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 second fiscal quarter results conference call. My name is Lincoln Tan, Director of Investor Relations, and joining 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 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. Over to you, Dan.

Thanks, Link. Good afternoon, everyone, and thank you for dialing in for another earnings call and a business update. We're very pleased to be speaking to you today, particularly given the events of the past six, 12 months and the outlook from here. So jumping straight in. Disclaimer, I encourage you all to read it. Jumping into who we are and what we do, there's obviously been an increasing level of interest in our business over the last few months. So we thought it was worth a recap of who we are and what we do. At our heart, we're a next generation data centre business, very distinct from traditional data centres. And many of you would have heard this before, but traditional data centres have typically grown up and evolved in capital city areas. locations where they've optimized for very different outcomes and very different workloads to what we've designed. Your live time cloud computing, your mission critical systems, hospitals, governments, corporates, et cetera, where really low latency, ultra high reliability and proximity is really important. In the emerging world and the future of where we believe computing is going, is driving demand and the bifurcation of compute into still those traditional data centres, but equally this high-performance computing market, the demand for power-dense, high-performance compute. And at its heart, that is the platform that we've built and are continuing to grow. So our asset base, we've now got over 1,000 acres under our property portfolio. We've got 200 megawatts of operating data centers, over two gigawatts of power and associated land secured. We've got all the appropriate networking, physically dual redundant fiber. We've got very strong cybersecurity protocols that were developed early on. And finally, we've got our energy trading capability, particularly around Bitcoin mining, where that gives us the ability to trade energy market pricing against Bitcoin mining profitability on essentially a lifetime basis. So that's the asset base. It's a real asset base. It's next generation data centers, which have been specifically designed and purpose built by us for this emerging class of computing around power dense, high performance computing. And as we've always said, how we use that asset base and monetize it over time will undoubtedly evolve. Today, Bitcoin mining, we've been doing it for a number of years now. Most of you understand what Bitcoin mining is. It's essentially using computing power to secure the network in return. We liquidate those rewards directly into cash, withdraw that cash to our bank accounts, pay the bill. The power bill at the end of the month and pocket the rest is profit. It's quite a simple business. As we outlined in the last row there, the payback periods on the compute are attractive. We intend on continuing to grow this business segment. In parallel, we also have our AI cloud services business, which is NVIDIA GPUs today, but may become more than just NVIDIA over time. and essentially GPU compute for AI customers. So this involves graphic processing cards as distinct from Bitcoin mining, which involves application specific integrated circuits or ASICs. So two different types of chips, but at its heart, two different, two computers. So the business model for that is essentially selling out our GPU capacity on a per hour basis. Again, we pay the electricity costs and pocket the rest as profit. As you can see, also a relatively attractive payback period on the hardware. So that's where we are today. In future, we could be doing both. We anticipate doing both. We're pretty excited to be capitalizing on two macro tailwinds, which we believe are a multi-decade thematics around Bitcoin as a store of value emerging monetary asset. and AI in particular, which we think is fundamentally going to change the way humans work together. In terms of future applications and way that we can use our high-performance computing data centers, we'll continue to pursue and assess and weigh up the opportunities. So that's who we are, what we're doing. If we roll into a little bit about Bitcoin mining and where we are today more specifically, So as many of you know, we were the fastest growing miner in 2023 in terms of percentage gain in capacity installed. And that's the trajectory we anticipate to continue. We've got 6.2 exahash operating in the coming months. That should step up to 10 exahash. We're finishing off the data centers now. The chips are due for delivery. We don't anticipate any reasons why that all won't be achieved in the first half this year, as we've said since last year. Furthermore, we're on track to hit 20 exahash over the next nine to 10 months. Again, we have the hardware and the machine secured through a combination of outright purchase agreements and options that was struck when Bitcoin was around $30,000 per Bitcoin. So we've got fixed price contracts already for hardware which were contracted when Bitcoin was around 30,000. We have the power available. We have the land available. And equally importantly is this is just a single side expansion. We are not doing anything new. We are just continuing to build out existing data centers at our existing site in Childress, Texas. We have an internal construction team. We have external contractors mobilized. They will just continue to roll from building to building and deploying this capacity over the course of this year. So we're super excited about the outlook for us in terms of our Bitcoin mining business. We believe that over the next time to 10 months, as we approach that 20X hash mark, that will lead us to being one of the largest Bitcoin mining businesses on a standalone basis. In terms of dynamics around Bitcoin mining, most of you would be aware we've got the halving coming up in about eight, nine weeks. And that's the point in time at which the block reward halves. So instead of miners receiving 6.25 Bitcoin every 10 minutes, it gets halved to 3.125. We feel like we're in a really strong position. We've got almost $150 million of cash sitting in our bank account today. We've got a strong market position, access to ongoing capital for growth, and that goes to both equity, but as well as other non-equity financing opportunities, which I'll come to a little bit later on. We're very excited about the efficiency gains that we will see as we approach that 20X a hash. We've acquired and