Iris Energy Limited Price & Performance (IREN)

Good afternoon to those joining us from North America, and good morning to our in Australia. Welcome to IRAN's second quarter FY twenty twenty five results presentation. My name is Lincoln Tan, Director of Investor Relations and I'm pleased to be joined today by Daniel Roberts, Co Founder and Co CEO Belinda Nusifora, CFO and Kent Draper, Chief Commercial Officer.

Before we begin, please note that this call is being webcast live accompanied by a presentation. I'd also like to remind you that some statements made during this call may constitute forward statements are based on certain assumptions and subject to risks that could cause actual results to differ materially from our expectations. Listeners should not place undue reliance on these statements Please refer to the disclaimer on Slide two of the accompanying presentation for further details. Let's get started. Over to you, Dan.

Thanks, Lincoln. Good afternoon, everyone, and thank you for dialing in. To our Q2 FY twenty twenty five results. Presentation. So straight into the highlights. A record result in Q2 underpinned by some pretty rapid growth over the last six months, twelve months. And low cost Bitcoin production. So the investments we've made in scale and efficiency over the past twelve months as you can see, is starting to flow through to our earnings. Dollars $18,900,000 of NPAT recorded last quarter. Expect this continued earnings momentum in tandem with that growth profile. Noting that the 31 exa hash of energized capacity was only achieved at the end of the second quarter and you can see that the [indiscernible] operating hash rate for the prior quarter was substantially lower than that. So as we continue into ramping up to 50x of hash, by the middle of this year, we expect to see those numbers to continue to grow in parallel. Final point on this is to note that, yes, every's miner's strategy and financials are slightly different. But these financials are not impacted by any Bitcoin revaluations. We don't hold Bitcoin on our balance sheet. There's no fluctuations in the value of those up or down sideways.

And consequently, our results reflect the pure profitability of our underlying operations. On the growth front, three key initiatives which we'd like to highlight today. So firstly, we're excited to announce Horizon One, Horizon One is our new 75 megawatt liquid cooled AI data center to be delivered at Childress this year. 75 megawatts of capacity translates to around about 50 megawatts of IT load.

And what we've seen particularly coming into the start of this year it's increasingly clear that there is a strong market opportunity for us to capitalize on the shortage of liquid cooled data center capacity. So as many as you would know, the liquid cooled Blackwell GPUs from NVIDIA are in the process is coming to market and the required racks of densities are continuing to escalate with this generation and subsequent generations of GPUs. So we are future proofing this deployment We're designing and building for densities of up to 200 kilowatts Correct. Well beyond the 120 kilowatt rack density required to for the black well GPUs. So we're excited There appears to be a real scarcity of liquid cooled data center capacity and we feel that we're in a relatively unique market position to deliver this type of capacity in a relatively short timeframe. [indiscernible] Secondly, we're excited to announce the development of Sweetwater two, a new 600 megawatt site that will further strengthen our position in West Texas. Situated around 28 miles from the 1.4 gigawatt Sweetwater 1 project, and about 39 miles from Abilene. This expansion would create a two gigawatt data center hub at Sweetwater.

With design work already underway for a direct fiber loop between the two sites.

We've secured over 500 acres of land in the process of finalizing a 600 megawatt grid connection agreement with a target energization date of around 2028. Now one important caveat we always talk about ones and zeros with grid connection agreements. We do not have one yet.

So at the moment, this is a hypothetical project. However, we've chosen to disclose the details today for two key reasons. One, this project is in late stage development. And we're getting closer to the execution of binding agreements. But secondly, the two gigawatt data center hub it potentially creates with Sweetwater One is material to the market opportunity we are seeing in West Texas. So while this is still a project under development, Sweetwater two would provide yet another organic growth pathway for our AI and mining business However, more importantly, expands upon the potential value of the single site AI opportunity at Sweetwater something that we'll come to a little bit further on in the presentation. [indiscernible] Finally, let's not forget about the rapid expansion of our Bitcoin mining business.

Our operations from thirty one ExoHash today to 52 ex a hash this year. We're dedicating 75 megawatts of Childress Phase six to Horizon one And as a result, this adjusts our prior expansion plans from Bitcoin mining from 57 down to 52 exahash. But to reiterate, we remain on track to hit that fifty ex a hash target by mid this year. The five hundred plus site team at Childress continues to be well positioned to deliver 50 megawatts every month of data centers. In terms of the corporate and funding update, we're pleased to confirm that U. S. Domestic issuer status and U. S. GAAP reporting will commence from half to twenty twenty five. Our balance sheet remains robust We closed our oversubscribed convertible note at the end of 2024 and recently put in place a $1,000,000,000 ATM facility to provide flexibility to fund growth initiatives. However, market conditions, as we've all seen, are very dynamic, and we are always looking for ways to optimize our capital structure and we remain continuing to evaluate alternative funding options. Finally, in terms of investor distributions, as you can see from this result, there is significant operating free cash flow being generated.

