.
Speaker #1: Unless otherwise indicated, all figures discussed today are in US dollars. Certain statements made during this call may constitute forward-looking statements within the meaning of applicable securities laws.
Speaker #1: These statements reflect current expectations and are subject to risks and uncertainties that could cause actual results to deferred materially. Certain key risks are detailed in our Form 10-K for the year-end of December 31, 2025, and our continuous disclosure documents.
Speaker #1: Except as required by law, we assume no obligation to update or revise any forward-looking statements. During the call, management may reference non-GAAP measures such as adjusted EBITDA.
Speaker #1: We believe these measures, alongside GAAP results, provide valuable insight into our performance. Reconciliations of GAAP and non-GAAP results are included in the tables accompanying today's press release available on our website.
Speaker #1: We will begin with a moderated Q&A session with our CEO, Asher Genoot, followed by a detailed financial review from our CFO, Sean Glennan. Let's get started.
Speaker #2: Hi. Good morning, everyone. And thank you for joining us. I'll start today with a conversation with Mark Idelman, our new head of investor relations, who joined us in June from Nextera Energy.
Speaker #2: Mark has spent the last several weeks speaking with the research and investor community, and I asked him to share some of the comments, questions, observations that he has heard most.
Speaker #2: After our discussion, Sean will walk through the quarter, and then we'll open up the line for questions.
Speaker #1: Thanks, Asher. Investors often describe Hut 8 as a Bitcoin miner that transitioned to data center development. I do not think that framing is quite right.
Speaker #1: What is Hut 8, and what does Power First actually mean?
Speaker #2: I think everything starts with one simple observation. Electricity is becoming one of the scarcest resources in the economy. Hut 8 is an energy infrastructure platform.
Speaker #1: Everyone, and thank you for joining us. I'll start today with a conversation with Mark Eidelman, our new head of investor relations, who joined us in June from Nextera Energy.
Speaker #1: Ability
Speaker #2: How.
Speaker #3: Not to
Speaker #3: differentiate.
Speaker #2: We build large-scale digital infrastructure around scarce power. AI, Bitcoin mining, high-performance computing, and whatever comes next are applications running on that platform. AI happens to be the highest value application today.
Speaker #1: Mark has spent the last several weeks speaking with the research and investor community, and I asked him to share some of the comments, questions, and observations that he has heard most often.
Speaker #1: After our discussion, Sean will walk through the quarter, and then we'll open up the line for questions.
Speaker #1: Applications change. Customer demand changes. change. Customer demand Technology changes. Our job changes. Technology is to preserve the flexibility to changes. Our job is to preserve the commercialize that power at the flexibility to commercialize that highest value use case in the power through the highest value use case market.
Speaker #2: Power First is not simply a development strategy. It is the operating system for how we allocate capital, manage risk, and build the business. So Bitcoin mining was our first proof point.
Speaker #2: Thanks, Asher. Investors often describe Hut 8 as a Bitcoin miner that transitions to data center development. I do not think that framing is quite right.
Speaker #2: What is Hut 8, and what does PowerFirst actually mean?
Speaker #2: We learned how to source low-cost power. Build infrastructure faster and more efficiently, and operate assets at scale. AI infrastructure rewards those same capabilities. But across larger deployments, longer duration contracts, and more financeable cash flows, the operating model has not changed.
Speaker #1: I think everything starts with one simple observation: electricity is becoming one of the scarcest resources in the economy. Hut 8 is an energy infrastructure platform; we build large-scale digital infrastructure around scarce power.
Speaker #2: The opportunity has expanded. In practice, our framework is repeatable. Originate power, secure site control and interconnection, commercialize with high credit quality counterparties, finance efficiently, and build and operate against long-duration contracted cash flows.
Speaker #1: AI, Bitcoin mining, high-performance computing, and whatever comes next are applications running on that platform. AI happens to be the highest value application today. PowerFirst is not simply a development strategy; it is the operating system for how we allocate capital, manage risk, and build the business.
Speaker #2: Riverbend, Beacon Point, and the financings we will discuss today are outputs of that same framework. We're not building a collection of projects. We're building a platform that repeatedly converts scarce power into long-duration contracted infrastructure assets.
Speaker #1: And I think that's really important for understand about the Hut 8. people to understand about the Hut 8 Our first two campuses that story.
Speaker #1: So Bitcoin mining was our first proof point: we learned how to source low-cost power. Build infrastructure faster and more efficiently, and operate assets at scale.
Speaker #1: So our first two we've announced were not campuses that we've announced; they were existing Bitcoin mining facilities that we had, not existing Bitcoin mining facilities converted.
Speaker #1: AI infrastructure rewards those same capabilities, but across larger deployments, longer duration contracts, and more financeable cash flows. The operating model has not changed; the opportunity has expanded.
Speaker #1: That makes sense. Many companies now describe themselves as Power First. Whereas AI infrastructure developers, how should investors distinguish capability from the claim?
Speaker #1: In practice, our framework is repeatable: originate power, secure site control and interconnection, commercialize with high credit quality counterparties, finance efficiently, and build and operate against long-duration contracted cash flows.
Speaker #2: Power First is not the differentiator. Capability is. The differentiator is the ability to consistently originate commercialized finance and execute infrastructure around scarce power. That starts with how we allocate capital.
Speaker #1: Riverbend, Beacon Point, and the financings we will discuss today are outputs of that same framework. We're not building a collection of projects; we're building a platform that repeatedly converts scarce power into long-duration, contracted infrastructure assets.
Speaker #2: We don't underwrite applications. We underwrite scarce power. Applications change. Customer demand changes. Technology changes. Our job is to preserve the flexibility to commercialize that power through the highest value use case over time.
Speaker #1: Two of the investment-grade construction first investment-grade construction financings were single sponsored data center financings for projects. In single-sponsor data center projects. multiple greenfield campuses, And multiple greenfield advanced through origination, campuses advanced through commercialization, financing, origination, commercialization, and now construction.
Speaker #2: Beacon Point is a good example. When we first invested in the site, we underwrote a Bitcoin commercialization path because it offered attractive risk-adjusted returns when we weren't sure the location hit the requirements of AI workloads.
Speaker #2: That makes sense. A many companies now describe themselves as PowerFirst, whereas AI infrastructure developers. How should investors distinguish capability from the
Speaker #2: claim?
Speaker #1: Infrastructure company, at the beginning of its journey. Brian, one of the most valuable resources in the economy: power. Large infrastructure platforms are built by repeatedly applying the same discipline framework over many years.
Speaker #1: PowerFirst is from. not the differentiator. Capability is. The
Speaker #2: But we never underwrote the investment around one outcome. We preserved multiple commercialization paths from day one. And as AI demand accelerated and locations started being more of a preference rather than a requirement, we commercialized the same underlying power through a higher value application.
Speaker #1: differentiator is the ability to consistently
Speaker #1: Originate, commercialize. But there's the ability to consistently originate financing and execute infrastructure—commercialize, finance, and execute—around scarce power. That infrastructure around scarcity starts with how we allocate capital.
Speaker #1: I believe Hut 8 is at the beginning of that journey. So, Asher, the topic you hear most from investors is execution risk. Hut 8 has not yet delivered projects of this scale, on this timeline, for counterparties of this quality.
Speaker #1: We power. That starts with how we allocate don't underwrite output; we underwrite scarce capital. We don't underwrite applications. We underwrite power. Applications scarce power.
Speaker #2: We did not predict the future. We built the flexibility to adapt to it. Our first two AI campuses were not existing Bitcoin mining facilities that we converted.
Speaker #1: What is the basis for your confidence in on-time delivery?
Speaker #2: And I think that's really important for people to understand about the Hut 8 story. So our first two campuses that we've announced were not existing Bitcoin mining facilities that we had converted.
Speaker #2: I think execution starts long before construction. People often think execution begins when you start pouring concrete, and I think construction is the final stage of execution, not the beginning of it.
Speaker #1: Beacon Point is a good over time. Beacon Point's a good example. When we first invested in the example. When we first invested in site, we underwrote a Bitcoin the site, we underwrote a commercialization path because it Bitcoin commercialization path offered attractive versus short because it offered attractive returns when we weren't sure the risk-adjusted returns when we weren't location hit the requirements of AI sure the location hit the requirements workloads.
Speaker #2: They were greenfield campuses that we originated from the ground up, commercialized with investment-grade anchored counterparties, and financed in the investment-grade markets. And are now executing through construction.
Speaker #2: By the time construction starts, a lot of the most important decisions should have already been made. That's why we think about execution as a system and not an event.
Speaker #1: We never underwrote the of AI workloads. But we investment column one outcome. never underwrote the investment around one We preserved mutual outcome. We preserved multiple commercialization paths from day one.
Speaker #2: It starts with disciplined underwriting, power origination, site control, permitting, engineering, procurement, financing, counterparty alignment, construction sequencing, every one of those decisions is made to reduce uncertainty before we mobilize on-site.
Speaker #2: At the same time, approximately 700 megawatts of our infrastructure supports our affiliated tenants, American Bitcoin. That demonstrates that we can commercialize power through more than one application.
Speaker #1: And as commercialization paths AI demand accelerated and from. And as AI demand locations started being more of a preference accelerated and locations started being more of rather than a requirement, we a preference rather than a commercialized the same underlying power requirement, we commercialized the same underlying through a higher value power through a higher value application.
Speaker #1: We did not predict the application. We did not predict the future. We built the flexibility to adapt to the future. We built the flexibility in it.
Speaker #2: And the market has already provided meaningful evidence of that capability. We have three 15-year leases with investment-grade anchored counterparties in the last nine months alone.
Speaker #2: And so our confidence rests on three things: priority, delivering Riverbend, and beacon point on time is our number one priority. Our reputation and the repeatability of the model depend on it.
Speaker #1: Our first two AI to adapt to it. Our first campuses were not existing two AI campuses were not existing Bitcoin mining facilities that I think that's really important to we converted.
Speaker #2: Two of the first investment-grade construction financings for single sponsor data center projects. And multiple greenfield campuses advanced through origination, commercialization, financing, and now construction.
Speaker #2: Discipline: permitting, procurement, site work, power delivery, and counterparty coordination all run in a single integrated schedule with conservative assumptions. And three demonstrated capability: we have energized industrial-scale capacity before, and repeatedly.
Speaker #1: They were greenfield that we had converted. They were campuses that we originated from greenfield campuses, that we built from the ground up. Commercialized with investment-grade network, commercialized with investment-grade counterparties, we financed with investment-grade anchored counterparties, and financed in market.
Speaker #2: In infrastructure, capability is not measured by what you say. It is measured by what customers sign and what capital markets finance.
Speaker #1: There are now executives the investment-grade markets. And are now in construction. At the same executing through construction. At time, approximately 700 the same time, approximately megawatts work 700 megawatts of our infrastructure across our affiliated tenants, American Bitcoin.
Speaker #2: The application has changed, but the discipline required to deliver it has not. And every campus we develop makes the platform stronger. It improves our engineering, supply chain, execution, institutional relationships, and ability to deliver the next campus.
Speaker #1: That demonstrates infrastructure supports our affiliated tenants, American Bitcoin. That that we can commercialize power through more demonstrates that we can commercialize than one outcome.
Speaker #1: The power through more than one market is already providing reasonable evidence of application. And the market is already providing that capability—meaningful evidence of that. We've fully 15-year capability.
Speaker #2: Execution is not something that we hope for; it's something we design for every campus we develop makes the platform stronger.
Speaker #1: leases with an investment-grade anchor We have three 15-year leases with counterparty, and the last 9 months investment-grade anchored counterparties in the last alone. Two of the first 9 months alone.
Speaker #1: So one thing I want to talk about is financing at JP Morgan. I'm a finance project at JP Morgan and helped build projects at Nextera.
Speaker #1: Talking about campuses, let's talk about Riverbend. Where does construction stand today at Riverbend, and what are the key milestones between here and energization?
Speaker #1: So one of the things I want to kind of introduce is why I left all of that and joined Hut 8. I think the best way to answer that is to start with what I've learned over the last 20 years.
Speaker #2: So delivery is part of our model investors can verify in real time. And we're very pleased with where Riverbend stands today. The team is executing well.
Speaker #1: In financing, and now infrastructure, construction. In capability is not measured by what infrastructure, capability is not you say. It is measured measured by what you say.
Speaker #1: Great infrastructure companies are not built around individual assets. They're built around repeatable systems that can consistently originate, commercialize, finance, build, and operate infrastructure over long periods of time.
Speaker #1: By what customers sign, and it is measured by what customers—what capital markets sign and what capital markets finance.
Speaker #1: finance.
Speaker #1: That is what stood out to me about Hut 8. Riverbend alone did not convince me. Beacon Point alone did not convince me. What convinced me was that both were produced by the same system.
Speaker #1: Projects can be replicated, systems compound. Before I joined, I spent a lot of time challenging you, Asher, and the team on the risks. Power origination and interconnection, customer relationships and counterparty quality, delivery timelines and construction risk, capital formation and financing, repeatability in the long-term vision.
Speaker #1: So one of the things I want to talk about
Speaker #1: is
Speaker #1: I financed projects at JP Morgan and
Speaker #1: helped build projects at
Speaker #1: Nextera. So one
Speaker #1: of the things I want to kind of introduce is why I left all of that and joined Hut
Speaker #1: I think the best way to answer that is to
Speaker #1: Start with what I've learned over the last 20.
Speaker #1: And you all had well thought-out answers to each of my questions that demonstrated that you understood the core risks and were mitigating them effectively.
Speaker #1: years. Great infrastructure
Speaker #1: Companies are not built around individuals.
Speaker #1: They're built around repeatable systems that can consistently...
Speaker #1: originate, commercialize,
Speaker #1: I was not looking for every risk to disappear. Infrastructure is not about eliminating risk. It's about understanding that structuring it and allocating capital accordingly.
Speaker #1: finance, build, and operate
Speaker #1: infrastructure over long periods of
Speaker #1: That is what stood out to me about Hut 8.
Speaker #1: Having spent my career financing and helping build infrastructure businesses, I recognize the same characteristics I've seen in the very best platforms. Disciplined capital allocation, rigorous risk management, and a repeatable system for creating value.
Speaker #1: not convince me. Beacon Point
Speaker #1: alone did not convince me. What convinced me was
Speaker #1: that both were produced by the same
Speaker #1: system. Projects can be
Speaker #1: replicated, systems
Speaker #1: compound. Before I joined, I spent a lot of
Speaker #1: time to challenge you, Asher, and the
Speaker #1: This is also a rare opportunity to help build an infrastructure company at the beginning of its journey around one of the most valuable resources in the economy, power.
