IREN Limited

Good day and thank you for standing by. Welcome to IRAN's third quarter FY 2024 investor update. At this time all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation there will be a question and answer session. To ask a question please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 1 again. I would not like to hand the conference over to your speaker today, Lincoln Tan, Director of Investor Relations.

Thank you. Good afternoon all to those of you in North America and good morning to those of you in Australia and welcome to IRAN's third quarter FY 24 results presentation. My name is Lincoln Tan, Director of Investor Relations and joining me on the call today are Daniel Roberts, co-founder and co-CEO and Belinda Nusifora, CFO. Before we begin please note that this call is being webcast live with an accompanying presentation. For those that have dialed in via phone you can elect to ask a question via the moderator after our presentation. I would like to remind you that certain statements that we make during this call may constitute forward-looking statements and IRAN cautioned listeners that forward-looking information and statements are based on certain assumptions and risk factors that could cause actual results different 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 2 within the accompanying presentation. Thank you and I will now turn the call over to Dan Roberts.

Thanks everyone for dialing in. Thanks Lincoln for the introduction. We're thrilled to be here for our quarterly earnings call. There's a little bit to get through so let's jump straight into it. So first of all it's probably worth recapping where we're at in terms of our business and our priority for 2024 and beyond and I think working from left to right on the slide deck in front of you the big news is we're now going to 30 exa hash this calendar year. So we're now at 10 exa hash of current Bitcoin mining operating capacity. We told guidance and provided guidance around 30 June for that milestone. We've completed it in mid-May and we're now upgrading our end of year so over the next seven months and a bit we're going to 30 exa hash. That's as a result of bringing forward the construction of some infrastructure so some additional data centers that we will build by the end of this year along with a transaction that we're pleased to announce today recently completed with Bitmain. So a bit more on that to come but that's obviously super exciting and will take us up into that very top tier of listed Bitcoin miners. The next part which is also exciting is the continual development of our AI cloud service business. We've provided updates over the course of this year. We're looking at ways to expand this so we look forward to giving you a further update during the course of this presentation and then there's been a lot of commentary publicly in the media, social media about the value of power and land in the context of the data center and AI crunch. As most of you know we've got over 3,000 megawatts of power and land secured. This not only provides us with fantastic optionality and flexibility to continue our organic growth profile but it's also giving rise to some interesting near-term opportunities to potentially bring forward monetization of some of that portfolio. Again we'll get into that in a little bit more detail but it's an exciting time. There's a lot going on and without further ado let's jump in to the Bitcoin mining side. We're now in a position to go to 30x a hash in 2024 and in fact 20x a hash by the end of Q3. So over the next few months we anticipate quite a large swift ramp up in our capacity. We were the fastest growing Bitcoin miner last year in the listed market and as a result of this we anticipate being similar this year. So 30x a hash of capacity, the majority of that is via S21 pros from Bitmain which have an average efficiency of 15 joules per tera hash which by the end of it all being installed for the 30x a hash this year we anticipate 16 joules per tera hash in terms of nameplate efficiency and a $17,000 per Bitcoin electricity cost. So in terms of size, scale, low cost we're very pleased to be in a position where we think that we're on course to be one of the real industry leaders in this. So again this is as a result of bringing forward the construction of the infrastructure, the operations team, the construction team are really accelerating their work around this as we've spoken about in the past. We've got a standardized data center design that we've been rolling out for a number of years now. We recently upgraded that from the 20 megawatt design to 25 megawatt design. That's indeed helped but the fact that it is standardized, the fact that we have been doing this for a number of years, the team is simply getting better and faster at it. So that's putting us in a great position to continue to build. What I also should say is that we're not stopping at 30x a hash. We've got options for another 10x a hash as we'll see on the next slide. So as you can see we're pleased to announce that we're at 10x a hash in terms of current operating capacity. We anticipate hitting 20x a hash over the course of the next few months, i.e. by the end of September and then by the end of December hitting that 30x a hash mark that I've mentioned a few times now. In addition we've got fixed priced options for an additional 10x a hash to potentially deploy early in 2025. And I think what's really important about all of this is the fact that we've got the land, we've got the power. So six years ago when Will, my brother and I set this business up our belief was firmly that power and land would be scarce and the fact that it takes multi-year timeframes to develop and many of you on this call invested in our early rounds where we spoke about things like the Matrix, Ready Player One, Wreck-It Ralph, all these sci-fi movies where it portrayed humanity in a certain direction and as a result of that how much computing power it would need. Now who knows where we end up? Is it that way? Is it a different trajectory? But our belief was over the next 10, 20, 30 years the world is going to have this insatiable amount of demand for computing power and we're going to have this real world, digital world dislocation that we've spoken about many times before. The fact that the revenue line, the demand drivers are largely driven by the digital world whether it's the price of Bitcoin, whether it's demand for AI, whether it's some sort of new computing application in the future. The reality is once the real world gets to a critical mass it's very hard to scale up and this is why at the moment we're seeing such demand for new power both from Bitcoin miners, data centers, hyperscalers, etc. And the fact is you just cannot bring forward these power projects for various reasons we'll go into. So we're in a really good position where it's all organic growth. We've spoken to you for years about the platform and the foundation that we are laying down in terms of that organic growth and over the next six to nine months we believe that you'll really see the fruits of that investment as we scale up our business extremely quickly. So I might pass over to Lincoln.