contracted for new generation Bitcoin mining machines from Bitmain and that will drive our efficiency on a portfolio basis to a bit under 22 joules per terahash by the end of this year at that 20 exahash market. In terms of our energy trading business, that continues to perform in line with expectations. We delivered the platform, the software, hardware integration, the ability to dynamically trade between Bitcoin mining profitability and the local power market in Urquhart, Texas, where essentially we have an algorithm that automatically trades on our behalf and maximizes profit. So when the market price of power is high, it automatically puts our Bitcoin mining machines to sleep and we sell power back into the market. When power prices are cheap, Because of renewables, wind, solar, et cetera, negative priced at times, we simply route those electrons through our machines and monetize the electricity via the Bitcoin network. So that's been a fantastic strategy and profit centering of its own right for us. And we look forward to that continuing, particularly among the macro outlook for energy markets. in Texas. We're seeing the ongoing permitting construction of wind and solar, particularly up in the north where we're located. We're seeing the forward curve for power starting to soften. So we're very excited about the local dynamic there for power and our ability to dynamically manage it to optimize our cost base and profitability. So that's Bitcoin mining. Moving into the AI cloud services segment, and we're really excited to give you an update around this. It's been a busy period. As you can see there, there's a photo of our data center at Prince George with the Nvidia GPUs. You would have seen recent announcements where we've announced a tripling of our AI cloud capacity. And as the market continues to utilize each GPU purchase and demand continues to appear strong in the market, we will continue to grow that. And for us, given the data centers that we've built, the multifunctionality of those data centers, the ability to order GPUs and either replace existing ASICs or plug it into new data center capacity that is agnostic as to whether it is used for Bitcoin mining or GPUs, gives us enormous flexibility to capitalize on a thematic that we're extremely excited about, being AI. We believe artificial intelligence, the development we're seeing around there, is a super exciting theme over the next 10 to 15 years. We believe it's still very early, but we believe that that is one significant way that humans are going to progress from here. And our ability to own the real assets, the picks and shovels, as some like to call it, and be agnostic in some cases as to what specific applications are developed is really exciting. We believe that we can play a very large and important role in this evolution of the sector. We have a competitive advantage, which I think is now becoming clear. As I mentioned before, this is very different to traditional data centres. As we've been saying for the last five or six years, you will and we are seeing the bifurcation in data centres. where you've got those mission-critical, low-latency, high-reliability capital city hyperscale data centres servicing very important high-reliability workloads, but you've got this emerging high-performance computing segment, which is only growing and growing quickly, which demands very different characteristics. So for us, having developed our own data centre design from the ground floor up, where we have optimised from day one for this power dense compute and not being distracted with trying to be everything to everyone by servicing traditional data centre loads has put us in a fantastic position with a real competitive advantage where we have a cost base that is super competitive by virtue of where we locate both regionally close to the source of low cost renewable energy, but also in terms of construction costs. We have designed these things from the ground up. We have iterated over a number of years, and we've got a design and internal construction team that we believe is best in class and extremely competitive. So we're extremely excited about where we sit in respect to the AI cloud services business, and we anticipate continuing to grow this strongly over the coming months and years. In terms of that competitive advantage, as I mentioned, we are cost effective because we have remained specialized. We have fit for purpose capability. We have not tried to be everything to everyone. We are laser focused on power dense, high performance computing workloads. And that goes to Bitcoin mining today, AI GPU compute today, Tomorrow, we don't know, maybe there's more, but just those two alone are extremely exciting for us as we have an outlook and give us the ability to really be competitive in a market. And you can see there at the bottom, given our price point, because of our cost base, because of the way we have set up our business and the fact that we are not trying to be everything to everyone means we can be extremely cost competitive and deliver a quality product to our customers. So now to mix things up a little bit, we're going to jump to a video.

In the beginning, there was no data. The only thing driving evolution was evolution itself. And for millions of years, this was the way. But our beginnings are a different story. A story where data and technology are essential to human progress. A company founded on the idea that there is a right way to power it. Started by pioneers linked by blood and belief. With a shared vision to not only power the future, but sustain it. And data centers capable of meeting the challenge. Bitcoin mining helped lay the foundations of our platform and primed us for future applications of high performance compute. But doing this right meant owning the land, the infrastructure, the next generation data center design, the green compute. And it meant being smart about how we source our energy. We let the wind, the water and the sun do the heavy lifting, so we can give the Earth a break. And it paid rewards. And not just to the planet, but to our surrounding communities and our shareholders. Our next generation data centers ensured our future progress, allowing us to master new avenues and evolve as technology does. Same business, same goals, different name. An evolutionary move to match our growth. A move that supports emerging power-dense applications in AI, in medical advancements, in engineering, and in areas yet to exist. The way is clear, and while our footprints will be light, our impact will be unmistakable. The future can be anything, but how we get there is everything. Iron, proceed with purpose.