Speaker #1: Power automation and interconnection,
Speaker #1: customer relationships and counterparty
Speaker #1: quality, delivery timelines and
Speaker #1: Large infrastructure platforms are built by repeatedly applying the same disciplined framework over many years. I believe Hut 8 is at the beginning of that journey.
Speaker #1: formation and financing,
Speaker #1: repeatability and long-term
Speaker #1: vision. And you all had well
Speaker #1: thought-out answers to each of my questions that demonstrated that you understood the core risks and were mitigating them effectively. I was not looking for every risk to disappear.
Speaker #1: So, Asher, the topic you hear most from investors is execution risk. Hut 8 has not yet delivered projects of the scale, on this timeline, for counterparties of this quality.
Speaker #1: What is the basis for your confidence in on-time delivery?
Speaker #2: I think execution starts long before construction. People often think execution begins when you start pouring concrete. And I think construction is the final stage of execution, not the beginning of it.
Speaker #2: By the time construction starts, a lot of the most important decisions should have already been made. That's why we think about execution at the system, and not an event.
Speaker #2: It starts with disciplined underwriting, power origination, site control, permitting, engineering, procurement, financing, counterparty alignment, construction sequencing, every one of those decisions is made to reduce uncertainty before we mobilize on site.
Speaker #2: And so our confidence rests on three things. Priority, delivering Riverbend and Beacon Point on time is our number one priority. Our reputation and the repeatability of the model depend on it.
Speaker #2: Discipline, permitting, procurement, site work, power delivery, and counterparty coordination all run in a single integrated schedule with conservative assumptions. And three demonstrated capability. We have energized industrial-scale capacity before, and repeatedly.
Speaker #2: So, one of the things I want to
Speaker #2: talk about
Speaker #2: is financing at
Speaker #2: JP Morgan. I found this project
Speaker #2: The application has changed, but the discipline requires to deliver has not. And every campus we developed makes the platform stronger. It improves our engineering, supply chain, execution, institutional relationships, and ability to deliver the next campus.
Speaker #2: at JP Morgan financing at JP Morgan.
Speaker #2: about build projects at
Speaker #2: Nextera. So I want to take up
Speaker #2: That piece is why I left off, I think.
Speaker #2: the best way to answer that is to start with what I've
Speaker #2: learned over the last 20
Speaker #2: years. Big infrastructure companies are not
Speaker #2: Execution is not something that we hope for. It's something we design for every campus we develop makes the platform stronger.
Speaker #2: built around individual
Speaker #2: assets. They're built around
Speaker #2: people that can consistently originate assets.
Speaker #2: and commercialize
Speaker #2: financing, sales, and operate infrastructure
Speaker #1: Talking about campuses, let's talk about Riverbend. Where does construction stand today at Riverbend, and what are the key milestones between here and energization?
Speaker #2: over long periods of time. That
Speaker #2: is what stood out to me about Hut
Speaker #2: 8. Riverbend alone is time.
Speaker #2: not. Beacon Point alone is
Speaker #2: So delivery is part of our model investors can verify in real time. And we're very pleased with where Riverbend stands today. The team is executing well.
Speaker #2: not. What convinced me was that both of
Speaker #2: these are the same
Speaker #2: system. What I see is
Speaker #2: applicated systems compound.
Speaker #2: People I talk to spend a lot of time explaining.
Speaker #2: So structural steel erection began in early June. The building foundations are expected to be completed before month's end. And that opens up additional workfront that allows crews to move in in parallel rather than sequential right now.
Speaker #2: to you,
Speaker #2: Asher, how origination and
Speaker #2: interconnection, customer team on the risks.
Speaker #2: relationships and counterparty quality,
Speaker #2: delivery timelines and construction
Speaker #2: risk, capital formation and
Speaker #2: We began steel erection on the substation in mid-July. And now we're beginning slab-on-grade pours, or cross-acceleratory support yard, in the main building. And none of that is accidental.
Speaker #2: financing, repeatability in the long construction risk, capital
Speaker #2: term, and you
Speaker #2: all do a well-thought-out answer to each
Speaker #2: of my
Speaker #2: questions. I'm not looking for every response. Infrastructure is.
Speaker #2: It's what discipline sequencing integrated planning in one delivery schedule are designed to produce. So every milestone does more than advance Riverbend. It strengthens our engineering supply chain and execution capabilities, and our capability behind the next transaction.
Speaker #2: As our customers and our partners look at how we execute, they build more and more confidence. And so Riverbend is not only a building.
Speaker #2: It's a campus. It's building capabilities that will make every campus after it and every building on the campus much better.
Speaker #1: Thanks, Asher. Let's shift to Beacon Point. We announced a second Beacon Point lease last month. What does that transaction demonstrate?
So, structural steel erection began in early June. The building foundations are expected to be completed before month's end, and that opens up additional workforce and allows crews to move in in parallel rather than sequentially, right now.
Speaker #2: Beacon Point Building 2 is important for a much bigger reason than just signing another lease. It's another proof point that our framework is repeatable.
Speaker #2: The progression matters. Riverbend demonstrated that we could commercialize a greenfield campus with an investment-grade anchor counterparty. I know a lot of people are waiting for that, and we were able to announce that last December.
Speaker #2: Then Beacon Point Building 1 demonstrated that the framework was repeatable, but with a different customer. And then Beacon Point Building 2 demonstrated something different.
Speaker #2: Again, an existing customer chose to expand under the same commercial framework. So different customers, same operating model, similar lease structure, same long duration, contracted cash flows.
We Begin steel erection on the substation in mid July and now we're beginning slab on Grey pores across the auxiliary support yard and the main building. And none of that is accidental. It's what discipline, sequencing, integrated planning in 1. Delivery schedule are designed to produce. So every Milestone does more than Advanced Riverbend. It strengthens our Engineering Supply Chain and execution capabilities and our capability behind the next transaction, as our customers, and our partners, look at how we execute, they build more and more confidence. And so Riverbend is not, the is not only a building. It's a compass is building capabilities that will make every campus after it and every building on the campus much better
Speaker #2: And the second Beacon Point lease is for 352 megawatts of IT capacity. And it represents about 9.8 billion dollars of expected base-term contract value.
Last month. What does that transaction demonstrate?
Speaker #2: With that lease, the campus is now fully commercialized with full gigawatt of utility capacity supporting contracted investment-grade cash flows. And the customer chose to double its footprint at Beacon Point.
Speaker #2: We think that's one of the strongest forms of validation in an infrastructure platform can receive. And customers don't expand because of presentations. They expand because they have confidence in the asset, confidence in our ability to deliver.
Beacon Pointe Building 2 is important for a much bigger reason than just signing another lease. It's another proof point that our framework is repeatable. The progression matters. Riverbend demonstrated that we could commercialize a greenfield campus with an investment-grade anchor counterparty. I know a lot of people are waiting for that, um, and we were able to announce that last December.
Then Beacon, Pointe, building, 2 building 1 demonstrated that the framework was repeatable.
But with a different customer.
Speaker #2: And Beacon Point also reinforces how we allocate capital. We originally, as I mentioned, underwrote the site for a Bitcoin commercialization path, but we preserved these multiple paths from day one.
Speaker #2: And so when the market evolved, we were able to commercialize that same power through a higher application and build it from greenfield. And we didn't change the asset.
Speaker #2: We just changed the application. So at the platform level, Beacon Point now represents 704 megawatts of contracted IT capacity, roughly about 19.6 billion dollars of expected base-term contract value.
And then Beacon, Pointe building 2 demonstrates, something different again. An existing customer chose to expand under the same commercial framework. So different customers. Same operating model, similarly structure. Same long duration, contracted cash flows. And the second Beacon. Pointe, lease is for 352 megawatts of it capacity. In represents about 9.8 billion dollars of expected, base term contract value with that lease. The campus is now fully commercialized with full gigawatt of utility capacity, supporting contracted investment. Grade cash flows,
Speaker #2: And so together with Riverbend, total contracted AI data center capacity, it's about 949 megawatts. Representing roughly 26.6 billion dollars of expected aggregate base-term contract value, all produced by the same operating model in less than a year.
Speaker #2: And so every commercialization expands the platform. And it's what compounding looks like for us. So Mark, a key part of Riverbend and Beacon Point is not only the signed lease, but the executed financing behind it.
Speaker #2: When you look at the Riverbend financing from the outside, what did it signal to you?
Speaker #1: Asher, well, let me start with what impressed me most. It was not the size of the financing. It was what the market agreed to underwrite.
Speaker #1: Transaction consisted of 3.25 billion of fully amortizing senior-secured notes to 2042. Rate investment grade issued to the project level, non-recourse to headache. And backed by contracted lease revenues from a campus still under construction.
Speaker #1: Investment grade market has historically not financed construction stage data centers, especially single sponsor, single asset projects. Yet rating agencies and fixed income investors underwrote the contract structure, counterparty credit and backstop, headache delivery model, and risk allocation for 16 and a half years, covering the expected construction period and the entire 15-year lease.
A Bitcoin, commercialization path. But we preserved, these multiple paths from day 1 and so in the market evolved, we was commercialized that same power through a higher application and build it from Greenfield and we didn't change the acid, we just changed the application. So the platform level Beacon Point now represents 704, megawatts of contracted it capacity roughly about 19.6 billion dollars of expected base term, contract value. And so together with Riverbend, total contracted AI Data Center capacity is about 949 megawatts. Uh, representing roughly 26.6 billion dollars of expected aggregate based term, contract value all produced by the same operating model in less than a year. And so, every commercialization expands the platform,
and it's what compounding looks like for us.
Speaker #1: Having spent years on the other side of that analysis, I can tell you that credit committees do not finance ambition. They finance certainty and execution.
So Mark a key part of Riverbend and Beacon Point is not only the signed lease but the executed financing behind it. When you look at the Riverbend financing from the outside, what did it signal to you?
Speaker #1: That was institutional validation of the development model, expressed in the most rigorous currency there is, committed capital, and investment-grade pricing. It also proved the capital formation model.
Ah sure, well let me start with what impressed me the most. It was not the size of the financing. It was what the market agreed to on Direct.
Transactions consisted of 3.25 billion, billion of fully amortizing, senior, Securities to 24.
Speaker #1: Each project raises debt against its own contracted cash flows, non-recourse of the parent, and fully amortizing. That generally ring-fences development risk and preserves capacity at the parent level.
Great investment. Grade issued at the project level non-recourse, the highest and backed by contract to lease revenues from a campus still under construction.
Speaker #1: Riverbend did more than finance one campus. It created a repeatable template for financing future campuses. Beacon Point then applied that template again and on even better terms.
Investment grade Market is historically, not financed construction stage data centers, especially singles, sponsor, single asset projects.
Speaker #1: Riverbend did just not finance a campus that created a repeatable engine for funding growth. So Asher, that Beacon Point financing, as I mentioned, was executed on better terms than Riverbend, a higher rating, higher pricing, greater scale.
It radiates agencies and fixed income investors under the contract structure, counterparty credit, and back-stop, holiday, delivery model, and risk allocation for 16 and a half years, covering the expected construction period and the entire 15-year lease.
Speaker #1: So what does that improvement tell you? And how does the capital structure support growth from here?
Having spent years on the other side of that analysis, I can tell you that credit committees do not finance ambitions; they finance certainty and execution.
Speaker #2: I think it tells us that capital follows capability. We did not get an investment-grade financing because we wanted it. We earned it through the disciplined execution.
That was institutional validation of the development model, especially the most rigorous currency. There is committed capital at investment-grade pricing.
It also proved the capital formation model.
Speaker #2: And so when we first started Riverbend, I talked about this in one of our previous earnings. We went to the rating agencies. And the investment-grade result was because of what we presented them, not because we went in expecting that.
These project raises debt against its own, contracted cash. Flows, non-recourse of the parent and fully advertising.
That generally ring-fences development risk, and preserves capacity at the parent level.
Speaker #2: And so Beacon Point consisted of 4.25 billion dollars of senior-secured notes. The notes were rated one notch higher above Riverbend. And they priced 20 points inside of Riverbend.
Riverbend did more than Finance 1 Camp, as a create a repeatable template for financing future campuses.
You can point that apply that template again and not even better terms.
Rubber bands are just did, just not finance a compass. Pre repeatable engine for funding growth.
Speaker #2: And the offering was substantially oversubscribed, with repeat investors returning and also new investors joining. And we pushed amortization from two years on Riverbend to four years on Beacon Point.
So actually that you can point Finance is I mentioned, was executed on better terms than Riverbend. A higher rating, higher pricing greater scale. So what does that Improvement? Tell you and how does a capital structure support growth from their
Speaker #2: We did not copy the transaction. I think that's really important because it would have been easy to do so. We structured every term from first principles again.
I think it tells us that Capital Falls' capability.
We did not get an investment grade finding because we wanted it; we earned it through disciplined execution.
Speaker #2: And the result resulted in improved ratings, pricing, scale, and amortization. And we didn't negotiate our way to better terms. We earned it to, through the way that we structured and the way that we built the second project.
And so, when we first started Rubber Band—I talked about this in one of our previous earnings—we went to the rating agencies, and then the investment grade result was because of what we presented to them, not because we went in expecting that. And so,
Speaker #2: The structure is also what allows us to scale. It's fully amortizing, so there's no refinancing wall at the project level. It's non-recourse, so there's zero recourse debt at the parent level.
we can point consisted of 4.25 billion dollars a senior secured notes.
Speaker #2: And it's non-dilutive to equity holders. And each project is designed to generate sufficient cash flows to support the related construction financing. So growth is not constrained by the corporate balance sheet.
The notes were rated one notch higher above Riverbed, and they price 20 points inside of Rubber Bands.
Speaker #2: And we can develop multiple campuses at once. And so together, Riverbend and Beacon Point Building One represents approximately 7 and a half billion dollars of investment-grade capital raised for construction stage development.
And the offering was substantially over subscribed with repeat investors returning and also new investors joining. And we push Advertiser from 2 years on Riverbend to 4 years on Beacon Pointe.
We do not copy the transaction, I think that's really important because it would have been easy to do. So we structured every term from first principles again and the result
Speaker #2: Every successful financing expands the platform's ability to finance the next one. And this is capital formation compounding in real-time in front of you all.
resulted in improved ratings, pricing scale, and amortization.
