Cipher Mining Inc. Price & Performance (CIFR)

Before we start, I'd like to remind you that the following discussion as well as our press release and presentation contain forward looking statements. Including, but not limited to Cypress financial outlook, business plans and objectives, and other future events and developments. Including statements about the market potential of our business operations, potential competition, our goals and strategies. Forward looking statements and risks in this conference call, including responses to your questions, are based on current expectations as of today. Cipher assumes no obligation to update or revise them, whether as a result of new Additionally, the following discussion may contain non GAAP financial measures. We may use non GAAP measures to describe the way in which we manage and operate our business. We reconcile non GAAP measures to the mostly directly comparable GAAP measures. And you are encouraged to examine those reconciliations, which are filed at the end of our earnings release issued earlier this morning. I will now turn the call over to our CEO, Tyler Page.

Tyler? Thanks, Courtney. Hello. This is Tyler Page, CEO of Cipher Mining.

Thank you very much for joining our fourth quarter and full year 2024 business update.

We had an extremely productive fourth quarter at Cipher.

As we continued the on time execution of the growth and expansion plans I'd like to begin by substantiating that growth with some key indicators that underscore our immense progress and reflect the successful execution of previously discussed strategic initiatives. In the fourth quarter, we produced revenues of $42,000,000 and GAAP net earnings of $18,000,000 Our adjusted earnings were even stronger. We produced adjusted earnings of $51,000,000 for the quarter, up $54,000,000 from the prior quarter. We are very proud of our fourth quarter numbers as they demonstrate our success success in executing on our vision of being a low cost producer of bitcoin. We believe that the relative advantages of being a low cost producer of bitcoin will only increase going forward. Our key growth achievement in the fourth quarter was the successful upgrade of our Odessa fleet, which grew our total self mining hash rate to 13.5 exa hashes per second. We expect to continue to build on this growth in 2025. With our hash rate projected to reach at least 23 exahashes per second in the third quarter of this year. This acceleration in 2025 will be driven by the completion of Phase one of our 300 megawatt Black Pearl data center, which we will discuss in further detail Phase one completion at Black Pearl will substantially expand our current operating capacity of three twenty seven megawatts and continue to improve our already impressive fleet wide efficiency of eight Lastly, for those newer to the Cipher story, we are widely recognized for our highly competitive all in weighted average power price of just $0.027 per kilowatt hour.

As electricity accounts for the large majority of our operating costs, our low price is a key Cipher. Of our strong and sustainable unit economics. Ed will give a more detailed breakdown of our numbers during his portion of the call. So I'd like to shift the focus now to an update on our anticipated Over the last two quarters, our business model has rapidly evolved from being solely a Bitcoin miner to being a developer of HPC data centers with a natural built in off take via Bitcoin mining for prospective sites. Our current primary intent for our pipeline of sites is to develop them as HPC data centers. We believe that large scale interconnects available in the next few years are exceedingly rare and valuable. And against that backdrop, we have continued to acquire assets and focus more time on this business. We are excited to announce today that last week we acquired three thirty seven more acres of land at our Barber Lake site and also signed a memorandum of understanding to potentially expand the scope of the facility. This expansion would include the build out of an additional 500 megawatt data center adjacent to the current 300 megawatt site.

This would result in a total potential capacity of 800 megawatts at Barber Lake, with the additional 500 megawatts of capacity expected to be available in '20 With these deals, we believe the Barber Lake site development opportunity grown much larger than we previously believed and our discussions with potential tenants and financing partners are evolving to reflect this much larger opportunity as we work to finalize the best possible deal for While HPC is our focus at new sites, we are confident that we can also use our proven expertise in managing power curtailment and producing best in class electricity costs to put the sites to profitable use as Bitcoin mining sites as an alternative. Our Bitcoin mining business remains robust. And we have continued to work around the clock to develop phase one of Black Pearl, which remains on track to energize in the second quarter of this year. We continue to evaluate our options for the remaining 150 megawatts of capacity at the site. Including the potential to develop Phase two for HPC hosting or Bitcoin mining. We believe that we have found a truly unique niche by opportunistically investing in greenfield development Cipher, Knowing that we can build and operate HPC data centers, [indiscernible] If a high quality HPC tenant fails to materialize, we profitable use.

Our site sourcing team remained busy in the fourth quarter acquiring Stingray, a 100 megawatt data center site in West Texas. We will discuss in more depth later on the call. Cipher can maximize the value of our now 2.8 gigawatt development pipeline with the deep expertise of our construction and operations team. Our construction team built over 600 megawatts of hyperscaler data centers before joining Cipher, has deep connections throughout the supply chain and can innovate as the data center industry continues to evolve rapidly. We are extremely proud of our team. Which is built for scale and provides a huge competitive advantage in our ongoing discussions with potential tenants. On Slide five, we provide a portfolio breakdown of our existing megawatt capacity and the expected timeline for scaling our pipeline of managed power This pipeline is the culmination of the extensive work we have done to source attractive new data center sites for future development. Based on feedback from ongoing conversations with hyperscalers, we are confident that our pipeline with access to adequate land and fiber will allow us to be a market leader in this space. As a reminder, we have historically acquired sites that have already received interconnection approvals, but we recently expanded our scope By getting involved earlier in the development timeline, we avoid broader bidding competitions and source valuable sites that most of our competitors cannot, while improving long term visibility for our supply chain and construction functions.