Thanks Dan. So just to provide context the next couple of slides we'll just talk through the CAPEX requirements, funding requirements as well as some further detail around the S21 Pro agreements that we've just signed. So turning to this page in terms of the CAPEX as we previously mentioned the expansion to 20 X a hash which is now being pulled forward to end of September this year that is already fully funded and the focus on this page is really talking about the additional CAPEX and growth to get to 30 X a hash by the end of this year. As we saw on the previous slide the step up from 20 X a hash to 30 X a hash requires an additional 10 X a hash on miners and an additional 150 megawatts of data center capacity. So really at Childress by the end of this year we will have 350 megawatts of operating data center capacity at Childress and the CAPEX guidance that we're providing for both the mining hardware as well as the data centers is approximately 300 million dollars and as you can see on the top right quadrant of that slide that comprises approximately 190 million dollars for 10 X a hash of the latest generation Bitmain S21 Pro machines and approximately 110 million dollars for 150 megawatts of data centers which is broadly in line with with the previous guidance we provided that sort of benchmarked data center CAPEX had about 750 thousand dollars per megawatt. Now turning to the funding strategy we anticipate funding the step up to 30 X a hash through a combination of existing cash resources operating cash flows and other sources of capital and as we previously mentioned we have 322 million dollars of cash and that is of 30 April 2024. The business is generating very strong operating cash flows which we are reinvesting into growing the business and Belinda is going to touch on this in more detail in the financial statements but you will note that we reported 48 million dollars of positive operating cash flow -to-date this financial year and we are also continuing to explore other funding opportunities right across the capital structure. So as you're aware we've got our existing ATM which has a capacity of 137 million dollars remaining. We've also just filed a new 500 million dollar shelf in ATM and in parallel we're also exploring opportunities with debt capital including potential funding for data centers and equipment financing for GPUs which Dan is going to touch on a little bit later in this presentation and then finally in terms of returns and that's just talking to the shaded box on the opportunity to provide a little bit more detail around how we frame up our capital raising and investment decisions. So fundamentally you know the use of the ATM program for example is entirely at our discretion and we just view this as an important instrument that helps us fund growth that that makes sense strategically and also financially in terms of returns to shareholders. We've done some analysis, some benchmarking analysis on how the market is valuing Bitcoin miners today and we note a high degree of value being placed on installed extra hash capacity and in particular for the larger scale miners specifically Marathon, CleanSpark and Riot each of these operators with hash rates above 10 extra hash the market is valuing their capacity at an average of around 135 million dollars per installed extra hash and as you can see on the right hand side of the page we are building and delivering incremental hash rate at 30 million dollars capex for one extra hash and that is inclusive of the mining hardware and the data centers. So putting all of that together we see raising capital to become one of the largest and most efficient publicly listed miners this year as making strategic sense and also driving long-term value creation for our shareholders. Stepping to the next slide we won't spend too much time on this there's a lot of detail in our in our disclosures but we've entered into a number of purchase and option agreements with Bitmain which underpin our growth to 30 extra hash this year and providing a in the first half of calendar 2025 just wanted to emphasize that these new and amended agreements relate to a combined 35 extra hash of the s21 pro miners which as Dan mentioned have a efficiency of 15 joules per terahash these agreements are being struck at $18.90 per terahash and as you as you can see on the on the table as we start to deploy that hardware you can see that meaningful improvement in overall fleet efficiency to 16 joules per terahash at 30 extra hash and then to 15 joules per terahash at 40 extra hash and in terms of just the structuring these agreements were very deliberately structured in this manner with delivery dates that align to the data center rollout at Childress over the rest of 2024 and 2025 having options in the structure provide a degree of flexibility around growth as compared to for example a firm purchase as well as an element of downside production to the extent market conditions change and as we've just demonstrated you know as new technology emerges a new and more efficient mining hardware emerges you know we were able to for example amend the terms of our t21 option into the latest generation as 21 pros without impacting the deployment timeline and just flagging that this may not have been possible if we'd made a firm purchase order for those same machines turning to the next slide this just maps out the landscape and a couple of perspectives to share here the chart shows Bitcoin mind in April and the table underneath just shows market cap as of last Friday and installed hash rate across the sector so Dan mentioned we were the fastest growing miner in 2023 increasing our hash rate last year from 1.5 extra hash to 5.6 extra hash at the end of 2023 whilst maintaining market leading levels of efficiency we are continuing that trajectory this year having grown from a 5.6 extra hash at the start of the year to 10 extra hash today and obviously there's a lot more growth to come in 2024 as we grow to 30 extra hash this year and moving into 2025 fully expect to maintain that momentum as well with our pathway to 40 extra hash in the first half and I'm gonna hand this back to Dan now to talk to the AI cloud services business

