IREN Limited

Good afternoon to those of you in North America, and good morning to those of you in Australia. Welcome to the Iris Energy FY23 Earnings Conference Call. My name is Lincoln Tan, Senior Manager of Investor Relations, and with me on the call today is Daniel Roberts, Co-Founder and Co-CEO, and Belinda Nusifora, CFO. I would like to remind you that certain statements that we make during this call may constitute forward looking statements and Irish 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.

Thank you, Lincoln. Dan Roberts, co-founder, co-CEO. Welcome back to another results presentation. We're thrilled to be here. It's been a year of consolidation, building and putting ourselves in a position where, as an organisation, it's fair to say that we're rather excited about what lies ahead. Talking about exciting, there are two quite powerful and exciting numbers on the slide in front of us. They do come with caveats and context, which we'll go into, but we do believe we've laid a very powerful foundation to build upon. And today we'd like to present that to you. So moving through the slides, there's the disclaimer that Lincoln referred to, encourage you all to read it. Why Iris Energy? In very simple terms, we've now established a platform which is ready to scale and continue the growth that we've delivered, particularly over the last 12 months. As we'll discuss today, we've established an extremely powerful power dynamic at Childress, our 600 megawatt Texas side, and we'll go through that today. We've got 30 exahash of Bitcoin mining capacity so far as power availability, the land and the program to execute upon that. And as we've previously mentioned, we're exploring next-gen generative AI computing and are quite excited about the upcoming deployment of our NVIDIA H100 chips. 1.4 cent power at Childress. Again, caveats. This is based on actuals since inception. As you can see, we've delivered around two cents once we adjust for ERS, which we assume that we'll receive given we have fulfilled all the requirements to receive that. We weren't eligible for 4CP given our first year of operations. So if we adjust for that, we're looking at 1.4 cents of power. That's extremely powerful. It is lower than what we were expecting, quite frankly. It is a function of volatility in the market. Having located close to the source of low-cost wind and solar, congested transmission lines, there are periods of substantial power market volatility. Given the way we've established our operations, the end-to-end control of systems, technology and infrastructure, we've been able to dynamically interface with those energy markets and throttle between Bitcoin mining, and power market trading to optimise that cost of power. However, it may vary significantly from that 1.4 cents, as we saw in August. In August, we delivered a net cost of electricity at Childress, our Texas site, of minus eight cents per kilowatt hour. So rather than the 1.4 that we mentioned on the previous slide, There was volatility in the market that led to a substantially different outcome. Eight cents per kilowatt hour was effectively the equivalent of being paid $28,000 a Bitcoin to mine Bitcoin, which we then sold for another $28,000 per Bitcoin, delivering $56,000 per Bitcoin in mining profit. Childress and this power market dynamic is the basis upon which we can now scale rapidly and we can start working towards 30x a hash of overall mining capacity. It involves a single site expansion at this Childress site. As we've previously advised, there's 600 megawatts of power and about total organisational power capacity of 760 megawatts. 20 megawatts is operating. Another 80 megawatts is under construction and due to be commissioned early in the new year. And we've started working through long lead items and construction timeframes to continue scaling that up towards the full 600 megawatts and take our business towards that 30 exahash target. It's an ongoing delivery and construction process. We've got teams on site. They continue to build. We envisage them moving from one data centre to the next data centre, continuing to build out capacity on the site. In addition, we've been thinking very carefully around funding and how we're going to fulfil this. And while we will continue to be respectful of market conditions and throttle up and down our fundraising efforts in line with market conditions, we have put in place a $626 million funding plan at a minimum. That involves the $69 million of existing cash in bank. We still have $57 million under the ELOC facility previously announced. In addition, we're going to establish a $500 million shelf of which $300 million will be dedicated towards an ATM. and another $200 million will be put aside for other products. Finally, we continue to envisage reinvesting our operating cash flow in the growth of the business. As we've previously advised and differentiated from other miners, we don't believe in holding Bitcoin on our balance sheet. We believe that creates a lazy balance sheet, we believe that that lowers risk-adjusted returns for shareholders. When we have the capacity to reinvest that static asset in additional capacity and compound returns for shareholders to deliver more and more Bitcoin equivalent exposure, we believe that's a far superior outcome for shareholders and that they should not be paying us to hold Bitcoin on their behalf. Down the bottom, you can see the trajectory that we're on. We've already grown substantially in the last 12 months, and we expect that to continue. Lincoln, I'll pass back to you.