Our options to acquire the McKeska, Milsing and McLennan sites upon interconnection approval are prime examples of this approach. And we anticipate those sites being ready to energize in 2027. In addition to those purchase options, we also own a 70 megawatt site called Revali scheduled to energize in 2027. With the possibility for expansion. The capacity of these four twenty twenty seven sites [indiscernible] our nearer term energizations of Black Pearl, Barber Lake and Stingray, are all reflected in the chart Notably, all of our sites sit at the center of the major trends we see influencing the data center space in the coming years. The meteoric growth of increasingly larger AI related HPC data and continued adoption of the Bitcoin network and related value of Bitcoin mining as a flexible load that helps balance power grids. Again, we believe large scale interconnections available in the next three years are exceedingly rare assets and we are aggressively positioning the company to take advantage of anticipated demand. We All of our pipeline sites have the necessary characteristics for development of HPC data centers. But also sit in locations with demand response programs that would allow us to monetize the flexibility of curtailment used in Bitcoin mining operations.

With these sites, we have a lot of optionality. Especially given their staggered energizations. Which is exactly where we like to be positioned. In front of trends with the potential for massive growth. While it is too early to predict the exact mix of our business lines across sites, Bitcoin mining and HPC infrastructure are complementary in that they have different risk and payoff profiles and even have the potential to converge. With our robust pipeline, we think Cipher is uniquely positioned to be best in class in both verticals and our strategy will be guided by our intent to maximize shareholder value over time as we develop our future data centers at these sites. While our development pipeline reflects exciting growth opportunities, our existing operations continue to serve as a strong foundation for our success. Across our sites in 2024, we paid an average all in electricity cost of roughly $20,281 per bitcoin produced at our data centers. We are very proud of this number. Please note that when we talk about all in electricity costs, we mean the total cost to deliver electricity to our mining rigs. So our numbers include all taxes, transmission and other charges and our low numbers dramatically demonstrate our competitive advantage.

On the left side of the slide, we show an overview of our production split across Odessa, and our JV data centers along with our all in electricity cost per bitcoin at the sites in 2024. The chart on the right side of the slide illustrates our rapid expansion in mining capacity recently and going forward. As you can see, we expanded from 9.3 exa hashes per second to 13.5 exajas per second today. And currently expect to produce at least 23 exa hashes per second in the second half 2025 when we bring Phase one of Black Pearl online. Next, we will review production by site Slide eight has a production summary for our Odessa facility. Odessa is the most significant part of our portfolio as it currently represents approximately 87% of our bitcoin production in January. As we've noted before, Odessa set a new industry benchmark as the first Bitcoin mining data center to to receive the Uptime Institute's stamp of approval for management and operations. This wholly owned facility operates under a five year fixed price power purchase agreement. Securing some of the most competitive electricity rates in the industry and reinforcing our cost advantage and operational strength.

As we mentioned earlier in the call, we are very proud of the successful and on time completion of our fleet upgrade at Odessa. Which raised our operating hash rate improved our fleet efficiency and further strengthened our track record delivering on previously outlined plans. As of January, the current operating hash rate at the site is 11.3 exo hashes per second. Up from 7.1 exo hashes per second before the upgrade. Using the same approximately two zero seven megawatts. Post upgrade Odessa's fleet efficient stands at 17.6 joules per terahash. On this page, we also provide the observed all in electricity cost bitcoin at the site. In January, which was roughly $20,298 This low cost number illustrates the value of the fleet up upgrade as it reflects our first electricity bill for the operations [indiscernible] [indiscernible] As we've mentioned many times on past calls, it is extremely valuable for Cipher to have a cheap fixed price of power available on such a large portion of our portfolio. On Slide nine, we highlight our joint venture data centers of Alborz, Bear and Chief. With the twenty twenty four expansions at each of Bear and Chief, the sites have a total power capacity of 120 megawatts and generate approximately 4.4 gigahertz per second.

We own 49% of the JV sites and our portion recently generated roughly 13% of our overall Bitcoin production. On this page, we also provide the observed all in electricity cost per Bitcoin at the sites in the fourth quarter which was roughly $34,542 As a reminder, both Bear and Chief operate as front of the meter Cipher, so there are expected seasonal fluctuations with their electricity costs.

Now let's turn to an update on our development portfolio. We have segmented the development pipeline into near term growth across Black Pearl and Barber Lake and longer term growth across 2026 and 2027. We are thrilled to share that the construction of Phase one of Black Pearl remains on track to energize in the second Phase one will feature 150 megawatts of air cooled rigs expected to produce over 9.5 gigahertz per second We continue to evaluate our options for the remaining 150 megawatts of capacity at the site. Including the potential to repurpose Phase two of the data center for HPC hosting. Ultimately, our final design at the site will depend on what we think will produce the best outcome for our shareholders. As you can see, delivering such a large data center construction project on time requires coordination of hundreds of workers around the clock. In the last few months, we made significant advancements at the site, including the commencement of point of interconnection construction, the successful manufacturer of the first substation transformer for the site and the near completion of the Phase one building spanning over 100,000 square feet, We couldn't be prouder of our team's ongoing commitment and execution.

