Cipher Digital Inc.

Good day and welcome to Cipher Mining's fourth quarter and full year 2024 business at date call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would like to turn the call over to Courtney Knight, Head of Investor Relations. Please go ahead.

Good morning and thank you for joining us on this conference call to address Cypher Mining's fourth quarter and full year 2024 business update. Joining me on the call today are Tyler Page, Chief Executive Officer, and Edward Farrell, Chief Financial Officer. Please note that you may also review our press release and presentation, which can be found on the Investor Relations section of the company's website. This call will also be simultaneously webcast on the Investor Relations section of the company's website, and this conference call is the property of Cypher Mining. Any taping or other reproduction is expressly prohibited without prior 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. Forward-looking statements and risks in this conference call, including 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 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 Cypher Mining. Thank you very much for joining our fourth quarter and full year 2024 business update call. We had an extremely productive fourth quarter at Cypher as we continued the on-time execution of the growth and expansion plans discussed on previous calls. 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 million and gap net earnings of $18 million. Our adjusted earnings were even stronger. We produced adjusted earnings of $51 million for the quarter, up $54 million from the prior quarter. We are very proud of our fourth quarter numbers as they demonstrate our success in executing on our vision of being a low-cost producer of Bitcoin. We believe that the relative advantages of being a low-cost producer of Bitcoin will only increase going forward. Our key growth achievement in the fourth quarter was the successful upgrade of our Odessa fleet, which grew our total self-mining hash rate to 13.5 exahashes 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 shortly. Phase one completion at Black Pearl will substantially expand our current operating capacity of 327 megawatts and continue to improve our already impressive fleet-wide efficiency of 18.9 joules per terahash. Lastly, for those newer to the cipher story, we are widely recognized for our highly competitive all-in weighted average power price of just 2.7 cents per kilowatt hour. As electricity accounts for the large majority of our operating costs, our low price is a key driver of our strong and sustainable unit economics. Ed will give a more detailed breakdown of our numbers during his portion of the call, so I'd like to shift the focus now to an update on our anticipated growth in the coming months and years. Over the last two quarters, our business model has rapidly evolved from being solely a Bitcoin miner to being a developer of HPC data centers with a natural built-in offtake 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 337 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 2029. With these deals, we believe the Barber Lake site development opportunity has grown much larger than we previously believed, and our discussions with potential tenants and financing partners are evolving to reflect this much larger opportunity as we work to finalize the best possible deal for Cypher. 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 1 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 2 for HPC hosting or Bitcoin mining. We believe that we have found a truly unique niche by opportunistically investing in greenfield development sites, knowing that we can build and operate HPC data centers, or if a high-quality HPC tenant fails to materialize, we can continue to expand our Bitcoin mining footprint and put the sites to profitable use. Our site sourcing team remained busy in the fourth quarter, acquiring Stingray, a 100 megawatt data center site in West Texas, which we will discuss in more depth later on the call. 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 capacity. 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 necessary to service HPC customers, will allow us to be a market leader in the 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 Reveille scheduled to energize in 2027 with the possibility for expansion. The capacity of these four 2027 sites plus 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 centers and continued adoption of the Bitcoin network and related value of Bitcoin mining as a flexible load that helps balance power grids. Again, we believe large-scale interconnections available in the next three years are exceedingly rare assets, and we are aggressively positioning the company to take advantage of anticipated demand. All of our pipeline sites have the necessary characteristics for development of 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 Cypher 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 exohashes per second in the third quarter of 2024. to 13.5 exahashes per second today, and currently expect to produce at least 23 exahashes per second in the second half of 2025 when we bring Phase 1 of Black Pearl online. Next, we will review production by site. Slide 8 has a production summary for our ODESA facility. ODESA is the most significant part of our portfolio. as it currently represents approximately 87% of our Bitcoin production in January. As we've noted before, Odessa set a new industry benchmark as the first Bitcoin mining data center to receive the Uptime Institute's stamp of approval 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 of delivering on previously outlined plans. As of January, the current operating hash rate at the site is 11.3 exohashes per second, up from 7.1 exohashes per second before the upgrade. using the same approximately 207 megawatts post upgrade odessa's fleet efficiency stands at 17.6 joules per terahash on this page we also provide the observed all-in electricity cost per bitcoin at the site in january which was roughly twenty thousand two hundred ninety eight dollars this low cost number illustrates the value of the fleet upgrade as it reflects our first electricity bill for the operations post-upgrade. As we've mentioned many times on past calls, it is extremely valuable for CIFR to have a cheap fixed price of power available on such a large portion of our portfolio. On slide 9, we highlight our joint venture data centers of Alborz, Bayer, and Chief. With the 2024 expansions at each of Bayer and Chief, the sites have a total power capacity of 120 megawatts and generate approximately 4.4 exahashes 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 sites, so there are expected seasonal fluctuations with their electricity costs. Now let's turn to an update on our development portfolio. We have segmented the development pipeline into near-term growth across Black Pearl and 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 quarter of this year. Phase one will feature 150 megawatts of air-cooled rigs expected to produce over 9.5 exahashes per second of hash rate. We continue to evaluate our options for the remaining 150 megawatts of capacity at the site, including the potential to repurpose phase two of the 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 manufacture 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 587 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 of capacity is expected to be available in 2029. We have already been in discussions for months with multiple potential tenants who are interested in the site given its optimal setup and timeline to availability. We have also been discussing financing options with potential financing partners who are excited to work with us on building an enormous next generation data center at the site. Given our recent work to expand the scope of the data center, We anticipate these discussions will continue to evolve favorably. The opportunity for Cypher's HPC business has gotten much larger in the last few days, and while it will take time to finalize our path for Barber Lake's development, we have never been more excited about the commercial potential at the site. 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 250 acres of land adjacent to the transmission assets. The site is expected to energize in the second quarter of 2026, which complements our 2025 and 2027 energizations. Slide 15 outlines our expected massive growth in 2027 across four sites with 1.6 gigawatts of potential power capacity. Our Reveille site, located in Cotulla, Texas, is scheduled to energize in 2027. As mentioned, it has been approved for 70 megawatts, and we have submitted a request for additional capacity. 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. McKeska, Milsing, and McLennan, or what we call the 3Ms 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 site. The 3Ms 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 the sites 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, Ed Ferrell.