Thanks very much, Dan. So this page just maps out the peer landscape and particular outlines two specific key metrics from August. So in the darker blue shaded columns that represents Bitcoin production in August and overlaid on top of that in the light blue outline that represents disclosed exahash capacity across the sector. And as you can see shaded in the green column, that's Iris Energy. third largest production of Bitcoin on the NASDAQ with 410 Bitcoin mined in August. So if we just take a quick step back here, in terms of the relationship that you would expect to see between disclosed exahash capacity and Bitcoin production, the greater hash rate that you have, means you've got a greater share of the global hash rate and therefore you would expect that your Bitcoin mining production should be higher. So really it should come down to relatively simple math and probability. However, as you can see from the chart, it appears quite evident that not all of the disclosed hash rate capacity is being utilized to mine Bitcoin. something's not quite matching up as we look across the peer landscape. And to Dan's point earlier, even if we do consider the impact of curtailment, particularly in deregulated markets like Texas, from an Iris Energy perspective, We just use our capacity to mine the Bitcoin and it's our experience that we are still operating at very close to full output over that four or five month period. So, you know, in terms of what this means, a few key takeaways from our perspective. Firstly, in terms of how Bitcoin mining companies generate revenue. We don't get paid based on our disclosed exahash capacity. We get paid based on our actual Bitcoin production. And that is purely a function of exahash that is on the ground, actually operating and hashing within our facilities 24-7. But the second key point here is I think this clearly highlights some potential differences in operating models across the sector and potentially exposes some of the challenges that might be associated with, for example, third party hosting, old shipping containers, abandoned warehouses, single source generation and behind the meter arrangements. and other business models which may prioritize speed or other factors over sustainable levels of Bitcoin production. And just finally, before I hand back over to Dan, we don't see this as a particularly recent phenomena. This is nothing new. We've been tracking these metrics fairly closely and the same sort of monthly data across the sector since our IPO. And we don't really get it. We just think that this is potentially overlooked by the market and potentially something that investors should pay a bit of closer attention to. Over to you, Dan.

Thanks, Lincoln. So I think that's a good segue link into the next slide. We are positioning ourselves as a next generation computing platform. We're not a crypto miner. If we buy computers, we actually operate them. As you can see from the previous slide, if we tell you we have an amount of capacity, we will operate it and we will generate revenue from it. Just as we have put a purchase order in for NVIDIA chips, we don't intend for them to sit there idle either. We intend for them to be operated. As we've previously advised, we've ordered 250 Nvidia H100 GPUs. They're on order, they're expected to arrive in the coming months, and we continue to have a number of promising customer conversations. We're talking term, we're talking pricing, we're talking growth ambitions of these customers, and in due course, we are hopeful and would expect to sign a customer and provide a further update. to the market. I think what's really exciting for us, the more time that we spend on this sector is just the enormous growth ahead this is like the dial-up days of the internet remember in the 90s you'd have to dial up your modem it would be slow it would be clunky you would go on to a messenger service it again would be slow there would be latency and it was a bit of a hurdle to adoption because you really had to be committed to pursue and utilize those services the exact same dynamic is happening in this space For those of you on the call that have used generative AI, whether it's large language models or it's generative images like mid-journey, it takes time, particularly the images. Text is a bit quicker. But when you're sitting there waiting two minutes to generate an image, that is an indication of why we believe we're at the dial-up phase of this sector. Because A, it is an indication of the demand. If there was no one using it, then those images would be produced faster. Secondly, more GPUs, more capacity will make that quicker, leading to greater utility out of the service, greater adoption, and that positive flywheel effect. So we're super excited. A large number of the team are currently in Los Angeles at a conference that we've sponsored. We've spoken there to a number of customers. We're excited about the sector. We look forward to providing a further update in due course. Belinda.