Slide 13 gives an overview of our Barber Lake site, which we acquired in Q3 of last year. The site has enormous potential for HPC. Given its immediately available capacity of 300 megawatts and now five eighty seven acres of surrounding land. Plus its already energized substation. As I mentioned earlier in the call, we recently signed a memorandum of understanding to potentially expand the scope of the facility to include an additional 500 megawatt data center adjacent to the current 300 megawatt site. This would result in a total potential capacity of 800 megawatts at Barber Lake. The additional 500 megawatts capacity is expected to be available in 2029. We have already been in discussions for months with multiple potential tenants who are interested in the site given its optimal setup and timeline to availability. We have also been discussing financing options with potential financing partners who are excited to work with us on building an enormous next generation data center at the site. Given our recent work to expand the scope of the data center, we anticipate these discussions will continue to evolve favorably. The opportunity for Cipher's HPC business has gotten much larger in the last few days.

And while it will take time to finalize our path for Barbara Lakes development, we have never been more excited about the commercial Slide 14 outlines our expected growth in 2026. And highlights our new site acquisition in Andrews County, Texas called Stingray. The site purchased in November features 100 megawatts of front of the meter capacity, all necessary regulatory approvals and two fifty acres of land adjacent to the transmission assets. The site is expected to energize in the second quarter of twenty twenty six which complements our 2025 and 2027 energizations. Slide 15 outlines our expected massive growth in 2027 across four sites with 1.6 gigawatts of potential power capacity. Our Reveli site located in Cotulla, Texas is scheduled to energize in 2020 As mentioned, it has been approved for 70 megawatts and we have submitted a request for additional capacity. Based on early discussions with the transmission service provider, we are optimistic that we can expand the site capacity by the time the site is energized. [indiscernible] what we call the three M's for short are pending final approvals for interconnection. We expect the results of approval processes for the sites to be finalized this year. We are targeting approvals for up to 500 megawatts at each site.

In addition to the interconnections, our purchase options on the 3Ms also cover substantial parcels of land at each [indiscernible] The three M's have all the necessary characteristics for development of HPC data centers.

All of our sites expected to energize in 2027 are located further east than our current sites and some sit closer to major metropolitan areas. We have already received early interest in the sites in our conversations with potential tenants and anticipate that Cipher will be in high demand as the calendar continues to roll forward. With our 2.8 gigawatt pipeline, and proven track record of execution, we remain confident in our vision of becoming a best in class data center developer for HPC infrastructure, while remaining best in class in Bitcoin mining. We've consistently demonstrated success in originating the best sites and power deals in bitcoin mining, and we look forward to bringing that expertise to the traditional large scale data center market. Now for a review of our financials I will turn it over to our CFO, [indiscernible] Thank you, Tyler, and hello to everyone on the call.

Before I dive into our financial results, I'd like to remind everyone that today, I will be discussing our performance three month and twelve month periods ending 12/31/2024. 2024 was another successful year for Cipher as we continue to lay the foundation for future growth. We once again demonstrated our ability to execute at a high level highlighted by our Cipher fleet upgrade at Odessa the ongoing construction at Black Pearl, the acquisition of Barbara Lake and as Tyler referenced, continuing to make progress on our HPC initiatives. We also expanded our pipeline of sites securing new opportunities long term strategy. Additionally, we strengthened our operational controls enhanced liquidity management and advanced key infrastructure projects. These efforts position us for an exciting and impact Before I get into the details, I want to take a moment to address significant milestone for Cipher. Our recent pipe investment from SoftBank. As a reminder, in Q1 of this year, SoftBank invested $50,000,000 in Cyphers through the purchase of approximately 10,400,000.0 shares of our common stock. This investment strengthens our ability expand our data center development business. We're excited to welcome SoftBank as an investor and look forward to leveraging this relationship accelerate growth.

Slide seventeen and eighteen give a snapshot in which we provide every quarter of some of our financial metrics on both a sequential and year over year basis. First, on Slide 17, as Tyler stated earlier, we had a strong fourth quarter as our top line revenue grew 75% quarter over quarter increasing from $24,000,000 in Q3 to $42,000,000 in Q4. This strong performance was driven by a couple of key factors including the successful completion of our Odessa mining rig upgrade completed in Q4 and the continued price appreciation of Bitcoin in the quarter. Again, we reported GAAP net earnings of $18,000,000 or earnings came in at $51,000,000 or $0.14 per share. We're extremely proud of these results which we see as a direct result of our team's hard work and our execution particularly in expanding our self mining hash rate during the fourth quarter. Moving to Slide 18. In the fiscal year, we achieved a $24,000,000 increase in revenue compared to 2023. Operating expenses in the current year increased $48,000,000 primarily driven by depreciation and amortization expense which I will provide more detail later in my remarks. Thus, in 2024, we had a GAAP net loss of $45,000,000 a loss per share of $0.14 or a net loss of $0.1 per share in the prior year.