all right so into the AI update thanks link for mining out the Bitcoin mining obviously very exciting so most you be aware that when we set out building this business we built data centers so we never built shipping containers sea cans we never subscribed to the abandoned warehouse model of mining Bitcoin we built multifunction data centers from day one capable of supporting different types of computing power we signed an MOU with Intel computing many many years ago about four years ago for in a bit to bring some of their customers and hardware out to our first site at the time the market wasn't quite ready we put it on ice focused on Bitcoin mining and then with the roundup in AI last year we dusted off the old strategy went and ordered some Nvidia H 100s have installed them in the same data centers ie we unplugged the a6 and we plugged in the GPUs the same infrastructure the same data centers and we launched an AI cloud service it's a highly complimentary business line we don't see it as competing with Bitcoin mining we see it as additional and incremental to Bitcoin mining and the key reason for that is the power consumption as you can see in the chart on that right hand side every 100 million dollars of GPU expenditure is only using around 1% of our data center capacity that we'll have online this year so we could go and spend a billion dollars on GPUs tomorrow run rate earnings from that would be somewhere in the order of 400 million dollars plus based on market data and it would use around 10% of our data center capacity so again we don't see it as competing with Bitcoin mining we see it as complementary and additional now in terms of cost of capital and optimizing it we see this as a really important opportunity or inflection point for the business it's no secret that Bitcoin miners have struggled to raise debt type financing it's a volatile in commodity it's been a volatile business but all of a sudden with the introduction of an additional earnings line and importantly an additional view on the collateral within the platform conversations with lenders are looking far more prospective in terms of terms of potential debt to elaborate on that more visualize yourself as a lender you go up to your credit committee and they say you're lending to a Bitcoin mining business what happens if Bitcoin goes to zero now most of us if not all of us on this call understand the probability of Bitcoin going to zero is very low but that's not the point those types of questions get asked so all of a sudden what's the secondary value of the infrastructure having now proven that our data centers can be used for alternate use cases all of a sudden there's a collateral value in the data centers the infrastructure the land portfolio the power connections as we know which really opens up a very different lens for these credit funds and prospective debt providers so this is something we're quite excited about pursuing we're in a number of conversations at the moment if the terms are right we will pursue some corporate level debt financing but equally given the accretion of continuing to use existing capital sources as Lincoln went through a couple of slides earlier we certainly don't feel the pressure to do this so we'll make the right decision over time the other interesting aspect to scaling the AI cloud service business so far as capitals concerned is there appears to be substantial demand for GPU finance instructors we saw core wave announced last year a 2.3 billion dollar GPU finance instructor led by Blackstone we then saw only a couple of weeks ago Lambda another cloud service provider secure 500 million dollars in GPU financing again we've now proven out our cloud service we've had exceptional customer feedback from our customers and importantly we've got the power points we've got the data centers and the same cannot be said for other cloud providers certainly not all of them where essentially they sit in the middle of a data center and the end customer and they own the computers and I think part of the feedback we're receiving and try to dissect why it's been so positive I think is down to largely two things one is our vertical integrated platform where we're not sitting in the middle of the data center and an end customer so when the end customer wants to optimize some of their machines they want to update some software firmware they want to do something on the ground in the data center if you're simply a cloud service provider all you can do is lodge a support ticket with the end data center and wait for them to come back to you you'll govern on the terms of your service level agreement now contrast that to iron where the customer picks up the phone to us our CTO our customer service and all of a sudden they can do absolutely anything live time on site we've got 24 7 people on site and we own and control everything all the way from the soil the concrete foundations the steel structures the ventilation the network cabling all of the infrastructure the software the firmware layer so it's very easy in relative terms for us to tweak make adjustments and optimize the service offering for these end customers live time the second element having received again really positive feedback around the performance of our clusters and you can see the quote on your screen around performance of one metric being three times bigger than any other hardware setup one of our customers has used and we've been trying to dissect why is this the case we've set it all up properly and our theory something to be is that it's due to the rack density that we're operating under so to step back traditional data centers 80% of traditional data centers operate at 5 kilowatts or less rack density according to the uptime Institute report Nvidia GPUs require 40 to 45 kilowatt rack density based on their reference architecture now if you're installing a rack in different rooms because you can't manage the power you can't manage the heat and the ventilation all of a sudden you've got these servers spread out across quite a distance within a data center now Jensen the Nvidia CEO has been out there talking about things like the data center is the new computer and when you zoom out you think about over the last 10 to 20 years a lot of the innovation in compute at a chip level has been minimizing and shrinking the gate width on the transistors to enable the signal to travel back and forth faster and more effectively extrapolate that out to the data center where all of a sudden these GPUs are now talking to each other to crunch training models to run these AI models and it stands to reason that if they're all spread out and there's a lot of latency between the GPUs go back and forth then there might be a lower performance as compared to someone like us who is operating 70 kilowatt rack density so all of our servers are in one spot it's all tight so in theory the latency is very low the signal is communicating very quickly so it is possible that is leading to the exceptional service reviews that we're getting but we're testing that further to try and validate in terms of the rest of the strategy on our cloud service we're currently testing the on-demand market so we've proven the model with bilateral contracts and now we're going down the pathway of testing an on-demand service which is really exciting because we believe we understand that there are a number of smaller users and a number of bigger users that don't want to sign contractual commitments medium or long term for compute it does deliver a much higher price for us versus a contracted relationship yes it's at a higher risk but for us using some of the servers to do this to build relationships to learn we're in the process of developing software actually to allow true burst up and burst down such that essentially prospective customers can come onto a website click a drop-down box and start utilizing our cloud service so this type of capability will take our cloud service to another level and it's something that we're we're quite excited about so in terms of the outlook for this technically we've proven it up commercially it's looking really good with the likes of poolside the on-demand market and we're now in the process of working through the optimal way to scale this up further through capital maybe it's GPU financing maybe it's other sources now on to a little bit about our power and land portfolio so I mentioned at the outset that will and I when we set this business up we had a view that over the next 10 to 20 years the world was going to have a very large growing exponentially growing demand for compute and power from renewable energy sources to power that compute so developing power and land is something that doesn't cost a lot of money but it costs a lot of time it takes years identifying sites securing the sites putting in grid connection studies building out grid connections it's something that historically has taken three four five years and now with the onset of a tremendous amount of miners hyper scalers data center providers we're being told that these timelines are getting pushed out five six seven years so what does this mean the opportunity for us has always been to organically grow into this capacity but we're now engaged in conversations with various stakeholders that continue to triangulate and validate that this data and power crunch is real Morgan Stanley Goldman Sachs have all released reports in the last month in fact the Morgan Stanley report went into some detailed quantitative analysis around what the value of having power and land was and they came up with a number of five to twelve dollars per watt we've got three billion watts so that implies a tremendous amount of value in the portfolio is it worth that is it worth something different we have no idea but certainly this is the time in the market to start finding out so we're undertaking a process to explore various structures everything from prospective sales of some of our development sites to joint ventures over our development sites where we could build own and operate some sort of shell provide us a co-location service provider a cloud service we're talking to a number of the technology companies we're talking to a number of investors the large banks and it's something that we're excited to pursue over the coming months ultimately again we don't feel any pressure to execute on anything specific here we're in a great position to continue growing organically and utilize this power for our own purposes as a going concern so on that note I'll pass over to link to continue with some financial summary before Belinda then takes over from him thank you