And we didn't negotiate our way to better terms. We earned it to through the way that we structured and the way that we built the the second project
Speaker #2: Capital follows capability. And better capital is earned through better execution.
The structure is also what allows us to scale. It's fully unlevered, so there's no refinancing wall at the project level.
Speaker #1: Asher, let's shift gear a little bit. Behind the model and the capitals and organization, how do you build one that can deliver at this scale and keep delivering as a platform grows?
Speaker #2: I think people are ultimately what determine whether a platform can compound over time. Organizations don't scale because they own great assets. They scale because they build capabilities that can be repeated.
It's not in recourse. So there's zero recourse debt at the parent level and it's not diluted to equity holders and each project is designed to generate sufficient, cash flows, support the related construction financing. So growth is not constrained by the corporate balance sheet and we can develop multiple campuses at once.
Speaker #2: And people create those capabilities. We built the organization around actual lifecycle of a project, not around a traditional corporate org chart. So origination, underwriting, development, financing, delivery, operations.
And so together Riverbend and Beacon Pointe, building 1 will present approximately 7 and a half billion dollars of investment. Grade Capital raised for construction stage development.
Speaker #2: And we've been equally deliberate about the type of people we recruit. We want builders who take ownership, enjoy solving hard problems, think from first principles, and want to build something that compounds over decades, not quarters.
Every successful financing. Expands the platforms ability to finance the next 1 and this is capital formation compounding in real time in front of you all.
Falls capability. And better capital is earned through better execution.
Speaker #2: I spoke about having more of a being a company that's more of a religion rather than a job on my last quarterly earnings. And honestly, I've had multiple folks interview and bring that up and say, "I want to join this mission." And so like-minded folks really attract each other.
On the back behind the model on the capitals and organization. How do you build 1? That can deliver at this scale and keep delivering as a platform growth.
Speaker #2: And I think of the team we assemble for a project almost like a group of Navy SEALs, not an army. Everyone brings a specific skill set.
Speaker #2: Everyone has operated at a high level in that function. And they come together as one unit to execute from start to finish. And we have also invested in talent with deep backgrounds across power, development, infrastructure, procurement, project execution, and capital markets.
Speaker #2: I mean, Mark, you're an example of that. That investment shows up, though, in SG&A. And we do not view it as overhead creep. We view it as an investment in platform capacity and capability because we're so focused on growth and scale.
Speaker #2: After our first two campuses, we now have a repeatable framework across design and engineering, supply chain, contracting, financing, and delivery. And organizations learn capabilities compound.
I think people are ultimately what determine whether a platform can compound over time organizations, don't scale because they own great assets, they scale because they build capabilities that can be repeated and people create those capabilities. We built the organization around actual life cycle of a project not around a traditional corporate org chart so origination underwriting development financing delivery operations and we've been equally deliberate about the type of people, we recruit we want Builders who take ownership, enjoy solving hard problems. Think from first principles and want to build something that compounds over decades, not not not quarters. I spoke about having more of a, being a company that's more of a religion, rather than a job on my last, uh, quarterly earnings. And honestly, I've had multiple folks interview, um, and bring that up and say, I want to join this Mission and so like-minded, folks really attract each other, and I think of the team we assembled
Speaker #2: Every campus improves the team, and the improved team makes the next campus better. So people are not separate from the platform. They are the platform.
Speaker #2: And they are the capability that compounds every other capability.
Speaker #1: Thanks for that, Asher. Let's talk about the pipeline. Investors want greater visibility into the development pipeline. How do you decide what enters the pipeline and what changes quarter?
For a project, almost like a group of Navy, SEALs not an army, everyone brings a specific skill set, everyone has operated at a high level in that function, and they come together as 1 unit to execute from start to finish. And we have also invested in Talent with deep backgrounds across power development infrastructure, procurement project execution and Capitol.
Markets. I mean, mark, You're an example of that.
Speaker #2: Look, I think it's a fair ask. And I think the first step is to frame the question correctly. The goal is not to build the largest headline megawatt number.
Speaker #2: The goal is to convert the right opportunities into financeable, commercializable infrastructure. And we manage the pipeline like an underwriting exercise. The project must clear a series of gates before it moves forward.
That investment shows up, though, in SG&A, and we do not view it as overhead creep. We view it as an investment in platform, CA capacity and capability, because we're so focused on growth and scale after our first two campuses. We now have a repeatable framework across design and engineering, supply chain, contracting, financing, and delivery in organizations—learn capabilities, compound.
Speaker #2: So power scale and speed to power, interconnection certainty, site control and a path towards permitting, network access, customer demand, capital intensity, and risk-adjusted returns.
Speaker #2: Every megawatt in the reported pipeline has already been tested against those criteria. And that's what makes the number meaningful, not simply large. Through that lens, the development pipeline now stands at about 8.7 gigawatts, up approximately 300 megawatts from last quarter.
Every campus improves the team and the improved team makes the next campus better. So people are not separate from the platform. They are the platform and they are the capability that compounds every other capability.
Thanks for that Ash.
The pipeline.
Greater visibility into the development pipeline.
How do you decide what enters the pipeline and what changes this quarter?
Speaker #2: We have 11 sites in the under-diligence and under-exclusivity stages. Averaging more than 650 megawatts each. On average, those opportunities are larger than each Beacon Point building.
Speaker #2: We did not only grow the pipeline. We advanced it. The exclusivity stage increased by 200 megawatts as projects move forward from diligence. And what's really, really important is the reported number also excludes M&A opportunities.
Speaker #2: Behind the meter-powered generation solutions, and potential Riverbend expansion, where the tenant holds a right of first offer on the next gigawatt. So the direction of opportunity flow is also changing.
Look, I think it's a fair ask and I think the first step is to frame the question correctly. The goal is not to build the largest headline megawatt number. The goal is to convert the right opportunities into financial commercialization and we manage the pipeline like an underwriting exercise. The project must clear a series of gates before we move move forward. So power, scale and speed to power, interconnection certainty site control, and a path towards permitting network. Access customer demand Capital intensity and risk adjusted returns every megawatt in the reported pipeline.
It has already been tested aggressively as a criterion, and that's what makes a number meaningful—not simply that it’s large.
Speaker #2: Riverbend and Beacon Point have led more developers and power producers to bring opportunities to us rather than the other way around. They see our ability to execute our ability to finance at scale and have tenant deep tenant relationships.
Speaker #2: And so we're having more inbound interest from an M&A perspective more than ever from developers who have a piece of land in an interconnect and need someone to commercialize that for them.
The pipeline now stands at about 8.7 gigawatts, up approximately 300 megawatts from last quarter. We have 11 sites in the under diligence and under exclusivity stages, averaging more than 650 megawatts each. On average, those opportunities are larger than each Beacon Pointe building.
Speaker #2: And I think that's a sign that the platform itself is beginning to compound. And so we don't optimize for the biggest pipeline. We optimize for the highest quality pipeline.
Speaker #2: And investors should underwrite the platform's ability to repeat, not only the next lease.
We did not only grow the pipeline, we advanced IT the exclusivity stage increased by 200 megawatts as projects move forward from diligence. And what's really, really important is the reported number. Also excludes m&a opportunities,
Behind the meter power generation Solutions and potential rubber band expansion.
Speaker #1: Last question for you, Asher. It was clearly a philosophy underpinning these answers. How would you simply summarize our philosophy for investors?
Where the tenant holds the right of first offer, on the next gigawatt.
Speaker #2: It comes down to a handful of principles we were turned to every day. Scarcity creates opportunity. First principles identified that opportunity. Optionality protects capital.
Speaker #2: Commercialization creates value. Execution earns trust. Capital follows capability. Platforms compound. Everything starts with power, and we have built the operating system that turns those principles into contracted cash flow.
So, the direction of opportunity flow is also changing. Riverbend and Beacon Pointe have led more developers and power producers to bring opportunities to us, rather than the other way around. They see our ability to execute, our ability to finance at scale, and our deep tenant relationships. And so we're having more inbound interest from an M&A perspective—more than ever—from developers who have a piece of land and an interconnect, and need someone to commercialize that for them. I think that's a sign that the platform itself is beginning to compound. And so we don't optimize for the biggest pipeline; we optimize for the highest quality pipeline, and investors should—
Speaker #2: And we are proud of what the team has accomplished, but we still believe we are very early. Every campus strengthens the platform. Every financing expands our capabilities.
Underwrite the platform's ability to repeat, not only for the next lease.
asked question for your Asher was clearly a philosophy under
Speaker #2: Every customer deepens our relationships. And every great person makes the organization stronger. What I would encourage investors to underwrite is not our next project.
Summarize our philosophy for investors.
It comes down to a handful of principles, we were turned to every day.
Scarcity, creates opportunity.
Speaker #2: It is our ability to compound capabilities over time, create projects, and projects that create earnings, and compounding capabilities that create enduring enterprise value.
Optionality. Protects capital.
Commercialization creates value.
Execution. Earns Trust.
Speaker #1: Asher, thank you. Sean, let's turn to the quarter's financial results. Investors can read the income statement in the 10Q. So I want to focus this discussion on what the numbers say about the underlying business, the balance sheet, and Hut 8's ability to finance growth.
Capital follows, capability platforms compound.
Speaker #1: Revenue increased meaningfully year over year, adjusted EBITDA improved, and at the quarter still showed a significant gap at loss. How should investors reconcile those results?
Speaker #3: Thanks, Mark. I think there are three key takeaways in our financials. One, the operating business grew. Two, margins expanded. And three, EBITDA improved. Moving to the P&L items themselves, revenue increased approximately 81% year over year, to 74.9 million dollars, while cost of revenue increased by approximately 23%.
Everything starts with power and we have built the operating system that turns those principles into contracted cash flow and we are proud of what the team has accomplished. But we still believe we are very early. Every campus. Strengthens the platform, every financing expands our capabilities, every customer deepens our relationships and every great person makes the organization stronger. What I would encourage investors to underwrite is not our next project is our ability to compound capabilities over time.
Create projects and projects that create earnings and compounding capabilities that create enduring Enterprise Value.
Speaker #3: That produced gross profit of approximately 48 million and expanded gross margin to approximately 64%, compared with approximately 47% in the prior year period. Adjusted EBITDA excluding digital asset mark-to-market movements was 10.4 million.
Sure.
Investors can read the income statement and the tenants here. So I want to focus this discussion on what the numbers say about the underlying business, the balance sheet and how to ability to finance growth.
Speaker #3: That compares with 4.2 million in the prior year period. The gap net loss of 177.1 million was driven primarily by 138 million dollar loss in digital assets.
Revenue increased meaning it's a year-over-year adjusted ibaon approved yet the course still showed a significant Gap at Los. How often investors reconciled as results.
Speaker #3: Bitcoin declined during the quarter, while it had increased materially in the prior year period. So the year-over-year comparison is dominated by a non-cash mark-to-market swing.
Thanks Mark. I think there are 3 key takeaways in our financials 1 the operating business. Grew 2 margins expanded and 3 Eve Don grooved.
Speaker #1: Thanks, Sean. Let's go one level deeper. Who were the most important drivers across power, digital infrastructure, and compute?
Moving to the p&l items themselves Revenue, increased approximately 81% year-over-year to 74.9 million. What cost of Revenue increased by approximately 23%.
Speaker #3: So compute remained the primary operating contributor. Revenue increased to 72.5 million, from 34.3 million, which was driven by an increase in Bitcoin mined from approximately 308 to approximately 935.
That produced gross profit of approximately 48 million and expanded gross margins to approximately 64% compared with approximately 47% in the prior year period.
Speaker #3: That growth reflects additional operating capacity following the commencement of operations at Vega and the re-energization of our drum heller facility. Compute cost of revenue increased at a much slower rate than revenue itself.
Adjusted even de excluding digital asset, Mark to Market movements was 10.4 million that compares a 4.2 million in the prior year period.
Speaker #3: Resulting in a segment gross margin of approximately 66%. That operating leverage is important because it demonstrates the earnings capacity of the current platform even before our contracted AI data center revenues began contributing.
The GAAP net loss of $177.1 million was driven primarily by a $138 million loss in digital assets. Bitcoin declined during the quarter, while it had increased materially in the prior-year period. So, the year-over-year comparison is dominated by a non-cash mark-to-market swing.
Speaker #3: Digital infrastructure revenue was 1.3 million dollars. That was broadly consistent with the prior year period. Today, that segment still reflects the legacy base. Its financial profile changes materially as Riverbend and Beacon Point data halls are delivered, and the associated long-duration lease revenues begin coming online.
Thanks Sean. Let's go. 1 level deeper, what are the most important drivers across power, digital infrastructure and compute?
Speaker #3: Power revenue declined to 1.2 million dollars from 5.5 million dollars. And that's primarily because the prior year quarter included a full quarter of activity from the far north portfolio, which we sold in February.
To compute Remain the primary operating contributor Revenue, increased to 72.5 million from 34.3 million which is driven by an increase in Bitcoin mined from approximately 308 to approximately 935.
Speaker #3: That decline is therefore not a function of decline in revenues, but it's a function of portfolio management.
That growth reflects additional operating capacity following the commencement of operations at Vega and the re-energizing of our Drumheller facility compute. Cost of revenue increased at a much slower rate than revenue itself, resulting in a segment growth margin of approximately 66%.
Speaker #1: General administration expense increased substantially. How should investors distinguish between recurring overhead and investment in the platform?
That operating lever is important because it demonstrates the earnings capacity of the current platform, even before our contracted AI data center revenues began contributing.
Speaker #3: Yeah, it's something Asher touched on. It's something that we focus on a lot. It's really important to us. Reported G&A was 76.1 million dollars.
Speaker #3: And that compares with 30.2 million in the prior year period. However, approximately 43.6 million of the increase was share-based compensation. So the majority of the year-over-year was non-cash.
Digital infrastructure Revenue was 1.3 million. Now as broadly consistent with the prior year period today that segment still reflects the Legacy base, its Financial profile changes materially as Riverbend and Beacon. Point data Halls of billboard and the associated long duration, lease revenues begin coming online.
Speaker #3: Cash investment also increased as we added talent and capabilities to support a much larger development platform. Salaries and benefits increased by approximately 4.1 million dollars, primarily from additional headcount supporting growth initiatives, not maintenance initiatives, particularly in our energy origination group.
Power Revenue declined to 1.2 million from 5.5 million. And that's primarily because of the prior year quarter included, a full quarter of activity, from the far, north portfolio, which we sold in February.