Our adjusted earnings increased by $61,000,000 $107,000,000 dollars versus $46,000,000 in the prior year. This growth drove our adjusted earnings per share from $0.17 in 2023 to $0.33 in 2024. A key driver of success was the significant hash rate expansion. Over the year, hash rate grew by 88% seven point two ex a hash at the end of twenty twenty three, is 13.5 ex of hash at the end of twenty twenty four. As I mentioned earlier, our hash rate growth was driven by a successful fleet upgrade at Odessa where we replaced over 36,000 new mining rigs. This upgrade as well as the bitcoin appreciation during 2024 had a direct and meaningful impact on our revenue underscoring our strong execution and our ability to scale efficiently. Let's move on to Slide 19 and take a deeper look at the numbers. For the fourth quarter, we recorded GAAP net income of $18,000,000 compared to a net loss of $87,000,000 in the prior quarter. As a reminder, last quarter's results were impacted by a large mark to market loss on our PPA driven by a sharp downward shift in the forward curve in the ERCOT market. Whereas this quarter we had a mark to market gain of $11,000,000 For the quarter, we mined four ninety two bit generating $42,000,000 in revenue at an average price of $84,000 per bitcoin.

This compares to $3.96 bitcoin mined in Q3 twenty twenty four at an average price of $61,000 per bitcoin resulting in $24,000,000 in revenue, sequential increase of 75% I would like to point out that our monthly production reports in but also our 49% share from our joint venture data centers that is included in the equity and losses of equity investees line item and the bitcoin equivalent from PowerSales. On a year over year basis, revenues increased 19% primarily driven by Bitcoin price appreciation, as well as the previously mentioned rig upgrades that fuels our hash rate expansion offset by the having event earlier this year. Our fixed price power remains critical factor in maintaining a attractive unit economics. However, in the current quarter, our cost of revenues increased by 21% sequentially. This increase was primarily driven by our strategic decision purchase power from the grid during periods when our power provider curtails our Odessa's When this occurs, our proprietary tech stack analyzes power cost and our unit economics to determine whether purchasing power at the current market rates would yield a net off operating profit for the company. Excluding these instances of drawing power from the grid at higher costs, our cost of revenue remained flat quarter over quarter supported by our fixed price PPA at Odessa.

We'll discuss the quarterly pricing of the PPA more detail later, but its true value is evident in the low cost fixed price power, which is reflected in our cost of revenues.

Now let's shift our focus to operating expenses. Quarter over quarter compensation and benefits increased by $2,000,000 reaching $17,000,000 in Q4 and totaling $61,000,000 for 2024. This represents a 14% increase from the previous quarter and a 6% increase year over year. Throughout the year, we made targeted investments in our team, adding five new employees in Q4 and nine in total for 2024. We remain committed to a strategic opportunistic approach to headcount expansion ensuring that we have the right talent in place to support growth and operational efficiency. Turning to G and A, which includes IT corporate insurance, professional fees, occupancy and other public company costs saw a 4% increase quarter over quarter. On a year over year basis, G and A expenses rose by $5,000,000 reflecting a 17% increase, primarily driven by higher The key contributors to this increase was Sarbanes Oxley compliance requirements and expenses related to strategic growth initiatives. Quarter versus quarter depreciation expense totaled $36,000,000 representing a 27% increase from the prior quarter and a 73% increase year over year. The quarter over quarter increase was primarily driven by a Q4 upgrade at Odessa where we replaced 36,000 mining rigs as previously mentioned. The year over year increase was driven by both the Odessa fleet upgrade and our change in accounting policy for mining rig [indiscernible] As a reminder, we previously depreciated our mining rigs over a five year period.

However, given our 2024 fleet upgrades, and the rapid efficiency gains of next generation rigs we determined that a three year depreciation schedule is now more appropriate. Our expectations around hardware upgrades cycles and our ability to acquire and install more efficient machines have evolved and we believe this should be reflected in the accounting treatment of the entire fleet. This change was implemented in Q2 and applied prospectively. In Q4, we recognized a $14,000,000 unrealized gain on the fair value of our Bitcoin inventory compared to an unrealized loss of $22,000,000 in Q3. Unrealized gains and losses on Bitcoin relate to the marking of to market. We also recognized $26,000,000 of realized gains on Bitcoin during the quarter compared to $20,000,000 in the prior For the year, unrealized gains of $11,000,000 for 2024 are related to the increase in our Bitcoin inventory throughout the year and the overall Bitcoin price This compared to $3,000,000 in the prior year.