Thanks Dan this is this page is actually exactly the same one from our from our previous half-yearly update we've just refreshed some of the economics based on current market conditions and as you can see Bitcoin mining margins and returns on a post-harving basis remain strong and as we scale the business to 30 extra hash at current Bitcoin prices and network hash rate we've calculated illustrative electricity cost per Bitcoin of 17k and annualized hardware profit of four hundred and eight million dollars driving sub two-year paybacks and those economics there were were calculated on a Bitcoin price of about a couple of days ago turning to the right-hand column the AI cloud services business similar economics to what we've discussed previously with very high margins at the gross margin level above 95% driving approximately two-year paybacks on the GPU hardware as well so just to reiterate we continue to see very healthy margins and attractive payback periods across both lines of business which underpins why we're continuing to invest in growing both lines of business stepping through to the next page before I hand over to Belinda this is the first financial reporting period where we've recorded revenue for our AI cloud services business and you'll see that come through on the face of the PNL and as you can see from February to today a rapid ramp up in revenue which coincides with the onboarding of poolside as a customer in February you note that they also announced an upsize and extension to their contract to 504 GPUs which was effective in mid-April so we should start to see some of that increased revenues from the upsized contracts start flowing through to the revenue line in May and in the coming months and on the right hand side of the chart we've just highlighted there the 14 to 18 million dollar revenue opportunity that's associated with the current GPU fleet that's already operating I'll hand over now to Belinda to take us through the rest of the financial section.