However, from a capital management perspective, we've made a decision to accelerate our investment into the strategic initiatives that I've outlined and as a result, a deferring the consideration of potential investor distributions. So into a little bit more detail about Horizon One. As mentioned, we are planning to deliver a 75 megawatt liquid cooled AI data center within Childress Phase six targeting completion in the second half of this year. That will support a 50 megawatt IT load, and include the installation of backup generators and UPS systems, for power redundancy. Building this as part of Childress Phase six, you can see on the map, in the blue overlay. It is designed to support 200 kilowatt rack dense well beyond what's required for the NVIDIA Blackwell GPUs and consequently with an eye to be able to accommodate future increases in rack density architecture We've been working with a leading global EPC firm to deliver this project and leveraging our existing data center footprint an estimated build cost of $6,000,000 to $7,000,000 per IT megawatt. So why? Why are we doing this? Well, liquid cooling is a key priority for large scale customers. And what we've observed is a very limited availability of liquid cooled data center able to come online in 2025.

Meanwhile, the liquid cooled NVIDIA Blackwell GPUs are expected to ship in more meaningful quantities in the second half of this year. Iron is uniquely positioned to address this growing market demand leveraging our immediate access to power and our existing infrastructure on-site. 50 megawatts of IT load is a size that appeals to both smaller as well as larger customers. And also caters to NVIDIA's reference architecture allowing a single cluster of up to 16,000 Blackwell GPUs. We have a unique opportunity to move fast in a market which is changing quickly. Horizon One will enhance deliveries' uncertainty for customers. I. E. It helps them cut through the chicken and egg dilemma by showing them more concrete plans around design and delivery. Initially, we're focused on Childress and building out a multi tenant site there. We're engaged in meaningful two way dialogue with a variety of prospective customers noting that again Childress will be prioritized for multi tenant colocation in respective AI data centers, preserving the Sweetwater data center hub, and Sweetwater One site for more single site opportunities, which I'll come to later in the presentation. So uniquely, we have this opportunity to continue to scale this approach across our entire portfolio.

Something which we are actively looking at. Noting of course that the critical piece access to the grid connection, the power and the land is already secured. With grid connections already secured, we're seeing it's four to seven years to bring these projects from origination into the real world.

The data center buildings are already in place. All we need to do is to continue to install liquid cooling and Paraduncy to scale up this side of the business into the market demand. [indiscernible] the two gigawatts Sweetwater data center hub.

We're very excited to announce our new 600 megawatt Sweetwater two We're in the process of finalizing the grid connection agreement As mentioned earlier, it's situated on over 500 acres of land 28 miles from approximately 39 miles from Adelaide. Design work has already commenced on a direct fiber loop between the two data center campuses to support network connectivity. And create this two gigawatt data center hub.

We expect it to energize around 2028 and again we'll caveat this, it's not signed yet, so there's absolutely still risk around this development. But the development process has been in the works for some time, We feel it's getting closer to a potential outcome. Importantly, in the context of our strategy, how we're thinking about Sweetwater One and the single site, this two gigawatt data center hub. It potentially creates with Sweetwater One is material to the market opportunity we are seeing in West Texas.

In terms of the existing 1.4 gigawatts Sweetwater one project, It's full steam ahead towards energization in fourteen months. Procurement is well underway to support energization of the full 1.4 gigawatt bulk substation. And additional primary substations all by April. As mentioned earlier, we're working with a leading EPC contractor with experience on hyperscale deployments general site and civil works to support construction are commencing shortly. Clearly, with the recent market announcements, there's an increasing level of focus and interest on West Texas. As a data center market. Accordingly, this is a very exciting opportunity for Iron to build one of the largest data center sites and maybe hubs in the world. I'll touch a little bit more on how we're thinking about this site strategically later on in the presentation. Large scale, low cost [indiscernible] So two key pieces I'd like to reiterate today. One is the scale of our operations, 31 ExoHash, installed.

It was on time as we said it would be. We're on track for 50 ex a hash in five months. And then 52x of Hash shortly thereafter. This delivers economies of scale today and will continue as we continue to expand. We've got a demonstrated track record around operations, our uptime, and ability to deliver projects on time. The second point I'd like to make is we are a low cost [indiscernible] It supports strong unit economics and ultimately earnings for shareholders. Since announcing our plans in May to expand all of the investments we have been making, are starting to flow through to operating efficiency and earnings. We have best in class efficiency at 15 joules per terrahash. Our spot pricing strategy has delivered actual power prices of $0.03 a kilowatt hour. Where our the majority of our operations are today at Childress.