During 2024, we realized gains of $52,000,000 on mid The increase is driven primarily by our increased production of bitcoin with Odessa operating at full capacity for the entire year. Let's now turn to our non GAAP measure slide where we reconcile to adjusted earnings. As always, I'd like to remind you that adjusting earnings include the impact of depreciation and amortization the non cash changes in the fair value of our derivative assets Deferred income tax expense the non cash charge and the fair value of the warrant liability share based compensation and non recurring gains. These supplemental financial measures are not measurements of financial performance in accordance with U. S. GAAP However, we believe that these non GAAP measures may be useful to investors for comparing our performance across reporting periods consistently Internally, management uses these non GAAP financial measures better understand, manage and evaluate our business performance and to facilitate operational decisions. When adjusting our fourth quarter GAAP net income of $18,000,000 we added back $33,000,000 for the items I just listed resulting in adjusted net earnings of $51,000,000 for the quarter. This compares to an adjusted net loss of $3,000,000 in the previous quarter. For the full year, we reported a GAAP loss of $45,000,000 dollars However, adding back $152,000,000 for the reconciling items, primarily driven by depreciation and amortization our reported 2024 non GAAP or adjusted earnings [indiscernible] compared to $46,000,000 in 2023.

Now let's turn our attention to the balance sheet. On Slide 21, our total current assets at year end were $168,000,000 Our cash position declined to 6,000,000 a decrease of $81,000,000 from the previous year primarily due to investments made during the year. Including the $68,000,000 purchase of Barbara Lake, dollars 179,000,000 in minor purchases, and $82,000,000 for the development of Black Pearl. Fortified by our Bitcoin holdings, our liquidity position as of December 31 remained strong at $98,000,000 consisting of $6,000,000 cash and $92,000,000 in bitcoin. I'll quickly cover some additional balance line items as of December 31. Our prepaid expenses amounted to $3,000,000 This balance is primarily related to corporate insurance. As noted earlier, we ended the year with Bitcoin balance of $93,000,000 representing $9.94 Bitcoin held in treasury. This marks an increase from the $7.80 bitcoin held at the end of 2023, which was valued at $33,000,000 Our philosophy regarding inventory growth and treasury management remains unchanged. As we've highlighted in previous quarters, we take an opportunistic approach continually evaluating various funding options to support our growth initiatives Shifting focus to the value of our DESPOWAL contract we account for this as a derivative asset. As we have highlighted in the past, this contract provides meaningful competitive edge allowing us to operate as a low cost bitcoin producer.

We incorporate a third party valuation for this agreement which is reflected as a derivative asset on our balance sheet and reassessed each reporting period. In essence, it represents the in the money value of the contract inflow each quarter, seasonality and gradual expiry of the contract impact the asset pricing and leads to expected fluctuations in quarterly valuation. Given the unexpectedly mild summer we experienced in Texas, and the corresponding drop in forward power curve, we saw a significant decline in valuation last quarter with a $49,000,000 loss on the asset. However, this quarter we saw $11,000,000 gain as the power market partially recovered. While there is substantial fluctuations in reported value, these fluctuations in no way diminish the substantial value and competitive advantage the contract provides by securing low cost fixed power price at our Adesa facility. As of December 31, this asset was valued at $86,000,000 compared to its valuation of $94,000,000 at the end of twenty twenty three. As we progress toward the end of the contract in July of twenty twenty seven, expect the value to decline over time. As always fluctuations in the fair value of this contract will impact our GAAP earnings, but we exclude it from our adjusted earnings.

Other significant assets include property and equipment totaling $481,000,000 primarily attributed to our Odessa facility. Within this category, mining rigs and related equipment account for $342,000,000 These sold improvements are valued at 138,000,000 Land of $49,000,000 infrastructure of $28,000,000 and construction and progress of $82,000,000 at Black Pearl. These figures are net of $159,000,000 in accumulated depreciation. Deposits on equipment of $39,000,000 consists of progress payments we have made in accordance with previously announced mining rig purchases. Additionally, we hold intangible assets totaling $9,000,000 with $7,000,000 attributed to ERCOT approval at Black Pearl and the remaining $2,000,000 related to capitalized software. At the end of the fourth quarter, our equity investee interest [indiscernible] Fair and Chief JVs. Stand at $54,000,000 and we had operating lease assets of $13,000,000 We had security deposits totaling $20,000,000 or dollars which primarily represent the encore deposits related to construction of the interconnects at various data centers. Our liabilities increased from 2023 driven by our growth initiatives. Our accounts payable increased $23,000,000 primarily related to vendor payments for Black Pearl Construction.

Our crude expenses increased to $70,000,000 from $22,000,000 in prior year, primarily related to payments on Mine, and it is related to Odessa fleet upgrade. Short term borrowings of $32,000,000 relate to borrowings done to provide liquidity in the near term. While preserving Bitcoin inventory and as an example of our I'd like to add that subsequent to twelvethirty one, we paid down $15,000,000 this level. Finally, I'd like to thank everyone for participating on today's call. And as always, we look forward to continuously results over the coming quarters. I will pause now and Tyler and I are happy to answer your questions.

Our first question comes from John Tedera with Needham. Your line is open.

Hey guys, thanks for taking my question and congrats on the quarter. Obviously, always great to see net income going on. I guess, so first question on the HPC side. From what I saw, it looked like there was some exclusivity with SoftBank Cipher the February 28 date. Just Just help us understand that a little bit better. And then as it relates to HBV, I know you said you've had some discussions going on for a couple of months. Was it more so you had a lot of that hyperscaler interest so then SoftBake came around or are you seeing more hyperscaler interest since SoftBank came in And then I have just a quick follow-up on the Bitcoin side. Thanks.