That's a client is therefore, not a function of of of decline in in revenues, but for, but it's a function of portfolio management.
Speaker #3: We evaluate SG&A through excuse me, we evaluate SG&A spending through a growth-first maintenance lens. The organization required to maintain today's operating base as meaningfully smaller than the organization required to originate finance, construct, and operate multiple multi-million dollar campuses in parallel.
General Administration, expense increased substantially.
How should investors distinguish between recurring overhead and investments in the platform?
Speaker #3: That does not mean growth spending is unconstrained. We expect every investment in people, systems, and capabilities to be tied to specific commercial outcomes. More high-quality power origination, faster project conversion, lower cost of capital, improved execution, and stronger operating leverage over time.
Yeah, it's something Asher touched on and is something that we focus on a lot. It's really important to us. Reported G&A was $76.1 million, and that compares with $30.2 million in the prior year period. However, approximately $43.6 million of the increase was share-based compensation. So the majority of the year-over-year increase was non-cash.
Speaker #1: Let's talk about the balance sheets. It looks very different. Cash and restricted cash increased to approximately 7 billion dollars, a total debt increase to approximately 7.6 billion dollars.
Cash Cash Investments also increase as we added talent and capabilities to support a much larger development platform, salaries and benefits increased by approximately 4.1 million primarily from additional headcount supporting growth initiatives, not maintenance initiatives, particularly in our energy origination group,
Speaker #1: What is the right way to interpret those figures?
Speaker #3: So the first distinction is between corporate liquidity and project-restricted capital. At June 30th, we had approximately 233.6 million dollars of unrestricted cash and approximately 6.8 billion dollars of restricted cash and cash equivalents.
Multiple multi-million dollar campuses in parallel.
Speaker #3: The cash the restricted cash primarily represents proceeds from the Riverbend and Beacon Point financings. And those are held in projects and project accounts and can only be used for construction, debt service reserves, and other specified project purposes.
Speaker #3: It is not excess corporate cash, and the related debt is not general corporate leverage. Similarly, the majority of that approximately 7.6 billion dollars carrying amount of debt consists of the 3.25 billion dollar Riverbend notes and the 4.25 billion Beacon Point notes.
That does not mean growth spending is unconstrained. We expect every investment in people systems and capabilities to be tied to specific commercial outcomes more high quality power origination faster project conversion, lower cost of capital improve execution and stronger operating leverage over time.
I was talking about the balance sheets. It looks very different. The cash on hand, or circuit cash, increased to approximately $7 billion, and total debt increased to approximately $7.6 billion.
What is, what is, what is the right way to interpret those figures?
Speaker #3: Those obligations sit at bankruptcy remote project subsidiaries. They're secured by the applicable project assets and accounts and, importantly, are non-recourse to Hut 8's parent company.
Speaker #3: So the consolidated balance sheet has become larger because of two of our three projects under construction are fully financed. Economically, each project is designed to service its own debt from its own contracted lease cash flows.
so the first distinction is between corporate liquidity and project restricted Capital at June 30th, we had approximately 233.6 million of unrestricted, cash and approximately 6.8 billion dollars of restricted cash and cash equivalents
Speaker #3: That's the financial architecture we want. Ringfence project risk, preserve parent flexibility, and minimal reliance on corporate equity.
Speaker #1: Investors would also notice that interest expense increased sharply. While interest income increased to 27.1 million dollars, how should they think about the construction period carry on these finances?
The cash the restricted cash primarily versus represents proceeds from the Riverbend and Beacon Pointe financing. And those are held in projects and project accounts and can only be used for construction Debt Service reserves and other specified project purposes. It it is not excess corporate cash and the related debt is not General Corporate Leverage.
Speaker #3: Interest expense increased because we closed 7.5 billion dollars of long-duration project financing during the quarter. That's expected when fully funding two campuses before the related lease revenues begin.
Speaker #3: Importantly, the proceeds are not sitting idle. Undrawn construction funds are invested in short-duration instruments within project accounts. Those funds generated 27.1 million dollars of interest income in the quarter, partially offsetting the interest costs on the notes.
Speaker #3: We also capitalized 5.7 million dollars of interest into construction in progress during the quarter. The accounting, therefore, reflects three components: interest expense recognized currently, interest income earned on undeployed proceeds, and interest capitalized as part of the cost of the assets under construction.
Similarly, the majority of that approximately 7.6 billion dollars, carrying amount of debt, consists of a 3.25 billion Riverbend notes and the 4.25 billion Beacon Point notes, those obligations sit at bankruptcy, remote project subsidiaries, they're secured by the applicable, uh, project assets and accounts and importantly are non-recourse the highest parent company. So consolidate balance sheet has become larger because of 2 of our 3 projects. Under construction are fully financed economically. Each project is designed to serve as its own debt from its own contracted lease, cash flows. That's the financial architecture we want, ring fence project risk, preserve parent flexibility, and minimal Reliance on corporate equity.
Speaker #3: I think the broader point is that we structured these financings to remove refinancing risk and secure the full construction capital upfront. There's a cost of carrying committed capital during construction, but we believe that cost is outweighed by the certainty of funding protection against future capital market volatility and the ability to execute without returning to the market mid-build.
You will also notice that interest expense increased sharply, while interest income increased to $27.1 million. How should they think about the construction period carry on these finances?
interest expense increased because we closed 7.5 billion dollars of long duration project financing during the quarter that's expected when fully funding 2 campuses before the related lease revenues begin
Speaker #1: Well, how did the curfew conversion and the Falcon X refinancing change the parent-level balance sheet during the quarter?
Speaker #3: In our minds, it was pretty meaningful. So in May, Q2 converted the approximately 159.3 million dollars of accreted principal balance of its note into 9.7 million dollars shares.
Importantly, the proceeds are not sitting idle, undrawn construction, funds are invested in short duration, instruments within project accounts. Those funds, generated 27.1 million of interest income in the quarter. Partially offsetting the interest costs on the notes. We also capitalize 5.7 million dollars of Interest into construction and progress during the quarter.
Speaker #3: That eliminated our only remaining parent recourse debt. We also refinanced 200 million dollar Coinbase facility with a new 200 million dollar Falcon X term loan.
The accounting therefore reflects 3 components, interest expense, recognized currently interest income earned on undeployed proceeds and interest capitalized as part of the cost of the assets under construction.
Speaker #3: The coupon declined from 9% to 7% as a result of the refinancing, and the facility is collateralized by Bitcoin, not the parent. Those transactions simplify the parent capital structure.
I think the broader point is that we structured these financings to remove refinancing risks and secure the Full Construction Capital upfront.
Speaker #3: Excluding ordinary course obligations, the parent is not obligated under the Riverbend or Beacon Point notes. And the remaining significant financing is secured by a discrete pool of Bitcoin.
There's a cost to carrying committed capital during construction, but we believe that cost is outweighed by the certainty of the funding, protection against future capital market volatility, and the ability to execute without returning to the market in mid-field.
Speaker #3: That matters because one of our most valuable corporate assets is flexibility. A clean parent balance sheet gives us the ability to fund early-stage development, absorb timing differences, pursue strategic opportunities, and choose the right financing for each asset rather than being forced into the financing that happens to be available at a specific given point in time.
But how do the cursor conversion and the Falcon X refinancing change the parent-level balance sheet?
In our minds, it was pretty meaningful. So, in may go to converted the approximately 159.3 million of the previous principle of balance of its note into 9.7 million shares that eliminated. Our only remaining parent recourse debt.
Speaker #1: Beacon Point phase one finance and the second phase is now contracted. What principles will guide financing Beacon Point phase two and the broader development pipeline?
We also refinanced, $200 million, coinbase facility with a new $200 million, Falcon X Term Loan.
Speaker #3: So I think it really comes down to four principles. As always, the first principle is going to be asset-level self-sufficiency. We're going to seek to finance each project against its own contracted cash flows with risk generally ringfenced at the project and no recourse to the parent wherever feasible.
The coupon declined from 9 to 10% to 7% as a result of the refinancing, and the facility is collateralized by Bitcoin, not the parent.
Speaker #3: The second principle is optimization rather than repetition. Riverbend established the market. Beacon Point one improved on that execution with a larger issuance, a lower coupon, a higher rating, and a later start-to-schedule amortization.
Speaker #3: We will not assume the next financing should look identical. We're going to evaluate the asset, the lease, the construction schedule, market conditions, and investor demand from a first principles perspective.
Those transactions simplify the parent capital structure excluding ordinary course. Obligations, the parent is not obligated under the Riverbend or Beacon Point notes. And the remaining significant financing is secured by a discrete pool of Bitcoin that matters because 1 of our most valuable corporate assets is flexibility. A clean parent, balance sheet gives us the ability to fund early stage development absorb timing differences, pursue strategic opportunities and choose the right financing for each asset, rather than being forced into the financing, that happens to be available and a specific given point in time.
We can point Phase 1 and finance, and the second phase is now contracted.
Speaker #3: Third principle is disciplined use of equity. Equity should fund the portions of the development cycle where it creates the most value, origination, site control, interconnection, design, and other work required to convert an opportunity into a financeable project.
What principles will guide finance and meet employees Phase 2 and the broader development pipeline.
Speaker #3: Once contracted cash flows are in place, we want long-duration project capital to fund construction. And the fourth and final principle is preserving liquidity across portfolio.
So I think it really comes down to 4 principles. As always, the first principle is going to be asset level self-sufficiency, we're going to seek the finance each project against its own contracted cash flows with the risk, generally ring fence of the project and no recourse to the parents wherever feasible.
Competition.
Speaker #3: The model needs to support several campuses advancing at once, not just one project at a time. That means matching duration, amortization, covenants, and recourse to the economics of each asset while maintaining capacity of the parent.
Riverbend established the market Beacon, Pointe, 1 improved on that execution. With a larger issuance, a lower coupon a higher rating, and a later, start to schedule amortization.
Speaker #1: Thanks, Sean. To close, what should investors take away from the quarter from a financial perspective?
We will not assume the next financing should look identical. We're going to evaluate the asset, the lease, the construction schedule market conditions and investor demand from a first principles perspective.
Speaker #3: Yeah, and I think this is really important. So the first, the operating business is strengthened, revenue grew, gross margins expanded, and operated and adjusted EBITDAs excluding digital asset mark-to-market increased year over year.
Speaker #3: Second, the capital market the capital formation model moved from concept to repeatable execution. We raised 7.5 billion dollars of investment-grade long-duration project financing for two construction the parent.
There are principles disciplined, use of equity Equity, should fund the portions of this development cycle, where creates the most value origination site, control, interconnection design, and other work required to convert an opportunity into a financial project.
Once contracted cash, flows are in place. We want, we want long duration project Capital to fund Construction.
And the fourth and final principle is preserving liquidity across portfolio.
Speaker #3: Third, the parent balance sheet became cleaner. The Q2 note converted, the Bitcoin-backed facility was refinanced at a lower coupon, and the majority of consolidated debt is now matched to contracted project cash flows.
The model needs to support several campuses advancing at once, not just 1 project at a time. That means matching duration, amortization covenants and recourse to the economics of each asset while maintaining capacity of the parent.
Speaker #3: And finally, the financial profile is in transition. Today's income statement is still dominated by compute and digital asset accounting. As Riverbend and Beacon Point are delivered, the mix should shift meaningfully towards long-duration contracted digital infrastructure cash flows.
Thanks, thanks. Sean, to close, what should investors take away from the quarter from a financial perspective?
Speaker #3: Our focus is to manage the transition with discipline. Execute the projects, protect the parent balance sheet, and finance growth in a way that compounds value per share.
Speaker #1: Thank you, Sean. That concludes our prepared discussion. Operator, please open the line for questions.
Speaker #2: For analysts on the webcast, you can connect by phone to the conference call for Q&A by using the Switch to Conference Call window on the lower right of the webcast console.
Yeah, and I I think this is really important. So the first the operating business of strengthened Revenue, grew gross, margins expanded and operated and adjusted even docs, excluding digital asset Mark to Market increased year-over-year second. The Capital Market, the capital formation model moved from concept to repeatable execution, we raised 7 and a half billion dollars of investment grade. Long duration project financing for 2 construction stage campuses with no recourse to the parent. Third.
Speaker #2: Once connected, to ask a question, simply press star, then the number one on your telephone keypad. We kindly ask that you please limit your initial question to one and return to the queue for any follow-up.
Parent balance sheet became cleaner. The CO2 note, converted the Bitcoin back facility, was refinanced at a lower coupon and the majority of consolidated debt is now matched to contracted project. Cash flows.
Speaker #2: Our first question will come from the line of Stephen Berg with Morgan Stanley. Please go ahead.
And finally, the financial profile is in transition. Today's income statement is still dominated by compute and digital asset accounting.
Speaker #4: Hey, good morning. Thanks so much for taking my question. I wanted to just dive into behind-the-meter generation and really just get your overall temperature check in terms of how desired is this by your customers?
as Riverbend and Beacon, Point are delivered to the mix and ship meaningfully towards long duration, contracted digital infrastructure, cash flows,
our focus is to manage the transition with discipline, execute the projects, protect the dog hair and balance sheet and finance growth in a way that compounds value per share.
Thank you, Sean.
Speaker #4: I guess this can really help to create much larger sites. And move much faster potentially. So it strikes me as a very good complement to the grid access that you have and as you've spoken to this before.
That concludes our prepared discussion. Operator, please open the line for questions.
Speaker #4: But just curious, are your latest thinking in terms of how likely is this in your view? How important is this to your customers to be able to sort of achieve both the timing and scale objectives that they have?
Speaker #4: Love any comments you might have on that.
Speaker #3: Behind the meter and thanks, Stephen. Appreciate the question. Behind the meter capacity, will happen. We see the demand. We see the opportunities for them within our pipeline.
For analysts on the webcast, you can connect by phone to the conference call for Q&A, by using the switch to conference call Window on the lower right of the webcast console. Once connected to ask a question, simply press star. Then the number 1 on your telephone keypad. We kindly ask that you. Please limit your initial question to 1 and return to the queue for any follow-up. Our first question will come from the line of Stephen Berg with Morgan Stanley. Please go ahead.
Speaker #3: And they're the fastest speed towards power. And I think not only do the customers want it, but the grids that are looking at were built looking at building that, they want us to bring power and additional to consuming from the grid, right?
Hey, good morning uh thanks so much for taking my question. Um I wanted to just dive into uh behind the meter generation and really just get your your overall temperature check in terms of
um,
Speaker #3: They want us to help offset as well. The reason why we don't include behind the meter opportunities in our development pipeline is because we feel like those megawatts are bit disingenuine?