Finally, you've seen this to start to show in our quarterly earnings, but also in our monthly updates.

Our hardware profit margin is over 75% now we've scaled over that 31 ex a hash mark. So the expansion to 52 exahash, as we've discussed allocating 75 megawatts of Childress Phase six to support Horizon one adjusts our prior mining expansion plan from 57 to 52 ex hash. To reiterate again, our 50 Exahash target remains on track to be delivered in whole the next five months. Continuing to build 50 megawatts per month of data centers at Childress. The efficiencies that we have with large single site expansions 500 people on the site effectively copy paste in every single bot building.

As you can see on the right hand side, the schematic diagram, that reflects our data center construction status. To the extent you're interested, you can continue to track our progress in our monthly updates.

Our mining economics remained strong. We've seen the material step up in earnings and cash flow generation as we scale up And on the left hand side of the page, you can see some illustrative economics that reflect where we are today and where we expect to go. So the escalating power shortage. And escalating seems to be the only word that we can use given what we're seeing in the market.

Clearly, it's been a very interesting couple of weeks with Stargate [indiscernible] However, if we look through some of this volatility, nothing has changed for us.

If anything, we've seen an uptick in observed interest in cloud, and colocation services. AI doesn't live in a vacuum. Humans crave more and more. Particularly if it gets cheaper. Over time. And I think the Wikipedia page for Jevons paradox has never seen so many hits over the last two weeks. So on this slide, we illustrate two market dynamics that are relatively well documented. The first is hyperscale CapEx. Continuously being revised upwards The second is the power scarcity dynamic, looking at a 36 gigawatt shortage in data center capacity across The US. With over two gigawatts of secured grid connected power and land, this creates a compelling opportunity for Iron.

This two gigawatts, 2.3 to be precise, is not hypothetical potential megawatts. This is power that is either flowing today or is secured by binding into connection agreements with utilities being delivered by April. This slide essentially summarizes the macro backdrop of the opportunity for us here at Iron. Picks and shovels for the digital age. So just to change tack [indiscernible] And share a bit about our history.

Why we are in this position and ultimately set the scene for my final slide where I'll discuss our strategic focus. Will and I have been setting this platform and gearing up for this market backdrop since day one, There's been no pivot. This has been a deliberate strategy. It can be traced back to our earliest investor presentation, as you can see on the right hand side, in 2020. A vision which was remained unchanged. The value then and the value now is in access to large scale renewable energy required to power the future of supercomputing. Whether that be bitcoin mining, whether that be AI, two super trends that are front of mind right now as well as whatever comes tomorrow. We have delivered on our strategy to bootstrap a large scale and profitable business with Bitcoin mining and continuing to leverage that asset base, into new higher value and new increasingly interesting use cases such as AI. Our team's depth of experience in energy infrastructure, data centers have allowed us to organically develop a leading data center platform from the ground up. And our ability to continue to find and incubate greenfield opportunities and then execute upon them is a very important differentiating factor and an enormous opportunity for us in this power constrained and constantly evolving market, Finally, we've covered a lot over the past twenty minutes, so to try and tie it all together, and highlight how Will and I are thinking about our strategic priorities.

The market context as we've covered presents significant [indiscernible] The escalating demand for power and liquid The escalating demand for power, and liquid cooled data center capacity as along with the increasing institutional adoption of Bitcoin. If we start with our existing data centers in British Columbia, they continue to mine Bitcoin profitably and generate positive free cash But how are we thinking strategically about British Columbia? Well, firstly, we continue to grow our AI cloud services business in a sensible way. Currently operating side by side with Bitcoin mining. As many of you would have seen, in our Prince George data center, we have Bitcoin mining ASIC securing the Bitcoin network. Operating right next to latest generation NVIDIA H100 and h 200 GPUs providing cloud services to AI clients This is something that we will continue to explore and it's been pleasing to see even an uptick in observed demand post deep seek. In addition to that, we're continuing to explore AI colocation opportunities at these sites. Again, that strategy of bootstrapping sites with Bitcoin mining, and then as higher and better value use cases come along, looking to insert them on our infrastructure base. At Childress, fair to say Iris a very exciting data center campus today and a hive of activity.

We're growing Bitcoin mining capacity to 52 ex a hash this year and continuing to generate again significant operating cash flows and profitability from these operations. However, we are also really excited about delivering Horizon One, our 75 megawatt liquid cooled data center to be brought online this year. The way we think about Childress strategically is as follows.