Thanks, John. Appreciate the question. So it's also public that we are under NDA with SoftBank. So, I'll speak in broad terms, but don't know if I'll be able to get every detail you'd like answered, given our setup. But it's fair to say that there is a steady drumbeat of interest particularly in Barbara Lake. We have also seen interest at at Black Pearl and ultimately the pipeline. I think the of the three M sites, the ones that are the furthest East at least in discussions have seen a lot of interest. So that's Millstone and McLennan. So generally when we speak to hyperscaler or similarly situated potential tenant, they'd like to see our entire portfolio portfolio as they're doing their own planning for sites and looking at the different variables they like to check at each potential site. So there's been a steady drumbeat of interest as far as the we can have discussions with others. We can't sign a deal with anyone but SoftBank. Again, this is all sort of publicly filed. But until that exclusivity expires. So we have been free to have discussions [indiscernible] I'd say in addition to the potential tenants, a big part of what we're trying to do is line up financing simultaneously with a tenant so that there's no question that how are we going to pay for an expensive build.

There are lots of big financial firms that are interested in getting more data center exposure. And then through some of those discussions, they often have interest or relationship or a a pre approved lease template with hyperscalers So that has also led to some interest as well.

Great. And so just to be clear on that, you can't sign a lease with anyone else until I guess basically what three days from now Yes, I think it ends in the end of this week. End of this week. Okay, got it. And then I mean, that's interesting because it sounds like maybe a something could be coming sooner than later. But I guess and then just quickly on the Bitcoin side of things. And sorry if I missed this, there's another one going on as well. The $0.027 fixed power how much time do we have left on that one now? And then where do you think rates would go after that?

Yes. So great question. Our fixed price contract at Odessa runs till the July 2027.

You've got about two point five years left on that.

And I'll mention something that was relevant to this quarter and you could see sort of analogous to some seasonality that we see in our front of the meter sites for pricing in Texas, With the recent fleet upgrade at Odessa, we came into this last quarter let me zoom out. Recall that in our Odessa fixed price contract, we've traded a 5% curtailment option to our power provider. Annually. So we get a price that's very close to our $2.7 portfolio average, 95% of hours in the year, but they are allowed to claw back 5% of those hours curtail us and then sell power typically on the open market or do maintenance [indiscernible] We have recently added the ability that if with these new rigs we've added, at Odessa, they produce a higher amount of revenue even within increasing competition on the network. I think recently I haven't recalculated it this morning, but we made about $150 a megawatt hour of revenue with those machines we now have the ability to also purchase power from the market if we are curtailed. So even within that 5% of ours, we can go out if it's profitable and we want to buy power for dollars 50 or $75 or $100 on the open market, if we're making $150 of revenue, it's worth it.

So That's an interesting indicator as you then think to the answer of your question in two point five years, We have had some preliminary discussions with Luminant, our power provider at the site to potentially extend that lease. At Odessa. Remains to be seen what the pricing would look like or if we would even want a fixed price contract. I think at the time we signed it, fixed price looked great because the forward curve was was lower for power prices looking five years forward. I think if we did it today, we would likely do it with something like front of the meter pricing. So floating pricing, And we would probably end up doing something about like we've encapsulated in that contract, which is curtailing our operations the most expensive hours call it roughly 5% of the time. I think if we did that in current floating price environments, you'd probably see in the low $3 to $3.5 per kilowatt hour or $30 to $35 megawatt hour. Obviously, if you ramp up and curtail even less, you can kind of fix that price where you want. If you ran 100% of the time, you're probably close to, I don't know, it's probably between $50 and $60 a megawatt hour Right now, but it'll depend on what power price happens.

So the pricing at Odessa, if that were to happen, would look more like we've got at Bear and Chief or what we will have at Black Pearl. When it starts. Got it. That's very helpful as always. Thank you guys. Thanks, Tyler. Thanks John.

Thank you. Our next question comes from Mike Grondahl with Northland Capital Markets. Your line is open. Hey guys. This is Logan on for Mike.

Congrats on the quarter and just had two questions for you guys on the HPC side today. First, can you provide some color around the evaluation process for Phase two of the 150 megawatts at Black Pearl kind of what that process includes, What are you looking for? And kind of what can we expect for the timing of that decision? Thanks.

Thank you, Logan. That's a great question actually and it's a a daily analysis we're running. So with Black Pearl, Phase one is now on track for Bitcoin mining. We mentioned, that will be running this summer. It will be great. I was just in Texas last week Black Pearl. I was on-site at Barbara Lake at Odessa. It was interesting to be in Texas during the coldest day they've had for a long time and happy to see that the grid worked very well and Bitcoin mining curtailment was a big part of that. When we think about HPC for Phase two, at Black Pearl, it poses an interesting opportunity cost question. Because it's going to energize in the second quarter. So if we take a long time we're missing out on an opportunity to do bitcoin mining there. Probably really nice profitable rates given that we've got locked in really cheap pricing on rigs, with an option we can exercise with Kanan. If we wanted to do that or even buy machines in the spot market depending on where pricing is, or even move our old machines from inventory out there given that it's front of of the meter setup We already are sitting on 120 megawatts or so of machines.

