Cipher Digital Inc. Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Growth and Expansion: As of end-July 2024, self-mining capacity is 8.7 exahash per second with fleet efficiency 28.7 joules per terahash. Plans to upgrade rigs at Odessa data center to reach 13.5 exahash per second and 18.6 joules per terahash efficiency by year-end 2024. Black Pearl data center expected to expand self-mining capacity to 35 exahash per second and 15.3 joules per terahash efficiency by 2025.
• Data Center Pipeline: Signed letter of intent for option to acquire three new North American sites adjacent to transmission assets. Reveille site in Texas approved for 70 megawatts, potential to expand to 200 megawatts by Q1 2027. Pipeline of up to 1.7 gigawatts of capacity across four new sites.
• HPC Infrastructure Business: Launched HPC infrastructure business with advantages in sites, construction/operations team, and capital. Team has experience from firms like Google, Vantage, and Meta. Inundated with requests from HPC lenders and investors.
• Current Operations: Year-to-date, all-in electricity cost per Bitcoin produced at data centers is $15,004. Q2 2024 GAAP net loss was $15 million, mined 563 Bitcoin generating $37 million revenue at an average price per Bitcoin of $65,000.

Segment Performance

• Odessa: Represents approximately 86% of Bitcoin production in July. Currently generates ~6.9 exahash per second with ~207 megawatts. Post-rig upgrade expected to generate ~11.3 exahash per second. Year-to-date mined ~1,622 Bitcoin. All-in electricity cost per Bitcoin post halving: $23,563.
• Joint venture data centers (Alborz, Bear, Chief): Own 49% of these sites. Total power capacity 120 megawatts, currently generate ~3.7 exahash per second, accounting for ~14% of overall Bitcoin production. All-in electricity cost per Bitcoin post halving: $28,784.

Guidance

• By year-end 2024, self-mining capacity to reach 13.5 exahash per second with fleet efficiency 18.6 joules per terahash.
• 2025: Completion of Black Pearl data center, self-mining capacity to 35 exahash per second, fleet efficiency 15.3 joules per terahash.
• Reveille site expected to energize in Q1 2027, with potential expansion to 200 megawatts.

Risks

• Market rumors and speculation regarding acquisition targets, with the company stating no comment on such rumors.
• Uncertainties in financing and tenant sign-ups for the HPC infrastructure business.
• Fluctuations in Bitcoin price and hash rate affecting financial performance.
• Risks associated with long-term development of data center sites and interconnection approvals.

Q: Brett Knoblauch asks about Cipher being an acquisition target and M&A landscape.

A: Tyler Page responds that the company has no comment on market rumors, discusses M&A in the industry, and focuses on growth with low power costs.

Q: Bill Papanastasiou asks about HPC AI opportunity and capital allocation.

A: Tyler Page talks about HPC as hosting for tenants, long-term leases, and different financing from Bitcoin mining.

Q: John Todaro asks about allocating costs in Bitcoin business and HPC site curtailment.

A: Tyler Page explains focusing on hash price vs hash cost, and discusses curtailment in HPC context.

Q: Mike Colonnese asks about HPC revenue model and Black Pearl liquid cooling.

A: Tyler Page talks about HPC gross margins and reasons for liquid cooling in Black Pearl.

Q: Tyler DiMatteo asks about HPC sourcing and sweet spot for megawatts.

A: Tyler Page discusses large tenants preferring 200+ megawatts and sourcing process challenges.

Q: Reggie Smith asks about HPC capex and balancing capex with returning capital.

A: Tyler Page comments on capex estimates and balancing investment with potential returns.

Q: Mike Grondahl asks about biggest learning from HPC discussions and challenges.

A: Tyler Page talks about learning from tenant technical requirements and financing complexities in HPC