Firstly, once again, underwritten by Bitcoin mining, as was the plan five years ago, as is the plan going forward. Then utilize the site for higher value use cases as they emerge. We believe liquid cooling AI data centers is likely to be one of those and are accelerating our investment into this space. Importantly, from a strategic standpoint, we view Childress as a focus for multi tenant colocation. Preserving sweet water, which I'll come to in a second, for a potential single site deal and tenant. Sweetwater, the Sweetwater Data Center Hub. [indiscernible] So we have terminated the site sale process with Morgan Stanley.

We're now working with a range of different advisers brokers and partners on a broader range of opportunities where almost all of those opportunities now involve us retaining long term ownership of the site. Given the scale of the site and the market backdrop, of hyperscalers chasing one gigawatt plus single site campuses We are prioritizing Sweetwater One as well as the emerging Sweetwater data center hub for a whole of site single sentence, Holocyte single tenant colocation opportunity. Sweetwater two and the potential creation of this two gigawatt data center hub in West Texas only goes to further strengthen the strategic opportunity in this area. In the meantime, as we continue to explore those conversations, we will retain flexibility to once again bootstrap this site with Bitcoin mining as we've done with the rest of our portfolio, since day one. Belinda, over to you to cover the financials. Thank you. So good afternoon to those in Sydney.

Sorry? Actually, it's morning here. Good morning to those in Sydney. It's actually a beautiful day and good afternoon to those in North America. Thank you for joining us for our Q2 FY twenty twenty five earnings update.

As Dan earlier mentioned, this was a record result We delivered Bitcoin mining revenue of $113,500,000 and operating cash flows of $53,700,000 an overall net profit after tax of $18,900,000 Adjusted EBITDA for the quarter increased by $60,000,000 to $62,600,000 With the average operating cash rate increasing from 12.2 to 20 22.6x for hash. And we mined $13.47 bitcoin at an average realized price of 84.3 ks So I just noticed my camera may be out, so I'll try and adjust that. [indiscernible] Okay. I think that may be back on. [indiscernible] [indiscernible] electricity costs remained relatively flat for the quarter at 28,900,000.0 with the increased megawatt usage at Childress offset by lower cost per megawatt due to the transition to a spot pricing strategy in August 2024. As such, the average net electricity cost per Bitcoin mined decreased from 35.4 ks versus 21.4 ks.

Other costs of 25,100,000.0 increased by $3,700,000 primarily due to additional purchase of renewable energy certificates at Childress for the increased megawatt usage, as well as construction insurance costs at this site. The cost base reflects a business today that is delivering significant growth and projecting continued expansion over the coming years. So moving on to cash flows. [indiscernible] Closing cash at Bank at 12/31/2024 was 427,300,000.0 with receipts from bitcoin mining activities 113,600,000.0 and AI cloud services of 3,500,000.0. Dollars Increase in electricity payments reflecting continued expansion at Childress with commission capacity increasing from 200 megawatts to three fifty megawatts during the quarter. Decrease in net used cash used in investing activities $270,000,000 due to a decrease of mining hardware primarily due to significant milestones payments made in the previous quarter. There was an increase in net cash from financing activities of $372,300,000 with 311,700,000.0 net proceeds from the convertible notes and 63,700,000.0 increase in net ATM proceeds during the quarter.

Since the balance date, a further $50,400,000 of net ATM proceeds have been received and the total current number of ordinary outstanding shares is 19,000,000. So now moving on to the balance sheet. During the quarter, total assets increased by approximately $500,000,000 to 1,900,000,000.0 As a thirty one December twenty twenty four providing a strong balance sheet to support our future growth On 12/06/2024, we issued a $440,000,000 convertible note with an annual interest rate of 3.25%. Which is due to mature on 06/15/2023, unless earlier purchase redeemed or converted. Concurrently to the convertible note, we entered into a cap call transactions of $44,000,000 and a prepaid forward of 73,700,000.0 As IRAN currently reports under international financial the convertible note embedded derivatives, and financial assets have been bought to account at their fair value at inception and revalued at the reporting date at fair value through profit and loss. As iron transitions to U. S. GAAP reporting from January to 2025 the accounting for the convertible notes will be reassessed as well as the cap call transaction and prepaid forward line with the applicable U. S. GAAP standards. Total equity increased to 1,300,000,000.0 with the sale of 25,300,000,000.0 shares during the quarter.

Ending 12/31/2024. I think now we're turning over back to Lincoln for the start of And we'll go with our first question Our first question comes from the line of Joseph Faffy from Canaccord. Your question please. Hey, guys. Good afternoon to us in The U. S. And good morning to you.

Really great update, a lot of exciting things. Maybe we just start here on the update on Horizon one. Sounds like a or being ready later this year. Wondering if you could kind of talk about CapEx and where that stands at Horizon One and kind of what you've learned especially with this rack density that you're building there? And then I'll have a quick follow-up.

Kent, would you like to take this one?

