IREN Limited

Good afternoon to those of you in North America and good morning to those of you in Australia and welcome to the Iris Energy Earnings Conference call for the fiscal year ended June 30, 2022. My name is Lincoln Tan, Senior Manager of Corporate Finance, and with me on the call today is Daniel Roberts, co-founder and co-CEO, Lindsay Ward, President and Belinda Nusifora, Chief Financial Officer. Before we begin, please note this call is being webcast live with an accompanying presentation There will also be an opportunity for some Q&A following the main presentation. I would like to remind you that certain statements that we make during this conference call may constitute forward-looking statements, and Iris Energy cautions listeners that forward-looking information and statements are based on certain assumptions and risk factors that could cause actual results to differ materially from the expectations of the company. Listeners should not place undue reliance on forward-looking information or statements. Please refer to the disclaimer on slide two within the accompanying presentation. Thank you. And I will now turn the call over to Dan Roberts. Dan.

Thanks, Lincoln. Good morning. Good afternoon, everyone. Thanks for joining us for our inaugural annual earnings call. We've done a couple of quarterlies already, but this is the first annual and appreciate everyone's support and time to dial in today. Very excited to go through A quick update on the business, where we're at, where we're going and go through some of the details. So without further ado, I thought it's worth recapping at the top of the presentation. Who are we? Why are we here? And really, it comes down to three fundamental beliefs. One is we believe as a team that Bitcoin is here to stay. If it's here to stay, there's only 21 million. You can't stop it. You can't change it. Then it feels like It's likely to go up in value over time and be proven as a store of value asset. The second thing is we believe Bitcoin mining can be done better. Bitcoin mining has evolved rapidly over the 11 years Bitcoin's been around. It's evolved from hobbyists on their computers and laptops, through to graphics cards, through to the start of the ASIC era, to where we are today, which is hitting a level of maturity where we've caught traditional computing in terms of efficiency levels. And really, as we all know, the game is now more about that large scale energy data center infrastructure where everyone's got access to the same technology. It's really about the energy component now and how you access energy markets and how you do that in a socially responsible way. And then finally, we believe Bitcoin mining can be done better. As I said, it's evolved hobbyists, enthusiasts at home on their laptops and computers. to early mining farms with shipping containers, old warehouses, and now we're really starting to see the emergence of an institutional asset class. Last year alone, 2021, 15 billion US dollars of revenue line. The sector is growing, it's growing really rapidly, and it's maturing and evolving accordingly. So we've really set this business up over the last four years focused on doing it the right way, really not taking shortcuts, building an institutional grade platform where we're really building an asset base for the long term. We haven't held any coins. That's not because we're not bullish Bitcoin. We're very bullish Bitcoin. But we just don't believe it's in the best interest of our shareholders for us as a business to be holding Bitcoin. We believe you double down on risk, i.e. when Bitcoin's going up, happy days. But when Bitcoin goes down You're getting hit on your P and L as we're seeing at the moment, and you're getting hit on your balance sheet as well. If you've then geared up against those balance sheet coins, then we can see the issues that quickly arise. For us, the optimal strategy is to liquidate daily, lock in those profits. As you can see there, we're mining Bitcoin at $8,000 a coin, lock in that profitability, and then make a capital allocation decision with that profitability leftover. Today, even in the current market, Bitcoin mining is profitable. Incremental returns on CapEx are profitable. Why would you hold a Bitcoin on balance sheet if you have the ability to reinvest that Bitcoin in additional infrastructure and computing capacity to generate an additional Bitcoin every 12 to 15 months? I understand that not every business can do that, but when we've set up our business as a growth platform with a substantial number of development sites, it does continue to appear to be their optimal strategy from our perspective. The second point, we've delivered. We really pride ourselves on doing what we say we're going to do, and we have. Without preempting an announcement a little bit later on, we're pleased to report that we continue to hit our milestones. We said 3.7 exahash by the end of September. We will hit 3.7 exahash by the end of September. Every milestone along the way, we've at least met, if not exceeded in terms of timeframe. Not only that, but the facilities that we're building are highly efficient. And we've been saying this for a year. We don't do shipping containers. We don't take shortcuts with temporary facilities. We don't retrofit old warehouses. We build, own and operate our own proprietary data centre infrastructure, where we have now invested four years in optimising ventilation, airflow, networking, design infrastructure, to really house these chips in the optimal operating environment. And that's now proving results. We're in a very good balance sheet position. As of 30 June, 110 million US dollars of cash on the balance sheet. No corporate debt. Again, we've got some hardware financing, but that is limited to asset level. Again, essentially a key differentiator with other listed firms. We have not given parent company guarantees. We do not have cross defaults. We do not have cross collateralization. Those financing are limited recourse specifically to the individual computers and the SPVs they're held in. And further to our recent announcement, as a result of negotiations with Bitmain, we're pleased to have six exahash locked and loaded. We've got the hardware. It's all in the process of being on the ground operating or being delivered. And we're excited about installing that over the coming year. Low operating costs. Again, this comes down to the benefit of what our energy strategy has been since day