Thank you, Dan. So moving to the first slide and good morning, everyone. I'd like to take you through some of the key financial numbers for the year ended 30 June 2023, as disclosed in our financial statements and 20F. So the adjusted EBITDA for the 12 months was $1.4 million, with a $16.5 million increase in Bitcoin mining revenue year on year. Self-mining operating capacity increased by 380% from 1.2 exahash to 5.6 exahash with an additional 1,860 Bitcoin mined in FY23 with total Bitcoin mined for the year of 3,259. The average price realized per Bitcoin mined was 23.2K versus 42.2K in FY22. Average electricity costs per Bitcoin mine during FY23 of 11k versus FY22 of 7.9k. Total other costs, which include site and corporate costs, were 38.3 million for FY23, being an increase of 16.5 mil from FY22, primarily driven by the three new sites commissioned during the year, Prince George, McKenzie and Childress. as well as an increase in professional fees and other costs associated with our expanded global business and as we grow beyond the 5.6 exahash. So moving on to the next slide. The consolidated statement of profit and loss. So the net loss after income tax of 71.9 million as compared to the loss of 419.8 mil in FY22 was a decrease due to the factors with the non-cash mark to mark of the convertible instruments converted to equity at the IPO during the prior period. FY23 loss also includes significant non-cash items, such as the impairment of assets of 105.2 million, primarily relating to the limited recourse financing of 66.5 million and the impairment of mining hardware of 25.7 million. We also have other significant non-cash items, such as the shared based payments expense of 14.4 million, which primarily relates to 11.8 of the amortization of the 75 exercise price options, which were granted pre-IPO. So moving on to the next slide, we have our balance sheet. So we have a strong balance sheet at 30 June 2023 with total net assets of 305.4 million, cash and cash equivalents of 68.9 million and no debt facilities. We were able to fully utilise all the Bitmain mining hardware prepayments during FY23 and our total PP&E at the end of 30 June 2023 is 241 million. We have a current asset ratio of 3.7 times, which is underpinning our future growth strategy. And we also have liabilities to asset ratio of 8%, providing flexibility with no debt obligations. So I'll now hand over for our Q&A. I think Lincoln, will you start that?

Yeah, that sounds good. Thanks very much, Belinda. In terms of the Q&A, let's start with questions from the conference call line, and then to the examiner's time frame, we can move to the questions on the webcast.

Certainly. Ladies and gentlemen, if you do have a question, please press star 1-1 from your touchtone telephone in one moment for our first question. And our first question will be coming from Mike Colonies of HC Wainwright. Your line is open Mike.

Hi, good morning guys and Dan and team congrats on the tremendous growth in operations over the past year here. First for me, it would be great to get some more detail on the expansion build out and energization of the miners at Childress. I know your guidance calls for about three and a half extra hash of miners to come online in early 2024. So I was wondering, should we expect that to come in line all at once? And when you say early 2024, are we looking sometime in one, two?

I can take this, Lincoln. Great to hear from you and see you, Mike. Look, as we've previously advised, the expansion of this site happens in 20 megawatt data center increments. Each 20 megawatts is approximately 8 to 850 petahash, depending on the specific minor model that we install there, kind of revolving around that low 20s efficiency. So basically, as and when each data centre is commissioned, that facilitates the ability to plug in around that 8 to 850 petahash. In terms of minor procurement, we will advise the market once we formally enter into a purchase agreement for delivery. But at this stage, we remain where we were before, where we think there is substantial optionality in holding. There are a number of conversations ongoing around the right way to procure models in terms of the economics of it and the structure of it. We intend to fill those data centres swiftly as they're commissioned. But at this stage, we'd

with the ability to tell you exactly how we're doing that we prefer not to go into too much more detail great well fair enough dan appreciate that and uh just looking beyond phase one of this 100 megawatt build out at childress you know in light of the upcoming having uh and thinking about future scale uh scaling of that facility How do you plan to approach future expansion? If you could just talk through some of the dynamics there in your thought process as we navigate into future expansion.

Absolutely. And I think this is what I was alluding to at the start of the call, like the hard work's been done. We've got the platform, we've got the site, we've got the team. It's just a continual cookie cutter exercise, quite frankly, where we just have teams on site that roll from one building to the next, rolling out 20 megawatts at a time. We don't need any more power. We don't need any more land. We don't need new supply chains, new ways of doing things. We've proven our data center design. We've proven how it interfaces with the energy market. So from a practical implementation perspective, it's just continuing to do more of the same, which is really exciting and frankly has freed up a lot of our time. to focus on new growth areas for the business, like this generative AI, GPU, looking at new sites globally and the development opportunities there. Funding is a big part of how quickly you can scale. As we saw during the presentation, we do have almost $70 million of cash in bank, which allows us just to continue to push ahead. We've got other funding lines in place and coming in place. We're going to continue having those conversations. We're going to be respectful of capital markets, liquidity, cost of capital, etc. But our intention is to capitalize on the opportunity in front of us for our shareholders and to continue to build into that.