Yes, happy to jump in there. So So we had some guidance that Dan mentioned within the presentation itself. Around the CapEx levels that we're seeing Importantly, on our side, we are able to utilize a lot of the existing data center architecture.

Which means that we believe we're able to deliver this liquid cooled capacity at very effective cost per megawatt, but still with all of the key redundancy and other features that ultimate end users of that capacity would expect to see We've also it's worth noting and we've discussed it prior calls as well, already been ordering many of the long lead items associated with that build out as well. So as we do with all of our build out, whether it's on the Bitcoin mining side or on the AI data center side making sure that we are well ahead of the curve. In terms of ordering those long lead items.

Great. That's great color and thanks for that update, Ken. Maybe we talk a little bit on Sweetwater, clearly a very ambitious project with the update that we heard here about adding Sweetwater two, the Sweetwater one and the fiber loop interconnect. And I know Dan, you also mentioned that the agreement you had with Morgan Stanley or the is now kind of moving to the next stage where you're in different kinds of discussions. Two gigawatts quite of an ambitious big data center which would probably be used for AI and just I know you've had probably a lot of discussions with a lot of players in the space at a high level This would be like massive and just trying to get a feel for demand out there amongst hyperscalers or other players around two gigawatts and what you're hearing at at a high level? Thanks a lot. [indiscernible] Joe.

Look, we were called far less polite terms than ambitious six years ago when we first suggested that the future of data centers may not all be in metropolitan areas, because maybe there wouldn't be enough power there. So I think you fast forward to today, suggesting that a two gigawatts data center hub may be viable in the context of the market backdrop all the announcements being made including people with objectives far greater than two gigawatts, I don't think it's ambitious. I think it's entirely realistic and reflective of where the market is, today. We have been surprised coming into 2025 just over that kind of Christmas holiday period, just the step up in intensity in this sector And I think I can't think of many of any hyperscalers that we're not talking to that aren't interested in one gigawatt plus campuses that can be delivered in the next few years.

The market absolutely seems to be there wherein a lot of it active conversations. But again, I'm going to temper all of this because it's ones and zeros. You either do a deal or you don't.

And we've got the ultimate backstop of building out boot strapping with Bitcoin mining and preserving that single site opportunity where the value of having clusters all contained geographically on one campus seems to be quite powerful from these hyperscaler perspective. So it's interesting. I wouldn't call it ambitious. I can call it entirely realistic. Yes, there's risk around Sweetwater 2 and getting the final signatures and executing that and turning it into a real project rather than hypothetical. But we're working hard on that and yeah, I'm excited.

That's great. That's a great update. It's a great path forward and thanks for the update.

Thank you. And our next question comes from the line of Greg Lewis from BTIG. Your question please. Yes. Hey, thank you and good afternoon. Or good morning and thanks for taking my questions. I guess my first one Daniel, was around the update at at Sweetwater with the incremental 600 megawatts. I guess a couple of questions around that. And I guess the first one is, you're looking to potentially reenergize in February or energize in 2028. When did we have to get start getting in the queue to even be able to try to get on that track to 2020. I'm realizing we don't have the approvals yet and there's still work to do. But just kind of curious as you see that to even be able to kind of talk to the 600 megawatts and then kind of has that changed I. E. If we were to kind of get in the queue what would that look like? A %.

It's actually extraordinary how hard this is. Give you some context, we received a draft connection agreement for that site following completion of the studies. In July. So where are we February? How many months is that trying to get signatures on a document so different to how it was twelve, eighteen months ago. Don't know how all these power these megawatts are going to be developed going forward. We've obviously got our multi gigawatt development pipeline, including sites in Texas as well as globally and broader in North America. The congestion the difficulty in actually getting these projects over the line and crossing that zero and one barrier to having a project that you can actually build out on, it's actually extraordinary with the way we're seeing it at the moment. So we'll continue to push We almost didn't disclose Sweetwater two today, but we are getting close. We feel like we're getting close and it is material to how we think about Sweetwater one in the context of the broader market, dynamic we're seeing in West Texas, but absolutely there's risk around any megawatts that aren't contracted and we are living and breathing that every single day. I don't know Kent if you've got anything you'd like to add to that?

Yes. The only other thing I would add, as Dan mentioned, the process is taken a long time for that project, and that was connection requests that we submitted over a year ago now. For projects that have been submitted in more recent months, we know that there is been a massive increase in the number of applications to utilities and to ERCOT. And those utilities in ERCOT haven't substantially expanded their their teams and the number of people that are looking at those connection requests. So anything that has been submitted in the very recent number of months is going to take incrementally longer than what we saw for that Sweetwater 2 site. So it is becoming increasingly difficult.