Speaker #3: What do I mean by that? What I mean is if we have a piece of land, we have an interconnect on there, in terms of substation, transmission capacity, and we have pipeline frankly, we can put as many megawatts as the pipeline can support from a gas perspective, right?
how desired is this by your customers? I guess this can really help to create much larger sites, um, and move much faster potentially. So it, it strikes me as a very good compliment to, to the grid access that you have and, and as she's spoken to this before, but just curious to know your latest thinking, uh, in terms of, you know, how
How likely is this in your view? How important is this to your customers to be able to sort of achieve, both the timing and scale objectives that they have. So I love any comments. You might have on that.
Speaker #3: So Riverbend could be a multi-gigawatt site that we put into our pipeline. And so the numbers that we would have in our pipeline would far exceed the over eight gigawatts that we have today if we include it behind the meter opportunities.
Speaker #3: And so the way we see those similar to M&A where if they become real and they become executable contracted, you see that as additional catalyst that come in that are not as trackable, but we're working on a ton of opportunities on both behind the meter and M&A across different functions of the team today.
Speaker #4: Thanks so much for taking my question.
Speaker #3: Appreciate it. Thank you.
Speaker #2: Our next question will come from the line of Brett Nobloch with Cantor Fitzgerald. Please go ahead.
Speaker #5: Hi guys. Thank you for taking my question. I know Greg Addington sent a letter yesterday that had a lot of people ask him some questions.
Speaker #5: I'm curious to your thoughts on it, to what extent is kind of Beacon Point grandfathered and how does maybe that change your view of where you're looking to grow the portfolio from a pipeline perspective?
Behind the meter. And think think Stephen appreciate the question behind the meter capacity will happen. We see the demand, we see the opportunities for them within our Pipeline and they're the fastest speed towards power and I think not only do the customers want it, but the grids that are looking at we're build looking at building that they want us to bring power in addition to consuming from the grid, right? They want us to help offset as well. The reason why we don't include behind the meter opportunities in our development pipeline is because we feel like those megawatts are bit bit disingenuine. What do I mean by that? What I mean is if we have a piece of land, we have an interconnect on there in terms of uh substation transmission capacity. And we have like pipeline, frankly, we can put as many megawatts as the pipeline can support from a gas perspective, right? So Riverbend could be a multi gigawatt, uh, site that we put into our pipe button. And so the numbers that we would have in our pipeline would far exceed the over 8, gigawatts that we have today. If
Speaker #3: I think across the board, in the US today, more and more politicians are going to want to make sure that rate payers and their voters feel protected.
Speaker #3: And so we saw the letter and we trust the legislative process. As we're reviewing we're prepared to work with the PUC and ERCOT to implement kind of this process.
We included behind the meter opportunities and so the way we see those similar to m&a, were if they become real and that they become executable contracted, you see that as additional catalysts that come in that are not as trackable. But we're working on a ton of opportunities on both behind the meter and m&a across different functions of the team today.
Thanks so much for taking my question.
Appreciate it. Thank you.
Speaker #3: We feel very confident in the package we put forward during the batch process. And a lot of the things that we had put forward aligns with many of the points that Governor Abbott raised and that includes grid reliability, water usage, environmental considerations, noise, traffic, emergency, and other community protections.
Our next question will come from the line of Brett Knoblauch with Cantor Fitzgerald. Please go ahead.
Speaker #3: And so we actually were one of the ones that voluntarily participated in the PUE survey that they had come out. And we gave them all of the information on Beacon Point around the water and power usage.
Hi guys, thank you for for taking my question. Um I I know Greg Addison sent a letter yesterday that you know, had had a lot of people asking some questions. I'm curious to to your thoughts on it to to what extent is kind of big a point grandfather and how does maybe that change your view of you know where you're looking to grow the portfolio, uh, from a pipeline perspective.
Speaker #3: Of the site both operating and under construction. And so we plan to do the same exact thing with the governor's requests. And as we continue to develop across the pipeline, when we look at places like Texas, Louisiana, Alabama, kind of the southeast quarter and places across the US, there are some states where they want the business of data centers.
Speaker #3: But they also want to make sure that their communities feel protected because there's so much flood and noise out there in the system today.
Speaker #3: And there are other states that are a bit harder to do work in. And so those were a bit more sensitive in terms of entering and investing significant development capital.
Speaker #3: But overall, I think you'll just see this as a common part of development, which is you have to do the work to have people feel comfortable that you're not just saying that, hey, we have a closed-loop water system.
Speaker #3: We're not going to use water that cools the chips, right? We actually pay our way when it comes to energy infrastructure upgrades or energy capacity.
I think across the board in the US today, more and more politicians are going to want to make sure that ratepayers and their voters feel protected. And so we saw the letter, and we trust the legislative process. Um, as we're reviewing, we're prepared to work with the PUC and NERC to implement kind of this process. We feel very confident in the package we put forward during the batch process, and a lot of the things that we have put forward align with many of the points that Governor Abbott raised. Um, and that includes grid reliability, water usage, environmental considerations, noise, traffic, emergency, um, and other community protections. And so we actually were one of the ones that have voluntarily participated in the PE survey that they had come out. Um, and we gave them all the information on Beacon Point around the water and power usage of the site, both operating and under construction. And so we plan to do the same exact thing with the governor's request. And as we continue to do,
Speaker #3: I mean, most of these things we are doing no matter what because we have to in order to develop this infrastructure at scale. I think it's just putting in a bit more process to make people feel comfortable.
Speaker #3: And overall, I think it's actually very, very healthy for the US because right now without that, it's just a he said, she said and people are scared and local politicians are scared to do what they think is best for the communities from a kind of rate payer tax perspective.
Speaker #3: Impact, but also from kind of a general sentiment perspective. And so I think you see different politicians trying to enact this in different ways to make their voters feel comfortable.
Speaker #3: And then on the other extreme, you have some states that kind of are just extremely against it. And so I think Texas is one where they're just trying to make sure that the way that this capacity is coming online is thoughtful to the ecosystem and the community so there's not a huge reversion we're able to continue to scale.
Speaker #5: Awesome. Thank you. Then maybe if I could just follow up on Riverbend. I know there's a lot of talk about behind the meter. Curious from a timing perspective, like how quickly could behind the meter at that site get set up?
Developed across the pipeline. Uh, when we look at places like Texas, Louisiana Alabama kind of the southeast quarter and places. The us, there are some states where they want the business of data centers, but they also want to make sure that their communities feel protected because there's so much fun and noise out there in the system today and there are other states that are a bit harder to do work in. And so those were a bit more sensitive in terms of entering, um, and investing, uh, significant development Capital, but overall I think you'll just see this as a common part of development which is you have to do the work to have people feel comfortable that you're not. Just saying that, hey, we have a closed loop water system. We're not going to use water, um, that, that, that cools the chips, right? We actually pay our way when it comes to energy, infrastructure, upgrades or energy capacity. I mean, most of these things we are doing no matter what because we have to, in order to develop this infrastructure to scale. I think it's just putting in a bit more um, process to make people feel comfortable and
Speaker #5: Would that come before maybe additional power delivery from energy or and you guys might have commented on this. I might have missed this, but just walk me through how Riverbend expands from here via kind of grid or behind the meter or directly from energy.
Speaker #5: Thank you.
Speaker #3: So if we think about building one, it gets built really across 2027. Each data hall gets handed over. And so in order for building two to start, and to start delivering data halls, it's kind of on the back of building one, right?
Overall, I think it's actually very, very healthy for the us because right now without that it's just a, he said, she said and people are scared and local, politicians are scared to to do what they think is best for the communities from uh kind of rape hair tax perspective uh impacts but also from kind of a general sentiment perspective. And so I think you see different politicians trying to, uh, enact this in different ways to make their uh, voters feel comfortable, and then on the Other Extreme, you have some states that kind of are just extremely
Speaker #3: And so you think kind of end of '27 that that capacity has the opportunity to come online. When we think about behind the meter generation, we have a bunch of solutions we're looking at at Riverbend and other campuses as well in terms of what is that generation?
Against it. And so I think Texas is 1 where they're just trying to make sure that the way that this capacity is coming online is thoughtful to the ecosystem, the community. So there's not a huge reversion, we're able to continue to scale.
Awesome, thank you. The manufacturer just follow up on on Riverbend. Um,
I know there's a lot of talk about behind the meter.
Speaker #3: And some of those solutions the power actually can get there faster than the data center can get built. And that's obviously not all solutions.
Speaker #3: When we think about Riverbend, it's a really unique environment because we have such a supportive state and local legislative and administrative kind of community where they want us to bring this business in to expand.
Speaker #3: We have an amazing workforce of subcontractors there and all the skilled trades. And so when we look at Riverbend, the gas is there. There's plenty of access on the pipelines we've already confirmed that.
Speaker #3: And then obviously Entrgy we're working with as well around capacity. So I actually see a world where you might see some behind the meter generation capacity kind of working in concert with Entrgy Grid Connected capacity.
Speaker #5: Awesome. Thank you guys. I really appreciate it.
Speaker #3: Thanks.
Speaker #2: Our next question comes from the line of Darren Abtahi with Lucid Capital Markets. Please go ahead.
Speaker #6: Yeah, good morning. Thanks for taking the question. On your exclusive energy basket in your release, the roughly 1.9 gigs, could you kind of characterize maybe where are those sites Brownfield, Greenfield, and then just how you would kind of maybe also characterize geographic and community risk as Asher you were talking about the governor's letter as well.
Curious from a timing perspective like how quickly could behind the meter at that site, get get set up. Would that come before? Maybe additional power delivery from from energy or. And you guys might have comment on this. I might, I might miss this but just walk me through. You know, how Riverbank expands from here, via kind of Grid or behind the meter or directly from energy, thank you. So, if we think about building 1, it gets built really across 2027 each day at a halt gets handed over. And so, in order for building 2 to start, um, and to start delivering data holes, it's kind of on the back of building 1, right? And so you think kind of end of 27 that that capacity has the opportunity to come online when we think about behind the meter generation we have a bunch of solutions, we're looking at at Riverbend and other campuses as well, in terms of what is that generation and some of those Solutions, the power actually can get there faster than the data center can get built. Um, and that's obviously, not all solutions when we think about rubber band, it's a really unique environment because we have such a supportive state in
Speaker #6: Thanks.
Speaker #3: Happy to do so. We're pretty diversified. So I think the best way to think about our company and I'll take one step back and talk through how we develop.
In local, uh, uh, legislative in in administrative, kind of community where they want us to bring this business in. And to expand, we have an amazing Workforce of subcontractors there and all the skilled trades. And so, when we look at Riverbend, the gas is there there's plenty of access on the pipelines. We've already confirmed that, um, and then obviously energy we're working with as well around capacity. So I actually see a world where you might see some behind the meter generation capacity, kind of working in concert with energy grid connected capacity,
Speaker #3: When you think about each stage in the development pipeline, and again, to remind folks, these are Greenfield opportunities. And so primarily we're finding land, we're finding interconnect.
Awesome. Thank you guys, really appreciate it.
Thanks.
Our next question comes from the line of Darren Aftahi with Lucid Capital Markets. Please go ahead.
Speaker #3: A lot of the M&A opportunities that we have that kind of fall into people have already developed the Greenfield to a certain stage or Brownfield opportunities, those opportunities are not included in this pipeline.
Yeah, good morning. Thanks for taking the question on your exclusive.
Speaker #3: And we have a whole team working on those. And behind the meter is not included. So as we think through kind of how we build a team, we have multiple teams across five different ISOs.
Energy Basket in your release the the roughly 1.9 gigs. Can you kind of characterize?
Speaker #3: So we split the United States into five sections. Each section incorporates a certain set of ISOs. And we have different teams. So think of them as like Citadel pods.
Speaker #3: Each pod has a budget. They have a group of individuals within their team and they go and they develop. And so we have a bunch of these pods across each across these five regions and across each region.
Maybe where are those sites Brownfield green fields and then just how you would going to maybe also characterize you know Geographic and Community risk is actually you were talking about uh, the governor's letter as well. Thanks.
Speaker #3: Capacity under diligence is the pod under their budgets. Go and start putting in land options, interconnect agreement studies, pre-construction work, site development surveys, geotex, and so forth.
Speaker #3: When we get to capacity and exclusivity, there's a line of sight on power in addition to obviously the land control and path towards permitting as well as everyone knows we've kind of really been working through the Illinois and Logan County process of one of our sites.
Speaker #3: So kind of local community support is paramount as we think about sites that go from diligence into exclusivity and our confidence level in order to spend the resources and the work to make sure we have the support because otherwise, like exclusivity is where we have a lot of teams working on those projects.
Happy to do. So we're we're pretty Diversified. So I think the best way to think about our company and I'll I'll take 1, step back and talk through how we develop. When you think about each stage in the development Pipeline and again, to remind folks, these are Green Field opportunities. And so, primarily, we're finding land, we're finding interconnect, a lot of the m&a opportunities that we have that kind of fall into people have already developed a green field to a certain stage, or Brownfield opportunities. Those opportunities are not included in this Pipeline. And we have a whole team working on those in the behind. The meter is not included. So, as we think through, kind of how we build the team, we have multiple teams across 5 different issues. So we split the United States into 5 sections. Each section in corporates a certain set of isos and we have different teams. So think of them as like Citadel pods each pod has a budget, they have a group of individuals within their team and they go and they develop and so we have a bunch
Speaker #3: And bringing them to development where we're comfortable in the ability to commercialize those projects. That's how we deploy more capital and more investment into them.
To these pods across each—uh, across these five regions and across each region.
Speaker #3: And so as we think about the overall pipeline, we're pretty well diversified across the United States, across multiple states, multiple ISOs. And not have and do not have a heavy compensation in one area.
Speaker #3: And I think one that was done by design early on, our belief was the US is a pretty big area. And so instead of having one team be spread thin, was build these kind of separate pods in this incentive structure where we have different experts across the US in different ISOs.
Speaker #3: And I think that's worked out based on kind of the overall kind of concentration risk in the market today where we're able to say, all right, you know what, this site, this situation is happening, it's slowing down a little bit, that's okay.
Speaker #3: We have these other opportunities that are continuing to progress. And so we're pretty grateful for that and having built the platform day one to kind of support that.
Speaker #3: And that's where you see like the reason why we're investing into this growth SG&A the magnitude of these opportunities are so large. And so having amazing people to be able to scale our ability to capture this opportunity we think is a no-brainer.