Well thank you Lincoln and Dan so good morning to those in Sydney and good morning to those in North America thank you for joining us today for our first quarterly update to start with I wanted to highlight our positive cash flow from operations of 48 million for the nine-month period ended 31st of March 2024 this includes 129 of receipts resulting from the daily liquidation of our Bitcoin mined these positive operating cash flows highlight the quality of our underlining operations and are reinvested to support our ongoing expansion plans. Turning to the consolidated statement of profit and loss during the three months ended 31st of March 2024 we reported a positive net profit before tax of 12 million and net profit after tax of 8.6 million as we do not hold Bitcoin on our balance sheet this result has been achieved without any reliance on Bitcoin mark to market revaluation gains includes non cash expenses of 17 million. Moving on to adjusted EBITDA for the quarter the EBITDA increased from 13.9 mil to 21.8 mil this was due to the Bitcoin mining revenue increasing from 42 million to 53.4 mil as the average operating hashrate increased from 5.6 X has to 6.4 X has resulting when 1003 Bitcoin mined at an average realized price of 53.2 K being a 25% increase in price during the quarter our average net electricity cost per Bitcoin mind increased from 14.1 K to 19.3 K primarily due to lower number of Bitcoin mind during the quarter as a result of increased global mining difficulty quarter on quarter our other costs remained relatively flat Looking at the adjusted EBITDA for the nine months ended 31st of March 2024 we had a record adjusted EBITDA of 42.5 million this is an increase of 32% -on-year and very pleasing to see as I talked about earlier the nine months cash flow being 48 million so directly converting into that cash flow from operations Bitcoin mining revenue for this period increased from 41.3 million to 129.9 million as the average operating hashrate increased from 2 X a hash to 5.8 X a hash and we mined 3371 Bitcoin at an average price of 38.5 K being an 87% increase in price average net electricity cost during this period increased from 9.9 K to 15.4 K primarily due to the increased global mining difficulty and our other costs increased from 32 mill to 36 million with the children's site operational in April 2023 Moving on to our consolidated cash flows net cash and cash equivalents increased by 191 million for the nine months ended March 31st 2024 the increase in net cash flow from the operations operating activities was 48 million due to the increase in the average operating hashrate coupled with the higher average realized Bitcoin price the increase in net cash used in investing activities was 188 million due to the expansion of children's as well as our purchase of 816 new video H 100 GPUs increase in that cash from financing activities of 331 meal primarily due to net proceeds received from sales sold under the ATM and E lock facilities Lastly moving on to the balance sheet we had a cash closing cash balance of 260 million at the end of March no debt facilities and as I've mentioned strong operating cash flows during that period the cash position further has strengthened to 322 million at 30 April 2024 during the period of the quarter we raised 294 million from the sale of approximately 56 million shares and post April 1 we've raised a further 45 million from the sale of 8.2 million shares so we have a strong balance sheet with total assets of 724 million which will provide us flexibility to fund and grow into the future I'll now hand back to the operator to take any Q&A for our session today thank

