Cipher Digital Inc.

Hello, and welcome to the Cipher Mining First Quarter 2022 Business Update Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. It is now my pleasure to introduce Lori Barker, Investor Relations.

Good morning, ladies and gentlemen. Thank you for joining us on this conference call to discuss Cypher Mining's first quarter 2022 business update. Joining me on the call today are Tyler Page, Chief Executive Officer, and Ed Farrell, Chief Financial Officer. Please note that you may also review our press release and presentation, which may be found on the Investor Relations section of the website at investorsatcyphermining.com. Please note that this call will be simultaneously webcast on the investor relations section of the company's corporate website. The conference call is the property of Cypher Mining and any taping or other reproduction is expressly prohibited without prior written consent. 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 Cypher's financial outlook, business plans and objectives, and other future events and developments, including statements about the market potential of our business operations, potential competition, and our goals and strategies. The forward-looking statements in this conference call include responses to your questions are based on current expectations as of today, and CIFR assumes no obligation to update or revise them whether as a result of new developments or otherwise, except as required by law. Additionally, the following discussion may contain non-GAAP financial measures. We may use non-GAAP measures to describe the way in which we manage and operate our business. We reconcile non-GAAP measures to the most directly comparable GAAP measure, and you are encouraged to examine these reconciliations, which are found at the end of our earnings release issued earlier this morning. I will turn the call over to Tyler.

Tyler? Thank you, Lori. Hello. This is Tyler Page, the CEO of Cypher Mining. Thank you for joining our first quarter earnings call, and I look forward to providing a business update. Let's start with an overview of Cypher Mining. We are a U.S.-based large-scale Bitcoin miner with key competitive advantages in equipment, power, and operations. We brought our first Bitcoin mining operations online in February, and we have significant build-out plans for 2022 and 2023. Notably, we have a business position to withstand cyclicality in Bitcoin mining profitability. We do this by focusing on the main cost drivers of both CapEx and OpEx in the business. In Bitcoin mining, CapEx is dominated by the cost of your fleet of mining rigs. And OPEX is largely the cost of power. We've stayed very focused on maintaining cost discipline at Cypher, despite the inflationary environment the entire world has faced recently. That focus positions Cypher very well for potentially lower Bitcoin prices because with comparatively lower costs, we should be able to keep our machines running profitably when competitors with higher costs face challenges. We are expecting to bring approximately 7.5 exahash per second of hash rate online by early 2023. This is an increase in forecasted hash rate from our last business update due to an improved mix of machines under contract with MicroBT. With this improved mix of machines, we also now have a more efficient fleet of mining rigs on order with an average machine efficiency of about 32.1 joules per terahash. Our average price paid for our rigs is now forecast to be $45.01 per terahash per second. We have a portfolio of long-term power purchase agreements with a compelling weighted average price of 2.7 cents per kilowatt hour. We believe this price is extremely competitive versus our peers. Our operations team is now readying the power and infrastructure at four separate data centers, and we expect to have 275 megawatts available to accept our mining rigs by year end. We anticipate the CapEx costs for these sites outside of the cost of the mining rigs to be about $450,000 per megawatt. Let's discuss some milestones Cipher has achieved since our last call. First, our first quarter shipments of rigs from Bitmain have been installed on time at our Alvarez data center and are now hashing. Our hash rate build will accelerate throughout the year as shipments get larger, and we anticipate that growth in hash rate will pick up meaningfully in the coming quarters, as I will discuss in greater detail later in our deck. Next, we have now increased our hash rate forecast to 7.5 exahash per second, as we recently upgraded our machine purchase contract with MicroBT to include a more efficient mix of higher performing rigs. This new mix of machines in our fleet will add an additional 400 petahash per second to our previous forecast. Lastly, we recently closed our first equipment financing at our Alborz Data Center joint venture with BlockFi for about $47 million. The proceeds from this financing will go towards previously incurred cost for the Bitmain machines on order for the Alborz site. We are excited to partner with BlockFi on the first of what we anticipate will be multiple debt deals for the company in the near future. Now let's turn to our implementation plan and strategy. On slide six, we show an updated forecast for power and infrastructure readiness by site. Our operations team is currently hard at work deploying our first four data centers with an expected fifth to begin later this year. You will notice that our updated forecast reflects the fact that we have pushed out the anticipated start date for BEAR phase two and CHIEF phase two to 2023. Our updated end-of-year forecast for power and infrastructure availability is for a total build of 345 megawatts, with 275 of those megawatts belonging to CIFR and the remainder belonging to our JV partners. This is more than enough power to accommodate installation of all the rigs we have on order. On slide seven, we overlay our data center readiness schedule with our quarterly mining rig shipment schedule. You can see that we forecast to have sites ready to accept machines as they arrive throughout the year and plan to have excess site capacity as well, should we find opportunities to purchase additional machines at attractive prices. Across the bottom of the slide, you can see the hash rate associated with the mining rigs being shipped, billed by quarter. We forecast having roughly 7.5 exahash per second up and running in early 2023. Here are some updated pictures at our Alborz data center, which is nearing completion. The data center is currently operating the rigs we received in the first quarter and will continue to add machines as they arrive in the second quarter until the full 40 megawatts is operational. As you can see from the turbines in the distance, Alborz is 100 percent powered by wind. Slide nine features pictures of progress at Bear and Chief. Once all the machines have been installed at Alborz, the next mining rig shipped will be headed to Bear and Chief, where the sites will be ready to install them. You can see the early infrastructure deployment and our container foundations being set in these pictures from a few weeks ago. Slide 10 shows construction progress at our largest data center in Odessa. The upper left-hand corner has a picture of the site being initially cleared, which I showed off a few months ago. It is a huge 54-acre site. The other pictures show the substation, as well as foundations being placed, along with trenching and electrical work being done. We're thrilled with the progress here already, thanks to our best-in-class construction and operations teams. and look forward to more exciting and fast-paced construction at ODESSA over the coming months. Slide 11 shows some up-close pictures of conduit being put down at ODESSA, as well as the helical piles we use as foundations for our containers. Lastly, let me reiterate some key build-out statistics to note about CIFR as we continue to scale. We have an anticipated weighted average cost for mining rigs of roughly $45.01 per terahash per second. Our average rig efficiency is anticipated to be about 32.1 joules per terahash. We have an anticipated average weighted power price across our portfolio of about 2.7 cents per kilowatt hour. And we anticipate our non-minor infrastructure CapEx cost per megawatt to be roughly $450,000. As the pictures I've shown suggest, we've been extremely busy here at Cipher building out our four sites in Texas. We've made significant progress in the past few months executing to schedule during a time where many are finding it challenging to line up power and equipment. We're happy to have our first machines installed and hashing, and we're excited to get our next machine delivery soon and ramp up our production, particularly in the second half of this year. Now I will pass it off to CIPR's CFO, Ed Ferrell.