Riot Platforms, Inc.

Good day, and thank you for standing by. Welcome to Riot Platform's second quarter 2025 earnings conference call. Please note that all participants have been placed in a listen-only mode until the question-and-answer session begins following the company's presentation of this prepared remarks. Please also be advised that today's call is being recorded. I would now like to end the conference call over to Milk McPherson, Vice President of Capital Markets and Investor Relations at Riot Platforms. Please go ahead.

Thank you, operator. Good afternoon and welcome to Riot Platform's second quarter earnings conference call. My name is Phil McPherson, Vice President of Capital Markets and Investment Relations. And joining me on today's call from Riot are Jason Less, CEO, Benjamin Yee, Executive Chairman, Colin Yee, CFO, and Jason Chung, Executive Vice President and Head of Corporate Development and Strategy. On the RIOT Investor Relations website, you can find our second quarter earnings press release and accompanying earnings presentation, which are intended to supplement today's prepared remarks and which include discussion of certain non-GAAP items. Non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP and are included as additional clarifying items to aid investors in further understanding the company's second quarter performance. During today's call, we will be making forward-looking statements regarding potential future events. These statements are based on management's current expectations and assumptions and are subject to risks and uncertainties. Actual results could materially differ due to factors discussed in today's earnings press release, in comments and responses made during today's call, and in the risk factor section of our Form 10-K in Forms 10-Q, including for the three months ended June 30, 2025, which will be filed later today, as well as other filings with the Securities and Exchange Commission. With that, I will turn the call over to Jason Lest, CEO of Riot Platforms.