Got it. Thank you for taking my questions.

One moment for our next question. And our next question will be coming from Josh Siegler of Cancer Fitzgerald. Your line is open, Josh.

Hey team, this is Will Carlson on for Josh Siegler. First question, could you walk us through the delta between the CapEx required for HPC versus Bitcoin mining?

That's a very open-ended question, Will, in terms of... how you answer that because it is a little bit apples and oranges in the sense that one's an ASIC, one's a GPU. They both require different amounts of data center capacity. They both require slightly different configurations in terms of networking and storage infrastructure. They're both different revenue models. So it is a little bit difficult to say. I have seen a question that relates to this come through on the chat, which is adjacent to your question, which is around how to returns and payback periods interface between the two business lines. This is something that we're working through live time. But I think it's fair to say that with Bitcoin mining, you're generally going to have a higher starting return on investment in terms of annualised cash yield. It is going to be more volatile, notwithstanding as a low cost producer, you do have that natural volume hedge if the price goes down too far. GPU and generative AI, the model is more around selling GPU hours. So in the market, someone will contract with you and pay you X dollars per GPU hour for the right to use your capacity. Now for on-demand spot pricing, that's high. for long-term contracts, one, two, three years, it obviously drops lower, partly because you're locking up 100% utilization of that capacity. I think it's generally being fed elsewhere in the market that you can expect two, two and a half year paybacks on GPUs. But again, it's a very live dynamic market at the moment in terms of those returns. And it also should be said that our focus on what we see as a test case, this initial 250, is less about the discrete ROI on 250 machines as it is about proving product market fit, building customer relationships and exploring whether a business of scale exists and what that could look like going out into the future.

Got it. And then how are you thinking about energy monetization at Childress moving forward? And how do you expect to contribute during the summer months versus other months of the year?

Yeah, part of the benefit is we don't need to think. It just does it all automatically. So it's a really simple equation. We contract for power. And then our algorithm basically looks at revenue from Bitcoin mining or spot market pricing and makes the decision for us. So we're already using generative AI a little bit, actually, in terms of how we iterate that in the systems internally. The simple way to think about it is the greater the volatility, the lower our effective power cost will be because we can tap into that. So every 15 minutes, there's a market price signal in ERCOT. Our systems look at that price signal. They look at the opportunity cost of diverting electrons away from our machines and say, where is the highest and best use of that electricity? And they send those electrons to that. So whether that's through the Bitcoin mining Bitcoin network to deliver Bitcoin denominated revenues or whether it's back into the market. So we have come through summer months. That has been a volatile period for a number of reasons. As we look out into the future, it's fair to say volatility is expected and potentially likely to increase in the future. Transmission line congestion, the ongoing increased penetration of intermittent renewables, etc. But all we can do is continue to have our system set up to monetise that volatility and lower our overall costs going forward. The final point I would add is, we've mentioned this before, it is choose your own adventure. I can goal-seek what our power cost is. If you want us to have two cent power, we can do it. If we want one cent power, we can do it. It's all about the parameters that we set in our software and what we trade around.

Got it. Appreciate you answering my questions.

And one moment for our next question. Our next question will be coming from Joseph Vafi of Canaccord Genuity. Your line is open.

Hey, guys. Good morning. Nice to see solid progress in the business. Congratulations. Maybe we could talk just a little bit more on that power side, Daniel, you know, relative to your ability to exploit the power markets. Given how much power you used over the summer, if Childress does scale, do you think that your same methodology applies to – or the same energy strategy applies? I mean, basically, can your energy strategy scale if you're at 200 or 300 megawatts there? Thank you. And then I'll follow up.