Capacity under diligence, is the pot under their budgets. Go and start putting in land options, interconnect agreements studies, pre-construction work, site development, surveys, Geotech and so forth. When we get to capacity in this exclusivity, there's a line of sight on power. In addition to obviously the the land control and path towards permitting, as well as everyone knows we've kind of really been working through the Illinois and Logan County processes 1 of our our sites so kind of local community support is Paramount. As we think about sites that go from diligence into exclusivity in our confidence level, in order to spend the resources and and the work to make sure we have the support because otherwise like exclusivity is where we have a lot of teams working on those projects and bringing them to development where we're comfortable comfortable, in the ability to commercialize those projects. That's why we deploy more capital and more investment into them. And so as we think about the overall pipeline, we're pretty well Diversified across the United States um across multiple States multi.
Speaker #3: Frankly, I wish I would have done it even earlier. I remember when about two years ago, I had a meeting with one of the former CEOs of the largest energy utility in the US.
Speaker #3: And we were really talking about the analogies behind like data center development versus renewable development. And they arguably were one of the most successful renewable developers actually a person that ran Mark's former shop.
Isos, um, and and not have and do not have a heavy conversation in 1 area and I think 1 that was done by Design early on our belief was the US is a pretty big area. And so instead of having 1 team be spread thin was build these kind of separate pause in this incentive structure, where we have different experts across the US, and different isos. And I think that's worked out based on kind of the overall, um, kind of concentration risk in the market today where we're able to say,
Speaker #3: And a big comment was around scale, right? You need to find land, you need to find interconnects. And we really kind of got comfort in that once we felt like we had a repeatable platform and we had that customer demand that was repeatable as well.
All right, you know what, this site this situation is happening. It's slowing down a little bit. That's okay. We have these other opportunities that are continue to progress. And so, uh, we're pretty grateful for that and having built the platform, uh, day 1 to kind of, uh, support that.
Speaker #3: And we started really scaling over the last couple of quarters. But could have done an even earlier than that before the first deal was announced.
Speaker #3: And so I think our platform feels very, very healthy. It's very diversified. And the current platform we disclosed to the public is only one subset of the overall kind of platform internally that we work on.
Speaker #3: And the main reason is like authenticity of those numbers. Like we can have that platform look really, really big based on all the M&A conversations we're having, based on all the behind the meter conversations we're having.
Speaker #3: But we have a higher threshold to disclosing those because we want those to essentially be near complete to be able to share those to the market rather than early stage where it just becomes brag a lot numbers, which is not our goal with sharing these pipeline numbers.
Speaker #2: Our next question will come from the line of Stephen Glagola with KBW. Please go ahead.
Speaker #7: Hey, thanks for the question. And sorry if I missed this earlier on the call. Asher and Sean, can you maybe provide more detail on how you intend to fund the equity component associated with the beacon point phase two lease?
And that's where you see like the reason why we're investing into this growth sgna the magnitude of these opportunities are so large. And so having amazing people to be able to scale our ability to capture this opportunity. We think is a no-brainer frankly. I wish I would have done it even earlier. Um, I remember when about 2 years ago, uh, I I had a meeting with, uh, 1 of, the former CEOs of the largest, uh, energy utility in the US, and we were really talking about the analogies behind like data center development versus renewal development. And they arguably are 1 of the most successful, uh, renewable developers. That actually a person that ran marks a former shop and a big comment was around, scale scale, right? You need to find land, you need to find interconnects, um, and, and we really kind of got comfort in that once we felt like we had a repeatable platform, and we had that customer demand that was repeatable as long we started to really scaling over the last couple of quarters, but could have done an even earlier than that before. The first deal is announced and so, um, I
Speaker #7: And then Sean, I'm just curious maybe to get your broader thoughts. And what you're seeing in the funding markets today on the debt side and is anything changed in terms of project financing availability over the last few months?
Speaker #7: Thank you.
Speaker #3: Yeah, I'll take the first part of that and I'll pass it over to Sean. If we were looking at doing the exact same structure that we did from building Riverbend building one to beacon point building one, right, in terms of a 16-year IG bond, etc., the equity commitment that we would have, we have the balance sheet to be able to support that.
I think our platform feels very, very healthy. It's very Diversified. And the current platform, we disclosed to the public is only 1 subset of the overall kind of platform internally that we work on and the main reason is like authenticity of those numbers like we can have that platform look really really big based on all the m&a conversations. We're having based on all the behind the meter conversations we're having. But we have a higher threshold to disclosing those because we want those to essentially be near complete, to be able to share those to the market, rather than early stage, where it just becomes Bragg a lot numbers which is not our. Our goal is sharing these pipeline numbers.
Speaker #3: And we've really thought about, all right, how do we think about kind of equity dilution relative to that? So what we've shared from beacon point building one to beacon point building two was that we really focus on first principles of what made that deal strong and how can we make it better and how do we make it stronger.
Stephen Glagola with KBW, please go ahead.
Speaker #3: And I think from building one to building two, we were able to improve kind of metrics across the whole board. So when we look at beacon point when we look at beacon point building two now, which is the third financing, we're taking that first same first principles which is how do we really think about our overall cost of capital across the different mechanisms that we have and how do we structure something that's the most accretive in terms of long-term kind of creation.
Hey, thanks for the question. I'm sorry. If I missed this earlier on the call, uh, Azure and Sean can you maybe provide more detail on how you intend to fund the equity, uh, component associated with the Beacon Point. Phase 2 lease. And then Sean, I'm just curious maybe to get your broader thoughts on what you're seeing in the funding markets today on the debt side. And there's anything changed in terms of uh project financing availability over the last few months. Thank you.
Speaker #3: We'll share more on that in the coming weeks. But as we think about kind of the optionality of what we have with the balance sheet that we have today, the different financing counterparties that want to continue to support the story, we're pretty excited and confident as we think about kind of growth of the platform that what we're working on is going to be interesting and innovative similar to kind of building one and building one at Riverbend and building one at beacon point.
Speaker #3: Sean, pass it over to you.
Speaker #1: Yeah, thanks, Asher. And thanks for the questions, Steve. Look, the market remains open. It remains receptive to a lot of different paper that's out there.
Speaker #1: And I think you're seeing a lot of supply come that is for certain. But I think there's going to be a real discernment for investors and this is in our conversations with them with bankers whom we talk to all the time.
Speaker #1: On really quality leases, quality operators, quality developers, and quality structures. And so we spend a lot and this is why we are so principled and why we take so much time structuring the debt deals that we do.
Yeah, I'll I'll I'll take the first part of that and I'll pass it over to Sean. If we were looking at doing the exact same structure that we did from building uh, River Run. Building 1 to Beacon Pointe, building 1, right? In terms of a 16-year, IG Bond, Etc. The equity commitment that we would have. We have the balance sheet to be able to support that. And we've really thought about all right, how do we think about kind of equity dilution relates to that? So what we've shared from Beacon for building 1 to Beacon, Pointe building 2 was that we really focused on first principles of what made that deal strong and how do we make it better? And how do we make it stronger? And I think from building 1 to building 2, we were able to improve kind of metrics across the whole board. So when we look at Beacon Point, uh, when we look at Beacon Pointe, building 2 now, which is the third financing we're taking that first. Same first principles which is, how do we really think about our overall cost of capital across the different mechanisms that we have? And how do we structure something? That's the most secretive in terms of long-term kind of creation. We'll share more on that in the coming weeks. Um, but as we
Speaker #1: We want to make sure that they're going to be attractive to the market and that they'll get a lot of receptivity. Because ultimately, we want to make sure that we're being good stewards of bondholder capital as well.
Speaker #1: And so I think we've developed a pretty good following in the fixed income markets. And for those who have executed well, I think the market will remain open and provide pretty good pricing and whatnot.
Think about kind of the optionality of what we have with the balance sheet that we have today. The different, uh, financing counterparties that want to continue to support the story. We're pretty excited and confident, um, as we think about kind of growth of the platform that what we're working on, um, is going to be interesting and Innovative, uh, similar to kind of building 1, uh, and building 1 at Riverbend building 1 at bacon Point Sean pass it over to you.
Yeah. Thanks Asher. And, and, and thanks for the question. Steve, uh, look at the market remains open, uh, or remains
Speaker #1: I think it's really going to depend on what it'll be very issuer by issuer, I think, going forward. So we're really excited about where we sit in that ladder.
A receptive to a lot of different, um, paper that's out there, and I think you're seeing a lot of supply income, that is for certain. Uh, but I think there's going to be a real discernment for investors—and this is in our conversations with them, with bankers whom we talk to all the time—on really quality leases.
Speaker #7: Great. Thank you guys.
Speaker #3: Thank you.
Speaker #2: Our next question will come from the line of Ben Sommers with BTIG. Please go ahead.
Speaker #3: Hey, good morning. And thank you for taking my question. So Asher, you mentioned M&A opportunities. Curious on what you were seeing in that market and are there any specific power markets where you're seeing more acquisition opportunities?
Speaker #5: We have a lot of inbound everyday from everywhere. I think probably 70% of those opportunities are a bit of a waste of time. And 30% are interesting projects.
Quality, operators, quality, developers and quality structures. And so, we spend a lot and this is why we are so principled and why we take take so much time, structuring the debt deals that we do. We want, we want to make sure that they're going to be attractive to the market and that they'll get a lot of receptivity. Um, because ultimately, we want to make sure that, you know, we're being good stewards of bond holder Capital as well. And so I think I think we've developed a pretty good following uh in the fixed income markets. And and for those who have executed, well I think the market will remain open and and and and and and uh you know
Speaker #5: And so we've actually expanded the team to really diligence and vet through those opportunities. But it's across the board. Look, I think right now everyone's seeing kind of the data center momentum.
Provide pretty good pricing and whatnot. Uh, I think
Speaker #5: And so you have every person who has a piece of land in a transmission line that falls across that piece of land thinking that they can build a data center there.
It's really going to depend on. Um, you know what, it'll be very issued by issuer. I think going forward. So uh we're we're really excited about where we sit uh, in that in that ladder.
Great. Thank you guys.
Speaker #5: And then there's other developers that have really kind of done the work, gone in the interconnection agreements. But are unable to get the capital to build, don't have the track worker to actually get confidence within the tenant to actually go and execute and build the campus either.
Thank you.
Our next question will come from the line of Ben Sommers with BT. Please go ahead.
Speaker #5: And so I think the three leases that we've announced, the platform that we're building, has actually created a lot of good kind of reputational credibility out there.
Hey, good morning, and thank you for taking my questions. So Asher, you mentioned, m&a, opportunities, curious on what you are seeing in that market. And are there any specific power markets where you're seeing more acquisition opportunities?
Speaker #5: And we're having a lot of inbound. And as we think about M&A, we're also like as we look at the first couple of projects we developed, like our development risk capital out there is pretty low relative to how we think about development.
Speaker #5: We're not putting out nine figures of capital on pieces of land or equipment. Really, most of our capital is deployed post-commercialization, right? We're talking about tens of millions on the land in some long lead time equipment on both of these projects before we actually commercialize.
We have a lot of inbound every day from everywhere. I think probably 70% of those opportunities are a bit of a waste of time, and the 30% are interesting projects. And so we've actually expanded the team to really diligence and vet through those opportunities, but it's across the board. Look,
I I think right now everyone's seeing kind of the data center momentum and so you have
Speaker #5: But those dollars really were backwards weighted closer to negotiation of the agreement before the final kind of ink was signed. And so as we think about some of these M&A opportunities, a lot of developers and brokers and bankers know we're not the firm that will necessarily pay the highest dollar upfront to take all the risk.
Speaker #5: And we're comfortable with those opportunities going to other developers. But folks who come to us and say, you know what, I'll take rightway risk.
Every person who has a piece of land and a transmission line that falls across that piece of land is thinking that you can build a data center there. And then there are other developers that have really kind of done the work on the interconnection agreements but are unable to get the capital to build, or don't have the track record to actually get confidence within the tenant to actually go and execute and build the campus either. And so, I think the three LE that we've announced—the platform that we're building—has actually created a lot of good kind of reputational credibility out there, and we're having a lot of inbound. And as we think about M&A...
Speaker #5: I believe in your ability to execute and make this possible. And maybe I'll take some kind of backend economics on those opportunities as you commercialize them.
Speaker #5: So from our perspective is, okay, if we create the value and those are triggers for unlocking value for some of these developers that brought the opportunity, that could be really interesting.
Speaker #5: And so when we think about structuring we really think about like structuring them from a rightway risk perspective for Hut 8 where we believe in our ability to execute and those sellers have to believe in Hut 8's ability as well than the deal works.
Speaker #5: But we're seeing a lot of these opportunities teams are kind of working through them. And I think today what I'm most grateful for is we can get indication around interest on sites a lot faster.
Speaker #5: Than two years ago. We have pretty deep relationships across the counterparties that we've executed leases with in a lot of the counterparties that were at the kind of the finish line when we were looking at other customers for those and tenants for those opportunities as well.
Speaker #5: And so we don't just have relations with the current tenants. We have actually relations with a much broader subset. And we're able to get responses on feedback much more quickly.
Speaker #5: And then the other element that I think has really helped us and we've doubled down into this is we're relatively conservative when we bring opportunities to people.
Speaker #5: Like we tell them exactly all the work that we've done, the risk that we see, anything as a result that's created deeper trust. And I think in this business, trust is paramount.
Speaker #5: Do people trust that you're giving all the information to them very transparently? Are you trying to sell them build a partnership with them? And as we think about these relationships, we think about the next 5, 10 plus years.
Brokers and bankers know we're not a firm that will necessarily pay the highest dollar upfront to take all the the risk and we're comfortable with those opportunities going to other developers. But come to us and say, you know what, I'll take RightWay risk. I believe in your ability to execute and make this possible and maybe I'll take some kind of back in economics on those opportunities as you commercialize them. So, from our perspective is okay, if we create the value and those are triggers for a mocking value, for some of these developers that brought the opportunity that could be really interesting. And so, when we think about structuring, um, we really think about like structuring them from a right way, risk perspective for Hut 8, where we believe in our ability to execute and those sellers have to believe in how they ability, as well as in the deal Works. Um, and so, but we're seeing a lot of these opportunities teams are kind of working through them. And I, I think today what I'm most grateful for is, we can get indication around interest on sites a lot faster. Than 2 years ago, we had a pretty deep relationships across the counterparties that we've executed leases with and a lot of the
Speaker #5: And so we're never trying to sell any given opportunity. We're trying to work with them as partners and say, hey, this is the opportunity.