one. Target low cost excess renewables. But almost by definition, the cheapest power out there is marginal cost renewables. There is no feedstock cost. There's no commodity input. If there is overbuilt renewables, the marginal cost of that power fundamentally is lowest cost power. And we're really now starting to see the benefits of that play out, given what's happening in the macro environment. So I mentioned the efficiency gains, and here's a chart that seeks to really highlight that. What this chart shows is how many bitcoins we are mining per exahash of installed capacity over the course of this year. It's a very simple metric, one exahash worth of computers. How many Bitcoin did you produce from that one exahash? And again, there's a lot of good miners. There's a lot of different people doing different strategies, different approaches, but we're very pleased and pride ourselves on being number one in that list. And for us, this has two benefits. One is the obvious operating cashflow benefit. along with the CapEx efficiency benefit, i.e. we're obviously generating a better return on investment as a result of generating that additional Bitcoin. But for us, asset life, asset integrity, we are looking after our assets, the electrical infrastructure, the computing infrastructure. We're not letting it overheat. We're not letting dust get in there. We're not letting humidity. These chips, they're extremely profitable. We are looking after them. for the long term and managing those assets for the long term. I did say that I didn't want to preempt some news that Lindsay was going to address, but this chart basically does. Sorry, Lindsay, we energised 50 megawatts at Prince George literally in the last hour. It's a fantastic milestone for the business and really rounds out that 3.7x hash. objective or or stated guidance to the market that we've had for a long time now it will take another week or two for the individual sections to be lit up the miners are installed um but that takes us to 3.7 exahash and one of the largest listed bitcoin miners already um which is very pleasing and you know relatively short period of time from only reaching 0.7 about a year ago now And we look forward to obviously continuing to grow that not only into the 6x hash that we've got secured that we're building out, but obviously beyond as well. So again, this just shows the track record of delivery and the growth pathway that we've been on and also the near term growth pathway that we're guiding the market towards. As you can see, it was only 12 or so months ago that we're at 0.4, 0.7 exahash. We've continued to deliver these projects, and Lindsay will go into more detail around our operational and executional excellence. But fundamentally, it comes down to a team with substantial experience in building very similar data center energy, renewable energy assets. Just to recap, Where we're at in terms of balance sheet and profitability, this is on the right hand side, if I start right to left, is a matrix or a table that many of you will be familiar with. And it contains a link to an online website where you can validate this firsthand. And the beauty of Bitcoin mining is that it's very objective. It's very mathematical in terms of how the profitability and the revenues work. And as you can see, we're obviously leveraged to the Bitcoin price. We understand that. But where we're at in terms of 6x a hash of capacity and over $100 million of annualized mining profit based on that 6x a hash, we feel like we're in a very good position from a P&L perspective. And then balance sheet, absolutely critical to manage, particularly when you are exposed to a volatile exponential asset such as Bitcoin. $110 million of cash, as I mentioned at the outset. And importantly, from that 110, our expected spend post June 30 to deliver the six exahash of operating capacity is around $76 million. So around 76 of that 110 is expected to be utilized to deliver the full six exahash of capacity, which leads to the profitability matrix on the right. In terms of net assets, 462 million of net assets on balance sheet, and our market cap is slightly below that today. As I've mentioned a couple of times, we are building multi-decade institutional-grade infrastructure. We are here for the long term. We believe in Bitcoin. We believe it's here to stay. We believe in the value of our underlying asset base, locking up that low-cost excess renewable energy, building out the electrical infrastructure building out industry-leading data centres and monetising that into the digital exponential age. In terms of our sites, recapping where we're at today, that 160 megawatts across British Columbia as of one hour ago is now all energised. The computing capacity will be coming online progressively. The 30 megawatts at McKenzie is obviously a Q4 exercise, but the 50 megawatts at Prince George as of this morning now has energy. That will take us up to around 4.7 exahash by the end of Q4 this year, up from the 3.7 expected at the end of this quarter, being the quarter ended September, with an additional 1.3 exahash to be installed at Childress early next year. I've mentioned the management team a few times. Again, just to recap, we do this as a very large team. We've got about 100 people globally, all with substantial experience in associated sectors around data centers, electrical, engineering, construction, energy, et cetera. Many of them are construction contractors, but we've got a fantastic core group with substantial experience. Many of those who are on this slide will hear from Lindsay in a moment who will really drive through a lot of what we've done around the operations and the execution and why we've been able to deliver what we've been able to deliver. And then we'll also hear from Belinda around the financials at the last third of the presentation. Finally, alignment incentives. Around a quarter of the business is owned by us. We're all laser focused. We're really committed to the business. We treat every dollar as our own. We believe in where we're going into the business. We're extremely proud of the infrastructure we've built, the team we work with. It's a fantastic environment. We very much appreciate all that third party investment and support of our business and internally feel like we're very well aligned to the future of this business. So on that note, I'll pass over to Lindsay, who will now go through a bit of an operational update on the business. Thank you, Lindsay.