Thanks, Joe. There is no – In terms of the scale, I think what you're alluding to is we've had 20 megawatts operating. If that goes 10x, we'll... that volume have an impact on the economics? The shorter answer is no, I don't believe so. No, that is still a very small amount of power relative to the overall liquidity and amount of electrons in the market. I think we've disclosed previously, or you can validate for yourself, there's something like 20, 25 gigawatts of wind in solar farms up in that Pantanal region of Texas. So... A couple of hundred megawatts here and there is unlikely to play a material role in that. But look, there is uncertainty around the power market, right? Like it is a dynamic market. There is an extraordinary amount of new generation committed, tens and tens of gigawatts of new wind and solar. In Texas, there are no additional transmission lines planned up into our region where Childress is. Notwithstanding, there's about $10 billion of other transmission lines planned over the next five years. So that congestion, that kind of prevailing dynamic of a lot of cheap renewables is likely to continue on site. We aren't close to the load centres like Dallas and Houston, where power tends to be a little bit more expensive, and you'd probably want the benefit of a long-term cheap hedge and you might see less volatility so look there is substantial uncertainty around that number but equally we can only play what's in front of us and when you step back this is the whole reason we set up this business right because when the wind blows the sun shines there's cheap power there's volatility in the markets there needs to be a solution and we have developed a significant competitive advantage to take to take advantage of that

Sure, that's helpful. And then I know it's super early days, obviously, on the generative AI side, but do you have a feel at this point, Dan, on how power-constrained that market gets, how quickly, you know, obviously the Bitcoin miners have been able to do a good job of finding cheap power located close to the source of its production, But if this does ramp, do you have a feel for when power gets constrained in that market? Obviously, Childress has a lot of megawatts available to it over time. Thanks a lot.

Yeah, look, because it's such an early market and it's so disparate and the forecasts are all relatively subjective, right? Like what's the adoption curve for generative AI? But the range of variability in that answer alone is just going to cause an enormous amount of noise in any answer that I say. All we can say is everywhere we go, everyone we speak to speaks about the infrastructure choke on building out more generative AI capacity. Before I jumped on this call, I spoke to... uh will brother co-ceo co-founder who's in california at this ai conference watching a presentation from meta and their presentation is dedicated to the infrastructure challenge if they start onboarding billions of dollars billions of people into using generative ai so it does feel like it's flavor of the month in terms of the narrative um but again we prefer to validate these things rather than just get caught up in market hype. Let's see where we get to with this initial GPU purchase, see what it leads to in terms of tangible customer orders and revenue in the door. And then we'll obviously be better positioned to work out our own view on where we're going. Great. Thanks very much, Jan.

One moment for our next question. And our next question will come from Lucas Pipes of B. Reilly. Lucas, your line is open.

Thank you, operator. Hi, everyone. This is Nick Giles asking a question on behalf of Lucas. Congrats on all the progress here, in particular the strong utilizations and power costs. My first question is related to the AI opportunity. What do you need to see in this initial purchase of H100 to promote further expansion? Dan, you noted earlier that ability to scale is a key consideration. And is this at the data center itself, access to GPUs? Thank you for your perspective.

Yeah, thanks, Nick. Good to hear from you. Look, I think it's like any business. You want to know there's a product market fit. You want to know that there's a sustainable return on investment, and it's working towards those. You know, buying 250... GPUs, spending $10 to $12 million on that, seeing a return is part of that. But it's a little bit the chicken and the egg. You can engage in a lot of conversations in the market, but until you do something, you almost don't have a license to have proper conversations. conversations and we've seen that immediately a large number of our management team did spent time with nvidia this week speaking with customers and all of a sudden that knowledge curve and understanding where the market's going the customer set up it just grows and compounds really quickly just like once you buy these machines and plug them in You work out how to operate them. You work out what tweaks are required physically around your data center infrastructure. It just paves the way to develop a better understanding and appreciation for the risk return profile of dedicating more resources towards this sector. So that's brought a context to answer your question more specifically, what do we want to see? We want to see revenue. Again, we're not in the business of just installing computers and telling people how much we've got without actually generating revenue from them. And I think Lincoln made that point very strongly. we need to generate revenue from this but equally the discrete amount of revenue we generate from this initial purchase in my mind is second order to developing that profile in the market the understanding of where customers are at and the outlook for deploying a substantial amount of capital over time to build a proper business in this sector. And ultimately, it goes to risk return. If we're going to deploy capital, we need to see a long term sustainable return on that capital. And that also goes hand in glove with cost of capital. think it's no secret to acknowledge where crypto miners trade in terms of capital. And that's a very large way away from more traditional computing technology businesses. So it will be interesting to see over time, even when we build this business out, how all those factors come together to put us in a position to hopefully continue to drive shareholder returns.

