Cipher Mining Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Black Pearl Phase 1 Execution: Delivered on Phase 1 of Black Pearl, the first 150 MW, which is now hashing and on track to exceed prior guidance. Exceeded second quarter hash rate guidance, finishing at 16.8 exahash per second and on track to reach 23.5 exahash per second by end of third quarter.
• Financial and Operational Strengths: Paid off all short-term borrowings, grew Bitcoin holdings, improved fleet efficiency, and maintained a competitive all-in weighted average power cost. Adjusted earnings for Q2 were $30 million or $0.08 per share, up roughly 400% from the previous quarter.
• Pipeline Expansion: Current operating capacity stands at 477 MW with potential pipeline capacity expansion of up to 2.6 GW in coming years. Black Pearl Phase 2 construction underway, designed to support both hydro Bitcoin mining and HPC compute applications simultaneously.
• HPC Development: Barber Lake site has 300 MW of energized capacity and is in advanced discussions for HPC development. Stingray site in Andrews County, Texas, initiated substation development and is on track to energize in Q3 2026.

Segment Performance

• Odessa: Represents approximately 85% of Bitcoin production in Q2. As of June, operating hash rate is ~11.3 exahash per second using ~207 MW, fleet efficiency at ~17.6 joules per terahash, and all-in electricity cost per Bitcoin produced over the quarter was roughly $24,686. Odessa operates under a 5-year fixed price power purchase agreement.
• Joint Venture Sites (Alborz, Bear, Chief): Total power capacity of 120 MW, can generate ~4.4 exahash per second. Cipher owns 49% of these sites, and our portion generated ~13% of overall Bitcoin production in Q2. Combined all-in electricity cost per Bitcoin at these sites in Q2 was roughly $44,594. These sites are front-of-the-meter, so seasonal fluctuations in electricity costs are expected.
• Black Pearl Phase 1: The first 150 MW of the 300 MW data center is now mining at 6.9 exahash per second and on track to exceed prior guidance. Cipher grew Bitcoin holdings from 1,034 to 1,063 Bitcoin in Q2. Fleet efficiency at Black Pearl Phase 1 with legacy rigs plugged in was 20.8 joules per terahash, and once the new fleet is fully deployed, efficiency is expected to improve to 16.8 joules per terahash. Projected all-in weighted average power cost remains competitive at $0.031 per kilowatt hour.

Guidance

• Hash Rate Projection: On track to reach 23.5 exahash per second by the end of the third quarter, exceeding previous guidance.
• Black Pearl Phase 2: Construction of Black Pearl Phase 2 is underway, envisioning 150 MW of infrastructure designed for hybrid use.
• HPC Development: Barber Lake HPC development continues with ongoing discussions and progress. Stingray site development is on track to energize in Q3 2026.
• Production Growth: Anticipates significant growth from Black Pearl Phase 1 as it ramps up, with expected greater impact in future quarters from full quarter production.

Risks

• Market Dynamics: Fluctuations in HPC tenant negotiations and market demand for HPC capacity could impact development timelines and revenue streams.
• Construction Delays: Potential delays in construction of sites like Barber Lake, Stingray, and others could affect the expected timeline for energization and revenue generation.
• Price Volatility: Fluctuations in Bitcoin prices and power costs could impact unit economics and profitability.

Question and Answer

Q: Could you quantify the time to convert from hydro Bitcoin mining to AI HPC compute at Black Pearl Phase 2?

A: Phase 2 at Black Pearl is envisioned as a Tier 1 half data center, with completion expected in the back half of next year. The timing depends on tenant interest and alignment with construction completion.

Q: What are potential differences in costs affiliated with the hybrid model compared to a pure mining or pure Bitcoin site at Black Pearl Phase 2?

A: The hybrid model for 150 MW will cost about $1.5 million per megawatt. Costs depend on tenant requirements for redundancy, with potential additional costs if stepping up to Tier 3 specifications.

Q: Could you remind us of the split and expected economics for the JV with Fortress?

A: Cipher owns 20% in the equity of the JV on day 1 with increasing promote as IRR increases. Can buy up to 49% of equity, with potential to own about 40% of total economics if no further dollars are contributed, depending on lease terms and market conditions.

Q: How is the average power cost ticking up this quarter balanced with relatively stable sequential change in cost of revenue?

A: The $0.031 all-in weighted average power cost is an estimate over a large time sample. The cost of revenue is relatively stable due to factors like the fixed price power purchase agreement at Odessa and operational efficiencies, despite the impact of Black Pearl's front-of-the-meter power.