Okay, thanks, Dan. I just wanted to start today to talk about operational excellence. It is a key factor to our success. As a company, we're consciously building out our operational culture that has extremely high standards. It's the only way to be successful is to set yourself high goals and make sure you achieve them. Recruiting is a key part of that. Getting the right team in place allows us to achieve excellence in everything we do from safety, flowing into the environment, community, governance, operations, maintenance, asset management, construction and financial control. It's all about people once you get to the point of getting these buildings underway. We recently welcomed Heather Mills as our Vice President of People, Culture and Community, Javier Garcia as our Engineering Manager, Leonard Volchek as our Construction Manager down in Childress, and Martin Slovosky as our IT Manager. All of them recently joined the IRIS team. Having a motivated, flexible, and focused team is the key to success. Our air cooled data centers continue to outperform our competitors as Dan went through on that slide. And that's not a fluke. It's the outcome of very focused R&D, trial and error, and really learning from our mistakes and a constant focus to build out excellent infrastructure. We are confident that our operating performance will continue. We're continuing to build out. We've got a further 30 megawatts at McKenzie to come online by the end of the year, and that's progressing well. And as Dan said, we'll have 4.7 exahash online by the end of the year. Supply chain management, it certainly remains a challenge, but I think we've found the right formula to minimise the risk, particularly to McKenzie. We ordered the long lead items from McKenzie well in advance of construction and really well in advance of final design. And that really is a key strength of ours that we understand our data centres, we've done all the engineering, we understand what we need and we can order ahead of final design and that makes sure we get ahead of the queue. We've got a construction team, an in-house construction team. We've got key subcontractors who we're moving progressively now. They were at McKenzie, went down to Prince George, heading back to McKenzie, and they'll also supplement our children's team. And that's really important for us. Not only does it help us with our procurement because we know what we need, when we need it, and where to go and get it, but it also gives us a high level of certainty of building out our infrastructure on schedule. And I think it's just worth talking about a recent example of how focused we are on procurement. We had an issue, and it's around looking at the small items within a larger package. Often a subcontract will come to you or you'll place an order and the supplier will say, oh, that long lead item is X weeks. But it's not every component within that package that is a long lead item. What you've got to do is get behind the package, look at each individual item and track each individual item, not the longest item, because it gets a bit lost in the overall challenge of meeting deadlines. And so we were told by a supplier that, There was a part that we needed. It was only a small part. It's amazing, quite low cost, couldn't be found. And we managed to talk to an electrical contractor in Childress who went to a small supplier in Utah. We then flew down there, put it in a suitcase and brought it back up to Prince George, handed it to the service provider and kept ourselves on track. It's just that focus and dedication to winning that really is inherent in the way in which we go about building out our facilities. And I think just touching again, we lead this construction effort ourselves. We don't have an EPC or an EPCM sitting between us and the subcontractors. We've got one fully integrated team. We're all focused on outputs, making things happen safely, low cost. And it's really exciting when you see the subcontractors come on board. It's not a contractual relationship at all. It's a relationship to succeed in building out our data centres on time and ahead of budget. And I think from that perspective, that's been one of the things that I've really enjoyed watching is teams with different motivations, different outcomes coming together for the better good of getting us on track and getting our supply chain management enabled. In terms of technology, we're very focused on improving our systems and processes through technology. There's a lot of work going on in the background, looking at how we can do things quicker, smarter, more efficiently, cheaper, how we really enable technology to improve our business. We've got our own in-house IT team led by Dennis Skrinoff, our Chief Technology Officer. and they monitor every aspect of our operations. It's amazing the amount of data points that we're gathering data from, from air temperatures to airflow to dust ingress, chip temperatures, energy usage, efficiency of each miner and much, much more. And what's exciting is the guys on the ground who really make the difference to how efficient we are, are hungry for this data. You see it up on their large screens in their offices. We see it out in the field on their iPads. They're really looking for that 0.1 exahash every day. How can we just add a little bit more? What can we change to make it more efficient? It's all data-led. And to have your site team that's interested in the data and absorbing that data is really exciting and just a testament to the culture that we're building across our organisation. Community is at the heart of everything we do. We generally operate in small communities where our presence makes a real difference through the local employment that we create and through the expenditure that we do within those local communities. And you employ locals... it allows you to quickly get in touch with the community. And so they know what the community needs, they know where the community gaps are, and quite quickly we can get involved and help contribute to great community outcomes. I recently was in McKenzie, attended a community luncheon for the successful grant applicants. We handed out about $70,000, and it really makes a difference in a small community. And the feedback's