Dan, that's really helpful. I really appreciate that color. You alluded to it earlier, but I just wanted to ask, at a high level, how do you think about structuring agreements with AI customers? You mentioned reserve capacity and on-demand opportunities. Would you expect to be primarily reserve? Interested to hear your perspective there. Thanks a lot.

Yeah, look, our nature is always risk first. Like we're always going to be trying to lay off risk to other people. So if we can sign a long-term contract, our natural bias, just given who we are, is to give that to someone, but ultimately it comes to optimising returns. And that dovetails into the cost of capital point that I made earlier. If we can enter into long-term financing agreements over these GPUs, and we've seen other players like CoreWeave announce these in the market, So source of funding, long-term, attractive cost of capital, and then use of financing to deploy that into a customer at a headline rate that may be lower than what you'd order or what you'd receive, trading spot capacity. If that is going to generate more accretive returns for shareholders, then absolutely, that feels like our model. Like we're not... We don't need to be in the business of trading GPU per hour pricing. If we can line up a scalable way to raise capital and attractive costs and deploy that at scale into a market that needs it with long-term customer contracts, then that has a lot of appeal.

That's very clear. Dan, thanks again. And to you and the team, continued best of luck.

One moment for our next question. Our next question will come from Paul Golding of Macquarie Capital. Paul, your line's open.

Thanks so much, Dan. Congrats on the year. I wanted to start by asking if you could give some color on the state of the supply chain. As we were listening to your prepared remarks with respect to Childress expansion, I heard you note that you're looking at the long lead time items and ordering those ahead of capacity expansion. So just wanted to get a sense of what the lead time is and where there are constraints at the moment in the supply chain. Thanks so much.

Thanks, Paul. Great question. Look, the short of it is we're not being constrained because we've had this site for a while. We've been planning. We've got Gantt charts that are longer than I would like to read in terms of the project management. And it's just working through it, right? Like every component, every input into construction has an expected lead time. It has an expected risk. It has a number of options. We learnt a lot when we built our facilities in British Columbia across Prince George, Mackenzie and Canal Flats. We then learnt even more building the first 20 megawatts In Texas, it was a different dynamic, different supply chains, different contractors, different labor dynamic. So working through all that, we've now got a very accurate lay of the land in terms of what we need to order and when to ensure that we don't have choke points along the way. So for every component, we will look at the lead time. We'll look at the risk that that supplier falls over. What's our contingency? How late can we lead it, leave it? What level of buffer? So the short of it is we would only really be potentially constrained if we had a billion dollars in the bank tomorrow and wanted to pull the trigger on building out infrastructure for the full 600 megawatts. And those numbers are not linked, but they're illustrative. At that point in time, yeah, we'd probably face some supply chain challenges getting all the equipment as fast as we need. But generally speaking, it's all manageable and we don't envisage any major issues.

Thanks for that, Dan. And then a follow-up around uptime and power efficiency and utilization. We've seen in prior presentations, prior results and presentations, of the slide that you provided during this presentation that your utilization and efficiency and power use relative to peers based on those charts has been best in class in many cases. And I wanted to ask what you attribute that mostly to. Is it distinct data center engineering profile? Is it algorithmic in terms of your systems? How should we think about your edge versus the rest of the sector in terms of the capacity at your disposal? Thank you.

We build data centres. And I know that's a very single statement, but I'm not sure others do. Most of those on that slide are still putting computers in CCANs. I feel like the sector's maturing. Maybe we're sitting in the wrong concept. Maybe we're a data center computing business and not a crypto miner as decided. I mean, there's a lot of white gaps there that illustrate the inability or the fact that they aren't being Utilised, I think operating thousands of computers in sea cans in a remote site, potentially a challenge. I think the whole immersion cooling, we've said it, we'll keep saying it, you cannot manage heat as effectively with immersion cooling in Texas. It is just the laws of physics. It becomes exponentially hard when you're trying to evacuate heat out of a fluid in 100 degree temperature. I don't know, Paul. We're building data centers. We buy computers. We plug them in. Yes, we've developed a lot of competitive advantages and know-how internally, but at the end of the day, there's a PowerPoint. There's a data center. You plug them in. You generate revenue. Why aren't others doing that? I think that's more of a question for them.