you as a reminder to ask a question please press star 1 1 on your telephone and wait for your name to be announced to with a dryer question please press star 1 1 again one moment for questions our first question comes from Lucas pipes would be Riley you may proceed

thank you very much operator and good afternoon morning everyone then my first question is on the incremental extra hash and the optionality there that you outlined earlier on the call could you kind of walk us through where this would be deployed and then also just in terms of the potential timing around all of that thank you thank you so

much Dan might have dropped off there Lucas I'll I'll take that question so the majority of the capacity is being deployed into Childress and as we've previously disclosed that is scaling to 350 megawatts this year so the vast majority of the new extra hash growth is going to come on at Childress throughout the remainder of this year and in terms of hitting that 40 extra hash in the first half of next year that is also going to be deployed at Childress we did mention fleet upgrade as well so some of the capacity will be used to upgrade the existing fleet of s19j pro machines which are primarily located in our British Columbia data centers so it'll be a combination of both but primarily at Childress where it's a single-site expansion currently operating at 100 megawatts and scaling to 350 megawatts this calendar year

Lincoln thank you so much for the additional color there I appreciate it that best of luck I'll turn it over thanks Lucas

thank you one moment for questions our next question comes from Joseph Duffy with can't you know

on the 10 extra hash option with bitmain that you have I just wondering you know if you could kind of go through what would what would be some of the reasons you might you might exercise that I you know obviously if Bitcoin is a lot higher that may be one but just kind of balanced against maybe some of your other initiatives that you've got going on and I know I know you know there's a lot of moving parts but just trying to get inside your head on that and then I'll have a follow-up thanks

thanks Joe so just to clarify that's the 10 extra hash option to go from 30 to 40 extra hash right exactly yeah perfect look I expect we'll exercise it the presentation is clear in terms of the metrics when we can mine Bitcoin around that indicative cost of $17,000 a coin with Bitcoin where it is today around 65 that's a pretty healthy gross margin and a pretty good exposure going into what we believe is the next Bitcoin cycle and all we need to do is to continue to build out the same data centers at our existing site so for us we're planning to execute it and continue to grow through the cycle and when you see those market metrics that link spoke to where you know miners above 10x hashing capacity being valued at 135 million dollars per extra hash and we can continue building out an extra hash for 30 million dollars I mean the value creation to shareholders is absolutely crystal clear and we're only going to grow when it's a creative as you would have seen in the last six weeks I think we use the ATM three days we've sold a grand total of five million shares now yes we've lodged a shelf to replace the existing one but if we use it it's to generate that type of value creation for our shareholders so yet we anticipate continuing to grow and to ultimately exercise that 10x hash expansion from 30 to 40 early next year

great thanks for that update and then just maybe one quick follow-up here on you know the the three gigawatts of development sites that you have we could maybe drill down on that a little bit I know I think Dan you said that you may be entertaining some some deals and that we might hear about that soon just want to understand you know I mean you know with with with things moving so fast as does it make sense to structure a deal now or you know perhaps wait another nine months to a year when you know perhaps there's even more scarcity in the market relative to power and development thanks a lot

it's a great question Joe short answer is I have no idea all you can do is work through the process and see what options are presented in front of you and make a decision on that basis and I can make the case both ways for waiting you know if we've got this level of scarcity now in respect of an asset ie power and land that can take five to eight years to develop then the scarcity factor may indeed increase over the next six twelve eighteen months but equally I'm a selling offer that can demonstrate considerable value to shareholders particularly recognizing out market capitalization now as compared to some of these numbers that have been thrown around in terms of the value of the asset base we have then you know we're compelled to explore that and we will what I also should say is you know selling off or doing a joint venture on one of these sites is going to have realistically a very limited impact on our organic growth you might recall we've always said we've got over a thousand megawatts of additional development sites where we don't disclose additional detail that was the case before we announced our fourteen hundred megawatt site late last year and it was still the case after we announced that fourteen hundred megawatt site last year so over a thousand megawatts under development could indicate any number above a thousand megawatts so I feel like we're long an asset that we can look to monetize without necessarily compromising our organic growth plans.