Okay, great. Thank you for that. And my other one was around just kind of looking for color and it's realized things are evolving on a daily basis. But you mentioned that $6,000,000 to $7,000,000 per megawatt, it's our under sourced comes maybe comes from Mexico or definitely inside NAFTA. And so as we think about that $6,000,000 to $7,000,000 in the event that there are tariffs I don't know how we can I don't know if you want to talk about maybe when we think about that $6,000,000 to 7,000,000 is there any way to kind of frame out how much of it's imported without getting specific price numbers, maybe how much of it's imported and And yes, I guess that's kind of curious how how that could be changing at least in the over the next few quarters? Yes, I'm happy to jump in there, Dan. So, yeah, it is obviously a very dynamic environment at the moment. Changing on an almost daily basis, And yes, it's it's something that we continue to monitor going forward. There is the potential for higher construction costs We do have a very diversified supply base. So not everything today is coming in from the countries that have been announced as potential targets for increased tariffs.

So we do feel like we're in a good position to handle it. And of course, anything that does get implemented likely to hit all other providers as well. So I think it would be felt across the industry rather than something that is very specific to us. But yes, we have been working on diversification for a long time to make sure that we always have alternate providers in place And while we didn't obviously envisage these specific tariffs and things like that, it was very much with multiple different scenarios in mind.

Okay. Thank you very much for the time. Have a great day.

Thank you. And our next question comes from the line of Darrin Aftahi from ROTH. Your question please.

Yes. Hey guys, thanks for taking my questions. And nice job on the progress. Just two if I may. I know in the past you guys have always talked about looking at ROIs from the lens of the cost to build an ExaHash with Bitcoin and kind of the ascribed value the market gives you. I'm just sort of curious, what calculus you kind of went through with Horizon One in terms of kind of reducing five eggs of Hash and deciding to build the 75 megawatt HPD HPC endeavor, was that more of just always planned and now you're kind of formally announcing it or did something kind of change in what you're seeing? Yes. Hi, Darren.

Look, we deliberately didn't put numbers in the presentation because none of us know. This is unique. Like liquid cooled data center capacity just doesn't really exist at scale and there's no real market for it. What we do know and can see is traditional colocation rates.

And co location rates for capacity that isn't necessarily liquid cooled for 75 megawatts. [indiscernible] I think when you run those numbers against the backdrop of CapEx of $6,000,000 to $7,000,000 the numbers potentially were quite compelling. [indiscernible] we're not here to estimate where we'll get to. We're in a series of very different customer conversations around utilizing that capacity. And I think the decision goes, More broadly, and it's more strategic. It's saying, like, if you step back, you've got Bitcoin, we know where that's at. It's a great business. But we are so uniquely positioned from a strategic perspective to capture AI thematic and build out something that is relatively unique this year Obviously, if AI fizzles out and becomes nothing, then the facility we might have to repurpose it for, bitcoin mining or or another use case, but I think the conviction we're seeing in AI at a macro level [indiscernible] the lack of ability of the current market and I guess those mini micro data centers in metropolitan areas to service these types of capacities. It just seems a really obvious opportunity for us where I would expect we'll generate strong returns not just from the 75 megawatts, but what it then unlocks platform and how it helps us in the conversations that we're having around Sweetwater and the [indiscernible] there because all of a sudden we've now got a liquid called AI data center design signed up global engineering firms that we're building it creates, it's real.

It's happening. So I think the strategic value to the platform beyond the discrete economics from 75 megawatts of Horizon one is incredibly powerful. And I think in addition to that Darren, what we've really seen is the demand side of things crystallizing over recent times. Historically, obviously, black wells were announced and everybody had an eye towards liquid cooled data centers. But what we're seeing now is demand from a number of different customer segments and in particular customers that have already placed orders. And so they absolutely need liquid cooled capacity in order to house those GPUs. And we're seeing, as I said, that range coming from a range of different types, whether it's large hyperscalers, the neo clouds, enterprise customers as well. And that for us has really helped crystallize our decision making that that the time is right to make that investment in this capacity.

That's helpful. Just one more if I may. I know you mentioned there's some Iris to getting in across the goal line, but like what's the strategic benefit of you guys announcing Suite one or two is this more customer focused or is there there something else you'd mind indulging us? Thanks.

Yes. Look, it is very close, but I also think it's material for our investors to be aware that this project exists because a, it provides context to our strategy with Sweetwater One and the single site opportunity that we're seeing. But b, it's material in the context of the broader market thematic and what's happening with this chase for multi gigawatt data center campuses, particularly in West Texas, to build out these AI clusters. So yes, ordinarily, we don't disclose development details because there is Iris, but given that these late stage given its materiality, connected to the rest of our business, we thought it appropriate to bring investors into the fold and share a little bit more about this specific site.