been positive. And we're not a check-writing organisation. We get involved with the community. We had a kick-off lunch. We'll regularly touch base with each of the community groups, see how they're going, see where our money's being spent, see how else we can offer further support and look at longer-term relationships with some of these community organisations so that they can really plan for the future. So it's really at the heart of what we do. Excitingly, we're also starting a scholarship program. We've got our first successful applicant. It's a female apprentice who's going off to finish her studies. Financially, it wasn't possible for her to do that. And with our assistance, she can now finish the third and fourth year studies and then she'll come back and and work for that scholarship opportunity. So I think that's another thing we want to do more of and look at how do we get more females into the electrical space and into engineering. Community grants in Childress are going quite well. They're now closed. I'll be there in a couple of weeks' time in Childress. And again, we'll have a luncheon with the successful participants. It's a great opportunity for me to better understand the community, what things we can do differently, how we can be better a community citizen. And so that's a really important part of my travels when I'm in North America. And equally around Canal Flats, our other operating centre, we sponsor a number of local charities, sporting events, and we'll kick off a community grants program in Prince George in 2023. So just like to touch on our operating centres. Our first one was Canal Flats. It's been, it's ramped up quite impressively. It's operating consistently above nameplate and that's a testament to the guys on site who are very focused on improving the performance. uh canal flats is our center of excellence we've got a majority of our engineering team based there we've also got a fabrication shop it's an in-house a fabrication shop which makes it really easy to to trial new ideas and concepts because their engineers are there we can engineer on the run we can manufacture on the run and we're not relying on third parties who aren't incentivized to try things and make mistakes and so The work we do there rolls out to our other data centres as we progressively build them out, but also small operational tweaks and then rolled out progressively to the other sites. And what's key is that core group of people where we started this business, great culture, great ownership of Iris Energy. We utilise them to go out and initiate the production teams at each of the sites, so we keep embedding that great culture as we progressively build out our business. And the children's team also get involved in the construction down in Mackenzie. Prince George and they'll also be involved in the construction down at Childress as well. So we're just getting that consistency of approach, certainty of approach by sharing our workforce more broadly across the business. In terms of McKenzie, pretty exciting. I went there when we just had a bit of a patch of dirt and about eight months later, all of a sudden we've got 50 megawatts up and running and another 30 megawatts under construction at the moment. We switched that facility on in August. Since then, it's sat at 50 megawatts. consistently from day one, a great effort by the IT and the site team to get all that commissioned and tested ahead of ramping up. We really have not had any issues at all. And so to be able to just run consistently from day one has been fantastic. And we'll have 2.5 exahash built out at McKenzie by the end of this calendar year. The ops team's in place. All locals that have worked in other industries in the local area have been able to track them to our business. And we're really happy and excited that we've brought a brand new industry to Mackenzie that's contributing to the community, contributing to their economy. And we're there certainly for the next 20 or 30 years. And at 80 megawatts by the end of the year, it's going to be a really significant facility. Prince George is our third operating site, again, up in British Columbia. It is now the home of an additional 50 megawatts and 1.4 exahash housed across three data centre buildings. The construction is all complete, as Dan mentioned. The energisation happened at about four minutes to seven Australian time, so just in time for this call, which was great. And everyone's just excited watching all the WhatsApps come through and photos. It's another big milestone for the business. And again, we hadn't done anything on that site for about February of this year. So in seven months, we've gone from a paddock through to an operating data centre. We've done that very safely. We've had no material safety incidents. We've got a really motivated team. And that group of individuals came down from Mackenzie and then they're heading back to Mackenzie. So again, that consistency approach is really important to building great data centres. And then finally, just on to Childress, you can see a photo there of the earthworks are well advanced. It's in the Panhandle region of Texas. There's a lot of excess renewables there that we'll be able to take advantage of. We're planning to build out an initial 40 megawatt development in 2023. That will host the remaining 1.3 exahash of miners that we received recently from Bitmain, and in 2023 will be a 6 exahash business, which again is a fantastic achievement. All the construction permits are in place. Earthworks are underway. First data centre building earthworks of 20 megawatts is nearing completion. We've placed all the required long lean time items. So we're ticking along there at Childress and certainly it'd be great to have a fourth operating site up and running in 2023. And I think in closing, I'd just like to thank our team, their amazing group of individuals to bring on 50 megawatts in August and another 50 in September. Parallel builds has been a great achievement and a great milestone for the business. Thank you for listening to me today. Certainly happy to take any questions after this around the operational side of the business but I'll now hand over to Belinda, our CFO, to talk about our financial results. Thank you.