Fair enough. Thanks for the color, Dan, and congrats on the year.

Thanks, Paul.

One moment for our next question. And our next question will be coming from Joe Flynn of Compass Point Research and Trading. Your line is open, Joe.

Hi, guys. We're just looking for some color on maybe the initial timeline of AIHPC and the kind of test runs you guys are offering and what exactly those entail. And on that front, With the customer conversations you're having, would you attribute it to more legacy businesses looking to expand cloud offerings or startups that are getting priced out in the market from hyperscalers? Thanks.

Thanks for the question. So, look, the delivery schedule is in the coming months. So, you know, towards the end of this year, very early next year in terms of when they arrive. We're not waiting for them to arrive in terms of engaging customers in a perfect world with the customer lined up, ready to use them the moment they arrive on site and plugged in. So let's see where we get to. In terms of the nature of the customer conversations, we are talking to everyone. It's the short of it. The very large cloud businesses, the global technology majors, all the way through to platform aggregators and more startups, generative AI, specialized companies. So it's a bit early to preempt the direction that we'll go in that regard. Although it probably, if I had to guess, is probably not going to be one of the big technology majors at this point, partly because of scale. Do they really want to get out of bed to deal with 250 GPUs? Or is this more part of the broader strategy I was alluding to where um prove up our capability prove the product market fit and then utilize this test case to really scale over time and i think that would be the hope or the ambition of us as a business um in terms of how the returns or those customers would work with us you know is it long-term contracts is it spot that's um we're just going to have to work work through that um most of the time

All right, thanks. That's all for me.

Just as a brief reminder, to ask a question, please press star 1-1. One moment for our next question. And our next question will come from Reggie Smith of J.P. Morgan. Your line is open.

Hey, good morning, guys. Thanks for taking the question. A few quick ones. Could you remind us what your CapEx needs, our incremental CapEx needs are to get to the nine extra halves that you guys are talking about for early 2024?

I don't think we've disclosed that number specifically, Reggie. So let us take it on notice. It's a good question. I wouldn't want to respond.

I can probably provide some color down. Please. So Reggie, we haven't provided specific detail in this release, but I think one release back, we provided some guidance around what it would cost to do 20 megawatts. The mass hasn't changed materially since then in terms of, you know, to do a 20 megawatt building, roughly $35 million of CapEx for both the infrastructure and the miners. If we just look at current data points around where miner pricing is at, it's probably, you know, 15 mil on the infra and 20 mil on the miners thereabouts. So you sort of scale that up times four, gets you up to, you know, $140 million for the 80 megawatts, including, you know, the latest generation hardware. which is roughly split sort of 80 mil for miners and 60 mil for the infrastructure.

Got it. So just to make sure I'm kind of using apples and apples here, does that figure that you just quoted, should I be comparing that to your cash balance or has some of that already been spent, if that makes sense, or paid rather?

Yeah, look, some of that has been spent. I think it's just important to note that, you know, construction has been ongoing and that $69 million cash balance is a 30 June number based on the 30 June balance sheet.

Got it. Okay. Perfect. And this kind of ties in with that question, but, you know, obviously we've got the halving that's going to occur next spring. You know, how do you guys think about or even evaluate the offers and the pricing for hardware in this environment, given so many uncertainty around that having. And, you know, maybe you can talk about kind of your base case, you know, hash rate assumptions or just anything that you guys or how you guys think about it to help investors kind of appreciate that.