Fair enough. It's nice to have options. Thanks a lot Dan.

Thank you. One moment for questions. Our next question comes from Mike Colonies with H.G. Wainwright. You may proceed.

Hey good morning guys. Congrats on the quarter and great to see you delivering ahead of schedule again with your build out here at Childress. So you guys have taken a measured approach to rolling out the AI cloud services business which has certainly shown early successful pull side with the upsize deal there. Now that you have this proven model in place in service in place how have conversations evolved with potential customers for this business and how should we think about growth of the business based on the current pipeline and some of the funding opportunities you spoke to Dan.

Yeah thanks Mike. Look it's an evolving space. Clearly we've received really good reviews we've received really good demand for the cloud service. We see the mainstream narrative around the world being short GPUs and short data center capacity and we seem to be living that day to day. But the focus for us is continuing to develop this service and expand its capability which is why we've taken a group or a cluster of the last units we bought and developing this on demand service where the pricing is much higher and we believe that there might be quite a deep market that's attractive where you can provide that true on demand burst up burst down service. We're continuing to engage in conversations with everything from smaller customers to larger customers on multi-year contracts and all of that goes hand in hand with the financing for this. So looking at different structures around how we finance it there's a number of different type of structures that are being suggested around GPU financing. So it's just working through all that and looking at the best way to match it up and continuing to grow the service. I must say over the last couple of weeks this has been absolutely on nailing down this 30x hash trajectory finalizing the transaction with Bitmain and giving ourselves a very clear path to industry leadership on the Bitcoin mining and now we can really focus back on the AI cloud service. We're engaged with a number of those large customers financing providers and yeah let's see what happens over the next few months.

Great, great, appreciate the color. And just a follow-up for me, where do power costs come in at during the quarter at Childress and how are you thinking about pricing in the market and uptime versus curtailment levels at the facility as we look out through the balance of the calendar year?

I'm happy to take that one Mike. So it is touched on in our presentation but 3.3 cents a kilo at our sort of average price at Childress since this financial year and that's based on our experience obviously you know it's a volatile market we trade energy in that market and that's for purely economic reasons. So 3.3 cents per kilowatt hour at Childress which is a very attractive rate of energy costs. From a curtailment perspective and downtime uptime to your earlier point you know we're always making life decisions around whether we take the power to mine Bitcoin and we sell it back to the grid and you know we've grown up an ability to operate the data centers through relatively extreme conditions up to 111 Fahrenheit last year in the summer without skipping a beat. So you know these facilities are operating near 100% uptime with any curtailment or downtime basically purely for economic reasons and we expect that to be the case as we continue to scale the data center capacity there. Great thank you for taking my questions.

Thank you. One moment for questions. Our next question comes from Joe Flynn with Compass Point Research and Trading. You may begin.

Hi guys thanks for the question. I was hoping you could provide more color potentially on the two-year payback on H100 and ultimately if you expect the data center design specs to change materially as we move to further generations of chips such as the Blackwell and yeah just any color you there would be helpful.

So the two-year thanks Joe the two-year payback on chips is a rough guide. Reality is when you offer on-demand and shorter term contracts you're receiving a price where that payback will be shorter than 24 months. Equally if you sign a longer term contract then the payback might be a bit higher than 24 months. Market pricing for GPUs is pretty transparent. You can see how many dollars per GPU hour. Nvidia weight H100 cost around $40,000 so really it's back solving into that to get that rough two-year payback on the chips. In terms of data center configuration look it's something to watch but what's becoming really apparent is very few people can manage the 70 kilowatt rack density that we're operating at. We're seeing traditional data centers have to go down this liquid to chip and liquid cooling path where they can move the problem outside the data center. They physically cannot deal with the heat and the ventilation and the airflow in these multi-story legacy data centers so they're having to go down the path already of retrofitting and improvising to deal with that rack density and the reference architecture for Nvidia chips is only that 40 to 45. So it's really hard to see how our data centers operating at 70 kilowatt plus rack density fit for purpose and somewhat future proof as these new chips are released.