Speaker #5: This is interesting for you. This is the thing that we think are good. These are the things that we think may not be as good.
Speaker #5: Let's talk through those subset of different points. And so as a result, M&A has become really interesting because our ability to feed back quickly to be able to kill or drive deals forward has allowed us to really focus on the right opportunities.
Counterparties that were at the kind of the, uh, Finish Line when we were looking at, uh, other customers for those in tenants for those opportunities, as well. And so, we don't just have relationships with the current tenants we have, we have actually relations with the much broader subset and we're able to get responses on, uh, feedback much more quickly. And then the other element that I think has
Speaker #3: Super helpful. Thank you for taking my questions.
Speaker #5: Thank you.
Speaker #2: Our next question will come from the line of George Sutton with Cry Callum. Please go ahead.
Speaker #6: Thank you. Asher, during your Q&A, you talked about existing customers that have the right to new megawatts. I wanted to make sure I understood that in the context of that discussion you were talking about M&A.
Speaker #6: Are you operating on behalf of some of your customers relatively these M&A opportunities and going to market that way? Just wanted to be clear about that.
Speaker #5: No. So when we think about some of the kind of ROFOs we have in place, it's they get a first look at some of these opportunities.
Really helped us and we've doubled down into this is we're relatively conservative when we bring opportunities to people like we tell them exactly all the work that we've done the risk that we see anything, as a result that's created deeper trust and and I think in this business, trust is Paramount, do people trust that you're giving all the information to them very transparently. Are you trying to sell them all on a deal? Or are you trying to kind of build a partnership with them? And as we think about these relationships, we think about the next 5 10 plus years. And so we're never trying to sell any given opportunity. We're trying to work with them as partners and say, hey this is the opportunity. This is interesting for you. This is the thing that we think are good. These are the things that we think may not be as good. Let's, let's talk through those those subsets of of different points. And so as a result m&as become really interesting because our ability to feed back quickly, to be able to kill or drive deals forward. Um, has allowed us to really focus, uh, on the right opportunities.
Speaker #5: And they get to kind of say if they want them or not for the opportunities. But as we think about kind of the subset of tenants, I mean, in my mind, like six plus tenants were very, very close with.
Super helpful. Thank you for taking my questions. Thank you.
Our next question will come from the line of George Sutton with Craig Callum. Please go ahead.
Speaker #5: There's not that many in the grand scheme of things. But a lot of kind of these opportunities markets, it's still very similar. We're not going in blind.
Speaker #5: We're going in with two to three people in mind. And we get responses from them within days, not weeks or longer. And we kind of know what people are looking for.
Speaker #5: We have a very active dialog. And so as we look at M&A opportunities, we're able to understand what tenants might have interest in that.
Thank you. Um Asher during your Q&A you talked about uh existing customers uh that have the right to new megawatts uh I wanted to make sure I understood that in the context of that discussion you were talking about. M&a, are you operating on behalf of some of your customers relatively demanding opportunities and going to Market that way? Just wanted to be clear about that.
Speaker #5: Is it a real demand signal? And we know exactly the criteria that matter to them. And so overall, feel very good on the demand side of the equation and now finding the right opportunities that we can execute on well that is good kind of dedication of bandwidth and resources and the economic structures work as well.
Speaker #5: And so from M&A, I think a lot of kind of how historically those opportunities would have worked is and that's why we didn't really do much of it is you would have to take kind of a directional bet that you believed that it would work.
Speaker #5: And when we think about taking that directional bet, we're much more comfortable with greenfield because the cost basis is so much lower. But two things have changed in the recent kind of year, year and a half.
Speaker #5: One, is that we are actually able to get that demand signal. And if we ever have to put capital at risk, we think we can align that commitment from the tenant with the capital at risk.
No. Uh, so when we think about some of the kind of rofos we have in place, it's they get a first. Look at some of these opportunities and they get to kind of say, if they want them or not for for the opportunities. But as we think about kind of the subset of tenants, I mean, in my mind, like, 6 plus 10 is we're very, very close with. There's not that many in, in, in the grand scheme of things. But, uh, a lot of kind of these opportunities markets, it's still very similar. We're not going in blind. We're going in with 2 to 3 people in mind and we get responses from them within days not weeks or or longer, and we kind of know what people are looking for. We have a very active dialogue and so as we look at m&a opportunities, we're able to understand what
Speaker #5: So we're not actually putting any capital at risk. And two is we actually have many more developers that say, you know what, Hut 8 is a proven and trusted brand and we believe in your ability to execute.
Speaker #5: So we're actually willing to take back into economics on you executing rather than you having to put up the development capital. And they also know how we operate and it's kind of off the table if they're expecting a big payday without us actually commercializing anything.
Speaker #6: Thanks for the clarity.
Speaker #2: Our next question will come from the line of Joe Vassey with Canaccord. Please go ahead. Joe, you might be on mute. Our next question will come from the line of Brian Dobson with Clear Street Equity Research.
Speaker #2: Please go ahead.
Speaker #7: Hey, thanks so much for taking my question. So at the risk of beating a dead horse, regarding this statement from Governor Abbott, do you think that this might help wash out some of the weaker players in the queue for ERCOT and favor some of the more established players like yourself?
And it's might have interest in that. Is it a real demand signal and we know exactly the criteria that that matter to them. And so overall feel very good on demand side of the equation and now finding the right opportunities that we can execute on. Well, that is good, kind of dedication of bandwidth and resources and the economic structures work as well. And so from m&a, I I think a lot of kind of how historically those opportunities would have worked is and that's why we didn't really do much of it is you would have to take kind of a directional bet that you believed that it would work and when we think about taking that directional bet we're much more comfortable with green green fields because the cost basis is so much lower. But 2 things have changed in in the recent kind of year year and a half 1 is that we are actually able to get that demand signal. And if we ever have to look Capital At Risk, we think we can outline that commitment from the tenant with the capital at risk. So we're not actually putting any Capital at risk and 2 is, we actually have many more developers that say, you know, what, how did is a proven and trusted brand and
Speaker #5: I think a lot of these different initiatives are doing exactly that, right? As we speaking about kind of the M&A piece, we have so much noise out there and we're Hut 8.
Of off the table, if they're expecting a big payday without us actually commercializing anything.
Thanks for the clarity.
Speaker #5: We're not even ERCOT getting all of these requests to get submissions and approvals. And I think a lot of that noise scares people, right?
Our next question will come from the line of Joe Vafi with Canaccord. Please go ahead.
Speaker #5: Because the true numbers of development are not actually the numbers that these utilities are getting. Those are a lot of people kind of speculatively spending tens of thousand dollars putting an interconnection and putting a land option in saying, all right, I'm going to try to go sell this to the likes of a Hut 8.
Joe, you might be on mute.
Our next question will come from the line of Brian Dobson with Clear Street Equity Research. Please go ahead.
Speaker #5: And so I think it does clear up a lot of the noise within the system. And when you think about development, it increases the muscles of how do you develop well?
Speaker #5: I think at the end of the day, it is important that as we invest into these facilities and they generate great cash, those campuses are great partners within the communities that they operate within.
Hey, thanks so much for taking my question. Um, so at the risk of beating a dead horse regarding this, uh, statement from Governor Abbott. You know, do do you think that this might help wash out some of the weaker players in the queue for aircot and favor? Some of the more established players like yourself?
I think a lot of these,
Speaker #5: And this kind of mindset, I think, runs pretty deep within the culture of the company. The first site that we ever built and started was actually a former Dupont Sodium Smelter in Niagara Falls, New York.
Speaker #5: It was a 50 megawatt substation there. It was a brownfield campus. We went and we retrofitted that site and turned it into a Bitcoin mine.
Speaker #5: But when we built those, a lot of the people we hired, their parents and their grandparents worked in the Dupont factory. And that factory was kind of a core impact to that community.
Speaker #5: And it really, really made a profound impact on the people within that community. And so I think as we develop these large infrastructure assets and these data centers, it's really important to think about the impact on the communities and how do we make sure we're building alongside those.
Different initiatives are doing exactly that, right? As as, as we like, speaking about, kind of them at apiece. We have so much noise out there. And we're Hut 8, we're not even are caught, getting all these requests to get submissions and and and approvals and I and I think a lot of that noise scares people, right? Because the true numbers of development are not actually the numbers that these utilities are getting. Those are a lot of people kind of speculatively spending tens of thousands of dollars putting in interconnection and putting a lane option in saying. All right I'm going to try to go sell this to the likes of a hot date. And so I think it does clear up a lot of the Noise Within the system. And when you think about development like it it increases the muscle of. How do you
Speaker #5: And I think a lot of the companies that are willing to invest into thinking in that way and invest into the time into talking with these communities are usually kind of platforms that are more robust, that have more scale, right?
Speaker #5: If we think about where we were five years ago and we were a much smaller development shop, we didn't necessarily have the resources to do all of those things.
Speaker #5: And today we do. And so I think some of the stuff that's coming out will kind of make it better for folks who have a more robust development ability.
Speaker #5: But I think everybody will have to navigate through kind of these different processes as they kind of become more mature.
Speaker #4: Yeah. And if I may just one follow-up, there's some concern in the broader market about capex spending from the hyperscalers. Is there anything in your conversations that would lead you to believe that they're taking the foot off the gas in terms of data center development?
Developed. Well, I think at the end of the day, it is important that as we invest into these facilities and they generate great cache. Those campuses are great Partners within the communities that they operate within and this kind of mindset, I think like runs pretty deep within the culture of the company. The first site that we ever built and started was actually a former dupin, sodium smelter, in Niagara Falls, New York, there's a 50 megawatt substation. There, there's a Brownfield campus. We went and we retrofitted that site and turned it into a bit Bitcoin, mined. But when we built those, a lot of the people, we hired their parents and their grandparents worked in this Dupont Factory and they like that factory was kind of like core impact to that community. And it really, really made a profound impact on the people within that community. And so I think as we develop these large infrastructure assets and these data centers, it's really important to think about the impact on the communities and how do we make sure we're we're building alongside those and I think
Speaker #5: Demand is robust from all the conversations we've had. Demand is real. Demand is there. Everyone wants capacity yesterday as has been the story for the last two years since we have really kind of dove deep into these relationships.
Speaker #5: I mean, I'm out of the office most weeks meeting with tenants, showing campuses that we have, and so forth. Demand is robust. And I think part of that is because and Sean mentioned this similar to the kind of the financing side of the equation.
I think a lot of the companies that are willing to invest into thinking, in that way and invest into the time and to talking with these communities or usually kind of platforms that are more robust that had more that have more scale, right? If we think about where we were 5 years ago and we were much smaller development shop. We didn't necessarily have the resources to do all of those things and today we do and so I I think some of the stuff that's coming out will um, kind of
Speaker #5: We've built more reputation, more trust. And so frankly, I'm not sure if demand is more robust now than it was 10 years ago. But for Hut 8, it definitely is.
It may be easier for folks who have a more robust development ability, but I think everybody will have to navigate through these different processes as they become more mature.
Speaker #5: And so I think there's a little bit of bias in these perspectives because I think we've built more kind of reputational credibility alongside tenants, financing counterparties, and so forth.
Yeah, and if I may, just one follow-up. You know, there's some concern in the broader market about capex spending from the hyperscalers. Is there anything in your conversations that would lead you to believe that they're taking the foot off the gas in terms of data center development?
Speaker #5: And today we're kind of right in the centerfold of all of this. And see it firsthanded and from our perspective today, demand is real.
Speaker #5: Demand is there. Every tenant will have been flow in terms of their demand, right? Some folks, they'll have a lot of capacity. Their CFO will say, hey, let's pause for a second.
Speaker #5: I'll pause for a month or two. And then it turns back up and we've seen that same story happen across the last two years.
Speaker #5: But overall, as kind of a market, we're seeing robust demand and we're seeing anyone who's paused turn back on and kind of that cycle up and flow.
Speaker #4: Yeah, excellent. Thanks very much.
Speaker #5: Thank you.
Speaker #2: Our next question will come from the line of Patrick Moley with Piper Sandler. Please go ahead.
Speaker #6: Hey, good morning. This is Will Conson for Patrick Moley. Thanks for the question. The specifically, as it relates to your gigawatt diligence agreement with Anthropic, could you give us an update on your talks and relationship with the company?
Speaker #6: And then where this sits on your list of priorities relative to maybe the 50 megawatts under development, Riverbank expansion, or the movement of any number of megawatts into development from exclusivity or diligence?
Demand is robust from from all the conversations we've had, uh, demand is real demand, is there? Uh, everyone wants capacity. Yesterday as has been the story for the last 2 years, since we have really, kind of, uh, Dove deep into these relationships. I mean, I'm out of the office most weeks, uh, I mean with tenants showing campuses that we have and so forth. Uh, the man is robots and I think part of that is because in Sean mentioned this, similar to the kind of the financing side of the equation, we've built more reputation, more trust and so like, frankly, I'm not sure if demand is more robust now than it was 10 years ago. But for Hut 8, it definitely is. And so I think there there's a little bit of bias in in these perspectives because I think we've built more kind of reputational credibility alongside tenants financing counterparties and so forth. And today, we're kind of right in the center for the wall of this and, and see it, uh, first handed. And, and from our perspective, today, demand is real demand. Is there every tenant? Well, I've been flow in terms of their demand, right? Something
Speaker #6: Thank you.
Speaker #5: Thanks for the question. Anthropic is a great kind of example of a customer that needs a lot of demand and capacity to fulfill their needs.
Folks, they'll have a lot of capacity, their CFO will say. Hey, let's pause for a second. I'll pause for a month or 2 and then it turns back up and we've seen that same story happen across the last 2 years. But overall, I was kind of a market. We're seeing robust demand, we're seeing anyone who's caused turned back on and kind of that cycle up and Flow.
Speaker #5: And so we work very closely with them, have a good relation with them. Obviously, we're building the campus in Riverbend for them. And so overall, look to continue to do work and expand with them as well.
Yeah, excellent. Thanks very much.
Thank you.
Our next question will come from the line of Patrick moly with Piper Sandler. Please go ahead.
Speaker #5: But we feel very good with the relation that we built with them. And have some kind of down the farer opportunities that we're in discussions with them and have some more novel fun opportunities that we're in discussion with them as well.
Specifically, as it relates to your gigawatt diligence agreement with Anthropic, could you give us an update on your talks and relationship with the company, and then where this sits on your list of priorities relative to maybe the 50 megawatts?