That are older, but you can run them very profitably with lower uptime and we could spend nothing on rigs for the second half of the site. And so that's all a revenue opportunity that would be available to us later this year, right, in the late starting in the late summer. However, we have seen a fair amount of inquiry about taking 150 megawatts and making that available. For HPC. So right now, we're prioritizing that because we have a pretty substantial level of interest in financing such a build if we had a tenant for the 150 megawatts, We have a bunch of options where our cash out would be pretty minimal. And we could have participation in those economics. So that's really attractive to us. I think the other long term thing that's really interesting is this site is really impressive. I think anyone from the more traditional data center space that takes a visit at Black Pearl and I hope we're going to be doing an Investor Day kind of late this year. Out there. Anyone from the traditional data center space is going to be really impressed with the construction quality at Black Pearl. And so we would love to have a site that is literally on one side, it's 150 megawatts of Bitcoin mining.

And on the other side, it's 150 megawatts of HPC. And I think we really have this theory that maybe that's where data centers end up going giving the way that Bitcoin mining can soak up extra power, etcetera. There's all kinds of PUE and backup generation optimization curtailment questions and theories that people in the space have that we would love to have a live test case for. So we're running through conversations on HPC. We're lining up the ability to basically not have to put a lot of cash out to do a deal there and talking to potential tenants. That said, I'd say after a few months, if we're not solidly on track with a tenant lined up, we'll probably proceed with bitcoin mining because that was our original plan for the site. It's an awesome site for Bitcoin mining and there's just a pretty big revenue opportunity sitting there for us right away to build that out. So that opportunity cost is really what we're weighing every day. Against our ongoing discussions. And I would expect we'll have direction on that probably by the next earnings call.

Perfect. Thank you. Yes, that was very good color. Then one last one from us.

Can you additionally kind of expand on the MOU for the additional 500 megawatt data center and the incremental three thirty seven acres What that means for Cipher and what's the ideal timeline in trajectory for Barbara Lake given these recent announcements? Sure. So Barbara Lake, is an awesome site. We so there are two separate things. So we closed on the purchase. Of three thirty seven acres that's just Cypress New Acreage That Is Next To The Plot We Had Right Next To The Substation That's Already Energized. It Already Had Pretty Substantial Land, But We're Pretty Bullish On The Opportunity At Barber Lake.

No matter what the market is doing day to day in terms of fluctuations guessing about the future of large scale data centers, that does not line up with the discussions we are having, which is pretty consistent level of interest from lots of parties in such an opportunity. So we went ahead and bought more land. And we own it now five eighty seven acres and again, in live discussions on how we will set up an HPC tenant at Barber Lake. Separately, we announced an MOU. We now have an exclusivity for two months discussing with our friends at Priority Power an opportunity that they have that is adjacent to our site. So they literally have a draft for interconnection that is available on land next door And given the way these discussions around large data centers seem to be progressing that there is extra value in larger size where you've got potentially networked data centers across frankly close areas. This opportunity seemed amazing that we've seen some other folks out there talking about stretching data centers dozens of miles apart and trying to link them. This was an opportunity where literally there's 500 megawatts potentially available right next door.

And so we are now in discussions with priority to come up with a way to build a 500 megawatt data center that is immediately adjacent to our 300 megawatt data center and hopefully be talking to an end user looking for 800 megawatts of data centers located next to each other and in a very attractive location.

Perfect.

Yes, thank you for clarifying that. Congrats on the quarter. There's a lot of exciting stuff happening right now.

I'll hop back in the queue. Thanks, Thank you.

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

Hey, good morning team.

This is Charlie on for Reggie.

Thanks taking my question.

Tyler, you just touched on this a little bit in the previous question, but thinking about applications for future Cipher data centers, have you seen any change in the type of workloads counterparties want to do at your sites Specifically kind of thinking about a demand to use data centers for model training versus inference applications since DeepSeq. And then kind of as a follow-up, does the type of workload counterparty is doing change anything in negotiations or site CapEx or funding costs Thanks, Charlie. That's a great question. So would say at the level of discussions we're having with the types of counterparties, we are speaking to, they have a lot of interest in capacity across different use cases. So we haven't seen necessarily people say, oh, well, this is for inference. So the lease is going to be set up differently than we had been discussing. I think what is impacting it more there is definitely, I think, interest in the availability of a data center to do all things and sort of if you're solving for the hardest thing, that's going to be inference given the need for low latency. And so I'd say that does drive the level of interest in the sites.

So while I mentioned we do have interest in Black Pearl, for example, Black Pearl is certainly a little bit more remote than some of the three ms sites, the twenty twenty seven sites we've got on. And that drives not necessarily everyone is as interested in Black Pearl [indiscernible] I'm sort of reading the tea leaves, but my interpretation there is they're underwriting to inference And sort of what the best stats possible would be And then figuring out where in their own organization to purpose it. Like I said, we still have interest in Black Pearl. So that doesn't necessarily drive every discussion. I think there's interest across several uses. It is hard for me from my seat to read through on like what's the future amount of demand for training versus inference? I probably in no better position than anyone else following the industry.