Okay. Thanks a lot. [indiscernible] Thank you. And our next question comes from the line of Brett Knoblauch from Cantor Fitzgerald. Your question please.

Hi guys. Thanks for taking my question and congrats on On the print, I guess the whole sector kind of fell off following DeepSeq. I think in your prepared remarks, you talked about maybe interest or demand picking up post that Does that factor into maybe why you guys are announcing Horizon one after maybe just only recently kind of upping your hash guidance from 52 to 57 by end of the year? [indiscernible] I think as Dan mentioned earlier, that's right. And we've seen it both on the cloud and the colocation side.

So it's not not just one area that it's limited to. But yes, it absolutely does factor into the thinking. And as I mentioned, we have seen a large uptick in demand for liquid cooled capacity and the timelines that people are wanting that demand on. As something that we feel very well prepared to deliver upon and that we have a competitive advantage in because we don't think there are many others that are going to be able to deliver liquid cooled capacity on that same timeline. So particularly 2025, but even into The early parts of 2026 still seeing a shortage of supply going out that far Perfect. That's helpful. And then one way you think of Verizon as it's almost like a model home showcasing who would be the the big tenants at Sweetwater like what you can build and design and kind of giving them confidence for doing that same vaccine but on a much larger scale?

Yes. I think that's certainly part of the benefit of it. If you look at our executive management team and board, we've got a very long delivery of success history, sorry, of successful delivery of large infrastructure projects. So in the many billions of dollars So we certainly have the expertise and capable I think we've proven that out to a large extent with the build out of the big coin mining side of the business. And as I've discussed in previous calls, the fact that we're building out 50 megawatts of data centers a month is, you know, to many people that we talk to in the industry, a massive surprise, but we've been doing that for many months now and continue to deliver at that clip. Albeit acknowledging that, that is a different type of infrastructure to liquid cooled. So I think the fact that we're able to build out Horizon one at the Childress site is just a further demonstration of our internal capabilities. So yes, I think it conversations. And many of those are as Dan alluded to earlier, sort of taking more of the path of us having an ongoing ownership interest in the infrastructure itself.

And so further demonstration of our capabilities is certainly useful.

Perfect.

Really appreciate it guys.

Thank you. And our next question comes from the line [indiscernible] JonesTrader. Your question please. Hi, Dan, Belinda, Kent, My question relates to investor concerns around potential HPC monetization of Sweetwater One. I think there are two large ones. One, the site's suitability inference compute and two, single tenants like hyperscalers willingness to do a deal with a Bitcoin miner given sort of this perception that there is more balance sheet risk Could you address sort of the validity of these concerns in your view and as your desire to retain ownership of the land potentially adversely impact conversations with hyperscalers for a deal at the site. Thank you.

Hi, Steven. Good to see you. Frankly, I think the world's moved past both of those two issues, and I'm surprised that we're still talking about the suitability of West Texas for AI training and inference Yep. I get it. People ask questions six, twelve months ago, and we continued to put forward the fundamentals and actually break down the narrative that was being promoted. But I think we fast forward to today and you're seeing the announcement in the market the intentions of all these trillion dollar companies and people spending hundreds of billions of dollars The question is to whether you can run inference for AI out of West Texas Yeah. I don't think it's really worth addressing to be frank. The question around whether people will engage a Bitcoin miner to build out AI data center capacity Again, I feel like we're going over old ground. Let's go back five years ago.

We're not a bitcoin mining company.

We've never done CKAN shipping containers, stitching projects in the middle of the desert to my Bitcoin not think about what's tomorrow. Our data centers have been purpose for built since day one for multi tenancy different applications. Like, we are operating again, like, I feel like a broken We've been operating for twelve months now NVIDIA GPUs right next to Bitcoin miners in the same data centers we have ever built and owned at all of our facilities. So honestly, I don't hear these investor concerns. I feel like we've addressed them pretty comprehensive [indiscernible] we'll just focus on the next steps, which is monetizing the portfolio.

Thank you. And our next question comes from the line of Joe Flynn from Compass Point Research. Your question please. Hi guys. Thanks for the question. I guess since the last business update three would you say is the biggest factor that led to the decision to build out the remaining capacity at Childress Iris [indiscernible] And would you characterize that more as a spec build or do you have any like maybe soft commitments interest for Talladevili signing that capacity to customers? Kent, would you like to talk to this one?