Thank you. One moment for questions. Our next question comes from Paul Golding with Macquarie. He may proceed.

Thanks so much. Just a quick question on the supply for GPUs. Just wondering Dan if you could comment on availability. Is the main constraint really just capital at this point? In other words if you have the power capacity available based on your energizing Childress and the subsequent data center if you had it available are you confident you'd be able to get the GPUs in hand through your suppliers and then as a follow on to that just briefly and looking at the table showing the 95% plus gross margin is there a scenario that we should keep in mind where it might make more sense to unplug more ASICS and plug in GPUs incremental GPUs. Thanks so much.

No pleasure Paul. So on the last one absolutely there's scenarios where you might unplug some ASICs and as I went through in the presentation you're almost not mutually exclusive where you can continue to manage both of these businesses in parallel because the GPUs simply cost so much but they're so expensive per unit of power consumed. So if we secured a financing and wanted to go out hypothetically and buy one billion dollars worth of Nvidia H100s tomorrow 25,000 units that would displace a bit less than 10% of our overall data center portfolio. So we're still able to be a very large-scale Bitcoin mining business in addition to having all this optionality and timing. Look it's a moving feast and week to week it does it does move around but you know guidance at the moment we can probably stand up new clusters within two months of go to work.

Great thanks so much and then just around availability it sounds like it's more so a question of capital but just wanted to confirm that the GPU marketplace would allow you to make this strategic purchases as needed.

I believe so current guidance that we're receiving from our suppliers is such that we could stand up new clusters within that two to two month time frame maybe three or four if it was a very large size.

Understood thank you so much.

Thank you one moment for questions. Our next speaker is Josh

from the HBC business. Hi guys thanks for taking my questions. First of all I was wondering if you could comment briefly on if you've started exploring and doing a little bit more work on the co-location aspect of the HBC business and kind of what that would entail to actually get set up.

Thanks Josh. This is something we've been looking at and could form part of this kind of JV type structure to monetize additional land and power that we've got in the portfolio and it really goes to who's the end customer what's the length of the contract how do you finance that and what's the opportunity cost around using that capacity ourselves. So do we want to lease out the data center capacity and access to that power and land which we understand is scarce in the current market or do we want to own and operate our own compute unit whether it's Bitcoin mining ASICs or whether that's Nvidia GPUs and monetize that capacity directly. So there's an opportunity cost there's options around that it's something that we're continuing to explore but equally like us keep saying the presentation we don't feel any pressure to engage and do a deal over a portion of this capacity when we can continue to monetize it out ourselves so we'll just keep looking at the options that present themselves.

Yeah I understood appreciate the color there. I guess you know secondly I'd like to take a second and just ask a little bit about what you're seeing in the market post-adding if you're seeing different dynamics and you can kind of talk to you know how your unit economics are holding up especially given your you know new growth plans and so thanks.

Yeah look it's interesting my view publicly before the parving was that you wouldn't see any downward adjustment in the hash rate I was proven slightly wrong there was and maybe there will be a little bit more to come just given where the hash price is now and the squeeze that that is having on some high-cost miners but ultimately when you believe that Bitcoin is going to remain robust you you assume that the hash rate will continue to remain where it is and potentially trickle higher over the coming period. You know private miners you know you see a lot of prospective processes where people are looking to sell you know we've seen some of the public models you know informally or formally talk about putting themselves up for sale and for us it's really hard to justify when we've got the ability to grow organically when we can grow so creatively and with those metrics outlined in the presentation where by the end of this year in seven and a half months you know indicative cost per Bitcoin mind of $17,000 post harbing and generating that value for shareholders where you're spending 30 million dollars in extra hash on CapEx and the markets value in that at 135 it just seems very clear decisions for us.

Yeah understood appreciate the caller Dan thanks for taking my question. Thanks Josh.

Thank you I would not like to turn the call back over to Lincoln Tan for any closing remarks.

Thanks I think I think that's we're just over the hour now and that's probably all we have time for this morning. Thank you for the questions I think just to reiterate 30 extra hash this year in 2024 pathway to 40 extra hash in the first half of 2025. No investing into very creative growth with fastest growing minor last year we fully intend to continue that trajectory and we look forward to the shareholders after this. Thank you very much for your time everybody.