Got it. Understood. Thank you.

Thank you. We have time for one more question. And that question comes from Bill Papinathaswih with KBW. Your line is open.

Good morning, gentlemen. Thanks for taking my questions and congrats on another strong quarter with continued progress on your AI HPC strategy.

Tyler, for my first question, you mentioned earlier in your responses that you're making $150 per megawatt from Bitcoin mining in Addesa. That's pretty attractive and right in line with with the core scientific core we've deal So how should we think about the terms that you're comfortable to secure with hyperscaler counterparty given the robust revenue that you're earning from bitcoin mining? Thanks. [indiscernible] So, they're very different and complementary businesses. I think the biggest thing about Bitcoin mining that every investor should understand is that there's both, let's call it a medium term cyclicality to the industry in terms of returns typically And there's also a long term trend typically. So we do have a cycle that's roughly based around the havings where we tend to see hash price expansion for a stretch after having then you get a peak market. And then after a having, you typically going to see a pretty big reduction in hash price, which is what us miners get paid for Bitcoin mining.

And so while there's a cyclicality and you want to get yourself exposed early in the having cycle, like we have done with Odessa and we're doing with Black Pearl.

You also need to be aware that while there's a cyclicality across four years, across much longer time periods, that hash price tends to decline. And so is a couple of things that are very attractive about having an HPC tenant. One of them is that Certainly, in the conversations we are having, I guess not everyone is oriented in orienting themselves this way, But we are looking at long term leases. Fifteen years. And so if you're making a payment that is about what you make in bitcoin mining or even less a little bit less than that, Having a very creditworthy counterparty that is obligated to pay you that for over a decade. Has a lot of long term value because hash price over that time period probably declines and as an operator of self mining, you probably have to do some CapEx upgrades along the way. So So that stream of revenues is diversifying and from a payoff profile, you're not going to have necessarily the peak you might have if we get a broad Bitcoin adoption period. But over long periods, it probably outperforms the Bitcoin mining revenue production towards the tail end of the contract.

The other thing is that at least at this point in time, HPC is highly financeable. If you have a lease with a very credit counterparty, you can go get bank debt financing at a very cheap rate and finance get 80% of the money borrowed for the build. Bitcoin mining, certainly on the rigs side, there really is no debt financing market.

Right now. And even on the infrastructure, often there's not as much interest, certainly not like HPC. And so that ability to finance is the other thing. It's very hard to overcome that advantage even if your sort of cash revenue returns look similar on the Bitcoin mining side. That said, Bitcoin mining is great too because you do have the peaks and it's a little bit more volatile but we're certainly very bullish on Bitcoin mining as well, particularly where we are within that Typically four year cycle.

Thanks, Tyler. And then just lastly for me, and apologies if you touched on this in the call, but how should we think about capital expenditures in 2025 going into 2026, thanks. Sure. So I know we we published obviously our financials as of year end. We took in the SoftBank investment in January. I think we put out monthly production numbers. So we had at the January a 91 bitcoin in inventory and about 60,000,000 in cash. [indiscernible] and then we've continued to spend it throughout February on bills and things like that. But if we look at the remaining spend on Phase one of Black Pearl, is about $200,000,000 that we'll be paying over the next I don't know, six ish months to finish Phase one. That's about $50,000,000 for the infrastructure and about $150,000,000 for the rigs. [indiscernible] still to spend. So between cash on hand and our positive cash flows we get out of production, we have an easy path to all the money we need to spend for our currently committed expansion. On a more opportunistic side, if we were to move to say hey, Bitcoin mining looks great, We're going to spend and build out all of Black Pearl Phase two That probably looks more like, that would be about another $260,000,000 or so And for that, we'll have to watch how big [indiscernible] Lots of capacity if we wanted to sell equity or raise debt.

We have not diluted like a lot of our competitors. We haven't done a convert. We haven't done any of that stuff. If we had a lot of conviction in Bitcoin mining and building phase two in a few months, that's probably the path we would look to fund that and that would be the spending we would expect. I mean, I think what's interesting is when you look at the effects of just having a new fleet, it's pretty stark because your cash hash cost starts to scale. If you look at our point in time hash cost Right now, it's about $29 per petahash per second per day. And that's against current hash cost. Bitcoin is off this morning a little bit, but I think the market's about $53 And so like if I translate that to a cash cost per bitcoin for us, it's about $49,500 And those numbers, the kind of overhead cash numbers scale really nicely with adding more. So we're excited about Phase one at Black Pearl and then Phase two, if we decide to finance that for Bitcoin mining, the sort of easily achievable with a very high return on that investment. So Good Good situation if in fact we don't end up moving forward with HPC on Phase two?

Appreciate the color. Thanks, Tyler.

Session. I'd like to turn the call back over to CEO, Tyler Page for any closing remarks.

Thank you very much for joining our call. We are very excited about everything going on in our portfolio. The HPC and the Bitcoin mining Cipher. And we look forward to updating you with more concrete updates in the future. Thank you very much.

Thank you for your participation. This does conclude the program and you may now