Yeah, sure. That's a good question, Reggie. I think part of that goes to the strategy as well, which Dan alluded to around optionality on the timing of the mining hardware purchases. It takes us physically six months to construct this infrastructure. But in terms of getting miners into these facilities once the infrastructure is built, that's sort of six to eight week type timeframe. You know, talking to the halving, the Irish energy strategy is really similar to what we've always done, which is prepare for the worst case scenario and hope for the best. So we hope that Bitcoin will run into and post the halving. We look back historically, there are some data points that suggest that's going to be the case, but we just need to lock down risk. wherever we can. So, you know, in terms of the cost of energy and making sure we survive and come out the other side very strong, it's managing our power prices appropriately, which Dan has spoken to. In terms of operating at scale, we are a 5.6 exahash business, third largest producer in the NASDAQ last month. So we tick that box. Efficiency is absolutely key. Again, we're demonstrating that. Optionality in the CapEx deployment, which we've spoken to in terms of, you know, the bulk of the CapEx relating to the miners, we're going to adopt you know, a bit of a wait and see approach around that. To the extent Bitcoin prices run, we have high confidence around the returns. We can invest and the capital will be there. To the extent there's a drawdown or Bitcoin does funny things around the halving, you know, thank God we haven't deployed all of that capital without any visibility around that. So, you know, historically, you know, if there's a drawdown in the Bitcoin price. You just expect, you know, lower cost miners to prevail and some of the higher cost guys with debt, less efficient facilities, higher operating costs, et cetera, to come out of the hash rate. And we want to be making sure that, you know, Iris Energy is as best positioned as possible relative to the rest of the sector.

Got it. You know, if I could sneak one more in and it's probably hard to answer, but Is there a rule of thumb that, like, investors should think about in terms of maybe a framework, a better word, in terms of, like, how do you evaluate a follow-on offering if you were to do an equity issuance? Like, how should investors think about that decrease in potential around that? Is there any rule of thumb or guideline for that?

I can take this one, Lincoln. Look, it's something we look very closely at. Sorry, the video is just taking time to update on my screen. Reggie, it's something we monitor almost live time, speaking to all the banks around price in terms, et cetera. I think it's fair to say these ATMs seem a more efficient way to raise capital. Just the spread on your share price, You know, the lack of, you know, I guess, discount. We've seen warrants in the past, which is extremely unattractive. I'm just not sure the feasibility of a placement in the current market versus, you know, utilising products like the ELOC, the ATM, speaking to people about kind of vendor financing strategies. options, particularly with GPUs in traditional computing land, that is more common. I alluded to the CoreWeave debt and financing facility they put in place. That's all attractive. Look, equity, when you're a growing business, and looking to lock down a platform is attractive but equally we need to be respectful of our share price liquidity etc um and not dilute our shareholders unnecessarily so we've got a lot of metrics that we look at in terms of accretion versus um non-accretive dilution of Shareholders, there's potentially some double negatives in there. It's just something you've got to monitor lifetime. The best thing about putting these products in place is you're not making a point-in-time decision. You retain that optionality every day that you wake up to ensure that you're optimising your cost of capital and generating that shareholder return.

I can appreciate that. It's a complicated process for sure. Thanks for the time.

And I'm showing no further questions. I would now like to turn the call back over to Dan Roberts.

Excellent. Thank you, operator. Well, thanks, everyone. Thanks for the great questions and support from the analysts that asked questions. As they always do, we appreciate the support of all our shareholders. It's been a very interesting 12 to 18 months. Establishing the platform, getting us to where we are today has involved an extraordinary amount of hard work from the team internally. Will and I could not be happier. We've got a fantastic group, the passion, the commitment. We know that we're at the forefront of an industry that is the future. You know, the digitization of our world, the electrification, the movement of renewable energy into high performance computing. We had conviction five years ago when we started this business. I know for a fact there is a number of seed shareholders. who are on this call that were there back then, they're here today. We're continuing to pursue that dynamic. And I think it's fair to say over the last five years, nothing has changed except that conviction around where the world is going is increasing. Like we are following that digitization electrification dynamic, and we have established a platform which is at the forefront of innovation to capitalize upon it. Yes, it started with Bitcoin mining, but we said five years ago that high performance energy dense compute broadening beyond Bitcoin is likely to happen. And here we are at the forefront of that industry as well with a very unique business model to capitalise on that. We've got a very unique proposition in terms of near-term growth, those 30xASH numbers, the 1.4 cent power that we discussed during the slide deck. We feel like we've done a lot of the hard work and we can now execute swiftly and most importantly, efficiently, pursuing that Bitcoin mining 30x a hash trajectory. But in parallel, have put ourselves in a position with a fantastic team to pursue these other business lines. And you can probably tell that, as usual, I'm super excited and, again, very appreciative for all your support. So thanks once again for dialling in. I'd say see you next year, but we'll see you well before that.