Yes, sure. So touched on earlier, we're seeing this dynamic where where the demand side is really starting to coalesce in terms of the requirement for liquid cooled data centers. So, you know, that is a part of it. As Dan mentioned earlier as well, the return side of it, it looks very attractive given where we're able to deliver that capacity in terms of a CapEx basis. In terms of the conversations we're having, we are having multiple conversations around their capacity. I think a lot of what you see with these customer conversations is there are people talking about liquid cool capacity and having the ability to deliver it, but they don't have long lead items on order They haven't been not advanced with their designs. Haven't started making any plans for construction. And so we think by actually catalyzing the construction and announcing this to the market, demonstrating the tangible path towards delivering this capacity that will help with a lot of the customer conversations that we're having. So it's certainly not just an on spec build, but again, we don't want get people over excited that there's a customer contract. About to land a week or two away, but there are a lot of good conversations that we're having.

And seeing interest from a lot of different customer segments for this type of capacity.

Does that answer your question?

Yes, sorry. On the financing component, you're originally going to going to use the ATM to build out the remaining capacity at Childress. Do you think there's opportunities to like that finance this at the project level? [indiscernible] Yes. So at a more general level, as Dan mentioned earlier, we are looking to We do have the ATM in place. There are other avenues available to us at a corporate level that we continue to explore. We are very conscious of making sure that we are having the right mix of debt and equity at a corporate level overall. But one of the things we do like about the potential co location side of the business is the ability to finance it. And attract different forms of financing So once once you catalyze a customer contract they generally take the nature of five, ten, fifteen year So very long long term contracts that lend themselves very well to project debt financing. So that absolutely is a possibility going forward. In terms of the way that we finance this sort of build out.

Sorry. And one more, what would you guys estimate the remaining CapEx to complete the 1.4 gigawatt substation by April? And I guess longer term, I mean, in regards to your conversations, like are you considering maybe like partnering with the financing provider or doing a JV or anything like that? Thanks.

Yes. In terms of the specific CapEx for the substation, we haven't disclosed, but substations are generally in the tens of millions. So well and truly covered by existing sources of capital, operating cash flow, as we've discussed. In terms of financing partners, look ultimately, these deals come down to the customer side, the revenue line. Get that, the financing will fall into place. I Will and I are pretty skeptical of JVs and partnerships etcetera, because my view, a long term held view across a variety of businesses is that all you're doing is kicking the can on difficult decisions. Because a JV partnership, a co owned vehicle, all you're doing is saying we don't know how to make decisions today, so therefore we're going to have a governance arrangement to make those decisions down the track. And as you'd see throughout our business history, it's all about control [indiscernible] and nimble in to take advantage of the opportunity. So do we ever bring in an equity investor into a project company Never say never, but our bias is always going to be to control the financing structures and governance of the underlying projects.

Thank you. This does conclude the question and answer session of today's program. I'd like hand the program back to Dan Roberts, CEO for any further remarks.

Thank you. Maybe just to spend two minutes addressing a couple of questions on Twitter or now ex as we've got a bit of a community there that I'd like to give a shout out to and the level of analysis there. Is pretty healthy. So just to run through a couple of their questions, Agriper Investments, could you provide more detail on the finance strategy for Horizon One ATM versus debt? As Kent mentioned, the financing strategy is flexible. The $1,000,000,000 ATM obviously underwrites certainty in our ability to deliver these. But the opportunity to layer in debt and project finance into AI data centers against customer contracts is real. Equally, we continue to look at the convertible note market. We continue to look at other forms capital So the expectation should absolutely not be that that ATM is the sole source and our focus of financing going forward, but it does provide something that we can count on to underwrite these growth ambitions. Could you please clarify the unrealized gainloss on financial instrument in the P and L, the $12,900,000 that's just changing fair value of the convertible notes [indiscernible] Why not HODL some of the mined Bitcoin from HODL fifteen Capital?

We've outlined this before. We don't believe in diluting shareholders to put Bitcoin on our balance sheet. You guys can buy it yourselves. Will we convert to a rate as suggested by Wolfe? And someone else Not at this stage. We see value creation more in the data center development and operations. Rather than being a landlord, how long is the sale process from start to onboarding a client into a data center, how long is a piece of string. Sorry, James. It depends on the client and the situation. Why did Morgan Stanley step out of the sale process? They didn't step out. I would terminate it. We believe our opportunity is best served by dealing elsewhere What's the best place to get food near Childress? The plaza has fantastic mix So anyway, let's wrap that up. Thanks for all the support on Twitter. To wrap up our Q2 twenty twenty five earnings call, thank you for listening in. We're really excited for three key initiatives. One, continuing to expand our Bitcoin mining which we're seeing flow through to robust earnings and operating cash flow. To the development of our Sweetwater Data Center project and hopefully be projects informing a potential two gigawatt data center hub in West Texas the opportunity to pursue a single sign single site tenant for that facility, but ultimately underwrite through Bitcoin mining in the meantime.

And then finally, our expansion into liquid cooled AI data center capacity. With the announcement of Horizon one which we're really excited to deliver on this year. So thank you everyone for dialing in. Have a good participation in today's conference.