Speaker #2: Our next question will come from the line of Chris Brendler with Rosenblatt Securities. Please go ahead.
Speaker #7: Hey, thanks for squeezing me in and congrats on all the progress. Quick question. Unrelated to the data center business, maybe give us an update on your ownership and current position in American Bitcoin.
Under development. Riverbank—Riverbank expansion, or the movement of any number of megawatts into development from exclusivity or diligence? Thank you.
Speaker #7: Just give them some of the developments there. And then how you're thinking about your very large Bitcoin stack, any changes in your thought process on holding a lot of Bitcoin in your balance sheet.
Speaker #7: Thanks.
Speaker #5: Thanks for the question, Chris. We own roughly around 54% of American Bitcoin today. American Bitcoin just had their earnings yesterday. And they had a really great operating year.
Thanks for the question and throughout the gives a great kind of example, of a customer that needs a lot of demand and capacity to fulfill their needs. And so we work very closely with them. Have a good relation with them, obviously, we're building the campus in Riverbend for them. And so overall, uh look to continue to do work in and expand with them as well. But uh we feel very good with the relationship that we built with them and have some kind of down the fair opportunities that were in discussions with them and have some more novel uh, fun opportunities that were in discussion with them as well.
Speaker #5: Most amount of Bitcoin that was ever mined, even though Bitcoin was down. I think Bitcoin was down double digits over the last call at one or two quarters.
Speaker #5: And margins only decreased single digit percentage points. Still roughly around 50% gross margins. And so overall, the operating business is strong. And stronger than it's ever been.
Our next question will come from the line of Chris brendler with Rosen Blatt Securities. Please go ahead.
Speaker #5: Overall market sentiment and liquidity in Bitcoin is obviously not. And so the stock price hasn't done as well. I actually think for a lot of the analysts on the call here today, when they first joined the Hut 8 story after the merger about two years ago, American Bitcoin is in a really similar spot, right?
Thanks for squeezing me in and congrats on all the progress. Uh, quick question, um, unrelated to the data center business, um, maybe give us an update, uh, your ownership and, and current position in American Bitcoin. Um, just give him, uh, some of the developments there and then, uh, how you're thinking about your your silver very large Bitcoin,
Speaker #5: The underlying business is actually strong. There's a lot less attention in the market just isn't there. And so I think overall as we're thinking about the opportunity, everything from an operational perspective is continuing to operate.
Back any, any changes in your thought process on holding a lot of Bitcoin or balance sheet? Thanks.
Speaker #5: I kind of shared this tweet the other day that the markets are a weighing game in the long term and the voting game in the short term.
Speaker #5: And all you can control is how well you build the business to be really, really heavy and kind of create a lot of intrinsic value.
Speaker #5: And so overall, business is strong there. As we think about Hut 8's balance sheet, I think obviously as we continue to grow and continue to become an energy infrastructure company, Bitcoin is a nice asset to have on the balance sheet.
Speaker #5: If there's opportunistic moments where we would sell that Bitcoin and fund different initiatives, we will. Those opportunities haven't come up yet. We've been able to finance these projects and we've been able to not have to raise equity in recent time in order to do any of that stuff.
Speaker #5: But Bitcoin on Hut 8's balance sheet is just like another asset, just like cash we view it. There's no need to hold it on our balance sheet.
Thanks for the question, Chris, we owned roughly around 54% of American Bitcoin today, uh, American Bitcoin, just had their earnings yesterday and they had a really great opportunity here. Most amount of Bitcoin that was ever mined, even though Bitcoin was down, I think Bitcoin was down double digits over the last call at 1 or 2 quarters and margins. Only decreased single digit percentage points still roughly around 50% gross margins. And so overall, the operating business is strong um and stronger than it's ever been overall Market sentiment and liquidity in Bitcoin is obviously not and so. So the stock price hasn't done done as well. I actually think for a lot of the analysts on the call here today, um, when they first joined the Hutt 8 story after the merger about 2 years ago, American Bitcoin is in a really similar spot, right? The underlying business, um, is actually strong. There's a lot less attention in the market, just isn't there? And so I think overall, it's worth thinking about the opportunity. Uh, everything from an operational perspective is contingent to operate, I kind of share this, uh, tweet the other day, that the markets are
Speaker #5: And then all of our exposure on Bitcoin will be through American Bitcoin.
Speaker #7: Okay, great. Thanks so much and congrats again.
Speaker #5: Thank you.
Speaker #2: Our next question will come from the line of Nick Giles with B. Riley Securities. Please go ahead.
Speaker #8: Yeah, thanks. There's a lot of dialogue around upward pressure on build cost. And so I was curious, how much of your CapEx is already secured on your contracted capacity or are there any further contracts to negotiate with your suppliers?
Are weighing game in the long term and the voting game in the short term and all you can control is how well you build. Um, the business to be really, really heavy and kind of create a lot of intrinsic value. And so overall business is strong there as we think, about headaches, balance sheet. I think obviously as we continue to grow and continue to become uh an energy infrastructure company, Bitcoin is a nice asset to have on the balance sheet. If there's
Speaker #8: And then can you speak to how your procurement strategy has shifted as supply chains tighten? Thank you.
Speaker #5: Thanks for the question. All building one and build sorry, the first two buildings, so the first building at each campus are fully contracted, 100% of long lead time buy-ins are contracted.
Opportunistic moments where we would sell that Bitcoin and fund different initiatives. We will, uh, those opportunities haven't come up yet, we've been able to finance these projects and we've been able, uh, to not have to raise, uh, equity in, in, in recent, uh, time in order to do any of that stuff. But, uh, Bitcoin on hot. A balance sheet is just like another asset just like cash. We view it. There's no, uh, need to hold it on our balance sheet. Uh, and then our all of our exposure on on bitcoin will be through American Bitcoin.
Speaker #5: GC, subcontractors, pricing is fixed. And that aligns with obviously the financings that we've done. Building two was cheaper than building one. And now as we're finalizing building three, we expect it to be cheaper than building two.
Great. Great. Thanks so much and thanks again.
Thank you.
Our next question will come from the line of Nick Giles with B. Riley Securities. Please go ahead.
Speaker #5: And so for us, interestingly enough, I think we just continue to push what we believe is possible. I think these things can be built way more efficiently, whether it be from a design, construction, supply chain perspective, we're using obviously some of the best vendors in the world.
Speaker #5: And then from a kind of allocation of capacity, we focus on building partnerships, not on just one-off purchases. And as a result, we actually haven't seen a big impact when it comes to lead times, capacity and allocation and queues.
Yeah, thanks. Um, you know, there's a lot of dialogue around upward pressure on build costs, and so I was curious, you know, how much of your capex is already secured on your contracted capacity? Or are there any further contracts to negotiate with your suppliers? And then, can you just speak to how your procurement strategy has shifted as supply chains tighten? Thank you.
Thanks for the question.
Speaker #5: At the end of the day, it's all kind of preference and priority. And with majority of suppliers that we work with, I mean, I'm directly connected at the CEO level with all of these companies.
Speaker #5: And companies that we don't believe we can build a deep relationship with, we don't engage deeply with. But we're talking about multinational companies that are all very, very excited by what we're doing.
All the building 1 and build. Sorry, the first 2 buildings. So, the first building on each campus are fully contracted, 100% of long lead time. Bye are contracted GC soft contractors. Pricing is is is fixed and that aligns with obviously, the financing that we've done building 2 was cheaper than building 1. And now, as we're finalizing building 3, we expect it to be cheaper than building.
Speaker #5: And the way we're thinking about innovation as well. It's not just we're buying equipment for this campus. We're talking about, hey, how do we push the frontier of how do we think about these developments?
Speaker #5: How do we think about integrating all of your equipment into a skitted design? So overall, I know there's kind of this talk and this noise around supply chain and costs, but at Hut, we're hyper-focused on being able to drive those down and build more efficiently.
You and so for us, interestingly enough, uh I think we just continue to push like what we believe is possible. I think these things can be built way more efficiently. Whether it be from a design construction, supply chain perspective, we're using obviously some of the best vendors in the world, um and and then from a kind of allocation of capacity,
Speaker #5: That's kind of core. And so when we think about what it takes to be successful, we obviously need amazing financing. We've talked about a lot about that today.
Speaker #5: And continue to challenge what we do and continue to improve on structuring in terms. But we do the same exact thing on the other side of the house from an operations design, procurement perspective.
Purchases. And as a result, we actually haven't seen a big impact when it comes to lead times capacity and allocation and cues. At the end of the day, it's all kind of preference and priority and with majority of suppliers that we work with. I mean, I'm directly connected at the CEO level with all of these companies and like
Speaker #5: And so this goes more overall to kind of the thesis and principle and values in which we operate. But as of today, we're looking to continue to improve on the builds and the cost of this infrastructure.
Speaker #5: We want to improve on time to build. We want to improve on cost to build, building after building.
Speaker #8: Super helpful, Asher. I appreciate the color.
Speaker #5: Thank you.
Speaker #2: Our next question comes from the line of Alan Klee with Maxim Group. Please go ahead.
Speaker #9: Good morning. On a site level basis for the digital infrastructure segment, as the leases fully scale up, how do you think about gross margins and adjusted EBITDA margins?
Speaker #5: You'll see those increase. And so Sean will share some of the numbers as well on a net debt basis. But if we think about roughly 27 billion dollars of contracted revenue, that's about 1.7 billion dollars per year of cash flow that comes in.
Companies that we don't believe we can build a deep relationship with. We don't engage deeply with, but we're talking about multinational companies that are all very, very excited by what we're doing. And the way we're thinking about Innovation as well, it's not just, we're buying equipment for this campus. We're talking about, hey, how do we push the frontier of how do we think about these developments? How do we think about integrating all of your equipment into a skidded design? Uh, so overall, I know there's kind of this talk in this noise around supply chain and costs. But at, at Hut, we're hyper focused on being able to drive those down and build more efficiently uh, that that's kind of core. And so, when we think about what it takes to be successful, we obviously need amazing financing. We've talked about a lot, a lot about that today, and continue to challenge what we do and continue to improve on on structuring, and in terms, but we do the same exact thing on the other side of the house. From an operations design, procurement perspective. And so this goes more overall to like kind of the thesis and principles and values in which we operate. Uh, but
Speaker #5: And because these are triple net leases, all the costs in running those facilities are actually passed through to the tenants, right? And so the majority of that 1.75 drops to the bottom line.
As of today, we're looking to continue to improve on the builds and the cost of this infrastructure. We want to improve on time to build, want to improve on cost to build building after building.
Super helpful, Astra. I appreciate the color.
Thank you.
Speaker #5: That's why we showed kind of a 99% NOI margin. And so really your costs on that capital is just servicing principal and interest on the bonds that we have outstanding.
Our next question comes from the line of Alan, CLE with Maxim group, please go ahead.
Speaker #5: Sean, anything to add there?
Speaker #3: No, I think that's right, right? If you think about the actual margins on the project, we've had 9,900% basically margins on the projects. And if you look at that's going to be kind of consistent going forward as long as we have triple net leases.
Good morning. Um, on a site level basis for the digital infrastructure segment as the lease is fully scale up, how do you think about gross margins and adjusted? EBA margins.
Speaker #3: I think we're going to stay away from guidance. For the future years, but the other thing I would say is we're going to continue to have a very keen eye towards what our SG&A is.
Speaker #3: And making sure that we're investing in maintenance and, excuse me, growth and not just maintenance. As Asher says a lot, we could run the existing company with a lot fewer people, a lot fewer expenses.
Speaker #3: And so we're very we're going to maintain a keen eye on that and make sure that we don't have as Asher mentioned before, SG&A creep.
Speaker #3: And so as you think about overall margins for the company, it's something we're very focused on, both at the lease level and at the corporate level.
You'll see those increase and so Sean will share some of the numbers uh as well and then that they that basis. But if we look think about the about roughly 27 billion dollars of contracted Revenue, that's about 1.7 billion dollars per year of cash flow that comes in and because these are triple net leases all the costs in running, those facilities are actually passed through to the tenant, right? And so the majority of that 1.75 drops to the bottom line, that's why we showed kind of a 99 percent, no margin and it's a really your cost on that capital is just servicing uh principle and and and interest on on the bonds that we have outstanding. Try anything to add there.
Speaker #5: And when we think about I mean, when I look out into the office, we have here today, the majority of people in the office know that their job is for net new growth.
No, I think that's right, right? And if you think about the actual margins on the project, they're, you know, we've had 99, 100 percent basically margins on the projects. And if you look at, um,
Speaker #5: If the job was, let's run this public company, let's run these three buildings and data center leases that we've announced, we can have significantly less people because more than 50% of the people out here are focused on net new growth.
Speaker #5: And not kind of keeping the lights on. And that's really, really important. And so look, I think from a cash flow perspective, it's relatively easy to model you guys know what kind of the least economics are.
Speaker #5: The two bonds that we've announced, you kind of can look at what those amortization schedules are. On those bonds as well. And then you take a prediction on SG&A and that kind of gets you your net cash flow.
Speaker #9: Thank you.
That's going to be kind of consistent going forward. As long as you have triple net leases. I think we're going to stay away from guidance, um, for the future years. But you know, the other thing I would say is we're going to continue to have a, a very, uh, you know, Keen Eye towards what our sgna is and making sure that we're investing in maintenance and, or excuse me growth and not just maintenance, uh, as Asher. Says a lot, we could, you know, run the run the existing company with a lot fewer people a lot fewer expenses and so we're very uh we're going to maintain a key Keen Eye on that and make sure that we don't have as Asher mentioned before sgna creep. And so as you think about overall margins for the company, uh it's it's something we're very focused on both at the lease level and at the corporate level,
When we think about, I mean, when I looked out into the office, we have here today, the majority of people in the office know that their job is for net, New Growth. If the job was, let's run this public company. Let's run these 3, uh, buildings in data center. Leases that we've announced we can have significantly less people, uh, because more than 50% of the people out, here are focused on net New Growth, um, and not kind of keeping the lights on and that's, that's really, really important. And so it looks I think from a cash flow perspective is relatively easy to model, you guys know what, kind of the lease economics are, um, the 2 B that we've announced, you kind of can look at what those advertising schedules are on, on those.
Bonds as well. And then you take a prediction on sgna and that kind of gets you your net, uh, net cash flow.
Thank you.
And this concludes our question and answer session, and our call today. Thank you all for joining.