Thank you, Phil, and good afternoon, everyone. I'm excited to walk through the results of another strong quarter for Riot. But before we dive into second quarter earnings, I'd like to share Riot's strategic roadmap and provide some additional context to the development of our data center business and how we view all of our operations working together in a complementary manner. We are incredibly proud of the position that our company, Riot Platforms, is in today. Over the last seven years, we have scaled incredibly, both in terms of our size and our capabilities, representing the culmination of years of hard work, long-term planning, and coordination, all with a view to taking ownership of our future and placing our destiny in our own hands. We have grown and evolved as a company, driven by our ability to develop world-class capabilities, including land and power procurement, Bitcoin mining at a globally significant scale, power management and trading at scale, engineering, manufacturing, and servicing critical electrical infrastructure, and significant access to global capital markets. Recently, we have added a new world-class capability, With the hiring of Jonathan Gibbs, Riot's chief data center officer, and other highly capable professionals from the traditional data center industry, we find ourselves at the beginning of another exciting chapter in Riot's story. With this new capability, we are about to undergo the next step of our evolution as a company. With the ability to build and develop high-performance compute data centers, we will transform Riot by establishing a robust and scalable data center segment. Successful execution in this regard is Riot's top priority, and we recognize the importance of clearly articulating our approach to investors and stakeholders. To be clear, we are not pursuing a so-called pivot into AIHPC initiatives with a view of doing a quote-unquote deal. Rather, we have added a new data center development capability, which we will apply to as much of our power portfolio as possible, and which will transform our company in the years to come. This mindset informs all of our decisions, enabling us to capitalize on this exciting opportunity with discipline and foresight. If I had to summarize our strategy into a simple elevator pitch, The pitch would be that Riot is in the business of monetizing megawatts with a view to utilizing as much of our power portfolio as possible and maximizing the value of our megawatts over the long term. We will maximize the value of our operational assets, specifically optimizing our megawatts to use all available power. We have a great advantage with a portfolio of ready for service power. anchored by our operational flagship sites at Rockdale and Corsicanum. These assets are not conceptual. They are active today, thanks to prior investments in Bitcoin mining infrastructure. This enables more certain execution on our data center development initiative compared to a standalone traditional developer. Our Bitcoin mining capabilities have proven integral to this strategy, as they underpin our ready-for-service power portfolio. By utilizing our mining capabilities, we have put ourselves in the fortunate position we find ourselves in today, and we can secure new power sites by playing to our strengths, profitably managing risk, and simultaneously creating a sustainable cycle of growth. Given the attractive economics and higher valuation multiples associated with data center leases to high-quality tenants, converting as much of our power portfolio to data centers remains our preferred end use for those assets. The pace of transition from Bitcoin mining to data centers will be influenced by customer demand trends, the availability of financing, and the general data center market. our current efforts are laying a strong foundation for a pipeline of future transactions. We have many advantages that have put us in an incredible position because we offer a unique combination of significant scale of readily available power in high demand jurisdictions, a strong balance sheet underpinned by holding more than 19,000 Bitcoin and $330 million in cash, and with significant access to the capital markets, experienced hyperscale data center leadership and development capability, scaled efficient Bitcoin mining revenues, generating hundreds of millions of dollars in revenues and cash flows annually, and battled hordes in experienced management and operations teams. With this framework, our mission is clear. Riot will maximize value across our entire power portfolio with a view to ensuring no stranded capacity, progressively shift power capacity towards data centers, strategically expand our power assets utilizing Bitcoin mining where advantageous, and increase our shareholders' exposure to value-accreting assets. We are strategically positioned at the convergence of surge in compute demand and Bitcoin growth, offering compelling potential for shareholder value creation. Now turning to the second quarter. We continue to aggressively pursue further development of our data center business build-out and achieved a key milestone in our development plan. More specifically, we announced the hiring of Jonathan Gibbs as our chief data center officer. As we search for the right person to take leadership of this primary initiative for Riot, Jonathan's name repeatedly came strongly recommended to us by a number of different industry parties. The market for data center talent is incredibly competitive, and professionals with Jonathan's level of expertise are in very high demand. Jonathan's decision to join Riot and lead our data center platform is a testament to the unique opportunity set available to Riot and our ability to succeed. We are incredibly excited to have someone of Jonathan's caliber on board to drive our efforts. During the second quarter, we also continued to acquire additional land around our Corsicana site and now have a total footprint of 858 acres. Adding additional land ensures that we can fully utilize the large scale access to power that we have on site without leaving any power stranded. and therefore maximize the value for Riot, at which we believe is the premier data center development opportunity in the country. We continue to see strong demand in the market, and we remain engaged in ongoing discussions with interested parties. With that said, in the second quarter, we also continue to make strong progress in our Bitcoin mining business. where we have made significant operational efficiency improvements that now place us among the most efficient operators in the industry, while also focusing on lower costs and maintaining a disciplined approach to capital allocation. Riot has also maintained our strong balance sheet, a longstanding key pillar of our business, ending the second quarter with over 19,000 Bitcoin and $330 million in cash on our balance sheet. representing $2.4 billion in liquidity today. We continue to sell our monthly Bitcoin production in order to finance our ongoing operations, while raising additional funds via a $200 million Bitcoin collateralized financing facility with Coinbase, allowing us to reduce issuance of stock through our ATM and fund our multiple growth opportunities, driving long-term shareholder value creation. I am proud of what we have been able to achieve in the second quarter. These results and the financial and operational strength of the company will allow us to continue aggressively growing our data center business in a way that will maximize long-term value for our shareholders. I look forward to continuing to report on our progress throughout the rest of the year and beyond. With that, I would now like to turn the call over to Colin Yee, CFO of Riot Platforms, to present our second quarter financial update. Thank you, Jason. I am pleased to present Riot's financial results for the second quarter of 2025. For ease of reference, we have highlighted key metrics on slide 8, which presents a snapshot of key financial and operating metrics for the second quarter. During the second quarter, Riot increased its self-mining hash rate from 33.7 exahash to 35.4 exahash, representing a 5% increase over the course of the quarter, while global hash rate rose by 9% in the same period. Riot produced 1,426 Bitcoin in the second quarter, a slight decrease as compared to the 1,530 Bitcoin produced in the prior quarter. Driven by the global network hash rate growing at a greater pace than Riot's deployed hash rate, given our shift in strategic focus to developing our data center business. Year to date for 2025, we have increased Bitcoin holdings per million fully diluted shares from 44.3 to 45.9, representing a Bitcoin yield of 3.7% through the period ended June 30th, 2025. For the second quarter, Ryan reported total revenue of 153 million as compared to 161.4 million for the previous quarter. A 5% decrease quarter over quarter, primarily driven by lower Bitcoin production due to global hash rate increasing at a faster rate than our self-mining hash rate. Gross profit for the second quarter was $70.3 million as compared to gross profit of $73.6 million for the prior quarter. Gross margin in the second quarter equaled 46% flat with the prior quarter. Net income for the second quarter was $219.5 million or $0.65 per share compared to the net loss of $296.4 million, or $0.90 per share for the prior quarter. This net income was primarily driven by mark-to-market adjustments due to the quarter-end appreciation in Bitcoin price and marketable securities totaling $477 million. As a reference, the Bitcoin price at the end of the first quarter was $82,534, while the price at the end of the second quarter was $107,174. resulting in mark-to-market upward adjustment of $470.8 million for the quarter. Net income for the quarter also included a $158.1 million loss on contract settlement as part of the rhodium acquisition, depreciation and amortization expense of $83.2 million, non-cash stock-based compensation expense of $30.1 million, and was positively impacted by the release of $26 million in restricted cash associated with the post-closing dispute settlement with Northern Data. Non-GAAP-adjusted EBITDA for the second quarter was $495.3 million as compared to non-GAAP-adjusted EBITDA loss of $176.3 million for the prior quarter, which included $470.8 million in unrealized gain on Bitcoin health. Cash SG&A for the quarter was $45.8 million, including one-time litigation expenses of $14.3 million and advisory fees of $2 million. Excluding these one-time expenses, Riot's cash SG&A expenses equaled $29.5 million, at the low end of our prior guidance of a run rate of $30 to $33 million per quarter for 2025. For the second quarter, Bitcoin mining revenue totaled $140.9 million. in line with the prior quarter Bitcoin mining revenue of $142.9 million. Bitcoin mining gross margin for the quarter was 50%, an increase from 48% in the prior quarter. This margin expansion was driven by higher Bitcoin price. Most notably, RISE year-over-year hash rate utilization increased from 61% to 87%, demonstrating our strategic focus on improving operations across all of our sites,